- Richard Helms
- Meeting with President Johnson.
Here we reproduce the transcripts of the hearing about Iran. The source document can be found here.
After reading this, it becomes obvious that in this Johnson era, Iran was mostly regarded by M. Holmes as a threat than a friend. His future support of the Islamic revolution which has still the favour of Democrats can be understood from this point of view.
Arms Sales to Iran
----------
Tuesday, March 14, 1967
U.S. Senate,
Subcommittee on Near Eastern and South Asian
Affairs, of the Committee on Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:30 p.m., in
room S-116, the Capitol, Senator Stuart Symington (chairman of
the subcommittee) presiding.
Present: Senators Symington, Fulbright, Gore, Clark,
McCarthy and Hickenlooper.
Also present: Peter Knauer, Assistant for Congressional and
Special Projects, Office of the Director of Military
Assistance, Department of Defense; and Lt. Col. Albertus B.
Outlaw, Office of the Assistant to the Secretary of Defense
(Legislative Affairs).
Also present: Mr. Marcy and Mr. Bader of the committee
staff.
[This hearing was published in 1967 with deletions made for
reasons of national security. The most significant deletions
are printed below, with some material reprinted to place the
remarks in context. Page references, in brackets, are to the
published hearings.]
STATEMENT OF MR. HENRY J. KUSS, DEPUTY ASSISTANT SECRETARY OF
DEFENSE FOR INTERNATIONAL LOGISTICS NEGOTIATIONS; ACCOMPANIED
BY MR. W.B. LIGON, DIRECTOR, NEAR EAST NEGOTIATING DIRECTORATE
AND ECONOMIC PLANNING-COORDINATION OASD (ISI) FOR ILN
* * * * * * *
EXECUTIVE BRANCH DECISION IN IRANIAN CASE [P. 4]
Mr. Kuss. First of all, this machinery included intensive
and detailed discussions with the country itself. For several
years, we have agreed with the Government of Iran that military
supplies will not be sold or bought by them, by any country,
without clear analysis of their need and the economic
capability to support the impact of such purchases.
Secondly, a U.S. military team bringing in our unified
command and joint staff machinery, worked with the Imperial
Iranian forces in analyzing the threat and recommending the
types of equipment which would be desirable.
Simultaneously, our State Department and AID machinery, at
the embassy level, worked with the Central Bank, not just with
their defense ministry, but with the Central Bank of Iran, to
determine financial resources which would be available to meet
total Iranian development and consumption requirements as well
as the effects of contemplated military procurement on such
resources.
Both these military and economic analyses were reviewed by
the Shah, and his prime minister and other governmental
agencies of Iran, and discussed with our ambassador.
All of this information was then made available in
Washington to the State Department, AID, and Defense machinery
for further consideration.
There were many adjustments made in the application of this
machinery. Needless to say, they didn't all adopt my
recommendations. There were many changes.
On the basis of these views, a decision was made at the
highest level in the United States Government concerning the
program which we would be willing to undertake.
From the time that the Shah gave indication of his first
need for additional equipment, to the time that my office was
informed of the program to be specifically negotiated, over
nine months elapsed with consultative machinery operating in
Iran and the United States.
In the final analysis, the most surprising thing to me is
that the Shah waited nine months since he was financially
independent; certainly he is politically independent and had
achieved the approval of the Majlis in November 1965 for the
purchase of $200 million outright from any source.
This waiting period only proves to me to some extent that
he really preferred the United States to continue as principal
military supplier even though he had to wait through all of the
time for the machinery to be processed, and even though he did
not get all that he was capable of purchasing in the process,
in the first analysis.
I should like to conclude my opening remarks with a
highlight summary of the situation taken from reports by people
in our AID, Defense and political machinery, who are a lot
closer to the situation than I personally can confess to be.
These statements from our AID, political, Defense people on
the scene are as follows:
1. While Iran's economic situation is basically sound, the
United States would greatly prefer that it limit the
expenditure of further resources on military equipment. This is
an important element of what was the basis for our final
decision.
The impression is that we wished to limit the amount of
military supply that we provide.
However, there is no prospect of convincing the Shah that
Iran need not develop what he considers an adequate defense
establishment to protect his fully exposed vital oil
installations in the south. Moreover, it is in the United
States interest to maintain a close military relationship with
Iran in order to protect our interests and to enable us to
maintain a dialogue with the Shah on the broader issues of
Iranian economic development and their relationship to military
expenditures.
