16. Telegram From the Department of State to the Embassy in Iran 1

774. Re Embtel 922.2 Joint State-AID-Defense message.

We gratified with handling of conversation reported reftel and believe Shah’s present approach provides basis for proceeding with constructive discussion of military modernization program of reasonable content and proportions. You authorized proceed discussions, as outlined reftel, without reference to which party should bear costs.
We share Shah’s hope that material he presented will permit sufficient early discussion with Iranian staff so that general outlines of feasible long-term program, including time-phasing, might be apparent before Shah’s talk in Washington. We assume he understands, however, that we would not be able in that time to reach final position on any program, except possibly as regards sales of U.S. equipment for short-term expansion and replacement programs mentioned in third para reftel.
We particularly concerned to develop reasonable and flexible criteria for assuring that program would “not hamper Iran’s economic development program.” To this end we would be interested in examining economic indicators worked out by GOI or Country Team which would permit assessment proposed programs from this standpoint in light of Iran’s enhanced economic prospects.
Information re availability of credits for sales to Iran will be sent by separate message.
  1. Source: Department of State, Central Files, DEF 19–3 US–IRAN. Confidential. Drafted by Tiger; cleared in draft by Towsley, Preble, and Padelford, and in substance by Victor H. Skiles (AID/PC), and Warren; and approved by Bracken. Repeated to CINCSTRIKE/CINCMEAFSA, and CINCSTRIKE/CINCMEAFSA for POLAD.
  2. Document 15.