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

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

Washington, October 27, 1976.

SUBJECT

• Northrop Letter on the F–18L

You asked for clarification of the letter from Tom Jones, Chairman of the Board of Northrop, to Bob Ellsworth in Defense which was given to you in Texas (Tab A).²

Since early 1975, when the fly-off between the single engine General Dynamics F–16 and the two-engine Northrop F–17 was in progress, the Shah of Iran has expressed interest in both aircraft. The F–16 won the fly-off for acceptance by the U.S. Government and was accepted by four NATO countries. At that time, Iran made a firm decision to purchase the F–16. Iran was made part of the General Dynamics program for manufacture, covering the U.S., NATO and Iran. A Letter of Offer for F–16s has been through the Congressional review process and a firm letter of intent to purchase has been signed by the Shah.

When the Navy subsequently expressed interest in purchasing a two-engine carrier version of the F–17 (now the F–18A), the Shah indicated his continued interest in acquiring the aircraft in a land-based version (now designated as the F–18L). Following a visit by Tom Jones to Tehran in September,³ the Government of Iran forwarded to Defense a formal request to purchase 250 F–18L aircraft, including authorization to expend $8 million for R&D development.

The present situation is as follows:

—The Master Plan for the Navy purchase of the F–18A is still under review in the Department of Defense, although Navy purchase is virtually certain. (None of the U.S. Services intend to purchase the land-based F–18L, but the Navy would act as program manager for any Iranian FMS arrangement because of the substantial commonality of parts.)

—The Master Plan for the F–18L for Iran was initially presented to the Department of Defense for review in September. As of this time, DOD is still working with Northrop to develop necessary pricing information and other data.

—An estimated $300 million of research and development is required to develop the F–18L. Although it is the outgrowth of the original F–17 prototype, there are significant differences in the wing, avionics and other aspects of the aircraft to transform it from a flight prototype to a weapons system. (The F–16 is much further along in the development process due to the firm orders by the USG, NATO and Iran.)

—Future Iranian funding is very uncertain. The Shah has indicated from the beginning of his interest in the F–18 that he intended to finance it through an oil-for-arms barter arrangement. No arrangement of this type has yet been made and, based on other attempts at such financing arrangements, prospects do not appear promising at this point.

—Delivery of this system to Iran in the early 1980s, as the Shah has requested, would mean that Iran would be faced with the problem of absorbing three of the most advanced aircraft systems in the world (F–14, F–16, F–18L) all simultaneously.

Tom Jones and other Northrop representatives have been very active over the past two months urging early approval of the F–18L program.⁴ However, until the Iran Master Plan is completed, the basic data necessary to prepare a Letter of Offer will not be available. Also, in view of the uncertainties of the F–18L development, Iranian financing and follow-on considerations such as training and support which must be included in any FMS package, our initial response to Northrop has been to counsel restraint.

The F–16 package, which was presented to the Government of Iran in September, was the result of more than 15 months study and preparation by the U.S. Air Force and the Department of Defense.⁵ That preparation paid off with a well-balanced, comprehensive briefing to the Government of Iran identifying the potential problems of training and financing which could be anticipated. The best DOD cost estimate for the F–16 package, for example, turned out to be $3.8 billion for 160 aircraft rather than the $2 billion for 300 aircraft which General Dynamics had quoted to the Shah.

In addition to considerations of our relationship with Iran in the purchase of another expensive, sophisticated aircraft, there are Congressional aspects. These cut both ways, in that some Congressmen would be unhappy to see another major sale for Iran coming on the heels of the F–16 and others, such as Senators McClellan and Taft, are keen to see the deal consummated because of the advantages it would bring American industry and the probability of reducing the cost of parts for the Navy F–18A which are common with the F–18L.

The Departments of Defense and State have been following the F–18L matter closely for several months. They have been in communication with Mr. Jones and other Northrop officials as well as the Government of Iran. In view of the uncertain situation outlined above, they have given neither approval nor disapproval of the F–18L deal for Iran but have told both the Iranians and Northrop that the matter requires further review.⁶ As soon as DOD completes the Iran F–18L Master Plan, a policy decision will have to be made on whether or not to approve negotiations between the USG, Northrop and Iran on a final F–18L package which could be presented to Congress.

1. Source: Ford Library, National Security Adviser, NSC Middle East and South Asian Affairs Staff: Convenience Files, Box 6, Iran (14). Confidential. Sent for information. A stamped notation on the memorandum indicates the President saw it, and Ford initialed it.
2. Attached but not printed is the letter in which Jones presented the benefits to the U.S. Government of Northrop’s sale of 250 F–18’s to Iran. On November 4, Jones made his case more forcefully in a letter to Scowcroft, the premises of which were rejected by Oakley in a November 10 memorandum. Noting potential problems of financing and absorption, as well as politics and military validity, Oakley recommended that approval of a U.S. FMS commitment to the program be withheld pending a Defense Department review. (Ibid, Presidential Country Files for Middle East and South Asia, Box 13, Iran (13))
3. The Embassy reported on Jones’s visit to Tehran in telegram 9263 and 9825 from Tehran, September 14 and 30. According to the telegrams, following Jones’ audience with the Shah, Toufanian was instructed to request from Rumsfeld an FMS letter of offer for 250 F–18L aircraft. (Both in National Archives, RG 59, Central Foreign Policy Files, D760351–0776 and D760369–0985)
4. In telegram 253368 to Tehran, October 13, the Department alerted the Embassy to an October 11 Washington Post article, “Northrop Sales Blitz in Iran Flouts U.S. Control Efforts,” which argued that Northrop was trying to “stampede the US government into approval of its efforts to sell Iran a jet that is still on the drawing board.” The Department requested notification of all military sales efforts by U.S. firms. (Ford Library, National Security Adviser, NSC Middle East and South Asian Affairs Staff, Box 7, Country File, Iran Mil. (4))
5. The F–16 Master Plan, dated December 29, is in the Washington National Records Center, OASD Files: FRC 330–79–0037, Box 27, Iran October–December 1976, 452.1.
6. According to a memorandum from Janka to the Middle East Arms Transfer Panel, December 23, Rumsfeld and Hyland agreed that the question of the 250 F–18L aircraft for Iran should be forwarded to the panel for further interagency study. (Ford Library, National Security Adviser, NSC Middle East and South Asian Affairs Staff, Box 7, Country File, Iran Mil. (5))