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

12570. Personal for Secretary Kissinger and Secretary Rumsfeld. Department please pass to General Scowcroft, White House. Subj: Possible Change in Iranian Foreign Policy.

1. At audience on afternoon of December 30, Shah informed me that he was going to have to re-think Iranian foreign policy in light of significant revenue losses caused by dropoff in oil liftings of a million barrels per day.2 After pointing out that any foreign policy involved military and economic considerations as well as political ones, the Shah explained that he cannot go on lending money to countries like Britain and France nor can he go on buying arms and civilian goods from the United States unless he has the revenue to make this possible. Having identified the extent to which military power promotes political leverage in foreign affairs, he said that Iran would be obliged to give up the idea of extending its influence outward and would be obliged to be entirely “inward-looking.” “You and Saudi Arabia can handle the policing of the Indian Ocean,” he quipped. He added that there was no possibility of naval patrolling as far as South Africa if indeed he is obliged to cancel the Spruance purchase and the development of a naval base at Chah Bahar, which he is seriously considering doing. “I will be obliged to have a purely defensive navy.” The Shah ruled out [Page 458]military aid to other countries (cf. Lebanon) but said he would not pull out of Dhofar since his commitment to Sultan Qaboos was firm. The Shah went over in some detail the other military purchases he is intending to cancel including AWACS, AMST, the F–16, and reducing the number of I–Hawk battalions now on order. In summarizing, the Shah emphasized that he would tailor his foreign policy objectives and his military purchases entirely to the income his country derives from oil.

2. At the conclusion of his comments involving the United States, the Shah went on to say that since Britain and France were responsible for 60 percent of the oil take-off from Iran, he would be talking to those countries along the same lines that he had talked to me. He said that it might be necessary to cancel weapons purchases from Britain (cf. Rapier Missile) and he might be obliged to cancel understandings with France for building a subway system in Tehran and nuclear power plants in other parts of Iran.

3. During course of day December 30 three approaches were made to US officials here: the Shah spoke to me, and General Toufanian, Vice Minister of War and purchaser of all Iranian weapons systems, spoke with both DefRep Von Marbod and me separately. The message was exactly the same. The application of pressure to increase oil liftings was clear.3 Exactly what the Shah in the end will do is not so clear. After 33 years in power, he has endured much and has had many ups and downs. He is essentially a pragmatist and is quite capable of making unpleasant decisions when he decides they are justified. Therefore it would not be advisable for the USG to conclude that he is bluffing. He is ambitious for his country, he wants to improve the standard of living of his people, and he desires a larger role for Iran on the world scene. Nevertheless, he is not consumed by his shiny goals, and as he once said to me in another context, “The people of my country can always go back to subsisting on goat cheese as they did for centuries.”

4. In light of the foregoing, General Toufanian’s trip to Washington in mid-January assumes additional importance and should not be postponed if it is at all possible to accommodate him. The visit can have dis[Page 459]tinctly constructive aspects in bringing about reassurance on DOD performance.

Helms
  1. Source: National Archives, National Security Adviser, Presidential Country Files for Middle East and South Asia, Box 14, Iran—State Department Telegrams, To SECSTATE–EXDIS (2). Secret; Immediate; Exdis. Also sent to the Secretary of Defense.
  2. DIA Defense Intelligence Notice DIADIN 3338–75, December 19, noted that Iran’s drop-off in oil sales was due to its overpricing of heavy crude oil in a market depressed by unseasonably warm weather and the economic recession in the West. (Washington National Records Center, OSD Files: FRC 330–78–0058, Iran 300–900, 1975)
  3. According to telegrams 12136 and 12152 from Tehran, December 15 and 16, the Shah had argued for several weeks that with rising arms prices, Iranian purchases could not proceed unless the United States prevailed upon oil companies to increase exports from Iran. (Ford Library, National Security Adviser, Presidential Country Files for Middle East and South Asia, Box 14, Iran—State Department Telegrams, To SECSTATE—EXDIS (2), and National Archives, RG 59, Central Foreign Policy Files, D750436–0780, respectively) In telegram 12252 from Tehran, December 18, the Embassy commented that major oil companies were treating Iran better than most other Persian Gulf nations, and that Iran was asking the United States “to try to achieve indirectly what it knows it could not achieve directly: a reduction in liftings from Saudi Arabia to make more room in the market for Iranian oil.” (Ibid., D750441–0496)