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

161. Telegram From the Embassy in Iran to the Department of State¹

Tehran, July 25, 1966, 1230Z.

378. For Hare NEA. Ref: State 13889.²

1. Even before we informed Shah we “considering” second F–4 squadron (State 4417),³ he insistent on need for two squadrons of 16 each. He himself had figured on basis one squadron of 12 or 13 for $39 million that two squadrons of 16 would cost circa $100 million. He considered this cost high but he might conceivably pay this sum: a) because he knows F–4 is best of its kind; and b) he and General Khatemi want keep air force in US hands. As to delivery, Shah’s target date for completion of defense build-up is 1968, when British leave Aden and in his view Nasserist threat will become more serious. He will, therefore, be disappointed at prospect of delivery in 1969–70.

2. In President’s letter, as earlier, we have indicated possibility two F–4 squadrons. Since Shah has had no reason to reckon cost at other than $100 million, proposal in reftel would represent nothing new nor special. It would, therefore, by itself not dissuade Shah from buying other things from Soviets. Meanwhile, French are pressing hard, and if his hopes for F–4’s falter, Shah apt move quickly to purchase of Mirages (which he been offered at half F–4 price and better credit terms). He has made this clear in conversations with me.

3. My talk with Shah 23rd,⁴ as well as comments from numerous top Iranians, have convinced me that if we hope have any chance keeping Soviets out, we are going have to offer something which clearly indicates extraordinary move by USG. As minimum, it means: a) noteworthy mark-down in F–4 price (probably on order 50 percent which is attractiveness of rehab F–4 proposal); b) reduction of $2 million in battalion price of Hawks (which Shah considers R and D surcharge); c) scaling down of surcharges on other equipment; d) expeditious schedule of deliveries; and e) ultimate availability under USG credit of Sheridan tanks.

4. Above is tall order, but should be within USG competence. Underneath bargaining lies something more fundamental. Sahah remains obsessed with idea that since 1961 USG has shifted its affection from traditional friends and allies (he probably has read Schlesinger) to courting “third world.” He is, therefore, looking for unmistakable sign that USG values Iran’s friendship. For his simple barometer is prices, terms and delivery dates we offer for military equipment which he is prepared to purchase (instead of receiving as grant as heretofore) and which he considers essential for Iran’s role, particularly in Gulf area after 1968.

5. Current Soviet aim, manifest in daily clandestine broadcasts, is ouster of US influence in Iran, particularly US military presence and our strategic facilities which military presence covers. While Embassy cannot guarantee that special move as suggested in para 3 will preclude all arms purchases from Soviets, we can guarantee that without such move Soviets will make major inroads and US interests will suffer accordingly. By making such a move, with attractive F–4 proposition at its heart, USG will: a) demonstrate to Shah USG’s continued interest in assisting Iran to meet its reasonable defense requirements; b) provide Shah with bridge for retreating from excessive military involvement with Soviets; c) thwart Soviet efforts for ousting our facilities and other interests here; and d) assure healthy maturation of US-Iran relationship. If despite friendly USG move Shah still becomes entwined with Soviets, we remain free to adjust our policies as circumstances require.

Meyer

1. Source: Department of State, Central Files, DEF 12–5 IRAN. Secret; Priority; Limdis.
2. In telegram 13889 to Tehran, July 22, Hare asked for the Ambassador’s judgment as to the probable Iranian reaction to a U.S. offer of an aircraft package of two squadrons of new F–4s (up to a total of 32 aircraft) at new aircraft prices with rough cost estimate of $50 million per squadron and probable delivery in late 1969 or early 1970. (Ibid.)
3. Document 152.
4. See Document 160.