November 2, 1977

SECRET

TO:                    The Secretary

THROUGH:      T - Mrs. Benson

FROM:             NEA - Alfred L. Atherton, Jr.
                         PM - Leslie H. Gelb

US/Iranian Military Relationship

As requested by Dr. Brzezinski we have prepared the attached options paper as background for the Shah's visit. The paper focuses on two issues, our future stance on arms sales to Iran and the Shah's request for 140 additional F-16 aircraft. These subjects are discussed in terms of the Congressional criticism of our arms transfer restraint and the importance of the military supply relationship with Iran to our overall relations with that country.

You may wish to review the paper quickly, especially the conclusions and suggested options. The paper could provide the basis for a PRC meeting or an informal discussion with Secretary Brown and Dr. Brzezinski to formulate recommendations for the President.

Recommendation

That you approve the attached Tarnoff to Brzezinski memorandum.

Approve________ Disapprove________

Attachment:

As stated.

Drafted : NEA/RA:HPrecht:yw
               11/2/77 x20303

Clearances:
      S/P - Mr Lake
      H - Mr. Flaten (draft)
      DOD/ISA - Mr. McGiffert (draft)
      ACDA - Mr. Hirschfeld (draft)

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MEMORANDUM FOR DR. ZBIGNIEW BRZEZINSKI
THE WHITE HOUSE

Subject: Options Paper on US-Iranian Military Relationship

As requested in your memorandum of September 23 I transmit a paper on alternative courses of action on the US-Iranian military relationship. This paper was prepared with the participation of DOD, ACDA and the CIA.

Peter Tarnoff
Executive Secretary

Attachment:
As stated.

SECRET

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MEMORANDUM FOR:

                    THE SECRETARY OF STATE
                    THE SECRETARY OF DEFENSE

SUBJECT: Working Group on Iran

In preparation for the Shah's visit to Washington and the subsequent brief visit of the President to Tehran in November, the Department of State should convene a working group to examine the key issues which will require interagency consideration prior to these meetings. Other agencies should be invited to participate in the activities of the working group as necessary.

Recommendations on those subjects which will require Presidential decision, e.g. alternative courses of action on the U.S. -Iran military relationship and nuclear energy cooperation, should be forwarded to the NSC Staff no later than November 2, 1977.

/S/
Zbigniew Brzezinski

CONFIDENTIAL GDS

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US-IRANIAN MILITARY RELATIONSHIP







SECRET

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US-IRANIAN MILITARY RELATIONSHIP

TABLE OF CONTENTS

I. Issues

II. The Setting: The Importance of the Military Supply Relationship

III. US Arms Transfer Policy (PD-13)

IV. Congressional Attitudes

V. Assessment of Military Forces

A. The Iranian Perspective

B. Iranian Military Preparations

C. Pending Iranian Requests for Major Defense Equipment

D. U.S. Assessment

VI. Problems

A. Absorptive Capacity

B. Financial Implications

Chart 1 - Iranian Armed Forces - Significant Programs
Chart 2 - Current and Projected Iran-Iraqi Inventories

VII. Conclusions

VIII. Options

A. Alternative Approaches for Explaining to the Shah the USG Posture on Arms Sales

1. Importance of Our Military Supply Relationship With Iran

2. Importance of Restraining Future Iranian Requests for Major Arms Purchases

B. Alternative Suggestions for Responding to Iran's Request for 140 Additional F-16s

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US-Iranian Military Relationship

I. Issues

The President and Secretary Vance have assured the Shah of the basic importance we attach to our military relationship with Iran. The Congressional AWACS debate and the direction set by the President's arms transfer policy (PD-13), however, have raised the question whether we can — or should — continue to maintain our stance on arms sales to Iran as in the past. Clearly, a difficult policy choice is posed between the mandate for restraint expressed by PD-13 and the Congress and Iran's requests for sales of sophisticated military equipment.

There are two subjects which should be addressed in discussions with the Shah. First, we should convey a general posture or attitude on major arms transfers to Iran. Second, as the President has promised the Shah, we should respond to his specific request for 140 additional F-16s. The Iranians will probably interpret our handling of these two issues as establishing the policy line on arms transfers that the Administration will follow with Iran during the next three years.

Whatever decisions are taken on these issues, we should apprise the Shah of the relationship of his interest in new, sophisticated equipment to PD-13 and the Congressional perspective. Our objective should be to convince the Shah of the wisdom of our approach and enlist his support and cooperation. Whether or not we can elicit a positive reaction from him, we owe it to our long-standing relationship to explain our position fully and to listen carefully to his point of view. Both of us have an interest in maintaining a dialogue and in avoiding surprises and misunderstandings.

II. The Setting: The Importance of the Military Supply Relationship

The Shah's interest in creating a strong military force is not a recent development, but has its origins in his father's strenuous, but less than successful, efforts in the 1920s and 30s to strengthen the central government's control over dissident tribal elements and resist Russian and British pressures. During World War II, with British and Soviets troops in Iran, the present Shah began the task anew, obtaining the assistance of US military advisory missions in creating a strong military force. Up to the late 60s we had provided the GOI with about $1.5 billion in grant and loan military assistance.

Throughout this period the Shah persistently pressed for more US aid and for modern US weapons. In general, the US closely scrutinized these requests, providing only the equipment we believed Iran could afford and absorb and was appropriate in terms of the regional arms balance. An exception was our decision to sell 32 F-4Ds in 1967 in response to our concern that the Shah might seek Soviet aircraft if we denied the sale.

