191. Telegram From the Department of State to the Embassy in Iran1

267996. Eyes Only for the Ambassador. Subject: Letter from President Ford to His Imperial Majesty Mohammad Reza Pahlavi:2

1. At the earliest appropriate time, and in any event, no later than COB Monday, November 1, please deliver the following personal message from President Ford to His Imperial Majesty, Mohammad Reza Pahlavi:

2. Begin text: Your Imperial Majesty: Your decision not to insist upon an oil price increase at the Bali OPEC meeting in May was an act [Page 570]of statesmanship which was important in determining the outcome of that meeting.3 Avoidance of an oil price increase is of such great importance to the maintenance of the global economic recovery now underway that I am writing to request your continued constructive leadership in order to prevent such an increase.

3. I have been kept fully informed of your concern earlier this year that decreased oil exports would seriously affect Iran’s internal economic development and its ability to fulfill its role in the region. I have carefully noted, therefore, that the increased economic activity associated with recovery in a number of oil-importing countries is reducing the difficulties which you had anticipated in financing Iran’s development and defense plans. I am told that in the last four months Iranian crude production has averaged nearly six million barrels a day.

4. It now appears likely that the OPEC countries will earn $125 billion this year from their oil exports, about 20% more than in 1975 and more than 400% more than they earned in 1973 on a similar volume of oil exports. In contrast, our most careful analysis of the dollar prices of exports from the major industrialized countries to the oil producers indicates that these prices have risen by only 30% since mid-1973, and only 4% over the past year. Prices for our largest export—grain—have actually fallen; wheat prices averaged $150 per ton in the first half of this year, compared to $200 per ton in 1974.

5. The progress of industrialized countries in controlling inflation through major policy actions has been dramatic, considering all circumstances, with the average rate of inflation for major countries now standing at half the 1974 rate. In the United States prices are rising at about 6% annually, compared with 12% in 1974. It is likewise encouraging that certain oil-importing developing countries have begun to narrow their current account deficits in 1976 as a result of reduced inflation, rising exports and improved terms of trade. However, the balance of payments situation of many countries remains critical, while that of less fortunate energy deficient developing countries is truly desperate. Many countries have in fact virtually reached the end of their ability to borrow.

6. My deep concern, which I bring to your attention in the spirit of our close relationship, is that the favorable trends toward economic recovery will be reversed by the negative inflationary and balance of payments effects of a new increase in the price of oil. Several important industrialized countries which are experiencing economic difficulties and the attendant danger of political instability would encounter still more severe economic problems if faced next year with a new oil price [Page 571]increase. Similarly, the energy deficient developing nations would suffer additional damage to their prospects for economic growth and a further erosion of their already weak borrowing ability. This would add major new strains to the international financial system and intensify pressure on both industrialized and oil-producing nations to provide balance of payments support. Thus, the fragile and uneven nature of the global economic recovery requires that responsible nations avoid action which would endanger it.

7. Secretary Kissinger reported fully to me on his talks with you last August, and noted your concern about the need to maintain close cooperation between our two countries despite opposition in Congress and other circles.4 As the Secretary told you, this administration is determined to continue to assist your nation in developing its military establishment and meeting its goals for economic development and to cooperate with Iran in seeking solutions to major regional and worldwide economic and political problems. I am sure you have been fully informed of the administration’s successful resistance to Congressional attempts to block the sale of F–16 aircraft and other military equipment to Iran. The struggle with certain segments of American opinion on this subject has by no means been won, however, and I fear that there will be further and perhaps greater pressures next year. By working together, we can overcome these pressures and solidify the close relationship between our two countries. However, Iranian support for an OPEC decision to increase the price of oil at this time would play directly into the hands of those who have been attacking our relationship.

8. The determination to strengthen the cooperation between important producing and consuming nations, which you and I share, is not universal. And yet this cooperation, and that between the developing and developed worlds, is a key element in the pursuit of the global political and economic stability which will allow all nations to achieve better lives for their peoples. I believe that further progress in a number of areas of the North-South relationship, including the official development assistance made available to the developing world, should be possible in the coming months. Your resistance to a further increase in the price of oil could be a significant influence in restraining the growth of pressures which threaten to divert us from the path of positive achievement in this important area.

9. Given this situation, I believe that the outcome of the December OPEC meeting will have far reaching economic and political consequences. Your Imperial Majesty’s personal stature and Iran’s position of international leadership provide an opportunity for a historically im[Page 572]portant contribution to political stability, economic prosperity and cooperation beneficial to Iran and to all nations. I therefore urge Your Imperial Majesty to give these concerns serious and positive consideration in making your decision on this matter. Sincerely, Gerald R. Ford

End text.

10. The above letter should be dated October 29, 1976.

Kissinger
  1. Source: National Archives, RG 59, Central Foreign Policy Files, N760007–0861. Secret; Niact; Immediate; Nodis. Drafted by Rogers and approved in the White House by Hormats.
  2. Similar letters were sent to King Khalid and President Pérez on October 29. (Both in Ford Library, National Security Adviser, NSC International Economic Affairs Staff: Convenience Files, Box 5, OPEC (1)) President Ford approved sending the letters, as recommended by Scowcroft in an October 28 memorandum. See Foreign Relations, 1969–1976, vol. XXXVII, Energy Crisis, 1974–1980, Document 106. According to a memorandum to Kissinger from Rogers, November 12, the letters were part of a broader strategy in which U.S. officials approached key OPEC members to resist a price hike at the December 15 OPEC meeting in Doha, Qatar. (National Archives, RG 59, Central Foreign Policy Files, P840121–1973)
  3. See footnote 4, Document 175.
  4. See Document 183.