253. Memorandum From the President’s Special Assistant (Rostow) to President Johnson1
SUBJECT
- Reply to Shah’s Letter
The Shah wrote you describing his military and economic development programs for the five years beginning next March.2
In short, he ticks off his own economic plans and hopes for U.S. private investment much as he outlined them to you in August. He also urges you to lean on our oil companies to increase their liftings from Iran—a perennial request.
The main surprise is the size of his military program—$800 million. We think that must be a bargaining figure.
He wants to know what he can count on from us. All we can say is that we are going ahead with the third and fourth slices ($50 million [Page 454] each) under our amended 1964 agreement and beyond that will do all we can but have to see what Congress does.
We’ve consistently tried to keep the brakes on his military spending, but that’s increasingly hard to do with his oil revenues rising as they are.
We’ve tried to strike a balance in the attached reply3 between the responsiveness I believe you would want and the limitations imposed by uncertainty over what Congress will allow. Our best leverage now is to ride along with him and inject a word of caution where we can.
Attached is a letter for your signature, if you approve.
For Reference: In 1964, we signed a $200 million agreement to cover 5 years, FY 1965 through FY 1969. It also provided that grant aid would end in FY 1969. In 1966, we amended that agreement to add another $200 million in sales in four $50 million slices through FY 1970—September 1966, June 1967, June 1968 and June 1969. The last two are those referred to in the attached reply. The Shah hasn’t yet defined his new program precisely enough for us to know how it would be related to the present program.
- Source: Johnson Library, National Security File, Special Head of State Correspondence File, Iran, 9/1/67–12/31/67. Secret.↩
- Document 242.↩
- Document 254.↩