A new attitude toward military sales was adopted in May 1972 when President Nixon, pursuant to the Guam Doctrine, decided that we should allow Iran to make its own decisions on the acquisition of military hardware. In effect, this decision meant that we would deny Iran only the most sensitive advanced weapons technology, e.g., Lance missiles, naval minés, nuclear submarines and sophisticated electronic gear. The full impact of this liberal policy was not realized — and probably not anticipated — until the December 1973 OPEC decision quadrupled oil prices and provided Iran with the means to carry out its civilian and military modernization aspirations.

Our willingness to sell Iran a substantial portion of its military equipment, particularly for the Air Force, and to support these systems adequately, is at the core of our overall relationship. The Shah was undoubtedly relieved by the discussion with Secretary Vance in May, which reaffirmed our continued commitment to close ties with Iran, and later by the President's strong personal support for the AWACS sale. The heavy Congressional attacks on our arms sales relationship — the AWACS debate, Senator Byrd's call for a moratorium on arms sales and the Senate Foreign Relations Committee Resolution — have, however, renewed his deep concern at the reliability of the United States as a supplier of military equipment. As a very practical man, he probably recognizes, and grudgingly accepts, the necessity for adjustments in our arms sale program from the liberal policy adopted in 1972. Learning the extent of the change will be the number one objective of his visit. As the Shah makes all decisions on military purchases, changes in policy carry the potential for being interpreted as a personal rebuff.

We cannot predict how the Shah would react to a change in our military relationship, but it could affect his attitude on other important US issues. Depending upon the extent of that change, he has the ability to take measures contrary to important US interests: reduce intelligence cooperation, direct commercial sales and investment opportunities elsewhere and, where immediate Iranian interests are marginal, such as Africa, be unresponsive to our requests for parallel action. Iran will continue, of course, to pursue its own intrinsic national interests — which would very likely remain generally parallel to our own — even if our arms relationship changes. Fundamental Iranian interests require a close relationship with the US for many reasons — especially as a counter to the Soviet Union. Iran would not wish to see this relationship badly damaged.

III. US Arms Transfer Policy (PD-13)

The US arms transfer policy enunciated on May 19 calls for restraint in arms transfers and the employment of arms transfers as an "exceptional" instrument of foreign policy. PD-13 establishes guidelines that govern transfers to non-exempt countries unless the President personally approves an exception; it also established a sales ceiling for FY-78 that will be progressively reduced in subsequent years.

Approval of some major items on the Shah's list of desired military equipment could require exceptions to specific PD-13 guidelines, e.g., the bar against commitments to sell weapons that are not operationally deployed by US forces. The F-16 has not been deployed with the USAF; the guideline may be deemed not to apply to the sale of the 140 F-16s, however, because we have already sold the aircraft to Iran.

The total value of the requested Iranian sales will also create problems over the next three years in managing the sales ceiling. We have told Congress that the $1.2 billion AWACS sale will be counted in FY-78. Prospective new sales (e.g., 140 F-16s) will be counted as letters of offer are signed. In the years ahead, if such new orders are added to the large continuing follow-on support and technical assistance requirements, there is likely to be restricted room for major new equipment sales to other countries. For example, in FY 77 Iran accounted for almost half of total Foreign Military Sales.

Iran is, in fact, the principal test case for the arms transfer policy. Sales to other Middle East countries are examined primarily with respect to how they impact on the Arab-Israel confrontation. Sales to Iran — more than to any other country — are judged by Congress and the press in terms of the President's intent to limit arms transfers. Similarly, other suppliers and recipients will examine critically our attitude on arms sales to Iran in formulating their reactions to our efforts to promote multilateral restraint in arms transfers.

IV. Congressional Attitudes

There is diversity in the views of individual Members of Congress on the question of arms sales worldwide and to Iran in particular. Those Members who see Iran as a strong bulwark against Soviet pressures in the Middle East and those who appreciate Iran's close cooperation with Israel are generally disposed to endorse or at least not to oppose our proposals for sales. Increasingly, however, Members are concerned at the high dollar levels and sophistication of the equipment we have sold to Iran. This attitude was forcefully expressed by Senator Byrd's call for a moratorium of sales to Iran and for revisions in arms control legislation and by the recent Foreign Relations Committee Resolution urging restraint in the transfer of sophisticated weapons to the Persian Gulf area. Critics of arms sales to Iran — who are much more vocal than supporters — make the following points:

— We cannot be sure of the political evolution of the GOI and should be wary of arming a country whose future rulers might not share US foreign policy perspectives.

— Iran is essentially an underdeveloped country which lacks the technical capability to use the advanced technology it is buying.

— Continuing sales of advanced weapons to Iran contravene the spirit if not the letter of the President's arms transfer policy.

— Our arms sales to Iran and the US technical support these require create an implicit US involvement in Iranian foreign relations which could lead, in the worst case, to the growth of a Vietnam-like commitment for the US.

— By selling Iran expensive military hardware we create upward pressures on oil prices.

— The Shah's arms purchases inevitably feed a regional arms race with potentially destabilizing consequences.

— The transfer of our most sensitive advanced technology to Iran is threatened by compromise through Soviet capture of equipment or penetration of Iranian military forces.

