Foreign Relations of the United States, 1964–1968, Volume XXII, Iran

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

Tehran, September 13, 1965.

355. Re Deptel 292.² Department and White House may be confident I wish cooperate to utmost in meeting critical intelligence requirements. Fully understand gravity of problem. If Embtel 332³ seemed unresponsive, it is simply that I do not want our interests here to follow same ill-fated course they have in Pakistan. reftel suggests USG prepared to take greater risks here than would normally be wise. With that assumption, following views are submitted:

A. Scope of Facilities

1. Existing sites. Although I have not visited all sensitive sites here, and in particular I have not been to [less than 1 line of source text not declassified], observations to date indicate that current quarters are being quite fully utilized. Small additional amount of extra equipment, however, can probably be installed in each of them (with possible exception of [less than 1 line of source text not declassified]). My hope would be that transfers from Pakistan could be limited to such modest expansion.

2. New [less than 1 line of source text not declassified]. Previous thought has already been given to [1 line of source text not declassified] building much needed warehouse. If additional housing is needed for facilities transferred from Pakistan, least risk would of course occur if they housed on compound. Proposed warehouse might be converted into [less than 1 line of source text not declassified]. Such new construction might however take minimum six months. I do not favor construction new ostentatious installations elsewhere than [less than 1 line of source text not declassified]. However, if Washington decides there is no alternative perhaps best [5–1/2 lines of source text not declassified]. This might make project palatable to Shah. As general rule any major new installations [less than 1 line of source text not declassified] should be discussed with Shah.

3. Consultations. While burgeoning American presence is indeed problem here, it is less explosive than new [less than 1 line of source text not declassified] installations. With all due respect to “top U.S. intelligence authorities concerned” it would seem to me that an Ambassador is entitled to know specifics of additional facilities contemplated [2 lines of source text not declassified]. Accordingly, I would appreciate consultations here within next week or 10 days with “top U.S. intelligence authorities” who can describe in detail each project desired and how it does not duplicate something already existing. As soon as their ETA received I will gladly reserve whole day for these mutual consultations. Incidentally, I would appreciate their bringing clarification whether [1–1/2 lines of source text not declassified] is functioning in accordance with money invested.

B. Political Parameters

1. Bird’s eye view. As Dept knows, particularly during present Indo-Pak tension, Shah is badgering us re West’s lack of appreciation his friendship. He appears to be shifting Iranian policy so as to reduce his image as “American stooge” and give impression Iran has “independ-ent” policy more consonant with mainstream of Afro-Asian nationalism. His subjects, taking cue not without some relief, inevitably tend to swing too far. There is current trend in government circles, press and public opinion treat Western interests much more critically and coolly. While both Shah’s shift and public allergy been developing over long period of time, they have developed markedly within past six months, and most specifically after red carpet treatment he received in Moscow. Much of this change is rooted in series of grievances re which Iran has felt lack of US attention.

2. Need for total policy. From my own experience, I know how Washington is compartmentalized. Issues between U.S. and Iran during recent months been handled pretty much without full realization their effect on total U.S.-Iran relationship. Impression around Washington is Iran is now “rich” country and, therefore, we can shift our attention elsewhere. As a result, most of these individual issues have not received sympathy in Washington which Shah and Iranians feel they deserved. Ergo, the U.S.-Iran relationship is not as healthy as it was. Shah asked me again last night, “Does Washington really care for Iran?”

3. Grievances. Since Iran’s grievances inevitably bear a relationship to Iran’s receptivity to what we might wish to do here, it may be worth reviewing some of key irritants. If these can be gotten out of way, climate for introduction of at least some part of needed facilities would be somewhat improved.

A. Military Aid. Shah has become increasingly resentful re our military aid program. While extending grant aid to countries less faithful to our cause than Iran, we are requiring him to pay for high percentage his procurement from us. We agreed on 4–5 percent interest and promptly applied 5 percent rate. He must repay in dollars. (Meanwhile Soviets are offering steel mill, and MIGs, at much lower rate with repayment in Iranian products.) There are other aspects of our military program which because of their restrictive nature tend to offend Shah’s sensitive pride but they stem from our legislation and there is little we can do about them, e.g. limitation on his helping Iran’s ally Pakistan.

B. Economic Aid. Because Iran is “rich,” we understandably have tapered off grant aid and are phasing out technical assistance programs. Loans via Eximbank and commercial banks are still available, but stand in stark contrast to Soviet blandishments, i.e., long term loans at 2–1/2 percent interest with repayment in Iranian products notably natural gas (exploitation of which has long been futilely asked by Iranians of oil consortium).

C. Gudarzian. Shah, his family and his govt simply cannot understand how a crook like Gudarzian can in highly civilized US perpetrate gigantic hoax as Gudarzian has against Iran Prince and Princess. Nearly hundred thousand dollars already been spent by Iranians to free $200,000 in funds attached via Gudarzian’s hoax. USG been working hard in both civil and criminal suits, but it is difficult to convince Oriental mind like Shah’s that after 18 months something more could not have been done in matter so close to friendly Chief of State.

