82. Paper Prepared by the National Security Council Staff1


Analytical Summary of IG Response to NSSM 66

1. The Problem (p. 1)

The Persian Gulf is a region of potential instability—vulnerable regimes, regional conflicts, and rivalries between outside powers—which is potentially exploitable by Arab radicals and by the Soviet Union. The question for U.S. policy is, how do we deal with it?

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The problem is raised by the certainty of Britain’s withdrawal of its defense commitments, protectorate responsibilities, and virtually all its military forces by the end of 1971. Eleven small Arab states in the lower Gulf—Kuwait, Bahrain, Qatar, the seven Trucial States, and Muscat/Oman2—will no longer enjoy this formal British protection or tutelage. [Britain’s political presence, however—in the form of active diplomacy, commercial involvement, military supply and training, and possibly even military contingency planning—will remain and will probably outweigh that of any other outside power in the lower Gulf. This, plus the desire of regional powers to manage regional affairs, could fill any potential “vacuum,” if the U.S. lends its encouragement and support and deters Soviet involvement.]

The paper presents two levels of policy decisions—six basic options (alternative strategies), and four specific operational questions. [Most of the options are impractical; the optimum strategy will be readily apparent. But some of the operational questions present important choices.]

2. US Interests (pp. 2–4)

Our overall interest in the stability of the Gulf area comprises the following particular interests:

  • Economic: Oil production and sales by 20 US companies yield a 55% of Western Europe’s oil, 90% of Japan’s, and 85% of the oil used by US forces in Southeast Asia. Britain’s commercial relationships in the area (the Sterling Area relation and £200 million income from investments) are crucial to the stability of the pound and of the international monetary system.
  • Political: The spread of radicalism in the Gulf would alter the balance within the Arab world and aggravate the Arab-Israeli conflict. Soviet political penetration would affect the East-West geopolitical balance (e.g., by increasing Soviet pressure on Iran and Turkey). Our friendly relations with Iran and Saudi Arabia are the mainstay of our influence in the area.
  • Military: The US has communications and intelligence facilities in Iran, and overflight and landing privileges in Iran and Saudi Arabia which provide an air corridor to South and Southeast Asia. A small US naval force (MIDEASTFOR), home-ported on Bahrain, enjoys refueling and port call privileges in much of the region.

3. UK Withdrawal Decision; Repercussions (pp. 4–8)

The British decision (January 1968) was more a part of an overall rearrangement of priorities than an economy measure. (Only £12 million [Page 258] annually will be saved.) But a reversal of this decision is doubtful, even if the Conservatives take power; the January 1968 announcement of the change in British policy has already set in motion the process of historical change and political adjustment in the Gulf.

The British presence served to exclude unfriendly major powers from the Gulf and to dampen intra-regional antagonisms and internal instabilities—which all show signs of re-emerging with the change in the British role. Territorial disputes (exacerbated by oil) are rife, Arab-Iranian ethnic and religious animosities remain strong, and radical pressures are beginning to develop in some of the shaykhdoms.

The nine shaykhdoms of the lower Gulf have yet to determine the form of their future independence. Their efforts to create a Federation of Arab Amirates (FAA) among all nine may or may not succeed; parochial differences and personal suspicions may prove stronger than the conservative skaykhs’ common interest in stability. The larger the unit, the better the chances of containing instability in the lower Gulf.

4. Soviet Interests (pp. 8–10)

Recent Russian naval visits in the Gulf (the first in 60 years) and memories of the 1940 Molotov–Ribbentrop protocol (which cited the area “in the general direction of the Gulf … as the center of the aspirations of the Soviet Union”) have aroused fears of Soviet penetration. The paper considers it “virtually certain that the USSR will seek to increase its presence in the Gulf after the British leave.”

[But it is less clear what this presence would consist of, and what Soviet objectives would be. Different points of view are possible:

  • —The complexities and potential instabilities in Gulf politics will present a tempting target. But greater involvement may magnify the contradictions in Soviet policy, i.e., supporting Arab radicalism while expanding ties with the Shah (an avowed conservative who has ties with Israel and disputes with Iraq).
  • —The importance of Western economic interests in the Gulf makes the potential Soviet threat ominous. But a cutoff of oil supplies to the West would not be in the interest of the producing states, whatever their ideology. The USSR is likely to develop a stake in the Gulf’s oil (especially for Eastern Europe), which will be large enough to give it a stake in the stability of the oil flow but not large enough to diminish the importance of the West as a customer.
  • —Soviet naval activity in the Gulf is disconcerting. But the USSR could not sustain a significant force in the Gulf region (especially while the Suez Canal is closed), and the establishment of a Soviet naval base in the Gulf is improbable.
  • —While a rational calculation of their national interest might thus lead the Soviets to avoid deliberate mischief-making, short-sightedness or opportunism might draw them into greater involvement. Even if [Page 259] they end up facing the very difficulties that we can foresee for them, their involvement would be harmful to our interests.]