— Excessive military expenditures divert funds from civilian spending on economic development needed to moderate social tensions.

— Iran's record on human rights, though improving, is repugnant to many congressmen.

These arguments were advanced in the Senate and House debates on the AWACS sale. Although the sale was not disapproved, pushing it through Congress required the expenditure of considerable political capital and set the stage for renewed, intense opposition to other major sales to Iran in 1978.

Some Members asserted, based on previous DOD testimony on the AWACS, that the aircraft would reduce Iran's need for additional fighter aircraft because its radar and command and control capabilities increase the effectiveness of each fighter — the "multiplier effect." Congress will examine any F-16 sale in light of the President's assurance during the AWACS debate that the "multiplier effect" will be taken into account in any future decisions on fighter aircraft.

Against this background it is questionable that a proposal to sell 140 additional F-16s would succeed with the Congress next year. There is also a high probability that in its current mood Congress will propose more restrictive legislation affecting arms sales worldwide. The notification of an F-16 sale in the near future would exacerbate that mood.

V. Assessment of Iranian Military Forces

A. The Iranian Perspective

Only in the Shah's lifetime has Iran emerged from a period of centuries when it was powerless before the competing pressures of Russia and Britain and lesser neighboring states. Although never a colony, Iran's territory was at times occupied by these powers—most recently in the 1940s when it required a major U.S. initiative to bring about Soviet withdrawal.

Iran has maintained correct relations with the USSR for a decade and does not deploy significant forces against its Soviet border, but Iranian suspicions of hostile Soviet intentions have not diminished. The Shah perceives a "pincer" movement surrounding Iran, planned and assisted from the USSR. To the west, there is the Soviet-supported radical regime in Baghdad with which Iran has a history of conflict. Relations are stable now, but in the past Iraq laid claim to the Arab-populated and oil-rich areas of Iran and Iran lent support to the Kurdish rebels. Iraq was the first of the two to introduce jet fighters, ground-to-air and ground-to-ground missiles, and other sophisticated equipment into the area. The Shah views Iraq as Iran's primary threat.

On the east, the Shah sees a Soviet thrust toward the Indian Ocean through the promotion of instability and radical elements hostile to Iran in Afghanistan and Pakistan and possibly through Russian encouragement of Indian actions against Pakistan. Although the Afghan armed forces are clearly no match for Iran's, the Shah is concerned that young Russian-trained officers might take over that government and invite Soviet or Cuban assistance. He is committed to resist the further fragmentation of Pakistan which could bring to power elements threatening to Iran or place on Iran's border an Indian-dominated state.

Across the Gulf the Shah doubts the ability of narrowly based feudal regimes to fend off radical pressures and fears that Qadhafi-like regimes in the Gulf sheikhdoms would threaten Iran's oil facilities and transit routes through the Strait of Hornuz. Since the British withdrawal from the area in 1971, the Shah has felt that Iran can rely only on itself to assure regional security. Hence, he was pleased to respond to Oman's request for troops to help pur down the Dhofar rebellion. Beyond the Persian Gulf, the Shah sees Iran's maritime supply line threatened by the growth of radical regimes in the littoral states on the Horn and in Southern Africa.

Behind all of these movements the Shah considers the Soviet Union to be the guiding force. Iran does not envisage and is not prepared for an all-out direct conflict with the Soviet Union, but it is building deterrent strength to raise potential costs and, if attacked, delay a Soviet advance until outside powers could render assistance. The Shah may fear that in a future period of strategic parity between the U.S. and the USSR, the latter could be motivated by the need for new oil supplies to threaten Iran with conventional armaments.

B. Iranian Military Preparations

The Shah is using his oil wealth rapidly to develop an enlarged, modern and—in view of the large size of his country—highly mobile military force. He is seeking to bolster Iranian self-sufficiency through agreements to co-produce arms in Iran. Several major defense purchases are being financed by oil barter in order to assure a source of funding in the event of a drop in regular oil revenues. The Shah has consistently shown an interest in the latest technology in order to leapfrog the development process and to project Iranian prestige in the world. Given the vulnerability of his oil centers and supply lines, he believes in the creation of clearly superior forces to deter aggression.

In the Ground Forces the emphasis is on armor based on British Chieftain tanks and APCs and on mobility with transport and attack helicopters. The Air Force is well equipped with air superiority fighters; its air defenses are being developed with the AWACS aircraft and Hawk and Rapier missiles. In addition, to compensate for Iran's weakness in ground transportation infrastructure, the Air Force has a substantial transport capability. The Air Force is modelled after the USAF, using our aircraft, procedures, training, logistics system and English. For this reason, the Shah has bought no significant aircraft in Europe. He will not wish to buy aircraft from the USSR, for he wishes to avoid having Iranians trained there or bringing Russians to Iranian air bases. The Iranian Navy has evolved in recent years from a border patrol force essentially limited to Persian Gulf waters to a regional navy that the Shah plans will be able to undertake missions in the Indian Ocean. A listing of major Iranian purchases for the three services is given at Chart 1.

C. Pending Iranian Requests for Major Defense Equipment

Iran has indicated it is interested in acquiring the following major defense equipment:

1. 140 F-16s as an addition for the Iranian Air Force inventory. Cost: about $2 billion. This is the only item on the Shah's immediate agenda.

