163. Memorandum From Secretary of State Kissinger to President Ford1

SUBJECT

  • Message for the Shah of Iran

The Shah of Iran has, during the last six to eight months, come to realize that, in spite of a dramatic increase in Iran’s income from oil since 1973, his expected revenues will not meet the costs of his ambi[Page 491]tious civilian and military development programs. In the fourth quarter of 1975, Iran’s exports of heavy crude oil plummeted by about 1.5 million barrels per day. In the last few weeks the Shah has made a series of direct and indirect approaches to us seeking the assistance of this Government in putting pressure on American oil companies to increase their purchases of Iranian heavy crude oil. He has suggested that, if Iran’s oil income does not rise to meet his development spending plans, he will have to revise his foreign policy to fit the country’s more modest financial capabilities.

Our studies have led us to the conclusion that the current world demand pattern for oil—particularly the heavy crudes—probably makes it impossible for us to be of any substantial assistance in increasing Iran’s oil income. We are also unable to be of any assistance to Iran in the related problem of the high and steadily advancing cost of sophisticated defense equipment. We note, incidentally, that a decision by the Shah to slow the pace of his defense development program would have the positive aspect of permitting Iran’s strained manpower and infrastructure to catch up with equipment procurements.

In the circumstances, I believe a damage-limiting effort is in order to reassure the Shah that our inability to be of assistance in his current problems has not diminished our interest in maintaining and expanding our special relationship with Iran. An expression of your personal sympathy with the Shah’s concerns would be a major element in such an effort. We are studying other steps to take in support of this effort.

Recommendation:

That you approve the attached message for transmittal to the Shah. [Tab A]2

  1. Source: Ford Library, National Security Adviser, Presidential Correspondence With Foreign Leaders, Box 2, Iran—The Shah (1). Confidential. Scowcroft forwarded Kissinger’s memorandum to the President under a covering memorandum, February 16, that reads: “Relations with Iran have suffered some strains in recent months because of our inability to help Iran in two important inter-related areas—escalating costs of U.S. arms and insufficient oil revenues to meet these and the overall costs of Iran’s ambitious military modernization program. More generally, the Shah remains concerned about the reliability of the U.S. commitment to its friends and allies around the world. It is important that the Shah be reassured of our commitment to a sound and special relationship with Iran, despite periodic differences on some issues.” (Ibid.)
  2. Brackets in the original. Tab A is not attached. There is no indication of whether or not Ford approved the memorandum, but on February 18, he sent a letter of reassurance to the Shah, noting that he was “completely understanding and sympathetic of your efforts to achieve, within Iran’s resources, the appropriate balance between Iran’s economic development and security objectives.” Ford also expressed pleasure that Vice President Rockefeller would be visiting the Shah to exchange views on furthering cooperation. (Ibid.) Rockefeller reported in backchannel message Tosit 6, March 24, on his 3-hour meeting with the Shah, who discussed international issues and, briefly, the oil deal. (Ibid., NSC Middle East and South Asian Affairs Staff: Convenience Files, Box 5, Iran (5))