10. Paper Prepared by William B. Quandt of the National Security Council Staff1

ANALYTICAL SUMMARY

NSSM 181, “US Policy in the Arabian Peninsula and the Persian Gulf”

The study prepared by the State Department in response to NSSM 181, “US Policy in the Arabian Peninsula and the Persian Gulf”, immediately follows this summary. It deals with several broad issues that go beyond our bilateral relations with the several states of the area.

As background to the analysis of options, the paper notes the growing importance of the region because of its oil; its growing financial reserves; the persistence of disputes which may provide opportunities for the Soviet Union to extend its influence into the area. These issues, however, are all dealt with in more detail elsewhere: oil in NSSM 174; financial reserves by working groups preparing for possible high level economic discussions with Saudi Arabia later in the year; and the Soviet threat in NSSM 181. The other key issue which is only mentioned in passing is the Arab-Israeli conflict and its effect on US-Saudi relations.

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In this study, the focus then is on the following questions:

—What role should we encourage Iran to play in the regional context?

—How can Saudi Arabia be encouraged to take a more responsive position to enhance regional cooperation and security, drawing on her growing oil revenues?

—On the periphery of the Arabian Peninsula, should the US increase its own presence, revise its arms and aid policies, or take a more direct role in helping Oman and Yemen deal with the military threat from PDRY.

—Is there a regional approach to this area that the US could adopt that would increase interdependence and cooperation among our friends without drawing us more deeply into the politics of the region?

—How can we best compete with the Soviets in this area?

Summary of the Policy Alternatives in the Study

Iran. The Shah is determined to make Iran the predominant military power in the region. In pursuit of this goal, the Shah is often overbearing and heavy-handed in dealing with his Arab neighbors, and the prospects for serious Iranian-Arab rivalry are considerable in the future. This could be accentuated when Iran’s oil production begins to peak out in the 1980s, while Saudi Arabia, Iraq and the UAE continue to increase oil production and earn revenues far in excess of Iran’s. It is this future imbalance between military power on one side of the Gulf and economic power on the other that poses dilemmas for the United States. These dilemmas would, of course, be most easily overcome through Iranian-Saudi cooperation, but that development cannot be taken for granted. In dealing with Iran, we have essentially two broad approaches to consider:

Urge Iran to pursue policies in the Gulf that give high priority to coordination with Saudi Arabia and other friendly Arab states. This will require an ongoing dialogue with the Shah about regional developments, and at times we may have to urge him to show restraint in order to preserve the fabric of Iranian-Arab cooperation. Insofar as this brings us into opposition with some of the Shah’s policies, we may risk straining our bilateral relations for the sake of regional cooperation.

Support the Shah as the major power of the region. The risk of this “blank check” policy toward Iran is that it could encourage the Shah’s more imperial fancies, resulting at worst in an over-extension of Iranian power and serious conflicts with Iran’s neighbors, perhaps including the Soviet Union. It is virtually certain that this policy would make Saudi-Iranian cooperation difficult to achieve, but it is less obvious what the price of non-cooperation would be.

Saudi Arabia. As our interests grow in Saudi Arabia because of oil, so do the strains in US-Saudi relations. King Faisal is increasingly involved emotionally in the Arab-Israeli dispute and is under pressure from Egypt to use his resources to bring about a change in US policy [Page 68]toward Israel. In order to improve US-Saudi bilateral relations, two courses of action are identified as imperative. First, the US must show convincing progress toward an Arab-Israeli settlement or it must take some distance from its position of full support for Israel. Second, it must help the Saudis find ways of using oil revenues to develop productive enterprises within Saudi Arabia and investment outlets abroad. The other area of concern to Faisal is Saudi security in the face of threats that he feels emanate from all quarters, but most immediately from Iraq and PDRY. The choices here for the United States are:

Urge Faisal to work closely with Iran, acknowledging that for now Iran is the dominant power in the area and that Saudi Arabia must accept that reality and turn it to its own advantage through cooperation.

Offer to cooperate closely ourselves with Saudi Arabia in regional security matters. We would try to enhance Saudi efficiency, speed of decision-making with respect to military issues, and might help the Saudis develop a quick reaction force for use in Oman and Yemen.

—Become more directly involved ourselves in Oman and Yemen, as the Saudis would like us to do. The Saudis would welcome this as evidence of our willingness to take a serious interest in security issues of concern to them.

Other Arabian Peninsula States. Presently we maintain a low profile in the states of the periphery of the Arabian Peninsula in a conscious effort to encourage the Saudis and the states themselves to take a more direct security role in this area. We are increasingly coming under pressures to upgrade our ties to these states and to become more intimately involved in their affairs. Several issues involving our presence and programs need to be reviewed:

Political Representation in the Lower Gulf and Oman. Our Ambassador to Kuwait is accredited to four other states—Bahrain, Qatar, the UAE and Oman. We could decide to name four more ambassadors to each of these states; or selectively to upgrade our representation by naming ambassadors to the UAE, then Oman. In addition, we could build up our commercial representation throughout the area.

Arms Sales Policy. Here the choices are to continue our present policy of supplying weapons only for internal security; to allow US firms to sell more advanced equipment; or to negotiate government-to-government deals for more advanced equipment.

Military and Economic Aid to Oman and Yemen. We can continue to coordinate Saudi and Jordanian efforts, as we are doing in Yemen; offer direct assistance in the internal security field; agree to direct sales to Yemen and Oman if Saudis or UAE agree to pay for equipment and services.

Regional Approaches. Should the United States move from its present policy of low-key efforts to encourage cooperation in this region toward a more ambitious policy of fostering a regional collective security system? The choices include greater US involvement in supporting the Shah’s attempts to develop a network of security agreements across [Page 69]the area; impressing for settlements of such regional disputes as those over the Gulf islands occupied by Iran and over the Buraymi Oasis; in encouraging a more active Jordanian presence in the area, including the creation of a Jordanian intervention force.

