86. Telegram From the Department of State to Secretary of State Kissinger in Islamabad1

Tosec 431/239903. Subject: INR Comments on Shah’s Concerns about Oil Prices. No Foreign Dissem/Controlled Dissem/Background Use Only.

1. Following is INR summary of two intelligence reports that you may find useful in forthcoming meeting with Shah.

2. Despite Shah’s truculent reaction to US statements on oil prices, these intelligence reports suggest that:

(A)—He is more concerned over possible US counteractions than he would like us to know;

(B)—He is trying to shift the blame for high prices away from Iran.

3. According to one clandestine report:

(A)—Iranian leaders are “very” concerned that the US might restrict arm sales to Iran;

(B)—The Iranian military considers it impossible to find substitute suppliers for the military equipment, in terms of quantities and sophistication, being purchased from the US.

4. According to another clandestine report, the Shah:

(A)—Urged Suharto to cooperate closely with Iran to stand up to the “threat” in the President’s September 23 speech;

(B)—Warned that the oil producers must prepare to “protect themselves against unexpected attack from industrialized nations.”

5. INR comment: These reports lead us to conclude that:

(A)—The Shah will not be moved by argumentation over the impact of current oil prices, including the potential damage to Western strength vis-à-vis the Communists, but he may feel vulnerable to a possible US review of the broader US-Iranian relationship in an effort to compel Iran to roll back oil prices. (Actually, there already has been some softening in public of the Iranian insistence on higher oil prices.)

(B)—The Iranian Government is particularly concerned about the possibility of US pressure for reduced oil prices through restrictions on [Page 258] arm sales. Without such sales, the Shah, in the Iranian view, cannot implement his ambitious plans for military modernization.

  1. Source: Library of Congress, Manuscript Division, Kissinger Papers, Box CL–152, Iran, Chronological File, 6 October–30 December 1974. Secret; Immediate; Nodis. Drafted by Phillip H. Stoddard and William D. Howells (INR/RNA), cleared by James W. Eighmie, Jr. (INR/RNA), and approved by Gerald Goldstein (INR/REC). Also sent to Kabul.