256. Telegram From the Embassy in Iran to the Department of State1
2704. 1. In opening discussion re arms procurement with Shah 28th, I referred to President’s letter.2 Shah expressed appreciation for warmth of friendship and President’s favorable disposition which letter reflected.
[Page 460]2. Shah had President’s letter before him and inquired re para which mentions our considering with him economic implications of his proposed military expenditures in light of Congressional views. I noted both Executive Branch and Congress have inherent desire to see developing countries spend less on military hardware and more on economic development. Fortunately, until now Iran’s economic progress has been heart-warming and all of us should be interested in keeping it that way.
3. When I noted that $800 million projection had come as somewhat of a shock, Shah reverted to his line that rate of expenditure is less than in past three years. He added, however, that if an adequate program could be developed for $600 million or less so much the better.
4. Noting that specifics re hardware being covered in HIM’s talks with Jablonsky, I said problem is to come up with feasible five year program of procurement. Shah agreed, but said that this should immediately be followed by USG determination as to how much credit it can provide for such program. I pointed out that, given situation in Congress, Shah cannot expect President or USG to make categoric credit commitments that far ahead. As is obvious President’s letter, I said, disposition of Executive Branch toward maintaining close military relationship is favorable and Shah would simply have to take chance that Executive Branch can secure Congressional support in years ahead. It was regrettable if Shah might not find it possible to have such patience.
5. Shah then came up with idea that after shopping list for next five years has been determined, GOI could proceed with placing orders, perhaps directly with American companies. If USG credit did not eventuate, Iran could secure financing from private American banks. I stressed importance of carefully phased program and re-emphasized point Jablonsky been making that Iran simply unable to find necessary trained personnel for military equipment which Shah has been talking of procuring within next five years. I acknowledged, however, that once practical program been outlined, possibility of credit from private banks is worth consideration. I gathered that Kuss and Samii were already doing some preliminary explorations.
6. Shah once again stressed his desire to keep air force American oriented, even if costs are higher, thus, he said, he would not oppose paying extra percentage point or two to private banks in order to continue American procurement for his air force. Shah also hoped that USG could assist by providing personnel to help maintain his air force. Five year package proposal for McDonnell to provide maintenance, he noted, estimates cost at $67 million. Thus USG by making military technicians available could be of real help. Comment: While Shah in discussion interest rates talks a bit cavalierly now, there likely to be resentment if and when American commercial credit terms are in fact proposed.
[Page 461]7. Re tanks, Shah said he goes along with Jablonsky’s proposals for holding density to present M–60’s, rehabbed M–47’s and eventually 250 Sheridans. Threat to Iran in Gulf, he said, is more apt to require naval or air force counter-action than tank action. When I said presumably his naval requirements will be met by British, Shah said there were some items such as ship missiles which he would like from US.
8. When Shah referred to argument that Turkey has large tank complement, figures which Dept so helpfully provided in State 901193 were given to Shah. It was emphasized that this info was for his personal info only. He was obviously impressed that Turks are not nearly as well off as he had thought.
9. When question arose as to possible tank production. Shah once again registered resentment toward Paks. According to Shah, Paks are declining to cooperate in project where British tank factory would be established in Iran to produce tanks for Pakistan, Saudi Arabia, Kuwait and Iran. Pakistani reluctance makes whole project dubious. Shah said that Paks are showing active interest in British proposal for building five-ton tanks in Pakistan. Shah regards such project with great disdain. He described five-ton tanks as useless “mosquitoes.”
- Source: Department of State, Central Files, DEF 12–5 IRAN. Secret; Priority; Limdis.↩
- Document 254.↩
- Dated December 27. (Department of State, Central Files, POL IRAN-U.S.)↩