Foreign Relations of the United States, 1969–1976, Volume XXVII, Iran; Iraq, 1973–1976

159. Memorandum From the President’s Assistant for National Security Affairs (Scowcroft) to President Ford¹

Washington, January 26, 1976.

SUBJECT

• Nuclear Agreement with Iran

The US has run into a serious impasse in its negotiations for a nuclear agreement with Iran. The agreement was to serve as the enabling vehicle for our supplying Iran with approximately 6 to 8 large nuclear power plants and the associated enriched uranium fuel, and for possible Iranian investment in the next US gaseous diffusion uranium enrichment plant.

Background

Our basic position for these negotiations was set forth in NSDM 292 (Tab D).² Consistent with those guidelines, which were intended to strengthen our nuclear safeguards, we have been seeking the right to approve where the US supplied fuel can be reprocessed and the resulting weapons-usable plutonium retained. Our objective is to preclude reprocessing and storage in wholly national facilities. We have, however, assured the government of Iran that we would permit our fuels to be reprocessed in Iran on a suitable multinational basis.

In the past, Iran also has expressed an interest in contributing up to 20% of the cost of the next, privately built US gaseous diffusion plant. Iran would then be entitled to receive 20% of the output of the plant. We have informed Iran that we would permit it to physically receive such amounts of this material as are necessary for its own reactors and for pass-through fabrication for use in third countries with whom we have agreements. The remainder of Iran’s proposed share of the output, which would be in excess of such needs, would be stored in the US until actually needed in Iran or in a third country acquiring its fuel through Iran.

Current Status

While our first round of negotiations, which were held in Tehran last April, were positive and hopeful,³ the Iranian position appears to have hardened significantly in the interim. In April, the only serious issue separating the two sides was Iran’s desire to assure that it could reprocess US plutonium in a national plant if a multinational facility could not be established. However, recently we were advised by the head of the Iranian AEC that several of our proposals have been rejected, and that the Shah is unwilling to accept any safeguards other than those required by virtue of Iran’s obligations as a party to the Non-Proliferation Treaty (NPT).

Specifically, Iran has

(a) strongly criticized our desire to retain a right to veto where supplied materials can be reprocessed;

(b) indicated vigorous objections to our proposal which would have limited the amount of Iranian-owned enriched fuel that could actually be transferred for storage in that country; and

(c) expressed the desire that any assurances that we might give them as to how we exercise our proposed rights of approval over reprocessing should be incorporated in the text of the basic agreement rather than in a separate note as we had proposed.

This reaction to our proposals has placed us in the position of having to decide whether to stand firm or to modify the “extra” safeguards we have sought. Also, in the background is the prospect of an acrimonious and possibly unsuccessful attempt to obtain the required Congressional approval of an agreement with Iran which does not contain strong safeguards, particularly with regard to reprocessing. Without volunteering any specifics, the Department of State has already informed Congress that the Iranian agreement would include more rigorous controls than found in earlier US agreements.

Two additional complicating factors are the prospect that the FRG and France will be willing to supply nuclear reactors with less rigorous safeguards than proposed by the US, and the crisis we are currently experiencing in our bilateral relations with Iran. Several serious problems, particularly those concerning oil revenues and the escalating cost of US-supplied military equipment, have shaken the Shah’s confidence in Iran’s special relationship with the US, thereby magnifying the importance he will attach to the success or failure of efforts to obtain acceptable terms from the US for a nuclear agreement.

Review of our Alternatives and Recommended Actions

The interagency non-proliferation working group prepared an analysis of our alternatives for further negotiations with Iran (Tab C),⁴ and agency views have been obtained (Tab B).⁵ The most important conclusion is that found in State’s memorandum. Namely, that prior to the active resumption of negotiations, an approach to the Shah should be undertaken by senior political and scientific officers, with the objective of sharing directly with the Shah the reasons why we attach such importance to the avoidance of the widespread proliferation of national reprocessing capabilities, as well as the technical and economic factors which favor the deferral for some time of reprocessing decisions abroad and the ultimate establishment of multinational or binational centers serving regional needs.

