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

140768. Subject: Uranium Enrichment Contracts for Iran. Ref: State 139702.2 Ambassador From Acting Secretary.

1. In reftel we informed you of arrangements for signing enrichment contracts. In talking with GOI officials you should not go beyond explanation in that message. You should also have the following which is for your background only.

2. AEC is indeed in a serious crunch on supply of nuclear fuel. Within last few days a veritable flood of requests for contracts has hit AEC which at this time does not rpt not have capacity to fulfill. There is some suspicion that several countries have heard that AEC capacity was reaching its limits and expedited contract requests. This problem is intensified by AEC’s plans to implement Presidential decision to turn over the future nuclear fuel enrichment business to the private sector. Consequently AEC is close to its sustaining level of production, and cannot meet all its requests. We have been urgently trying to sort this out, but as of now AEC is unable to sign all contracts. However, in light of our special relationship with Iran we have insisted that Iran receive special attention and pushed through two contracts.

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3. In addition to this very real supply crunch there are political considerations you should be aware of. Under normal technical and political circumstances we would have moved ahead expeditiously to meet Iran’s future needs for enriched material. However, our decision to have similar programs with Egypt and Israel has aroused strong Congressional and media criticism. Some Congressional quarters are raising broader issues of greater Congressional control over nuclear energy programs and stiffer controls or terms such as making ratification of NPT a condition for sale of nuclear fuel. Indian explosion, of course, has greatly stimulated concern over diversion of plutonium.3 These fears have also been fueled by recent spate of articles concerning possible insecure storage of nuclear material, difficulty of accounting for all material, etc. Articles frequently relate above to potential acquisition of explosive devices by criminal or terrorist elements. More-over, French-Iranian deal for five power reactors has also complicated situation.4

4. In view of this climate, we would have preferred await calmer time for going ahead with Iran, but AEC deadline of June 30 for signing contracts made this course impossible. We are, therefore, proceeding with Iran on limited basis of two contracts. In addition to real supply crunch noted above, it was our judgment that to authorize eight contracts at this time would have overloaded Congressional circuit and jeopardized all our nuclear energy programs in ME. In effect we have been caught in double bind of supply limitations and political climate here. We shall move ahead with other contracts when this is feasible. It is possible some of current media and Congressional criticism and concerns will now focus on Iran. We shall do our best to forestall or minimize and are consulting carefully with key Congressional figures.

5. We have decided that Israeli and Egyptian agreements should contain certain bilateral controls in addition to regular IAEA safeguards. It has now been decided that Iranian agreement for cooperation should also contain these additional bilateral controls: (A) U.S. veto over availability, disposition, and storage of the plutonium generated by the reactors; (B) a commitment by each party to ensure that satisfactory physical security arrangements are developed to protect nuclear material from theft; and (C) an explicit confirmation by Iran that U.S. material will not be used for “peaceful” nuclear explosions. GOI has not repeat not been informed of our intention in this regard. How[Page 205]ever, this info may break in press within next few days as result our consultations on Hill.

6. Additional bilateral controls should not, in our view, cause Iran any special problems since it has ratified NPT and test ban treaties and in current fuss over French newspaper misquotation Shah has reaffirmed Iranian policy not acquire nuclear weapons.5

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 603, Country Files—Middle East, Iran, Vol. VI, January 1974–. Secret; Niact; Immediate; Nodis. Drafted by Naas, cleared by Sober, and approved by Sisco.
  2. Telegram 139702 to Tehran, June 27, informed the Embassy that the AEC representative would hand-carry two uranium enrichment contracts, rather than the eight that Iran had requested, to Tehran for signing. (Ibid., RG 59, Central Foreign Policy Files, D740170–0979) Iran’s request for eight contracts is in telegram 4959 from Tehran, June 17. (Ibid., D740157–1036)
  3. Telegram 5652 from Tehran, July 10, reported that the Iranian Government had discussed a nuclear-free-zone in the Middle East with the UN Secretary General, in response to the recent Indian nuclear blast and to U.S. agreements to help Egypt, Israel, and Iran develop nuclear power. (Ibid., D740183–1118)
  4. Telegram 5564 from Tehran, July 8, reported that under the French-Iranian nuclear agreement, France would provide five 1,000-megawatt nuclear power stations, training of Iranian personnel, and consultancy services. Enrichment services had not been negotiated but were also likely to be provided. (Ibid., D740180–0632)
  5. Telegram 135137 to Tehran, June 24, inquired about a Washington Post report of the Shah’s interview with a French weekly in which he was asked whether Iran would some day have nuclear weapons. “He is quoted as replying ‘without any doubt, and sooner than one would think.’” (Ibid., D740165–0890) The Embassy replied in telegram 5192 from Tehran, June 25, that a government spokesman had denied the report, but had quoted the Shah as stating that Iran might have to revise its policy on nuclear weapons if other nations developed them. (Ibid., D740166–0805)