Foreign Relations of the United States, 1964–1968, Volume XXII, Iran

144. Memorandum for the Record¹

Washington, May 23, 1966.

On June [May] 23, 1966 the President approved the $200 million military purchase loan for Iran. He signed it with the proviso that we would communicate orally to the Department of State the following caveat:

“The President deeply concerned over Iran’s worrisome economic prospects. He wants each slice of this new program submitted to him for approval only after searching review of Iran’s economic position. He regards the new $200 million as a planning figure subject to annual review. He asks that Ambassador Meyer tell the Shah of this concern while reassuring him of the President’s full respect for his judgment.”

While the paper was on the President’s desk, a telegram addressed to the President came from Ambassador Meyer² expressing his profound misgivings at the package as it had been communicated on a hold basis awaiting the President’s signature.

1. He was particularly concerned that each year’s tranche would be equal to the others, instead of the first one being larger, since the long lead time necessary for certain items would put their delivery well into the 70’s. As a result, DoD agreed to pay special attention to the problem of speeding deliveries.

2. He was also deeply concerned that the GOI would be asked to consult with us before it made any military purchases in addition to those made possible by this loan. The instruction sent to him had insisted that he explicitly seek a revision of the 1964 Memorandum of Understanding to include such prior consultations.

NSC staff members Wriggins and Saunders revised the language of paragraph three of the instructing telegram so that it read as follows:

3. It is our view total amount of U.S. credit contemplated for FY 65–70 ($400 million) together with $70 million in cash purchases may prove overly heavy burden for Iran’s economy. That is why we attach importance to our joint annual military/economic review on which the future release of annual tranches will depend. These reviews will necessarily consider, among other things, substantial additional military purchases. FYI: We assume annual review already agreed to would allow for consultations on magnitude and terms of major purchases outside this arrangement and therefore specific amendment of 1964 Memorandum of Understanding not necessary. The President considers the new $200 million as a planning figure, a commitment in principle on condition that our joint economic review confirms the feasibility of Iran’s growing economic commitments. End FYI.

This was intended to be consistent with the staff’s understanding of the President’s intent in regard to our relations with the Shah, to the substance of the economic review without requiring such an explicit denigration of Iranian independence as the original language represented. Rostow informed the President by memo of 23 May (attached)³ of our approach, and the President did not object. Therefore, that part of the Rusk-McNamara memo⁴ which says we will deduct from future sales an amount comparable to the value of purchases in third countries should be read in the light of this later exchange (including Tehran 1572 attached).⁵

The record should note that the President approved this program via the covering memo from Walt Rostow. He probably did not address specifics in the Rusk-McNamara memo. Therefore, his decision should be understood more in terms of these memos than in terms of every last legalistic detail in the Rusk-McNamara memo.

Howard Wriggins ⁶

1. Source: Johnson Library, National Security File, Country File, Iran, Memos & Miscellaneous, Vol. II, 1/66–1/69. Secret. Copies were sent to NSC Executive Secretary Bromley K. Smith and Chief of the Bureau of the Budget’s International Division James W. Clark.
2. See the attachment to Document 143.
3. Document 143.
4. See footnote 2, Document 140.
5. See footnote 2 above.
6. Printed from a copy that bears this typed signature.