46. Memorandum From Harold H. Saunders of the National Security Council Staff to the President’s Special Assistant for National Security Affairs (Bundy)1
McGB:
We have reached a compromise on our new 5-year MAP agreement with Iran. RWK has dropped his idea of writing a foreign exchange ceiling into the memo of understanding provided we send Holmes tough instructions to tell the Shah our help will continue only so long as his military purchases don’t slow Iran’s development.
Defense and AID couldn’t go along with including a ceiling because (1) they don’t have a realistic figure and (2) they don’t think the Shah would stand still for such hand-tying. They think an annual US-Iranian review of the effect of arms purchases on the economy would give us better [Page 94] control. They say they’d even be willing to shut off credit altogether if the Shah goes too fast. The key point is to be sure Holmes gets this idea and explains it clearly to the Shah because the memo of understanding doesn’t sound that tough.
Kermit Gordon will be looking at the 1550 Determination this afternoon and may talk to you about it. State will also send over instructions to Holmes for clearance, which I’ll check.2
- Source: Johnson Library, National Security File, Country File, Iran, Vol. I, Memos & Miscellaneous, 1/64–12/65. Secret. McGeorge Bundy initialed his approval.↩
- See Document 48.↩