Three years ago the Shah first expressed interest in acquiring 300 F-16 aircraft to augment his Air Force. In early 1976 he divided this request in two segments: as a result of financial pressures owing to a temporary oil lifting shortfall, the initial purchase was to be limited to 160 aircraft which we notified the Congress that year. Shortly after we made the notification, he added the remaining 140 planes to his request. We advised Congress of the request for 300 F-16s, but did not increase the sale proposal to include the 140 planes. The Shah plans that 160 F-16s will provide a two-for-one ratio with his 80 more expensive F-14s (in accord with the US concept of high-low mix). The 140 F-16s would be deployed mainly at new bases Iran is constructing in the south and the east.

2. 160 F-16s (over and above the 300) as replacement for F-5s beginning about 1985. Cost: about $2.4 billion. The useful life of the F-5s should extend to 1991-92.

3. 250 F-18As, F-15s, or more F-16s to replace the F-4s, commencing in the mid-80s. Cost: over $4 billion. The F-4E has a useful life until 1994.

4. 100 advanced medium STOL transport aircraft (AMST) to replace Iran's C-130s in the late 1980s.

5. 8 FFG-7 guided missile frigates. Cost: over $2.5 billion, plus possibly $1 billion for other support costs. We have an Iranian request for price and availability information, but no formal request to purchase. These ships have not yet been deployed with U.S. forces. The same data have been requested from the UK, FRG, Italy, and the Netherlands for comparable ships. Iran has also explored with us and the UK the purchase of four large fleet replenishment ships.

In addition, Iran may request U.S. approval for the release of advanced electronic systems, including secure communications (USG equipment denied) and other advanced electronic programs, and for additional co-production projects (co-production of advanced model Maverick and Harpoon missiles has been denied) .

Finally, Iran will purchase from the U.S. each year supplies of spare parts and other military equipment and support services to maintain and operate previously acquired systems. Such sales could amount to an average of about $1.5 billion annually.

D. U.S. Assessment

In our judgment, Iran has on order, with deliveries scheduled into the mid-1980s, equipment which should give it the capability adequately to defend itself against aggression from Iraq, the most likely threat. The two countries now are closely matched, with Iran possessing an advantage based on the superiority of its Air Force. Although our estimates cannot be certain, future improvements in Iraq's overall combat capability will probably be matched by Iran. The Iranians have more and better aircraft, pilots, weaponry, and electronics than do the Iraqis. In contrast, about 15 percent of the Iraqi fighter force consists of obsolescent aircraft. Iraq's growing air defense system would reduce this Iranian advantage but not eliminate it Chart 2, presenting the inventories of the two countries portrays Iran as having the numerical edge in equipment.

Iran's numerical advantage is misleading, however, since a portion of its ground force equipment is in storage or deployed with rear area units. In terms of armor and air defense weaponry in combat units, transportation and logistics capabilities, and combat experience, the Iraqis have a clear advantage. Also, Iraq's wartime re-supply source—the USSR—is much closer than Iran's. The Iranians rely on their large numbers of helicopters and heavy artillery, the quality of their armor and the superiority of their Air Force to offset these Iraqi advantages.

The outcome of any conflict between the two sides is also dependent on the tactical scenario and on qualitative manpower factors which are difficult to compare. The Iranians, for example, are presently vulnerable to a surprise Iraqi air attack which could be exceeedingly damaging to Iran's military and economic centers. By 1985, the addition of AWACS, the IBEX communications monitoring project, and the F-16s should remedy this deficiency if the Iranians are able to man and properly manage these systems.

The single most important problem faced by the Iranians is a shortage of skilled manpower able to operate and maintain the sophisticated weapons systems being acquired. Iraq faces the same problem but of lower magnitude since its equipment is less sophisticated. Since Iran's advantage over Iraq will become increasingly dependent on the superiority of its Air Force and the ability of the Iranians to use the sophisticated air weaponry and electronics being acquired, the problem of skilled manpower will become even more important for Iran over the next decade. Although considerable progress has been made, much remains to be done before the Iranian armed forces can be considered a well-trained military force.

On the basis of forces presently projected for the region, Iran also has the capability to deal effectively with likely threats from the east or across the Gulf. Iran is acquiring the air and sea transport capability to enable it to respond to military requirements across the Gulf. The development of significant new dangers, e.g., the combination of geographic threats, states actively assisted by Russians or Cubans, or Indian or Pakistani hostility, would, of course, change the security equation. Such developments, in our opinion, do not now appear in prospect, although they are taken seriously in Iranian planning. In general, we believe the Shah overstates the dangers to Iran in his "worst case" analysis.

Iran's naval forces, assisted by land-based air power, seem well suited at the present to their security responsibilities in the Persian Gulf and regional waters. It is not clear what possible threats to Iran might justify a future major expansion of its naval forces to project power into the Indian Ocean. It is our view that new naval forces do not assist Iranian security as much as ground and air forces. If older ships are not retired, additional ships represent an ineffective employment of scarce manpower.

Iran is acquiring the military equipment necessary to inflict considerable damage on an invading Soviet force. In any engagement with the Soviets, however, the war-fighting qualities of Iran's officers and men would be crucial as would the particular scenario and the response of the U.S. and other powers.

In summary, Iran's major strength lies in its Air Force. As currently planned, this force, in combination with ground and naval units and an adequate air defense system, can be expected by 1985 to deter and defend successfully against any single non-Soviet threat which we now envisage. An increase in the strength of the Iranian Air Force (e.g., more F-16s) should, of course, give Iran deterrence and defensive capabilities beyond what it now has, placing the country in a better position to meet the Shah's contingency planning requirements.

