89. Message From Secretary of State Kissinger to the President’s Deputy Assistant for National Security Affairs (Scowcroft)1

Hakto 89. 1. Please pass the following message on to the President on my talks with the Shah of Iran.

2. Begin text: Upon arrival in Tehran in late afternoon of November 1, had two and one half hour audience before dinner and one hour and [Page 267]a half after dinner with the Shah. Audience took place in high-ceilinged sitting room which he uses as office at Saadabad Palace. Only other individual present was Ambassador Helms since customarily the Shah conducts audiences of this nature without presence of any Iranian officials or notetakers. After 33 years on the throne, his grasp of geopolitical realities and details of Iran’s foreign policy are extraordinarily impressive. The atmosphere was warm and cordial and no sharp edges developed despite the topic under discussion. At the end of the audience, we agreed on how we would deal with the press, particularly on the question of oil pricing about which I have already briefly communicated with you.2 Our talk broke down into certain general areas, the total range of topics being more numerous than need repeating.

Middle East: We first discussed developments on the Cyprus question in terms with which you are familiar. It should be noted that the Shah is steadfast in his support of Turkey even though he disagrees with the way it has handled the military aspects of the Cyprus situation.3 I then asked the Shah how he saw the situation in the Middle East as a result of the Rabat Summit meeting.4 The Shah immediately commented that the Arab agreements had made things more difficult since Israel would certainly not talk with either Arafat or the PLO. I pointed out that the United States would have to make a decision soon as to whether it should continue its peacemaking efforts toward some motion on one front or another or whether it would be better to permit a stalemate and to encourage all the participants to reconvene at Geneva. I said that I would go to the Middle East next week to take soundings and to find out what in fact was agreed at Rabat and how the various leaders interpret it.

The Shah said he wanted to make a suggestion even though he agreed that it might have certain “devilish” aspects. He asked why it would not be smart for the Israelis to withdraw on the West Bank, perhaps 10 kilometers, thus suddenly creating a new situation there which, he foresaw, would have the PLO and the Jordanians at each other’s throat and would gradually cause dissension throughout the Arab world. I pointed out that I had recommended the same maneuver to the Israelis over a year ago but that their generally short-sighted attitude had kept them from acting upon it when it was feasible. I said I saw even less prospect that they might do it now. If a stalemate, the [Page 268]Shah argued that the outcome would largely depend on the Soviets since stalemate is really preparation for war and the Arabs would have to ask the Soviets for additional arms.

The Shah said he would be going to Egypt on January 7 and would do what he could to strengthen President Sadat’s will. Since Israel will not “be sleeping” during the stalemate period, there inevitably arises the question of whether or not the Soviets could stay aloof if war were to break out again and Syria be militarily defeated.

At this point the Shah spoke of Iranian military assistance to the Kurds and described the artillery and financial support which he has given them. He pointed out that even if the Iraqis succeed in destroying the Kurds, they will still be nailed down on the Iranian border where they would in any event prefer to be as against facing the Israelis on the Syrian front. The Shah is worried about the 100,000 refugees which he is now caring for in northwestern Iran and is anxious for American assistance in getting international refugee organizations to help with the problem.

The various options in the Middle East were discussed, most of them being described as unworkable in the current context. This gave me an opportunity to explain to the Shah confidentially that the United States cannot accept another oil embargo and that contingency planning was going forward for military action in the event that one were to eventuate. The Shah immediately replied that Iran would not go along in any way were an embargo to eventuate in this context. He asked why the United States did not plan to purchase additional C–5 aircraft to improve its capacity for intervention in the Middle East. He said that he was prepared to put up the $165 million which it would cost to start up the Lockheed production line provided that the US Air Force was prepared to place some orders. The President of Lockheed who was in Tehran a few days ago told him that there was a possibility that the Saudi Arabians and the West Germans might buy C–5’s.

