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

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

Tehran, July 29, 1968, 1250Z.

5881. Shah’s Visit—Follow-up Actions. Ref: State 209512.² Summary. Although deeply disappointed over bleak prospects for selling oil to U.S., Shah welcomed aspects of President’s letter which indicate continued fruitfulness of US-Iran military collaboration. For the moment, we seem to be over the hump.

1. President’s message (reftel) conveyed to Shah at Caspian morning 29th. After reading it, Shah was told President’s reply reflects most careful study of various subjects raised during Shah’s Washington visit. I added that as usual diplomacy is continuing process and Shah, General Twitchell and I would be consulting re these matters on continuing basis.

2. Oil Deal. After expressing appreciation for President’s attention to Iran’s problems despite heavy preoccupations such as Honolulu Conference, Shah’s initial comment was re oil deal. Apparently he already alerted by Reza Falla (probably Ansary) re bleak prospects his barter proposal. I explained why USG cannot tamper with import quota nor dictate to authorized importers countries from which oil must be bought.

3. On commercial side, Shah felt Planet would find it most difficult to break into our import market at profit. He noted contract been initialed with General Electric for $70 million worth GE products if barter oil transaction consummated. I gave Shah background re Planet (State 208708).³ He smiled and said he wished he had bought stock. We agreed Allen et al. respectable entrepreneurs.

4. Shah pointed out how he had hoped to do $800 million worth business in US over next five years, and he mentioned capital goods, arms, and USG securities. In passing he expressed amazement at USG policy which restricts cheap oil from Mideast while consuming US’s precious and dwindling reserves.

5. Shah still saw ray of hope via program which Falla had reported whereby foreign oil imports are permitted to petrochemical industries provided products are exported. Without closing door to this possibility, I recalled recent PIW report which indicated Interior Dept running into trouble with this program due to strong resistance from domestic producers.

6. Re DOD purchasing, Shah was surprised to learn that via consortium substantial quantities of Iran oil are moving to Far East. He did not pursue this subject further.

7. USAF Technicians. Shah was pleased that despite Viet Nam, President prepared to make 50 USAF technicians available, initially for one year. Noting our Balpa difficulties, I pointed out technicians would be on fully reimbursable basis to which he agreed. Also stressed they would be supervisory-level, working within ARMISH/MAAG framework. He thought this best utilization of technicians. It was left that General Twitchell would work out timing and other details.

8. Gulf Defense. Shah requested DOD proceed with full study of Hormuz defense weaponry and expressed hope results would be available expeditiously. If land-based missiles are out, he hinted he might purchase certain hardware from Israelis (with whom, he disclosed, he recently signed secret general credit agreement). When I referred to Gabrielle missiles, Shah merely noted that there is some doubt as to their range.

9. Telecommunications. I pointed out various reps, both private, PTT and military, began meeting this morning to determine best integration of communications systems in Iran. Shah said it already decided that Peace Ruby with its communications would go to Philco as sole source. He also disclosed he has decided (whether it is irrevocable, I do not know) to purchase mobile TOPO units from Northrop for $8,000,000. He noted they are almost immediately available and eventually when land-based stations are completed mobile units would be valuable reserve. I urged we see what emerges from current deliberations.

10. Northrop P–530. Shah had already heard that Europeans are banding together to produce their own fighter for mid-seventies and this would probably rule out P–530 project. He was interested that DOD taking interest in P–530 and we agreed to stay in touch re this subject in coming months. If P–530’s unavailable, Shah is considering possibility that rehabbed F–4–C’s might eventually replace current F–5 squadrons.

11. Long-term Commitment. Although obviously disappointed Shah did not make issue of five-year commitment. If military credit is unavailable via USG sources in coming years, he said, he would seek to purchase directly from American companies even using cash if necessary. I explained USG record vis-a-vis Iran in field of military collaboration is impressive. Also emphasized that given Congressional and other problems in Washington these days USG, with concurrence of all Washington quarters, is again treating Iran very well indeed. I added that this unique treatment reflects confidence which USG has in Shah’s constructive, non-demagogic, and peaceful policies.

12. Comment: At Caspian, Shah tends to be calm and relaxed. We shall be hearing more on all these subjects in weeks ahead, but for moment we seem to be over the hump. In reporting to Ansary it is suggested we downplay our optimism for if he reports that we think Shah is satisfied Shah may seek ways to dispel our temporary complacency.

Meyer

1. Source: Department of State, Central Files, POL 7 IRAN. Secret; Priority; Limdis. Repeated to CINCSTRIKE/USCINCMEAFSA.
2. Document 307.
3. Dated July 25. (Department of State, Central Files, PET 6 IRAN)