The United States has made significant progress in the last
two years in stimulating the Government of Iran to examine this
relationship.
ECONOMIC GROWTH IN IRAN
For its own part, the Government of Iran has made great
strides in promoting economic growth in Iran, whose GNP
increased nearly 10 percent last year. Iran is credit-worthy
and, given its inability to rapidly absorb large amounts of
foreign financing for its development program, there is room
for additional military credits on reasonable terms.
Senator Hickenlooper. Given its inability?
Mr. Kuss. Yes. In other words, it can't grow up overnight.
All revenues are coming in faster than it can really spend them
on development projects.
Senator Hickenlooper. Therefore, they have some extra money
left over to buy arms?
Mr. Kuss. Yes, sir. That is the point I am making here.
The United States government has constantly tried to apply
brakes to Iranian military spending. Last year, although the
Shah planned $200 million in just one year from us in
purchases, in accordance with the requirements as confirmed by
the special U.S. military survey team, the U.S. government
limited the Shah to $50 million a year, with the possibility of
similar tranches over the next three-year period.
Limitations upon limitations have been placed on what he
can do with military programs.
2. Recent months have seen the steady--and I am quoting
now--continuation of a clearly visible trend toward a more
independent Iranian posture on the world scene. Developments
affecting Pakistan, one of Iran's closest allies, have
reinforced the Shah in his conviction that Iran must be
prepared to stand on its own feet. In setting his twin goals of
economic development and national defense, the Shah has linked
military security to economic and social progress, and believes
that he cannot have the latter without the former. Partly also
because of a deep-seated Iranian Nasserist antagonism and
partly because of the USSR's new policy of friendliness toward
Iran, Iran has shifted the focus of its major concern from the
threat of communism in the USSR in the north to Nasser and Arab
nationalism in the south. The Shah is acutely aware of the
vulnerability of his oil lifeline in the south to surprise
attack and the susceptibility to subversion of the Arab
minority, in Khuzestan.
The Shah feels compelled to maintain an adequate defense
establishment in face of a large-scale Soviet arms supply to
UAR, Iraq and Syria. He believes strongly that it is in the
interest of the United States, as well as Iran, that Iran be in
a position to deter or cope with regional threats rather than
calling on us a la Vietnam.
Egypt has several times Iran's arsenal.
The reason for the Shah's insistence on aircraft of the
type of F-4, and he did insist, was that even neighboring Iraq
already has delivered 18 of the all-weather Mach 2.3 MIG-21's,
whereas Iran has nothing better than day-flying Mach 1.3 F-5's.
SHAH'S MILITARY REQUIREMENTS
He has expressed his desire to meet his military
requirements from the United States, but he has made it
abundantly clear also that if the United States is unwilling or
unable to meet his major military requirements, he is
determined to go elsewhere to acquire what he needs.
3. The Shah's arms purchases from the Soviets are in
relatively non-sensitive areas such as trucks, armored
personnel carriers and ack-ack guns; his payments are primarily
in natural gas which for 60 years have been flared off. The
Shah's purchasing from the Soviets seems to him, and I am
reporting, seems to him, to be not without some value. He is
convinced that it will undercut Soviet propaganda about the
United States being solely arms merchants to Iran, and about
Iran's being an American puppet.
He also believes it will cause difficulties in the Soviet
relationship with Nasser and other radical Arabs.
Gentlemen, I deliberately didn't try to answer all the
questions in my opening statement but that poses a lot of
questions, I am sure.
* * * * * * *
END-USE AGREEMENT WITH WEST GERMANY [P. 7]
Mr. Bader. While you are getting that--let me ask you a
question. As I understand it, we include in our military sales
or grant agreement with West Germany a so-called end-use
agreement. Is that correct? That is, we have total veto, as Mr.
McNaughton said, over the final disposition of American
military equipment.
Mr. Kuss. That is right.
Mr. Bader. Is that correct?
Mr. Kuss. I negotiated them; yes, that is correct.
Mr. Bader. Fine.
So in the case of the these F-86, if they are not in Iran--
if they actually belong to Pakistan--then the West German
government and perhaps the Iranian government, if they were the
middleman in this case, have turned aside what was American
desire and policy with regard to Pakistan. Would that be
correct?
Mr. Kuss. I believe that would be correct.
May I continue my answer?
