322. Memorandum of Conversation1
SUBJECT
- U.S. Military Sales Program for Iran
PARTICIPANTS
- H.E. Amir Abbas Hoveyda, Prime Minister of Iran
- H.E. Hushang Ansary, Iranian Ambassador
- H.E. Mehdi Samii, Managing Director, Plan Organization, Iran
- The Hon. Dean Rusk, Secretary of State
- The Hon. Armin H. Meyer, American Ambassador to Iran
- Stuart W. Rockwell, Deputy Assistant Secretary, NEA
- Theodore L. Eliot, Jr., Country Director for Iran, NEA
The Prime Minister asked the new Managing Director of the Plan Organization, former Central Bank Governor Mehdi Samii, to join the discussion and to raise certain matters connected with our military sales program for Iran. He explained that Mr. Samii would, in his new job, continue to be responsible for military credit negotiations with the United States.
Mr. Samii said that Iran needs to place orders for the additional two squadrons of F–4 aircraft it desires in order to have these squadrons delivered by the end of 1971 when the British forces leave the Persian Gulf. A problem arises, however, because the planning ceiling of $100 million for the FY 1969 (seventh) credit tranche will not be sufficient to cover the [Page 575] F–4’s and other requirements. He asked if there could be some flexibility, for example exceeding in this year the planning ceiling. As an alternative, he mentioned the possibility of spreading out the credit requirements. (Comment: Here he was clearly referring to what we would term “incremental funding.“) In addition to the F–4’s, he mentioned the need to fund 100 additional Sheridan tanks, 200 recoilless guns and communications equipment in the seventh tranche.
Mr. Samii also said that we have informed Iran that after FY 1969 it must purchase all the ammunition previously supplied on a grant basis despite the fact that the 1966 amendment to our 1964 Memorandum of Understanding extended our grant program an additional two years. Ambassador Meyer and Mr. Eliot stated that the 1966 amendment of the 1964 Understanding extended the credit but not the grant program beyond FY 1969.
The Secretary said that he recognizes that it is necessary to think ahead but that our Congressional requirements make it necessary for us to plan on an annual basis. He said that if Iran wishes to increase the size of a tranche, we would have to ascertain whether the understanding between us would be firm over a number of years, so that we wouldn’t find ourselves being asked to increase later tranches and hence being asked to increase the total program.
Mr. Samii said that if we can reach an agreement on a total program, there would be no need to increase the size of later tranches.
The Secretary said that some of this may be easier for us in later years after the end of the war in Vietnam. He stressed that there is one serious aspect of the matter that must be kept in mind. Although we of course do not wish to infringe on the sovereignty of Iran, our ability to obtain the resources we need for this program depends on our examining the relationship between Iran’s military and development expenditures. The Secretary said he understood the Government of Iran would be supplying us with some figures.
Mr. Samii expressed the hope that we could advance the timing of our review of the economic factors. Hopefully, reports now being prepared by the IBRD and the IMF could serve as a basis. The Central Bank of Iran would also supply some data. All this information should become available in December.
Ambassador Meyer said that the economic review has usually taken place in the spring. He said that there are two important problems to be considered. One is whether incremental funding is possible. The other is whether the fourth squadron of F–4’s is really needed by the end of 1971. He asked whether delivery of the fourth squadron could be put off a year. This would assist solution not only of financial but also of manpower problems.
[Page 576]The Secretary said that it would be useful if the economic figures could be made available as soon as possible so that he could brief his successor. He doubted it would be possible to have formal negotiations within the next few weeks but said he would like to discuss the matter with his successor.
Mr. Samii said that the annual economic review has become a normal thing. The reports due from the IBRD and the IMF in December and January will cover the economic situation pretty thoroughly. In response to Ambassador Meyer’s remarks, he said that he did not believe that delivery of the fourth squadron of F–4’s could be postponed because once the British leave the Persian Gulf, Iran had to be ready for anything. Mr. Rockwell interjected that there was nothing four squadrons could do that three couldn’t do at that time. Mr. Samii reiterated that the fourth squadron was not just for “window dressing.” The Prime Minister added that Iran must be able to have teeth available.
Ambassador Ansary then mentioned that the Iranian Air Force also has a requirement for additional technicians at higher levels and asked if they could be made available. He said that the requirement is for more than the 50 the USAF has already made available and perhaps goes as high as 221. These technicians would supervise and train Iranians in maintaining F–4’s.
The Secretary said that we will look into this matter. He said that it presented no great problem in principle but posed a practical problem. He concluded this part of the discussion by saying that our military people on both sides might wish to review the military contingencies to see how many squadrons of F–4’s are really needed.
- Source: Department of State, Central Files, DEF 12–5 IRAN. Secret. Drafted by Eliot and approved in S on December 11. The source text is labeled “Part 3 of 4.” The time of the meeting is from Rusk’s Appointment Book. (Johnson Library)↩