The Administration has assured Congress that it will take into account the AWACS "multiplier effect" in evaluating future Iranian requests for sophisticated fighter aircraft. In summary, we understand that Iran factored into its plans for the purchase of air defense fighters (e.g., F-16s) the assumption that the U.S. would sell it the AWACS aircraft. The AWACS will improve the effectiveness of interceptor aircraft by enhancing the command and control of those aircraft and their ability to engage hostile planes earlier and more efficiently. With the AWACS the duration of air battles should be shorter. Iran believes that it needs additional fighters for deterrence and to overwhelm an invading force—possibly from multiple directions—with superior numbers. Although, as discussed in this paper, several factors bear on the decision whether or not to sell Iran additional fighters, we do not believe that the "multiplier effect" will in itself reduce the Iranian requirement for an adequate number of interceptor aircraft.

VI. Problems

The multi-billion dollar program of rapid military modernization set by the Iranian Government has naturally given rise to a variety of problems. These are discussed in two categories: Iran's ability to absorb or assimilate sophisticated equipment and the implications of large Iranian military expenditures for the country's social and political development.

A. Absorptive Capacity

In recognition of Iran's problems in assimilating new weapons systems, the Department of Defense in early 1976 adopted a policy that confirmed the need for rigorous examination of all factors prior to approving new major defense sales to Iran. Since that time, we have also talked frankly with senior GOI officials of the dangers of overtaxing Iran's absorptive capacity. These corrective actions have been necessary because of :

— excessive delays and bottlenecks at ports, rail and highway terminals;

— long delays in facilities construction;

— severe logistic management problems;

— critical shortages of skilled manpower.

Clearly, these are the difficulties of a society developing at a forced pace with consequent pressures on materials, capital equipment, organizational arrangements and trained manpower. In general, problems for the military services persist in varying degrees, particularly where sophisticated equipment is involved, but they have diminished and are being managed more effectively.

While infrastructure problems have delayed and will continue to delay specific programs, shortages in skilled manpower will persist. In part these shortages are being met by foreign (mainly U.S.) personnel. Some 50 U.S. companies (with about 5,500 technical employees) and about 1,200 DOD personnel are presently involved in security assistance programs in Iran. With their dependents, the U.S. defense-related community constitutes about half of the estimated 31,000 Americans resident in Iran, the largest Western foreign community. The U.S. Embassy projects that the total American civilian population will grow at about three percent over each of the next three to five years, while the U.S military element may expand by five percent annually. In general, relations between the American community and Iranian society are excellent, although life in Iran does pose a substantial adjustment for Americans.

B. Economic Implications

The Shah is attempting to use his large oil revenues to move rapidly on both civilian and military economic development. He believes strongly that there is little point in creating a prosperous society without the military strength to defend it. Thus, Iran now devotes roughly 25 percent ($9 billion) of the general budget to military expenditures, including an average of about $2 billion in payments for military purchases from the U.S. The Iranian Government will have to be careful that the sustained high level of military spending does not have an adverse impact on Iran's economic evolution and give rise to political tensions in the rural sector and within Iran's developing middle class.

Iran enjoys a strong resource base (oil, natural gas copper), over $10 billion in foreign exchange reserves, an excellent international credit rating and firm prospects for long-term industrial growth. On the other hand, the country has experienced major structural problems in making the transition from a largely traditional society to a balanced, self-sustaining industrial state. The Government will have to devote increased funds to the inadequate physical infrastructure (electricity, water, sewage, roads, public transportation), lack of housing, agricultural development (to increase productivity and raise rural living standards) and social services for the urban poor, especially those recent migrants from the countryside.

In the future, the Government will encounter tough choices on priorities between military and civilian economy expenditures. Given the levels of current military commitments alone and the strong upward pressures exerted by international inflation and rising personnel costs, it will be difficult to shift resources from military to civilian programs.

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CHART I

IRANIAN ARMED FORCES - SIGNIFICANT PROGRAMS

A. Maior US Foreign Military Sales (Representative Listing)

Iranian Air Force



Item (Qty) (Value)

Year Approved

Program Completion Date

F-4Ds (32) ($59 million)

1967

1969

F-4E (177) ($856 million)

1969

1978

I-Hawk Batts/Msls (37/1811) ($687 million)

1971

1980

Laser Guided Bomb Kits (4162) ($30 million)

1972

1979

F-5E (141) ($345 million)

1972

1977

F-14 (80) ($2,497 million)

1972

1979

Phoenix Missile (694) ($413.2 million)

1972

1982

KC-707 (13) ($260 million)

1973

1978

Maverick (2500) ($71 million)

1973

1977

Electronic Warfare Range ($22 million)

1974

1977

RF-4E (12) ($135 million)

1974

1978

CBUs (6000) ($22 million)

1974

1980

F-5F (28) ($127 million)

1974

1978

F-16 (160) ($3,600 million)

1976

1981

Logistics Support System ($191 million)

1976

1980

RF-4E (5) ($68.2 million)

1977

1978

I-Hawk Training ($183.7 million)

1977

1979

I-Hawk Motors/Parts ($54.7 million)

1977

1987

F-14 Training ($28.7 million)

1977

1981

E-3A: AWACS (7) ($1,303 million)

