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

5888. Dept pass to Dr. Kissinger. Subject: Commodity Situation. Ref: A. State 159320, B. State 163272.2

1. Upon my return to Tehran I reviewed as a matter of urgency commodity situation including what has been passed to the Iranians (Ambassador Zahedi and Bank Omran, Ref A) on outlook for commodity sales under PL–480 and CCC. In light of conversations I held in Washington on my recent visit, I conclude present situation as reflected in reftels could have almost disastrous effects on Iranian food situation and policy, as well as on our relations with Iran. Outlook is extremely bleak and I believe we should be as candid as possible with the Iranians so that they can better adjust and devise alternative policies.

2. Iran is heavily dependent on US sources for grain and vegetable oil. In recent years it has bought from US about 700,000 tons annually wheat (mostly Western white) and 70,000 tons of oil. GOI is already subsidizing bread industry to keep price at level acceptable to masses of people for whom bread is main source of nourishment. With sharp rise of wheat prices this subsidy will have to be raised accordingly, assuming wheat is available for import at world price, in order prevent popular unrest.

3. We are already hearing statements of concern and unhappiness over commodity outlook, so far from those directly involved in pro[Page 140]curement such as Bank Omran officials. We can confidently anticipate, however, that level at which concern is expressed will quickly rise—eventually to the top.

4. Facts of world commodity situation are such that there is obviously no easy way out. Our inability to supply commodities at previous low prices (and in case of some our inability to supply at all) will displease GOI, no matter how we present facts. To keep this displeasure at lowest possible pitch, I believe that I should be in position frankly to lay before GOI, possibly including Shah, facts in their coldest, most accurate form. I would like to do that at earliest possible time, going to GOI before some high official calls me in to express his concern. By doing that I believe that we may forestall charges of bad faith.

5. To be able to make this approach I need (A) in easily usable form latest and most accurate and complete figures available on outlook for commodity supplies and prices for this and next year; (B) well reasoned explanation of causes of current shortages, and (C) rationale for any exceptions we may be making overseas which will quickly come to attention of GOI. I would also appreciate being informed about what we can tell Iranians how commodity situation is shaping up next year and what Iran may reasonably expect.3

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 603, Country Files—Middle East, Iran, Vol. V, May 1973–December 1973. Confidential. Repeated to USDA.
  2. In telegram 159320 to Tehran, August 11, the Department related that, due to commodity shortages, it had been unable to offer Zahedi the assurances that he requested on agricultural sales to Iran. (Ibid., RG 59, Central Foreign Policy Files, [no film number]) Telegram 163272 to Tehran was not found.
  3. The Department responded in telegram 171499 to Tehran, August 28, providing the Embassy with figures on world commodities, noting that the tightness of the supply was due to “world-wide inflation, US devaluation, rising income and dietary levels in many countries combined with crop losses in many parts of the world.” (Ibid.) In backchannel message 90 to Laird, September 4, Helms asked if telegram 171499 was an “accurate reflection of true situation?” Laird responded in backchannel message WH31975 to Tehran, September 6, that the telegram was too “hedged” but that “the thoughts outlined in the State message are correct.” (Both ibid., Nixon Presidential Materials, NSC Files, Box 425, Backchannel Files, 1973, Middle East/Africa)