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

6159. For Secretary from Ambassador. Subject: Audience with Shah. Ref: A. Tehran 6106, B. State 152797, C. Tehran 6142.2

1. During audience on July 23, Shah said to me at two different points: “Dr. Kissinger is really a wizard and has done such remarkable things about settling wars after they have been fought, why is it that he cannot be equally clever before these events occur and prevent them from happening?” After making this comment for the second time, I asked the Shah if he really wanted me to report this comment to you. With a broad grin on his face, he said, “Yes, I certainly do.” I am not sure what triggered this genuine compliment, but it may have been a headline that morning in one of local English-language newspapers which read, “Kissinger does it again.”

2. Although pleased that you will be coming to Iran later on, the Shah appears to be somewhat restive and in a bit of a quandary over his [Page 218] relationships with the United States. It is not that anything has gone wrong officially. He recognizes that the President and you are strong friends and that his many requests in the civilian and military field are being handled about as promptly and sympathetically as is reasonable to expect. It is rather that items like the static from the United States over crude oil prices as manifested in Secretary Simon’s comments, The New York Times’ editorial criticizing Iran’s purchase of 25 percent of Krupp,3 the dragging on of the whole Watergate affair, seem to be causing uneasiness.

3. Secretary Simon’s frequent utterances to the press about Iran and crude oil prices are causing the USG nothing but problems with the Shah and the Government of Iran. Whether Simon is right or wrong from the standpoint of the United States is not the question. The Iranians think he is wrong-headed as well as rude. I will not bore you with how I handled the “nut” statement with the Shah, but I did. Incidentally, Nick Thimmesch of Newsday who has crossed paths with Secretary Simon in this Gulf area, indicates that Simon is “hard on Israel” and is going to push for prompt pressure on the Israelis to make territorial concessions to the Arabs.

4. I squared off on the concern about New York Times editorial policy by pointing out that I had personally heard Presidents Kennedy, Johnson and Nixon inveigh against these editorial attitudes on many occasions. I also pointed out that even the Israeli Government has got furious from time to time, that the only suggestion I had was to stop reading the newspaper as President Eisenhower had done. To this the Shah replied, “My Foreign Office keeps sending me telegrams about these things. I cannot avoid reading them.”

5. We had quite a discussion about crude oil prices. I pointed out that regardless of what one thought of the price hike on December 23 last, prices were still inching up as a result of the 2 percent royalty increase at Quito, Gulf’s acceptance of the buy-back prices dictated by the Kuwait Government, and the likely outcome of Saudi Arabia’s negotiations with Aramco. I weighed in about the balance of payments problem in the countries of Western Europe, discussed the effect on the international monetary system and the financial disequilibrium which was being caused in the world. The Shah listened and then quietly began to talk. He pointed out that he was not going to be cheated on the price of his oil, that its proper price should be keyed to the cost of alternative sources of energy, that it was a wasting commodity which would be finished within a predictable period of time, and that the derivatives from oil in terms of petrochemicals would bring returns at [Page 219] least eight times as great as the sale of the crude oil itself. He insisted that he does not want to see the price go so high that it ruins the economies of industrialized countries and that he is fully prepared to be reasonable about these matters. He said flatly that if Iran could keep its current purchasing power, he did not want to see the price of crude oil augmented any further. He insisted, on the other hand, that if inflation were to continue rampant in the West, he had no choice but to protect himself and his country. He then turned to the handling of the crude oil price problem by the United States Government. He said that in his December 23 press conference he had proposed a dialogue between the OECD nations and the countries in OPEC. He said he realized that all members could hardly hold a constructive dialogue with each other but that it should be possible to have conversations involving a small number on each side. He went on to say that the USG started off on the wrong foot in that it has spent its time organizing the industrialized countries but has done nothing to open conversations with the oil producers. It came through loud and clear that until the industrialized countries are prepared to communicate with the oil producers about the latter’s problems and grievances, nothing is going to be done about the current trends in oil prices, at least as far as the Shah is concerned. He is looking forward to talking on Monday with Jamieson of Exxon and Steel of BP about the profits of major oil companies and their future role.4 He will want to talk to you when you visit here about this whole problem after which he hopes that he will be “clearer” in his mind as to what he feels should be done. His presentation was remarkably consistent with the text of his December 23 press conference which you may want to review at some juncture.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 603, Country Files—Middle East, Iran, Vol. VI, January 1974–. Secret; Immediate; Nodis; Cherokee.
  2. In telegram 6106 from Tehran, July 23, Helms informed Kissinger that the Shah was “obviously pleased” that Kissinger would be the U.S. co-chairman of the Commission on Cooperation with Iran. (Ibid., RG 59, Central Foreign Policy Files, P850017–2021) Telegram 152797 is Document 66. Telegram 6142 is Document 68.
  3. The July 20 New York Times editorial described the Iranian investment of petrodollars in Krupp as a sign of the dangerous shift of power to the Middle East (p. 30).
  4. Jamieson briefed the Embassy on his and Steel’s July 29 meeting with the Shah. (Telegram 6326 from Tehran, July 30; National Archives, RG 59, Central Foreign Policy Files, D740206–0884)