In such an approach, we would be able (1) to ascertain directly the Shah’s views on the development of Iran’s peaceful nuclear program, (2) to gauge whether and to what degree the Shah personally holds the view that Iran would find controls beyond those of the NPT unacceptable, and (3) to elicit his views on possible alternate approaches to international reprocessing. The approach would be on a broad philosophical level, pointing out to him the hazards to worldwide stability, in which Iran has such a major stake, if nuclear weapons or the capability to produce them continue to spread. (In this regard, the Shah undoubedly is apprehensive about India’s demonstrated nuclear explosive capacity and Pakistan’s well-advanced efforts to obtain a reprocessing plant; but he would be most concerned about the future nuclear capabilities of his Arab neighbors.) We would suggest that our agreement can constitute an act of joint world leadership in dealing with the issue of proliferation in an age of burgeoning nuclear power, and could explore the Iranian idea of an ultimate strengthening of the safeguards provisions of the NPT. We would attempt, in general, to enlist Iran’s positive support rather than cause it to feel that we seek to impose our will on them. It is, of course, hoped that these discussions would serve to moderate or overcome any such views which the Shah may hold, and thus to create the most favorable possible climate for the resumption of negotiations.

This proposal makes a great deal of sense since we really are uncertain as to the Shah’s basic views and his flexibility. We have, most recently, not been negotiating with Iran but with ourselves.

The interagency study and the agency comments proposed a number of possible fallbacks for the US position on reprocessing, including imposition of US safeguards procedures in Iran in addition to those of the IAEA, plutonium buy-back, uranium exchange for plutonium, and guaranteed external reprocessing services. However, we are not at all sure if these fallbacks address the Shah’s main concern. Also, the fallbacks are not agreed among the agencies, and to resolve that problem now would require a detailed, controversial decision by you on a US position that might not be acceptable to the Shah.

It seems much more sensible to sanction the proposed talks, allow some flexibility in the exploratory discussions, and thereby ascertain with more accuracy the alternate approaches to the reprocessing question that may be necessary to reach agreement with Iran. We would then be in a position to judge the acceptability of these alternatives in relation to our own non-proliferation objectives, and to make some soundings on the Hill. We would, after these steps, seek your decision on a definite proposal which would be expected to be acceptable to Iran and to have a fighting chance in Congress. The agencies are now agreeable to this approach, and I recommend it to you.

All agencies also agree that:

—We should allow Iran to receive and store all enriched uranium to which it might be entitled by reason of an investment in US private enrichment firms (UEA or prospective centrifuge enrichment companies), as long as any retransfer is to countries with which the US has an appropriate agreement for cooperation. (This step should improve the outlook for Iran’s investment in private US ventures, which will increase the chances that they can get off the ground and make private enrichment a reality.)

—We should determine that Iran still has a serious interest in acquiring US nuclear equipment and material, and that our negotiation is not just an exercise.

The above decisions are embodied in a memorandum (Tab A)⁶ which has been coordinated with the agencies.

In reviewing this memorandum, Jim Cannon expressed concern that US efforts to deter proliferation by advancing the concept of multinational reprocessing might constrain our policies with respect to the development of our domestic reprocessing industry. Jim Cannon and I have agreed that our efforts on the multinational concept will in no way restrict the development of our domestic policy with respect to reprocessing, restrict our choices as to the respective roles of industry and government in that industry, or commit us to the involvement of other nations in financing and ownership of our US centers. The decision memorandum at Tab A reflects this separation of our international and domestic efforts vis-à-vis reprocessing.

Recommendation

That you approve my signing of the memorandum at Tab A.⁷

1. Source: Ford Library, NSC Institutional Files, Box 59, NSDM 292. Secret. Sent for action. Concurred in by Cannon. A stamped notation on the memorandum indicates that the President saw it.
2. Not attached. NSDM 292 is Document 115.
3. See Document 122 and footnote 2 thereto.
4. Not attached. A Department of State options paper, October 26, 1975, which apparently became the basis for the interagency paper, is in the Ford Library, NSC Institutional Files, Box 59, NSDM 292. In addition, a summary of an undated memorandum from Kratzer to Kissinger entitled “Next Steps in Our Nuclear Negotiations with Iran” is in the National Archives, RG 59, Central Foreign Policy Files, P830113–0150.
5. Not attached. Two of the agency views, a memorandum from Iklé to Scowcroft, January 19, and an unsigned Department of State memorandum to Scowcroft, January 13, are in the Ford Library, NSC Institutional Files, Box 59, NSDM 292.
6. Not attached.
7. Ford initialed his approval of the recommendation.