The Soviet and Radical Threats. Most of the regimes in the area that are friendly to the US feel threatened by radical forces, emanating either from PDRY or Iraq, or from subversive groups receiving Soviet support. To limit the effectiveness of these forces, we might:

—Talk to the Soviets to encourage them to moderate the behavior of their clients.

—Urge Iran to talk to the Soviets and Chinese about their support for radical elements in the area.

—Try to deal directly with Iraq, and perhaps PDRY, to give them a stake in relations with the West.

—Support Saudi efforts to overthrow the PDRY regime.

—Review our own naval presence in the Gulf to judge whether it acts as a magnet for Soviet influence, as the Shah believes, or a shield for our friends against radical pressures, or neither.

Issues for Discussion

Iran. In recent years Iran has begun to move rapidly into the modern world, and we have acknowledged her growing power and status. Is there now a danger that the Shah may overreach his country’s real capabilities by using an excessive amount of his oil revenues on expensive defense items that are irrelevant for Iran’s real requirements (e.g., F–15s) and which will become a heavy burden in the 1980s when oil production begins to decline? Would it make sense to begin trying to direct the Iranian armed forces toward a more sensible and less costly force structure designed more for Iran’s genuine defense needs than for prestige purposes? If not, how far are we willing to support the Shah if he begins to use his forces across the Gulf in ways that are bound to alienate Saudi Arabia and perhaps accelerate the radicalization of the Arab oil-producing states?

Saudi Arabia. The Saudis want, among other things, to be treated on a par with their growing economic strength. This is partly an issue of status. Are there things we could do, such as including Saudi Arabia in discussions of trade and international monetary reform, that would be symbolically useful and might encourage the Saudis to play a more responsible international role?

Kuwait. The NSSM posed the question of what role Kuwait might play in the Gulf and how we should respond to her defense needs. The study did not deal with this issue, but we do have pending some decisions on military equipment for Kuwait. If we were to go ahead and meet these requests, how could we expect Kuwait to respond? Do the Kuwaitis have a role to play in the lower Gulf or Oman? Can they be brought to restore their subsidy to Jordan in return for increased help from us in meeting their defense needs?

Jordan’s role. King Hussein is clearly willing to play a more active role in the Gulf and in Oman and Yemen. He expects us to underwrite this role and to pay heavily for it. The risks of encouraging him in this [Page 70]direction are that Jordan will become even more over-extended and insolvent than it now is, and we will have to pick up the bill. If Jordan can really help Saudi Arabia or the UAE deal with their own security problems, why should we be expected to pay when the Saudis, Kuwaitis and the UAE face problems in disposing of excess revenues? Is this a case where a small amount of “seed money” from us could bring out larger contributions from others? Is there a danger in encouraging King Hussein’s plans to play a major role in the Gulf?

Iraq. Our relations with Baghdad are nearly non-existent, and the Soviets seem to be well emplaced there. But from time to time we see signs that Iraq wants to turn more to the West, and in the aftermath of the recent coup attempt there this theme was publicly stated. Oil companies and some European countries are convinced that Iraq is second only to Saudi Arabia in terms of oil reserves and would very much like to help the Iraqis increase production. To encourage an Iraqi turning toward the West, do we have any role to play, such as discussing with the Shah the desirability of continuing his dialogue with Iraq; and abstaining from active support for the Kurdish insurgents? Is there anything we should do directly to make a gesture toward Baghdad?

The Soviet factor. Drawing on the study done under NSSM 182 on Soviet policy in this area, how should we best position ourselves to deal with expanding Soviet influence. Two general approaches have been suggested: one would seek to contain the Soviets by building up points of strength in the area; the other would emphasize the development of a network of regional associations that would restrict Soviet opportunities and draw on local forces to deal with security problems. As applied to this area, what would these two views imply?

The Saudi-Egyptian connection. We have been receiving some evidence that Sadat may drop his Libyan option in favor of much closer ties to Saudi Arabia, even at the expense of his relations with the Soviets? Is this a development we should welcome? How would it affect Saudi policy in the Gulf? with respect to oil production? or Iranian-Saudi cooperation?

Issues for Decision

You may want to bring the discussion to the following points for decision:

—Saudi–Iranian cooperation is still to be desired, and we should encourage the process in talks with Faisal and the Shah. This may mean urging restraint on the Shah and trying to prop up Faisal. Are the costs worth it?

—We should move to accord Saudi Arabia enhanced international status and to encourage them to play a more responsive role in their region. This should be one of the objects of any high-level discussions with Saudi Arabia on political and economic issues later this year. We should consider including the Saudis in monetary and trade negotiations.

—Our diplomatic presence in the Gulf should be selectively upgraded, starting in the UAE and Oman.

—In Oman and Yemen, we may want to upgrade our presence on the development side, but for the moment we should continue to play [Page 71]an indirect role in security assistance, relying more on Saudi and other Arab sources in Yemen and the British in Oman.

—In view of Kuwait’s interest in aircraft other than the F–4, we should encourage them to think of equipment appropriate to genuine defense problems. We will try to clear a statement on our arms policy for Kuwait in the near future.

  1. Summary: Quandt provided the analytical summary of the Department’s study responding to NSSM 181.

    Source: Library of Congress, Manuscript Division, Kissinger Papers, Box TS 71, National Security Council, Committees and Panels, Senior Review Group, March 1972–July 1973. Secret. This paper was attached as Tab B to the July 19 memorandum from Saunders to Kissinger published as Document 8. NSSM 181 is Document 2.