45. Memorandum From Robert W. Komer of the National Security Council Staff to the President’s Special Assistant for National Security Affairs (Bundy)1
Mac—
Iran Problem. Though 5-year $300 million Iran MAP plan (a real break-through) still has three years to run (FY 63–67), Shah recently got all fired up about buying some fancy new hardware. He alleges growing Arab threat to oil-rich Khuzistan, but more likely his rapidly growing oil revenues have gone to his head (he told LBJ he expected $1.2 billion annually by 1970—he gets $400 plus million now).
We’re happy to sell for hard currency, since otherwise Shah will simply buy elsewhere. However: (a) chief threat to Iran’s stability is still internal, not external—so nation-building remains the basic need; (b) since Iran is oil-rich, we want to phase out AID money and let it finance its development through oil revenues; (c) ergo, we want to limit Shah’s overall military outlays to reasonable figure, using MAP credit sales plus some continued MAP as the lever.
So we’ve cooked up a so-called Cooperative Logistics Agreement under which we: (a) promise Shah good credit terms for some $250 million in sales of M–60’s, C–130s, F–5s, etc. during FY 65–69; (b) as a sweetner promise to continue a MAP grant program through FY 69 ($53 million beyond present agreement); (c) want in return a promise that Iran will restrict its own military outlays to what we think reasonable so that development program is not short-changed.
McNamara is pushing hard for closing this deal immediately, saying he’s discussed it with LBJ. One story is that LBJ told him either to sell $1.5 billion a year in hard goods to balance our payments or to cut troops in Germany. Bob pressed Bell and Alex Johnson last week.
Whatever the cause, Bob has panicked his people, and seems to be listening only to his salesmen, not to politico-military types. For example, he reversed his OK to Sloan to steer Shah to M–48A3 (our Israeli ploy) and plugged M–60s. This will cause havoc with Turks, Paks and others, who will now want M–60s and can’t pay for them.
AID and I can’t see cause for rushing in so fast (Shah is quite happy with promises of M–60s and C–130s he got here). But above all we think this military carrot (to which we’ve no objection) should be used to get an agreed ceiling on Iran’s overall hard currency military outlays, so Iran’s [Page 93] future isn’t jeopardized to satisfy Shah’s military whims. Embassy Teheran says Shah wouldn’t like any attempt to impose ceiling (Teheran 1188)2 and promises to achieve same result through provision for annual reviews of Iran military program, upon which each year’s MAP and sales increment would be contingent. But I don’t trust Embassy or DOD here, and would prefer a real stab at an agreed ceiling, a la the successful Indian exercise we just went through. At least let’s make a try for an agreed ceiling, before retreating to annual reviews as a fallback.
We still have control of this, because a 1550 Determination is needed. I’m sure BOB will agree with us, and probably AID too. So I hope we won’t let Rapid Robert’s passion for promptitude panic us into premature pusillanimity. Saunders will keep you clued.