1977

1984

P-3F (6) ($73 million)

1972

1979




Iranian Navy



Ex-US DDs (2) Modernization ($58 million)

1972

1976

RH-53D (6) ($115.1 million)

1973

1978

MK-46 Torpedo (514) ($79 million)

1973

1978

Spruance (CG-993) (4) ($1,437 million)

1973

1982

Standard Msls (508) ($44.9 million)

1973

1981

Tang Submarines (3) ($90 million)

1975

1982




Iranian Army



214 Helicopters (332) ($1,200 million)

1972

1979

AH-1J (202) ($447 million)

1972

1978

Helo Trng Cntr ($199 million)

1974

1978

Helo Log Cntr ($226 million)

1974

1978

Helo Trng Cntr ($167 million)

1977

1981

Helo Log Cntr ($139 million)

1977

1981

Helo Support Cntr ($250 million)

1977

1981

AH-1J Support ($57 million)

1977

1982

155mm How (50) ($9.3)

1968

1972

175mm How (38) ($8.5 million)

1971

1976

8" How (14) ($54.6 million)

1971

1976

155mm How (200) ($55.7 million)

1972

1978

155mm How (60) ($15 million)

1973

1978

8" How (28) ($59.1 million)

1973

1978

155mm How (130) ($342.1 million)

1974

1978

8" How (9) ($54.3 million

1975

1979

175mm How (8) ($54.3 million)

1975

1979

2.75" Rockets (734,000) ($65.5 million)

1973-75

1977

Dragon Msls/Trkrs (20703/1218) ($95.8 million)

1974

1978

B. Iranian FMS Program Totals for Fiscal Years 1972-77

Value of FMS Agreements

$17.2 billion

Value of FMS Deliveries

$ 5.2 billion

Value of Weapons and Ammunition
(Includes combat ships and aircraft)

$ 9.1 billion

C. Major US Commercial Programs

National Communications System
C-130 Transport Aircraft (56)
Boeing 747 Transport Aircraft (12)
Shipyard Construction - Bandar Abbas
Shipyard Construction - Chah Bahar
Project IBEX - Communications Intelligence

D. Examples of Third-Country Purchases

Country

Item

Year

Value

USSR

APCs, Air Defense Artillery and Trucks

1967

$110 million

USSR

AA guns, APCs Rocket Launchers, Prime movers, AMMO

1970

$135 million

USSR

130 mm Guns, AMMO, Prime Movers

1972

$ 72 million

USSR

Trucks, road building and engineering equipment

1974

$250 million

USSR

Tank Transports, SA-7s, ZSU-23/4

1976

$ ?

Estimated total purchases from USSR as of January 1, 1977: $1.4 billion

UK

Chieftain Tanks (1162)
(approx. 1/2 Chieftain sales)

1971-75

$480 million

UK

Scorpion Tanks (354)

1973-74

$ 52 million

UK

Rapier

1970-75

$701 million

Estimated total purchases from UK as of January 1, 1975: $1.7 billion

Netherlands

F-27 transport, aircraft (25)

1971-74

$ 48.3 million

Italy

Helicopters (277)

1969-74

$176 million

France

Patrol Boats (18)

1974-75

$320 million

Total Third-Country purchases (1954-77) probably exceed $4 billion

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CHART 2

CURRENT AND PROJECTED IRAN-IRAQI INVENTORIES
OF SELECTED MAJOR ITEMS


1977

1985

Ground Forces

Iraq

Iran

Iraq

Iran

Personnel

185,000

280,000

270,000

350,000

Tanks

1,900

1,833

3,000

3,070

APCS

1,970

2,870

3,000-3,400

3,595

Artillery over 100mm

860

1,297

1,450-1,650

1,376

(Towed)

(860)

(769)

(1,200-1,400)

(839)

(Self-Propelled)


(528)

(250)

(537)

Mortars over 100mm

170

620

325-400

634

Helicopters

212

813

240

966

Air Force





Personnel

28,000

110,000

33,000

145,000

Fighters

470

440

480

610

Bombers

21

0

20

0

Reconnaissance

10

35

10

20

Airborne Early Warning Radar (AWACS)

0

0

0

7

Navy





Personnel

3,000

32,000

5,000

40,000

Destroyers

0

3

0

4

Other Surface Combatants

36

51

38

69

Submarines

0

0

0

3

Missiles





Surface-to-Surface

155

0

200

0

Surface-to-Air

1,900

2,100

5,000

4,500

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VII. Conclusions

There is general agreement on the following points:

— A dependable, smoothly functioning US military supply relationship is of key importance for continued successful collaboration with Iran on a number of issues.

— US and Iranian interests will remain roughly parallel even if some chances are made in our attitude toward future arms sales.

— Difficulties deriving from Iran's level of development will continue to complicate the country's assimilation of modern military equipment.

— There is a potential danger that the continued acquisition of expensive, advanced weaponry could impair Iran's civilian development efforts.

— Actual and potential threats justify the creation of a modern, highly mobile military force for effective deterrence and defense. Numbers and types of some equipment under consideration, however, may be (if we discount the Shah's worst case threat assessment) in excess of Iranian requirements and could stimulate arms acquisitions by neighboring countries. In particular, there is some doubt concerning the planned development of the Iranian Navy.