D. Fairhurst Case. As Iranians see it American businessman who invested only $200,000 is using blackmail of Congressional pressure to extort $5,500,000 for his personal profit.

E. PL-480 Food. Iranian requests for from 100,000 to 300,000 tons of PL-480 Title IV wheat have apparently gotten stalled in notorious red tape of Agriculture Dept.

F. Iranian Students. Re-stimulated by his recent New York stopover, Shah remains aggravated by apparent USG inability to do something re anti-Shah “students,” some of them over 40 years old who have already been in US decade or more.

G. Steel Mill. Iranians complain that for number years they been relying on Western interests for steel mill but response was always evasive. Now that Soviets have made attractive offer Iranians somewhat irritated by Western admonitions re dangers of dealing with Soviets. Shah points out to virtually every listener that students in US demonstrate against him, students trained in England almost assassinated him this spring, so what worse can happen if he sends technicians to be trained in Russia in connection with steel mill.

H. Literacy Conference. Current UNESCO Literacy Conference in Tehran is spectacle dear to Shah’s heart. He is less than pleased by our understandable coolness to his pet idea of devoting military funds to World Literacy Program.

4. Symptoms of coolness. Recent evidences of cooling Iranian attitude toward US:

A. Shah’s limited responsiveness to our appeals not to jog surgeon’s (UNSYG’s) arm in current Indo-Pak crisis.

B. Clear indications that Shah will accept new Soviet economic offers, including probably steel mill.

C. Shah’s increasing disaffection with CENTO.

D. Resentment over breakdown of Fairhurst negotiations and Congressional pressure in connection therewith.

E. Restoration of three years’ hard labor sentence on American engineer Bredin for the alleged murder of his wife. Higher court had earlier reversed this verdict and milder sentence was anticipated.

F. [1–1/2 lines of source text not declassified]

G. GOI turndown of our Embassy’s appeals for diplomatic exemption from gasoline taxes. This relatively minor matter but is straw in wind.

H. Similarly $2,000,000 GM contract with Ministry Water and Power for mobile generators was voided by higher authorities.

C. Recommendations

While I do not believe that even if these current irritants are removed, traffic here will bear introduction of full complements from Pakistan envisaged in Deptel 193,⁴ I do believe that if we want to expand our facilities in Iran and obtain approval as appropriate from Shah, we will have to improve climate as soon as possible. Following steps recommended:

1. Enlist White House assistance in calling off Senators McClellan and Kuchel from exerting ill-considered public pressure in Fairhurst case. There is not a moment to lose in making them aware that they risk endangering very important facilities here.

2. A suitable memento and really forthcoming warm message from President on the occasion of 25th anniversary of the Shah’s reign, as already recommended.

3. Action to ensure that Iranians obtain truly concessional interest rate for second tranche of military sales agreement. If we say that 5 percent is already concessional, why can we not give evidence of greater effort to produce greater concession? Our military sales are pivot of our military relationship with Iran. More can and must be done here to improve climate.

4. A high level push to come through with decision re PL-480 wheat. We could really make points both with Shah and public opinion if at least some part of transaction would be in Title I. Increased foreign exchange crisis here should provide justification.

5. A clean-cut steel mill proposition. While prospects are that Soviets have this project almost in hand, our only hope will lie in tidy package which has some attractive features to counter-balance favorable Soviet interest rate and repayment in natural gas.

6. Continued U.S.G. pushing for expeditious judicial verdicts against Gudarzian.

7. Court action against at least one or two vagrant Iranian students. Also reply to Shah’s frequent requests that we investigate where these “professional students” get their means of support.

8. Over long range, high level U.S.G. review of treatment of countries where aid programs being curtailed. We seem to swing between extremes. Once we decide a country, e.g. Iran is off list, it casts pall over almost every tangible tie. Specifically, we should have means to counter attractive loan terms offered by Soviets who gleefully pick up credit proj-ects in countries we deserting.

9. Also over long range do something about US laws which permit crooks so easily to attach stateside bank accounts of foreign leaders. Certain New York lawyers are making good living by these nefarious practices. Not only is there Gudarzian case, but Saudi bank accounts are being attached and also accounts of Hashemite family, all under most flimsy grounds and all to detriment our national interest.

While this is bit lengthy, it seemed appropriate to paint picture on wall. Such understanding is necessary to obtain receptivity of both Shah and Iran people for closer relationship reflected in installation of additional [less than 1 line of source text not declassified] facilities here. Believe specific questions asked in last two paras Deptel 193 are all answered in this full presentation.

Meyer

1. Source: Department of State, Central Files, POL IRAN–US. Top Secret; Sensitive; Priority; [distribution indicator not declassified]. No time of transmission is given on the source text.
2. Document 99.
3. Document 98.
4. Document 94.