35. Memorandum From the Deputy Assistant Secretary of Defense for International Security Affairs (Solbert) to Secretary of Defense McNamara1
SUBJECT
- Sale of C–130 Aircraft to Iran
The Shah of Iran has included in his most recent statement of military replacement needs a requirement for four C–130 aircraft for delivery [Page 74] by 1 July 1965. It is proposed that we approve a sale for this requirement totaling $10 million ($2.2 million each, plus spares) and advise the Shah of this approval during his current visit to Washington. The Air Force has indicated that four C–130B’s are available and could be rehabilitated and delivered by that date assuming the sale is consummated by 1 July 1964. The Air Force, in turn, would procure four C–130E’s for replacement to its inventory within the 22 months lead-time.
The question of credit may arise if the Iranians cannot meet the sale under dependable undertaking, our recommended starting position. In this event, the following credit terms under Section 508 of the Foreign Assistance Act of 1961, as amended, are recommended for your approval (State/AID concur):
Minimum Position
10% down, 3 years repayment in 12 equal quarterly payments, and 3–1/2% interest on the unpaid balance.
Fall-Back Position
10% down, 5 years repayment in 20 equal quarterly payments, and 3–1/2% interest on the unpaid balance.
This amount would be considered to be within the $20–$40 million range for military sales to Iran discussed in background material submitted to the President for the Shah’s visit.2