5. Arab/Iranian and Inter-Arab Problems; Radical Pressures (pp. 10–14)

Iran’s claim to Bahrain, a potential obstacle to the Federation and an irritant in Arab-Iranian relations, has been relinquished, with the UN providing a face-saving device. But the irritant caused by Iran’s claim to the Tunb and Abu Musa islands remains. Iraqi-Iranian tensions over the Shatt-al-Arab waterway continue, and may intensify now that Iraq has resolved its Kurdish problem. But Iraq is weak, and preoccupied with the Arab-Israeli issue.

The ideological pressures produced by the Arab-Israeli conflict threaten to spread to the region, which used to be relatively insulated from that conflict: Many thousands of Palestinians hold important governmental or social positions throughout the lower Gulf. Iran’s ties with Israel may impede Iranian-Arab cooperation. The paper declares that, unless the Arab-Israeli problem can be resolved, “the outlook is for a gradual but steady erosion of our position in these Arab states.”

The paper concludes that “if a federation can be formed with a significant counter-intelligence and police capability, these radical activities are not likely in the short run to be successful in subverting existing regimes. If federation fails, and local tensions increase, these groups may be able to seize one or more of the governments in, say, three to five years.” Bahrain is especially vulnerable.

6. Iran and Saudi Arabia; Regional Security (pp. 15–18)

Iran is by far the strongest and most stable nation in the Gulf region. The Shah is determined that Iran should replace Britain as the dominant power in the Gulf, to the exclusion of any outside power. But he is willing to cooperate with, and to aid, Saudi Arabia (as he did recently when South Yemen raided Saudi territory).3 Saudi Arabia is weaker, and its future stability is less certain. Faisal has sought our support in restraining Iran’s domineering.

Iran has suggested to us and the Saudis the possibility of a regional security arrangement, either formal or informal. But the paper suggests that the various animosities and suspicions will make this difficult, especially while the Arab-Israeli conflict continues.

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7. Future Oil Development; Economic and Commercial Trends (pp. 18–20)

There is a “real possibility,” the paper states, that the flow of oil to the West “may increasingly be arranged directly, on a government-to-government basis, between the producing and consuming countries.” This would “drastically curtail” the operations of US firms and reduce the $1.5 billion net balance-of-payments surplus which the US enjoys. The continuation of the Arab-Israeli conflict poses a threat to US citizens and US firms there.

8. The Outlook for the Future; Implications for US Interests (pp. 20–23)

“It would be wrong to assume,” the paper concludes, “that when the British leave there will be a vacuum in the Gulf area.” Britain will continue to play a significant role, through its continued diplomatic presence and military supplies. The US economic presence will continue to be politically significant.

More important is the possibility that a new set of regional interrelationships will fill the vacuum. But a stable regional system will depend largely on Iran’s willingness to avoid strong-arm methods, and on Saudi Arabia’s willingness to exert its influence more actively in the shaykhdoms.

At the moment, says the paper, the prospects for stability look good—at least if no “major new Arab/Israeli crisis” occurs. “The U.S. should give careful attention to discriminating among those regional issues and differences which bear directly on our interests, and those which are best left to resolution by the parties directly involved.” [This bit of wisdom is not elaborated on.]

9. US Options in the Gulf (pp. 24–39)

The paper first rules out three possible strategies: (a) convincing the UK to reverse its policy; (b) proposing to the USSR that we both adopt a hands-off policy in the Gulf; and (c) standing back from the area in any case.

The paper then recommends six options for consideration:

Taking on the UK role of “protector” ourselves;4
Backing a chosen instrument—either (a) Iran or (b) Saudi Arabia;
Fostering Saudi-Iranian cooperation;
Developing significant bilateral contacts and presence in the small states of the lower Gulf;5
Continuing to deal with the small states indirectly as at present;
Sponsoring a regional security pact between Iran, Saudi Arabia, Kuwait and the small states.

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[Options 1, 2(b) and 6 are impracticable; options 4 and 5 represent more an operational sub-issue than a strategic choice. Present policy is a blend of 2(a) and 3, and it is difficult to see a feasible or desirable alternative.]

Option 1: Assume the UK Role Ourselves (pp. 26–29)

Operationally, we would: make formal or informal security commitments to Kuwait and the smaller Gulf states; establish a naval base in the Gulf; increase our diplomatic representation to replace the UK Political Agents; provide MAP to the FAA.