Mr. Bader. Certainly.
Mr. Kuss. To supplement what you said, let me put it in the
record that the United States was supplying military equipment
through grant and sales to Iran at the time that this
circumstance arose.
The United States approval of the German sale to Iran was
influenced by the fact that there appeared to be legitimate
requirements and the experience of the purchase would not
unduly upset the Iranian defense budget.
* * * * * * *
Senator McCarthy. I just want to know, what is the game?
Why do the Canadians do it for Germany under our license? The
Canadians don't have a serious balance of payments problem with
Germany. We do.
What are the politics of it?
Mr. Kuss. The Canadians have--I am not sure the balance of
payments is the consideration at all.
Senator McCarthy. Why? That is the question.
Mr. Kuss. The Canadians have as serious a balance of
payments problem as ourselves, if one is to talk balance of
payments, and the Canadians having financed a production line
for F-86's for themselves were in a position to provide F-86's
for Germany during the build-up period.
Senator McCarthy. Is that because we couldn't do it?
Mr. Kuss. We could have done it.
Senator McCarthy. Why didn't we? I want to know why the
Canadians with our license produced and sold it to Germany. Who
arranged this? Did this involve cooperation on the part of the
Defense Department and our manufacturers of F-86's? What I want
to get at is the process by which these complicated decisions
are made, like the one involving the sale of Lightning fighters
to Saudi Arabia, for example. We sell F-111's to England and
they in turn sell Lightning fighters to Saudi Arabia. Northrop
Aviation, however, says really what the Saudis should have are
F-5's, but, in the end, the Saudis are told: ``You really can't
go out and do the kind of thing you are urging them to do,
compete in the open market really for arms sales because
somebody just said you have got to take Lightning fighters and
we are in turn going to supply F-111's to England.''
Mr. Kuss. My answer to the first question, to start with,
first of all, the North American Aircraft Corporation has the
right to license foreign manufacturers to produce F-86 aircraft
in this case.
Senator Symington. F-86 is a North American; not Northrop?
Mr. Kuss. North American, right.
I understood the question to be F-86--has the right to--
this was some years ago, of course, with the F-86--they have
the right to license other countries to produce the F-86
aircraft with the approval of the United States Government.
They obtained that right through their contractual arrangements
with the Defense Department.
They then obtained the approval of the Office of Munitions
Control, who would also check it out with Defense, to license
Canada to produce, not only for themselves, but for other
countries as they were able to work out mutually-agreeable
sales arrangements.
TOTAL U.S. MILITARY ASSISTANCE TO IRAN [P. 8]
The United States Government, in reviewing that license,
approved it but insisted that the license itself contain a
clause that if the Canadians were to sell those airplanes to
any other country that they must get the approval of the United
States Government, specifically for that other country, number
one.
And, further, in that particular agreement, that if the
other country were to ever sell it to any other country, they
must also get the approval in succession of the United States
government.
Senator Symington. If you will yield to me a minute,
Senator--as I understand it, then, some 90 F-86's were sold by
Canada to West Germany, correct?
Mr. Kuss. That is correct.
Senator Symington. And those were sold by West Germany--
Mr. Kuss. Maybe more, sir.
Senator Symington. All right, we are talking about these
90.
* * * * * * *
MOVEMENT OF F-86'S FROM IRAN TO PAKISTAN [P. 8]
Senator Symington. I understand about the initiation; I am
just talking about these planes.
They moved from West Germany into Iran, then from Iran to
Pakistan. Did we know that they had moved from Iran to Pakistan
when they did, or did we find out later?
Mr. Kuss. When we knew, and we consulted with the
Government of Canada, both the----
Senator Symington. Let me ask the question again to be sure
you understand my point.
Did we know at the time the planes moved from Iran to
Pakistan that they were going from Iran to Pakistan, after they
were sold to Iran by West Germany? Did we know it at the time?
Mr. Kuss. No.
As a deliberate plan of our own. No, we did not know.
Senator Symington. We did not know.
Senator McCarthy. I think he is saying that we didn't know
it was going to be through these three stages when we first
licensed them in Canada.
Senator Symington. Just bear with me.
Mr. Kuss. We expressed no objection to a sale to Iran, not
Pakistan.
Senator Symington. We licensed the sale to Iran.
Senator McCarthy. You approved that one, not the next one?
Senator Symington. When did we discover Iran had moved them
into Pakistan by sale, barter or gift?
