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

1603. Eyes Only for Secretary Kissinger from Under Secretary Robinson. Subject: Results of My Meetings in Iran.2

1. While I hope we will be able to discuss my entire trip in great detail next week, there are a few conclusions which I have reached as a result of my meetings in Tehran which I thought I should share with you right away.

2. There is a substantial possibility for development of a common position between the US and Iran on many oil-related issues, a far greater possibility than with any of the other OPEC countries which I have visited. Iran takes a practical view of the oil situation, basing its judgements on economic considerations rather than on the relationship of oil to the Arab-Israel conflict. To the extent it does inject politics, it is anxious to sustain its relationship with the West, on whom it is increasingly dependent economically, politically and militarily. With respect to a consumer-producer conference, there is no interest in exacerbating relations between producers and consumers, want to avoid interchange of extraneous raw material issues, and is attempting to restrain the more radical oil producers. Its goals are to find a method of avoiding the erosion of the purchasing power of its oil revenues through inflation or exchange-rate fluctuations, perhaps to realize a more secure climate for its investment, and to find an improved means of international cooperation to assist developing countries. It is clearly desirous of improved cooperation with the US in preparations for the conference.

3. While there are a number of areas in which improved cooperation can take place, including particularly the many projects which we have agreed can be promptly realized in the Joint Commission framework, there are three important policy areas where prompt action by the US could achieve major benefits for us:

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1. The US needs to develop a position in response to OPEC concerns that inflation is eroding the purchasing power of oil revenues. The Iranians are working on a proposal for indexation. While I am skeptical that an indexation proposal acceptable to OPEC will be acceptable to us, or that indexation is technically feasible, we ought to at least explore what a proposal satisfactory to us might look like. Certainly the OPEC countries will have such a proposal by the middle of March and we should have one as well. If we conclude that indexation is technically impossible, or that market forces will bring down the price of oil so that any indexation however viable technically should be resisted, we might at least consider possibility for developing a technical level consultative process between consumers and producers which examines the impact of inflation, the policies nations are using to curtail it, and the ways in which producers might act to counter its impact on their development objectives. This would institute a process for a commitment to indexation but would permit the possibility of an increase in oil prices based on consultation rather than unilateral action.

2. We might raise with OPEC countries the possibility of agreement to begin a dialogue between developed and developing countries on raw materials. OPEC, especially Algeria, is under pressure from non-oil producing developing countries to avoid neglecting raw materials in any conference with the industrialized nations. Agreement to a separate future conference, perhaps at the technical level at first, on raw materials might make it easier to remove this subject from the consumer-producer oil conference. It would, moreover, be consistent with your desire to develop an American initiative in this area.

3. There is a distinct possibility that the US proposal for a trust fund in the IMF can be married with the Shah’s proposal for a trilateral development fund. We believe a compromise can be reached which would include the funding scheme incorporated in our trust fund proposal, the trilateral board of governors proposed by the Shah, use of the staffs of the IMF and IBRD contained in both plans and the emphasis on balance of payments assistance contained in the trust fund plan. Such a proposal would include OPEC countries in a multilateral aid scheme, which would be more helpful, from our point of view than their present emphasis on bilateral aid, which often has political strings, avoid the appropriation problems through use of IMF gold, and put a strong plus in our relations with the Shah. Amouzegar was receptive to this suggestion for attempting to combine the two schemes. If we could have a basic proposal to him before he departs on February 25 to meet with other OPEC countries on this subject, he might try it out. Time is therefore of the essence, and if we are to get this proposal before OPEC, we would need to move immediately. I suggest you have EB draw up a [Page 318]proposal for your consideration by Saturday evening so that we could go over it together and send it to Tehran by noon on Monday.

Helms
  1. Source: Library of Congress, Manuscript Division, Kissinger Papers, Box CL–152, Iran, Chronological Files, 4 January–23 March 1975. Secret; Immediate.
  2. In addition to meeting with Amouzegar (see Document 104), Robinson also met with Ansary and Mina. He reported the details of his meeting with Ansary in telegram 1576 from Tehran, February 19. (Ford Library, National Security Adviser, Presidential Country Files for Middle East and South Asia, Box 14, Iran—State Department Telegrams, To SECSTATE–NODIS (1)) The Embassy reported the substance of his meeting with Mina in telegram 1779 from Tehran, February 24. (National Archives, RG 59, Central Foreign Policy Files, D750064–0459)