In a contingency situation, the Shah offered to refuel American C–5’s from the modern Boeing 707 tankers which he has recently purchased from the United States—even in an Arab-Israeli war if we kept it quiet.5

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Oil Price Problem: We discussed oil prices extensively as you can imagine. I gave the Shah the full benefit of our thinking on how the dislocation caused by the sudden rise in oil prices threatened to change existing arrangements, particularly in Western Europe and might bring about new political realities such as a feeling of impotence on the part of certain of the consuming countries. I told him that the United States did not want confrontation with Iran and did not want Iran to be singled out among oil producers as the villain. I spoke of the parochial outlook of so many of the leaders in the oil producing countries and conjectured that a consumer–producer meeting would get nowhere because of the limited vision of the participants among most of the OPEC countries. He countered by explaining the history of crude oil pricing and read to me in detail a letter which had been presented to him before the last OPEC meeting by Prince Saud, King Faisal’s brother, who is Petroleum Minister Yamani’s Deputy in the Petroleum Ministry. This letter developed in excruciating detail the complicated system of pricing which Saudi Arabia wanted to advocate and which looked as though it were lowering prices on the one side while raising them on the other. Without developing technical details, may I say that it takes a computer to figure out the price of a certain barrel of crude oil under existing arrangements.

The upshot of our discussions appeared to me to be constructive; the Shah will recommend at the December 12 OPEC meeting:

1. A single price system and 2. A freezing of crude oil prices for the first nine months of 1975.6 The Shah points out that the single price system which he is advocating will peg the price at approximately $1.65 less than the existing price of $11.65. In addition a freeze will cause the producers to absorb inflation for 18 months since there has been a freeze for 9 months already. This will give an opportunity for a decline to take place by the consumers and producers looking toward more permanent arrangements on the price of oil and other commodities. The Shah underlined the fact that inflation being what it is now, the purchasing power of Iran will be eroded during this nine-month period, so that the industrialized countries will be catching up during [Page 270]this time frame. He underlined that these would be his recommendations to OPEC but that he had no means for ensuring what the outcome of the meeting would be. Therefore we agreed that it was absolutely essential that there be no publicity given to the proposed Iranian recommendation since that inevitably would bring about a hardening of position on the part of other OPEC members before the meeting started. We agreed that the US should designate somebody trusted by you and me with whom he could conduct a confidential dialogue. He would then seek to bring his position closer to ours in international forums. Helms agrees that this is the maximum we could have obtained in one session.7

Food: I informed the Shah of the line I would take in my speech to the World Food Conference on November 5.8 I asked if he would back my position of the general subject of building fertilizer capacity in developing countries. He immediately agreed to do so. He said he has lent money to President Suharto of Indonesia to build a fertilizer plant. He has done the same with Sri Lanka and is prepared to help any country who feels that it needs fertilizer facilities. He stated that he is prepared to build in Iran a facility which would supply the whole area around his country. Minister Jamshid Amouzegar who will attend the Food Conference for Iran will be instructed to come out with a strong public statement on this general subject next week in support of the United States’ position.9

Russia and China: At his request I filled in the Shah in most general terms about my recent visit to Moscow. He is going there on November 17 and was anxious to get a reading on the mood of the Soviet leadership. He believes that the Soviets will try very hard to recoup their posi[Page 271]tion in the Middle East and that the time of maximum danger will come with the demise of Chairman Mao in China or with any indication that the Chinese nation has lost its central control and is breaking down into a conglomerate of war lords. The Shah tells me that the PRC is “flirting very hard” with Iran and is backing its various policies in the United Nations and other international conferences. The Chinese want the Shah to pay them a visit and he is still undecided whether to do so because of the protocol problem arising out of the fact that no one from China has returned the visit of the Empress and the Prime Minister of Iran a couple of years ago.