Mr. Kuss. I don't have a date here. I will be glad to
supply it for you.
Senator Symington. Roughly how many weeks or months was
it--was it some months after they went into Pakistan that we
found out that they had gone to Pakistan?
Mr. Kuss. It was some months, and after consultation with
Germany and Canada, both countries protested. Iran stated that
the aircraft were in Pakistan only for repair. Action was taken
to try to influence the return of the aircraft to Iran. The
Federal Republic of Germany held up further sales which they
had pending at that time to Iran as a result.
At the moment on this transaction we have two points of
information which I believe that you have seen, sir. The
Washington Daily News had indicated that the aircraft had been
returned as a result of strong U.S. pressures. This return of
the aircraft is generally confirmed by DIA but we are still
waiting for specific confirmation.
* * * * * * *
BRITISH SALE OF AIRCRAFT [P. 10]
Mr. Kuss. The Lightning is a British air defense aircraft
and solely usable for that purpose and no other purpose.
Senator Symington. Right. And that plane went from
Britain----
Mr. Kuss. To Saudi Arabia.
* * * * * * *
SALE OF F-86 AIRCRAFT BY WEST GERMANY TO IRAN [P. 11]
Mr. Bader. Is this also the case, as I have heard reported,
of some 200 to 400 M-47 tanks that have gone through Merex to
Pakistan via Iran.
Mr. Kuss. There have been no M-47 tanks that have gone from
Iran to Pakistan, to my knowledge.
Mr. Bader. Fine.
The West German Government has----
Mr. Kuss. As a matter of fact we have had that under
discussion with the West German Government, and we both have
held up any sale to Iran for the very purpose that we thought
they might----
Mr. Bader. They might go there.
Mr. Kuss. That they might go there.
Mr. Bader. Thank you.
F-4 SALE TO IRAN
I would like to go to the F-4 sale, Mr. Chairman, with your
permission.
Senator Symington. Very well.
Mr. Bader. Mr. Kuss, as I understand it, there are two
basic agreements between the United States Government and the
Iran Government with regard to military assistance, that is
agreements to talk about what you call in the Defense
Department hardware. First is the September 1962 memorandum of
understanding, and the second is the July 1964 memorandum of
understanding, is that correct?
Mr. Kuss. That is correct.
Mr. Bader. Now, in the memorandum of understanding of 1962,
we--in the major grant items there were 52 F-5's, is that
correct?
Mr. Kuss. Yes, that is correct.
Mr. Bader. That is roughly correct.
Now, would you explain to the subcommittee the terms of
this July 1964 memorandum of understanding? As I understand
it--and I must say I am quite confused about it--it has been
amended in August of 1966, is that correct, to allow for the F-
4 sale? Am I correct in the information that the July 1964
memorandum of understanding, as amended in August of 1966,
permits the sale to Iran of roughly $400 million of military
equipment, including the supplemental $200 million that covers
the F-4 sale?
Mr. Kuss. That is right.
Mr. Bader. That is right.
Mr. Kuss. May I say, there is one basic sales agreement and
that is the 1964 agreement. In that agreement we acquired
promises from the government of Iran that they would not
proceed at any independent pace on the purchase of this
military equipment, but that it would be subject to an annual
review of the economic availabilities of foreign exchange to
their development program as well as for other purposes. And we
did not wish to destroy that arrangement that we had achieved
from them in 1964. Thus, when we came to the conclusion that it
would be necessary to add $200 million of credit to the 1964
agreement, we thought it best to add it to an agreement under
which we had far more links, controls, reviews, analyses, if
you will, agreed to by the Government of Iran than if we were
to establish an entirely new agreement.
Mr. Bader. When did the Shah of Iran first approach the
United States about his requirement for an aircraft with the
capability beyond that of the F-5?
Mr. Kuss. From my personal knowledge, he was talking about
aircraft well beyond the F-5 before the 1964 agreement was
established.
Mr. Bader. With direct reference to the F-4's, was this in
the beginning of 1966?
Mr. Kuss. F-4s, and other aircraft, well beyond the F-5.
Senator Symington. Let me ask what counsel is interested
in, and what we are interested in: Was there mention in any of
these agreements of the F-4, the ones that they eventually got?
Mr. Kuss. No, sir.
Senator Symington. When was the decision made to ship F-
4's? When was the decision made and why was it made?
