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

171. Telegram From the Department of State to the Embassy in Iran¹

Washington, August 5, 1966, 8:15 p.m.

23184. Ref: State’s 23183.² Subject: Additional MAP Agreement.

• 1. Embassy is authorized negotiate amendment to 1964 Memorandum of Understanding on basis text para 2 and to sign if no changes made. Any changes must be approved by Dept.
• 2. Negotiating text: “Excellency: I have the honor to refer to the Memoranda of Understanding between the Govt of the United States of America and the Imperial Government of Iran of September 19, 1962, and of July 4, 1964, and to the exchange of notes in amendment thereof signed Aug. 18, 1965.³ The said agreements provide for the Military Assistance Program during Fiscal Years 1962–66, and for an additional Program of Mutual Defense Cooperation during 1965–1969.”

I have the honor to propose that the Memorandum of Understanding of July 4, 1964 be amended as set forth in the Annex hereto so as (1) to extend the period for the additional program of Mutual Defense Cooperation through Fiscal Year 1970, (2) to provide for additional cash purchases of an estimated $20 million principally for maintenance materiel and services, (3) subject to availability of funds, to provide additional credit for purchases up to $200 million in annual increments up to $50 million at interest averaging between five and six per cent, and (4) to provide that the additional amount of credits will be repayable over the ten-year period FY 1967–76.

I further have the honor to propose that this note and Your Excellency’s reply thereto concurring therein shall constitute an amendment of the Memorandum of Understanding of July 4, 1964 between our two Govts and shall enter into force on the date of Your Excellency’s reply.

Accept, Excellency, etc.

Annex of Amendments:

The Memorandum of Understanding of July 4, 1964 between the Imperial Govt of Iran and the Govt of the U.S. is hereby amended as follows:

1. In the first sentence of para III, substitute “FY 1965–1970” for “FY 1965–1969.”

In Para III.A 3(B):

A. In first sentence, substitute “$250 million” for “$200 million”; delete “and are consistent with” and substitute therefor the following: “and subject to satisfactory mutual conclusions being reached in the reviews provided for in para V, additional amounts not to exceed $50 million each for U.S. FY 1968, 1969 and 1970, all of such credit being subject to”.⁴

B. Delete the last two sentences and substitute therefor the following: “these credits will be repayable on terms which allow payments for the first $200 million over the ten-year period FY 1965–74, with additional terms to be negotiated and contained in each detailed credit sales arrangement under this agreement, taking into account Iran’s repayment capabilities. The interest rate on the unpaid balance to be negotiated will not exceed an average of 4 to 5 per cent per annum for the first $200 million and an average of 5 to 6 per cent per annum for such additional amounts.”

3. In Para III.B. substitute:

A. “FY 1965–70” for “FY1965–69“,

B. “FY up to $470 million” for “$250 million“,

C. “$70 million” for “$50 million“, and

D. “Up to $400 million” for “$200 million”.⁵

Rusk

1. Source: Department of State, Central Files, DEF 19–8 US–IRAN. Secret; Priority. Drafted by Newberry on August 4; cleared by Saunders, Colonel Haynes, Weh Meyer, Eliot, and Warren and in draft by Funari; and approved by Hare. Repeated to USCINCMEAFSA.
2. Document 170.
3. See Document 47 and footnote 6 thereto. The August 18 notes were not found.
4. In telegram 570 from Tehran, August 6, Meyer argued that rewording the 1964 memorandum with reference to Iran’s sovereign right to determine what it would devote to its defense was unnecessarily provocative and strongly urged that he and Hoopes be authorized to provide the interpretation intended by this new wording orally. (Department of State, Central Files, DEF 19–8 U.S.-IRAN) Telegram 23991 to Tehran, August 8, authorized Meyer to change the proposed annex to the amendment as follows: “In Para, III A 3 (B) in first sentence following the phrase “including the credits referred to in Paragraph III A, 3 A,” substitute for remainder of sentence “do not exceed $250 million and additional credits not to exceed $50 million each for US FY 1968, 1969, and 1970, consistent with the foreign exchange and other limitations contained in Paras III C and V.” (Ibid.)
5. In telegram 639 from Tehran, August 11, Meyer reported that he had handed the official note with the proposed amendment to the 1964 Memorandum of Understanding regarding military sales to the Foreign Minister that morning. He noted that he had emphasized again, as he and Hoopes had the previous day, the abiding U.S. concern that Iran’s outlays for military equipment not overburden its economic development effort. Aram had agreed to reemphasize this to the Shah when he secured his approval to a favorable Iranian response to the U.S. note. (Ibid.)