At the conclusion of the audience I suggested to the Shah that a meeting between you and him would be desirable. He told me that he had an invitation to visit Venezuela and was debating whether or not to accept it. If it comes off, it would probably be in February or March. I told him that a visit to you on the way to or back from Venezuela could probably be arranged and that if he would let us know well in advance, we would make our best effort to arrange a stop in Washington. End text.10

3. Warm regards.

  1. Source: Ford Library, National Security Adviser, Trip Briefing Books and Cables of Henry Kissinger, Box 4, Kissinger Trip File, October 20–November 9, 1974—Europe, South Asia, and Middle East, HAKTO (4). Secret; Immediate; Sensitive.
  2. See Document 87.
  3. Nikos Sampson was installed by the Greek military junta in July 1974 as the President of Cyprus following a coup. He was removed 8 days later after the Turkish invasion of Cyprus.
  4. At the Arab League Summit meeting of 20 Arab leaders and Palestinian representatives held at Rabat in October, the conferees designated the Palestine Liberation Organization as the sole legitimate representative of the Palestinian people.
  5. Kissinger and Schlesinger discussed Iran in a meeting on November 14. Kissinger commented: “The Shah is the one guy who has a strategic conception. He is with us on everything but oil and there he only wants money—and he could put $10 billion into the U.S. He would like to open the C–5 line for us.” When Schlesinger noted that the Shah expected payments of $12 million for any aircraft that anyone else bought, Kissinger responded, “I told him we were sympathetic on co-production and you would do it. He is also willing to refuel us in the event of a Middle East war.” (Ford Library, National Security Adviser, Memoranda of Conversations, Box 7)
  6. In telegram Tosec 447/240138 to Islamabad, November 1, Enders advised the Secretary that the single price system would create “the impression of a price reduction when in fact the actual average price at best would remain essentially unchanged by the Shah’s formula or at worst increase a dollar per barrel or more as advocated by Algeria, Iraq and Libya.” The single price, he warned, could institutionalize current high prices and imply nationalization of the oil companies. (National Archives, RG 59, Central Foreign Policy Files, D740312–0201) Telegram 9488 from Tehran, November 7, quoted a clandestine radio bulletin from the banned Tudeh Party, broadcast from the Soviet Union, that Kissinger had won the Shah’s covert pledge to reduce oil prices. The Shah, it claimed, was a “mouse who is all ears when it comes to talking with Kissinger.” (Ibid., D740320–0464)
  7. In a November 10 meeting with Ford, Kissinger told the President: “You are being told we have to break the Shah to get oil prices down. Simon will recommend that you cut the Shah off unless he cuts OPEC prices by 50%. It won’t work, and it’s based on a misconception. The Saudis tell everyone that they would reduce prices if Iran would—because they know Iran won’t. Without Iran, the Saudis wouldn’t do it because of the radicals. For us to break Iran is insane. He is politically one of our best allies.” Kissinger noted that the Shah “agreed to a cut of 20–25 percent, with an index for inflation.” Ford responded, “With him we would get a 15% cut and $10 billion in capital investment. Let’s meet with him.” Kissinger replied, “With luck we can announce the $10 billion by April. We do not have the horsepower to take on the producers until we get the consumers financially consolidated in an energy program. If we confront the Shah now, the Europeans will pick up the pieces. And we need him if there is a Middle East war.” (Ford Library, National Security Adviser, Memoranda of Conversations, Box 7)
  8. Kissinger addressed the opening session of the World Food Conference in Rome on November 5. The text of his speech is in the Department of State Bulletin, December 16, 1974, pages 821–829.
  9. Telegram 9577 from Tehran, November 11, reported Ansary’s announcement that Iran would assist countries in the Indian Ocean area to construct fertilizer plants to help ease the world food shortage. (National Archives, RG 59, Central Foreign Policy Files, D740324–0303)
  10. Scowcroft advised the Secretary in message Tohak 132/WH43092, November 3, that he had delivered this report to the President. Scowcroft noted that Ford “was very very pleased with what you had been able to accomplish with the Shah and remarked on your ‘almost unbelievable powers of logic, articulation, and persuasion.’ I emphasized the essentiality that any word on oil prices come from the Shah and not us and he said he would tell absolutely no one. He commented on the Shah’s reference to the C–5 and said that we should look into the possibilities. He also said he would be delighted to see the Shah on his way back from Venezuela or at any other time.” (Ford Library, National Security Adviser, Trip Briefing Books and Cables for Henry Kissinger, Box 5, Kissinger Trip File, October 20–November 9, 1974—Europe, South Asia, and Middle East, TOHAK (11))