Mr. Kuss. May I review that----
Senator Symington. Yes.
Mr. Kuss--For the record?
As we have pointed out on numerous occasions, there is a
tremendous amount of machinery in existence.
Senator Symington. We understand that.
Mr. Kuss. In the executive branch. One part of this
machinery was the military machinery, the joint staff
machinery, that we sent to Iran to review with the Iranian
armed forces what they stated as their requirements.
Mr. Bader. This is the so-called Peterson mission.
Mr. Kuss. This is the so-called Peterson report.
Mr. Bader. When was that issued?
Mr. Kuss. The Peterson report was issued in approximately
early '65.
Mr. Bader. The Peterson report was the basis of the
military justification for F-4's.
Mr. Kuss. Excuse me, early '66.
Mr. Bader. That was the basis for the military
justification.
Mr. Kuss. March 1966.
Mr. Bader. March 1966.
Mr. Kuss. March 1966, and in the Peterson report they
recommended that it would be necessary for F-4D aircraft, D
aircraft, be provided to combat the Mig 21's that were
available in the southern regions that the Shah was--to meet
the threat that was established.
Mr. Bader. And this was in March of 1966.
Mr. Kuss. This was in March of 1966, right.
Mr. Bader. Did the Peterson report recommend two squadrons
of F-4s which we have now sold to Iran?
Mr. Kuss. I do not recall; I would have to check.
Mr. Bader. According to the Peterson report, as I read it,
they recommended six squadrons of F-5 aircraft and one squadron
of F-4C aircraft during the fiscal year '67-'71 time frame.
Mr. Kuss. You have got to read the Peterson report in two
ways. First of all, we were anxious to keep things as
restricted as possible. The Peterson report not only gave a
report on what was within, shall we say, a constricted level,
but it also indicated that many hundreds of millions of dollars
more worth of equipment could have been justified if one were
dealing with the kind of threat that the Shah was talking about
in Iraq, Syria, and the U.A.R.
Mr. Bader. When was the decision made to go from one
squadron of F-4's, which the Peterson report recommended, to
two squadrons of F-4's which was the final agreement?
Mr. Kuss. This decision was communicated to the Shah on the
10th of August.
Mr. Bader. On the 10th of August.
Mr. Kuss. The decision was made, of course, within our own
executive branch shortly before that at the highest levels of
government.
Mr. Bader. Will we also deliver to Iran the original----
Senator Symington. Excuse me just a second. You say the
highest levels of government. By that, do you mean the
President?
Mr. Bader. Yes, sir. I do.
Senator Symington. Is it true that Secretary McNamara
opposed this sale?
Mr. Kuss. Proposed?
Senator Symington. Opposed it.
Mr. Kuss. Opposed the sale?
Senator Symington. Yes.
Mr. Kuss. No, not to my knowledge, sir.
Senator Symington. Not to your knowledge. Thank you.
Mr. Bader. Will we also deliver to Iran the 13 squadrons of
F-5's that were called for under the 1964 agreement?
Mr. Kuss. I would have to check that.
May I put that in the record? There is a substitution of F-
4 squadrons for F-5 squadrons, and I just want to be sure about
the numbers, and I would like to insert them.
F-5 AIRCRAFT PROVIDED BY THE UNITED STATES TO IRAN
Mr. Bader. It was the decision of the highest levels, that
is the President, that this would be F-4D's rather than F-4C's,
as well, that would be the latest and most sophisticated----
Mr. Kuss. F-4D's
Mr. Bader (continuing). Models coming off the line and
later models coming off the line.
Senator Symington. Who is the one who knows about these
sales?
Mr. Kuss. It all depends on which question you ask, sir.
Senator Symington. I see.
Mr. Kuss. If you want to ask the question about the model
of the F-4, I can answer that.
Senator Symington. What was the day the decision was made
to ship the F-4's?
Mr. Kuss. I believe I said it was communicated on the 10th
of August.
Senator Symington. Fine.
CONGRESSIONAL CONSULTATION ABOUT SALE TO IRAN
Now, when was the Congress notified that F-4's were going
to be shipped to Iran?
Mr. Kuss. I do not believe the Congress was notified,
Senator, until Mr. McNaughton spoke on the subject.
Senator Symington. That was after it was in the press.
Mr. Kuss. Correct, sir.
Senator Symington. And we talked about governmental
machinery.