Pro: The conservative regimes would welcome us as a protecting power. This would cost little, and give us direct influence over the Gulf’s future. Con: Iran and Saudi Arabia would strongly object. Radical Arabs and the USSR might be provoked into responding. The US would be drawn into the complex and volatile regional diplomacy. [In short, a straw man.]

Option 2: Back a Chosen Instrument (Iran or Saudi Arabia) (pp. 24–32)

Operationally, we would favor our “chosen instrument” with military assistance, with support in Consortium negotiations for oil revenues, and with support in territorial disputes in the Gulf.

Iran: Pro: Iran is the most powerful and most stable state in the look. Con: The Arabs are already suspicious of Iran’s intentions and resentful of Iran’s domineering. An aggressive Iranian policy could stir up Arab militants. US backing of Iran would alienate the Saudis. [In short, there are strong elements of this in what we are already doing, though we have not had to choose Iran to the exclusion of Saudi Arabia.]

Saudi: Pro: This would establish a Saudi-Iranian balance of power. The Saudis might be able to maintain order among the small shaykhdoms. Con: The Iranians would never acquiesce, and could turn to the Soviets. Saudi stability is less reliable than Iran’s. The Saudis are not eager for a dominating role. US backing would stigmatize the Saudis as “US tools” and weaken the moderates in the Arab world. [In short, self-defeating.]

Option 3: Foster Saudi-Iranian Cooperation (pp. 32–34)

Operationally, we would: encourage ministerial-level contacts and intelligence cooperation between the two; urge Iran to moderate its relations with Israel; urge each to refrain from unilateral efforts to dominate.

Pro: There is no reason for us to want to choose sides, unless forced to by a crisis. Cooperation has begun discreetly; they are aware of their common interests (which coincide with ours.) Their common power may be sufficient to maintain regional stability. Con: This might taint [Page 262] the Saudis in Arab eyes and weaken Faisal. It would require the US to restrain Iran, which could strain US-Iranian relations. It runs a risk that collaboration might break down, or that the Saudi regime is unstable or incompetent.

[Comment: Options 2(a) and 3 are not mutually exclusive: There is no reason to back Iran and not use our influence to encourage Saudi-Iranian cooperation. There is no feasible way to promote cooperation without recognizing Iran’s physical preponderance.]

Option 4: Develop Significant Bilateral USG Contacts and Presence in Lower Gulf (pp. 34–36)

Operationally, we would: establish diplomatic posts in the lower Gulf states; encourage a more active US commercial presence; develop cultural, economic, and technical assistance programs.

Pro: This would give us a more direct influence over events, without the burden of being a “protector.” It would be welcomed by the shaykhs, and might not be objected to by Iran or the Saudis. Con: The Soviets would oppose this, and might adopt a more active policy than if we left the shaykhs alone. The British are more expert than we in this area. [Not a real strategic alternative, but a tactical posture that would be consistent with the new political status of the small states of the lower Gulf.]

Option 5: Continue to Deal with Lower Gulf States Indirectly (pp. 36–37)

Operationally, this means not expanding our diplomatic presence beyond the present Consulate General in Dhahran.

Pro: Iran and Saudi Arabia are the key states; there is no need to involve ourselves directly in the shaykhs’ squabbles. Con: The shaykhs have relied on the UK and may continue to need outside support. Some might even turn to the UAR. It would not offer any direct means of protecting US interests in the lower Gulf. [Not a real strategic alternative; consistent only with aloof US posture.]

Option 6: Sponsor Regional Security Pact (pp. 37–39)

Operationally, we would: encourage exploratory talks between Iran, Kuwait, and Saudi Arabia; increase military aid to Saudis and Iran and undertake military aid to Kuwait and FAA; involve ourselves in the formative efforts of the FAA and encourage its collaboration with Iran, Kuwait, and the Saudis; same for Bahrain if it becomes an independent state.

Pro: The combined military power and political unity would exclude outside-power interference. Con: It is politically difficult for the Arabs to collaborate openly with Iran because of Iran’s ties with Israel. Our sponsorship of the pact would discredit it. [An unrealistic option unless so informal as to be identical to Option 3.]

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10. Limitations on US Action (pp. 39–41)

“There are serious limitations on our ability to act effectively in the Gulf region,” the paper notes. One of our important instrumentalities of influence—capital assistance—cannot be effectively used: Many of the small FAA states are capital-surplus countries because of their oil wealth, and would not qualify for US capital aid. But all the Gulf states, large and small, badly need technical assistance, which the US should be able to provide. This form of aid, plus USG and private cultural and educational assistance and exchanges, will probably be the extent of the “US presence” in the Arab world for the foreseeable future.6 But there is as yet no office in the USG able to react promptly to requests for such programs.

The political fall-out from the Arab-Israeli conflict is, of course, another factor limiting our influence in the region.