— The U.S. has a foreign policy interest in Iran's ability to deter aggression, defend itself and contribute

to regional stability; our objective is to avoid encouraging destabilizing rivalries and arms competition, e.g., between Iran and Iraq, or concern by other friendly countries in the region, most notably Saudi Arabia and India.

— We need to conduct the Iranian program carefully so as to avoid any damaging contradiction with the policy guidelines set by PD-13.

— We face sharp Congressional opposition to any major arms sales to Iran during the next year and the strong possibility that Congress will disapprove an F-16 or other similar sale (FFG-7s) if submitted during that period.

VIII- Options

A. Alternative Approaches for Explaining to the Shah the USG posture on Arms Sales

The policy framework for our military supply relationship, and in particular the request for 140 additional F-16s, should be explained both from Iran's point of view and our own. It will be important at the outset of a discussion with the Shah to ask him to describe Iran's security situation and his perception of Iran's requirements for further military equipment. He should not feel that we are disregarding Iran's concerns in the formulation of U.S. arms transfer policy.

The following two sub-sections include possible talking points that could be used in presenting U.S. policies to the Shah. The points in the first section emphasize the importance of our military supply relationship with Iran; points in the second section concentrate on our interest in restraining future Iranian arms purchases. A presentation to the Shah could be composed of points selected from one or both of the sections. A final section presents options on the F-16 request.

1. Importance of Our Military Supply Relationship With Iran

— This Administration views US-Iranian military cooperation as a central element in our overall relationship with Iran.

— Iran's ability to deter and defend against aggression is essential to the maintenance of stability in the Middle East and to the preservation of Western interests in that region.

— Accordingly, the U.S. will continue to the maximum extent possible to meet Iran's requirements for military equipment. We will continue to work closely with the Iranian military to develop a realistic program of requirements that will effectively satisfy pressing Iranian needs.

— As the Shah is aware, this Administration has adopted a policy of arms transfer restraint designed to inhibit the spread of regional arms races. We want to enlist the Iranians' help in applying those guidelines to the Persian Gulf region.

— As the Shah is also aware, Congressional opposition to arms sales in the Middle East has intensified in recent years.

— While this Administration and many Members of Congress share a common perspective on arms transfer restraint, we sometimes disagree on the importance for U.S. foreign policy and national security of specific sales.

— We undertook the necessary efforts for the successful conclusion of the AWACS sale without hesitation because we deemed it important for Iran's air defense requirements and the security and stability of the Persian Gulf region.

— We are prepared to deal with Congressional opposition to future sales when that serves important U.S. and Iranian interests. But it would be difficult at this time to approach the Congress with a major Iranian arms request.

— We must, therefore, delay action on the F-16 request until the most propitious moment for a presentation to Congress. We believe a delay will not adversely impact on Iranian security.

2. The Importance of Restraining Future Iranian Requests for Major Arms Purchases

— A principal thrust of our policy governing arms transfers is to reduce the level of sales, particularly of sophisticated equipment, below past annual levels. This will impact on all countries, including certain Iranian requests.

— Iran's rapid acquisition of sophisticated weapons systems has created difficulties for the Iranian armed forces. This is understandable; our own military services have had similar problems.

— It would be desirable to allow a period of consolidation of a year or two during which the very highly complex equipment Iran has ordered can be successfully integrated into the inventories of its armed forces. During this period it would be prudent for Iran to defer purchases of major new systems and to concentrate on the problems presented by recently ordered systems. Making the systems fully effective will significantly enhance Iran's defensive capabilities.

— We would hope that Iran could use its great international prestige to join with the U.S. in encouraging other nations to moderate their acquisition of conventional arms.

As a respected world leader, the Shah, like the President, has a special responsibility in this regard. Such an initiative -- though we should not underestimate the difficulties -- could have profound consequences for enhanced international security and the availability of additional funds for economic development.

It is possible that a clear demonstration of Iranian restraint in acquiring new systems right be reciprocated by Iraq. We believe that it is important to attempt to influence Iraqi decisions on acquiring new weapons systems in order to reduce pressures for a new round of arms purchase in the Arab-Israel context, as well as vis-a-vis Iran.

— Iran's image in the Congress and in U.S. public perceptions would be substantially altered and strengthened by moderation in Iran's purchases of major weapons systems. We believe that this shift in emphasis would benefit the overall US-Iranian relationship without endangering Iran's security.

— We believe it would be useful and timely to examine with Iran from a fresh perspective the role that Iran sees for itself in the Indian Ocean. We focus on Iran's present plans for naval expansion because it seems to us that this is an activity that might be stabilized at presently planned levels until we have a clearer idea of the real and potential regional naval threats and the possibilities for regional cooperation in preserving security.

— We have kept the Iranian Government fully informed on developments in our talks with the USSR on Indian Ocean stabilization. It is too early to tell where those talks may lead, but the Soviets appear to be serious. It would be preferable from every point of view if the Indian Ocean area could be stabilized at present levels and if we could avoid large expenditures on naval armaments by the littoral states.

— We realize that there may be some differences in perspective or judgment between Iran and the U.S. as to the kinds of equipment that Iran needs in the future. We will naturally respect the Iranian point of view on such matters and realize that on occasions when the U.S. is unable to supply the specific weapons systems requested the Iranian Government may wish to consider other sources of supply.

B. Alternative Suggestions for Responding to Iran's Request for 140 Additional F-16s

Six options are offered for responding to the Shah's request to buy 140 F-16s. We do not repeat in the brief discussions of each option the arms restraint arguments, Iran's military need, the absorptive capacity problems or financial implications. Plainly, these factors must be weighed against the background of the Shah's perception of his requirements and Iran's importance to us on the one hand and the likely Congressional reaction on the other.

If the selection of options permits some flexibility on the number of F-16s to be sold (i.e., not necessarily 140 planes) or the timing of our notification to Congress (1978 to 1980), we should consult with key Members to obtain their views and lay the groundwork for the later notification. The mere fact of consultations would materially, improve our case.

The selection of options on the sale of F-16s should take into account the separate decision for notification to Congress of the proposed sale of F-15s to Saudi Arabia. Congressional opposition to the latter is intense. Should we notify F-15 and F-16 sales to Congress during 1978, the combined impact could result in the defeat of both. To defer the Saudi F-15s, while proceeding with the Iranian F-16s, will antagonize the Saudis who were previously told we wished to wait until Congressional action was completed on the Egyptian sales this fall.

Option 1. Approve the sale and inform the Shah that we will submit the Congressional notification shortly after Congress reconvenes in 1978.

This option will please the Shah and suggest that the U.S. will continue to be forthcoming in meeting his requests for major weapons systems. It will, however, call into very serious question the Administration's commitment to restrain arms transfers. There is a high probability that Congress will disapprove the sale and enact more restrictive legislation on arms transfers. Execution of the entire sale in FY-78 will again give Iran about half of worldwide FMS sales, adding about $2 billion to $1.3 billion for AWACS within the annual ceiling.

Option 2 Inform the Shah that we approve the sale of 140 aircraft in principle, but because of Congressional pressures must have flexibility in the timing of formal Congressional notification between now and 1980. This could mean not going forward to the Congress with a formal proposal in 1978. We will arrange approval of the contract to avoid a break in the monthly delivery schedule of four F-16s per month until all 300 aircraft have been shipped. (The Shah has requested a delivery rate of eight aircraft per month, but we have told him that is not feasible.)

This option will meet the Shah's request, but delay in signing the formal contract for a year or two will make certain long lead time components more expensive and could increase the cost to Iran by about 20 percent ($400 million), depending on inflation. The Congress will have to be told of the decision; the reaction will be similar to that in Option 1 except that there will be no formal notification on which to focus opposition. By 1979 or 1980 Congressional opposition may diminish.

Option 3. Inform the Shah that we will approve the sale of 140 F-16s, but will consider them as replacements for Iran's F-5s, not as additions to the Iranian Air Force inventory. We believe that Iran's present inventory of aircraft, including the planes on order, is sufficient to meet anticipated threats. The present force will eventually require replacement and qualitative improvements and we are ready to discuss numbers and types of additional replacement aircraft. If Iran accepts this offer, we can arrange the shipment of the second group of F-16s to begin in mid-1983 at the rate of four per month with no interruption in the delivery of full 300 aircraft. This will mean a short overlap with the F-5s until they are phased out 6-8 years before the end of their planned utility (1991-92).

Holding the line on an increase in the strength of the Iranian Air Force is attractive from the perspective of arms transfer restraint and our efforts to induce other suppliers to follow our lead. The proposal will also be more acceptable to those Congressmen who oppose our programs of arms sales to Iran. It will, however, be resented by the Shah as an attempt on our part to dictate the size of Iran's Air Force. He may decide to purchase alternative aircraft from other sources, although this would present serious practical problems for his Air Force. Or he may accept the 140 US aircraft and buy additional planes from other suppliers. Early replacement of the F-5s will pose the problem for us of making acceptable arrangements for third country transfers .

Option 4. Inform the Shah that in view of the Congressional situation and our arms transfer policy, we can only approve a lesser number of F-16s (say, 40 to 70) depending on the outcome of consultations on the Hill.

This option would be a compromise between meeting the Shah's request and a totally negative response. Approving only a portion of what the Shah wants might prove helpful with some Congressional critics. The Shah will probably view it as arbitrary and an indication of a turn in US policy. Reducing the number of F-16s for Iran could suggest to Congress that we were applying the AWACS "multiplier effect" and thereby create a precedent complicating future proposals for aircraft for Iran and for our own forces.

Option 5. Inform the Shah that we are unable to approve the F-16 sale at this time. Any decision to sell will require further study and extensive consultations with Congress. A decision could be delayed until 1980 without affecting the delivery schedule contemplated in Options 1 and 2.

This response will improve our credibility in seeking multilateral cooperation to restrain arms transfers and avoids the expected Congressional reaction. The danger of this option is that the Shah, who expects a firm US decision now, will see the delay as tantamount to denial. He will probably buy alternative aircraft.

Option 6. Inform the Shah that we cannot approve the F-16 sale. We would commit ourselves now to F-16s or other suitable replacements for F-4s and F-5s, on a commonly agreed timetable.

This option is the most consistent with our restraint policy, holding the line on increases in Iran's aircraft inventory and avoiding any incentive for competitive Iraqi acquisitions. Its premise that, Iran does not require additional combat aircraft is broadly supported in Congress. It has the advantage over Option 5 of being decisive rather than dilatory. On the other hand, compared to other options, the refusal to sell the aircraft the Shah's believes Iran needs — the first such rejection in recent years — will provoke the strongest reaction from him and the most serious consequences for our overall relationship.