11. Specific Operational Decisions Required (pp. 41–48)

[The four operational questions will have to be answered independently of the choice of options. They involve instrumentalities—military, economic, and diplomatic—which would not necessarily be ruled out by any option, and which should be decided upon according to (1) their inherent feasibility and (2) the acceptability to us of the degree of involvement they imply.] The operational questions are:

the future of MIDEASTFOR (now home-ported at Bahrain by agreement with the British);
UN membership for the FAA or for any new states singly;
US arms policy toward Kuwait, the lower Gulf states, and Muscat/Oman; and
the establishment of US diplomatic posts in the new states.

[Only (a) and (d) are serious issues now; (d) really raises the important issue of the nature of our presence—diplomatic, economic, and cultural.]

A. The future of MIDEASTFOR (pp. 41–44)

The British have offered us first refusal of their Bahrain facilities7 A decision is needed now, so that arrangements can be worked out with the Bahrainis (and Iran) before the British go.

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The argument for continuing the MIDEASTFOR presence is: The shaykhs would welcome it. It would counter the symbolic effect of the increased Soviet naval activity. Apull-out at the same time as UK withdrawal would seem to signify abandonment of Western interests. CINCSTRIKE does not see any other home-port (e.g., Diego Garcia) as a feasible alternative to Bahrain. The argument against staying in Bahrain is: It could increase the vulnerability of the already-unstable Bahrain regime. It might antagonize Iran. The force is too small to be militarily significant.

B. UN Membership for the FAA (pp. 44–45)

The FAA would meet our mini-state criteria for UN membership. Iran’s claim to Bahrain has been a complicating factor. [But this has now been settled.]8

C. US Arms Policy Towards the Gulf Arabs (pp. 45–47)

Neither Kuwait, the nine shaykhdoms, nor Muscat/Oman is eligible under the Foreign Military Sales Act. They have relied before on UK sources but are interested in US arms. Unless we choose Option 5 (continuing to deal only indirectly with the lower Gulf), the paper recommends, we should consider arms sales on a case-by-case basis.

The argument for arms sales is: They would improve our position, but need not be substantial in amount. The states are rich, and would be able to get arms elsewhere. The area is remote from the Arab-Israeli conflict. The argument against is: Sales could involve us in local rivalries and could stimulate radical pressures. TheUK might resent US efforts to replace it as the main supplier. [We do not face this decision now.]

D. Foreign Service Posts (pp. 47–48)

The British, who have up to now resisted the creation of US posts in the lower Gulf, would no longer object. Because of the uncertain status of the FAA, the best location for possible new US posts is not yet clear. But if it is decided to increase US activity there, financial and staff projections should be undertaken well in advance.

[State might also be asked to draw up a comprehensive plan for a US presence in the Gulf, which would include cultural exchange, trade promotion, and technical assistance, as well as diplomatic representation. This planning will be useful for the whole Middle East, but it is particularly appropriate for the Persian Gulf.]

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–111, Senior Review Group, SRG Minutes Originals 1970. Secret. All brackets are in the original. The paper is an analytical summary of “Future U.S. Policy in the Persian Gulf,” the response to NSSM 66 prepared by the Interdepartmental Group, which was transmitted to the Review Group under a June 2 covering memorandum from Davis. (Ibid., Box H–156, National Security Study Memoranda, NSSM 66) The paper was initially drafted at the end of 1969; see Document 76. A May 21 version was part of the NSSM 90 studies. (National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–044, Senior Review Group Meetings, Review Group NSSM 90 5/21/70) NSSMs 66 and 90 are Documents 73 and 19, respectively.
  2. See map at the end. [Footnote is in the original. The map is attached but not printed.]
  3. As reported in telegram 118 from Dhahran, January 28. (National Archives, Nixon Presidential Materials, NSC Files, Box 629, Country Files, Middle East, Saudi Arabia, Vol. I) According to telegram 1483 from Tehran, April 15, cooperation between Saudi Arabia and Iran continued in the form of Iranian loans of MAP-furnished weapons to Saudi Arabia and confidential talks on how Iran could help Saudi Arabia if attacked again. (Ibid., RG 59, Central Files 1970–73, DEF 1 NEAR E)
  4. This sentence was circled and checked by Kissinger.
  5. Kissinger circled the number 4, and put a check mark in the margin.
  6. This paragraph reflects a March 9 briefing paper entitled “The U.S. in the Broader Middle East” prepared for the June 5 Review Group meeting; see Document 83. The briefing paper summarized that part of the President’s February 18 foreign policy report to Congress concerning the Middle East. The President’s “First Annual Report to the Congress on United States Foreign Policy for the 1970s” is printed in Public Papers: Nixon, 1970, pp. 115–190.
  7. See Document 72.
  8. See footnote 2, Document 81.