Is it the policy of the Defense Department to tell the
press before it tells the Congress about these sales?
Mr. Kuss. As a matter of fact, I do not believe we told the
press. I believe the British leaked it because of competition.
It was not our doing.
Senator Symington. So the British leaked it to the American
press.
Mr. Kuss. Yes, sir.
Senator Symington. Do you know who first published it in
the United States?
Mr. Kuss. No, I do not.
Senator Symington. Do you not think that, if we sell the
most sophisticated fighter to a foreign country, that
information should be supplied to the Congress?
Mr. Kuss. I would like to answer that question this way:
The F-4D, as we sold it to the Iranian Government, was not the
most sophisticated fighter that we were dealing with in terms
of sales to other countries. For example, it is not the same
airplane we sold to the British.
Senator Symington. Well then, let us say the second or the
third or the fourth most sophisticated airplane.
Mr. Kuss. I would like to answer that question by saying
that in addition to considering the problem, there were many
security meetings held at which we reviewed the switches, the
panels, black boxes of the F-4D, which related to nuclear
capability. They were taken out. We reviewed the missile which
was related to the F-4D and substituted SIDEWINDER missiles
which had been released already.
We eliminated the SHRIKE which is used on the F-4D. We
eliminated the WALLEYE missile which is used there. We
retrofitted some of our F-4D's with CORDS and DCM and
eliminated that.
So on balance we took a decision that we felt that this
would not be a security lapse here or any sensitivity, if
things went wrong.
Senator Symington. Let me repeat my question, please.
Mr. Kuss. All right.
Senator Symington. Do you not think, if you make a sale of
a sophisticated, modern airplane to a foreign government, the
Congress should be informed of that?
Mr. Kuss. I think I can best answer that question by saying
it is not my function to determine that answer, sir.
Senator Symington. Well, then you could say this also,
could you not; that you did not inform the Congress?
Mr. Kuss. Yes, sir.
Senator Symington. And you do not know anybody who did
inform the Congress.
Mr. Kuss. Yes, sir.
Senator Symington. And to the best of your knowledge it
would have remained a secret unless a foreign country had not
leaked it to the press.
* * * * * * *
FOREIGN AND MILITARY POSITION CHANGED BY SALES [P. 14]
Senator Symington. So you knew that the sale was going to
be made before you agreed to sell them the F-4's.
Mr. Kuss. Yes, sir, and we protested against it
considerably. We made a major point of it in our negotiation,
and made sure that the Shah was clear that our willingness to
sell sophisticated and sensitive equipment was conditional
pending clarification of Iran's position with respect to the
purchases from the Soviet bloc.
Now, the Shah responded to us on that and noted that he
wanted to reaffirm that if it came to Soviet equipment, he
would limit it to nonsensitive equipment. He went on further in
our discussions with him on the subject to note that he had
declined to send Iranians to the U.S.S.R. for training----
Senator Symington. I understand those points.
Mr. Kuss. I think these are important.
Senator Symington. We have had that information given to us
in great detail.
Mr. Kuss. I do not think the last group were.
He has limited the Soviet technicians, only a few, to go to
Iran to instruct Iranians on maintenance. The Soviets wanted
the team to remain two years. He gave them six months. And, as
a consequence, it was on balance when you consider the
tremendous position we have there, the number of technicians we
have there, the large predominance of $1.4 billion, I think,
that it will add up to, of the military equipment that we have
provided, that we still maintained our position in a changing
world, a world in which he was growing more independent, and in
a world in which he had gas to sell that he could not sell
anywhere else.
* * * * * * *
STEEL MILL SALE BY U.S.S.R. TO IRAN [P. 15]
Senator Symington. If they are building a $280 million
steel mill and a $400 million pipeline plant, and they are
purchasing over $100 million in military equipment, would you
not say, inasmuch as all this has happened in recent months,
that the position of the Russians from an economic standpoint
was rapidly moving at least into an equilibrium with our own in
Iran?
Mr. Kuss. No, sir, I do not believe so. I have certainly
pointed out very clearly on the military side that it is not
anything like an equilibrium. It is a man trying to dart in
through the armor with a little pin.
On the economic side, I can only say that when in 1962 we
decided, the Congress, along with the Executive Branch, to
eliminate development aid for Iran, it was inevitable that Iran
was going to turn to business means in the area to find its
way. And that in 1964, the 1964 military agreement was
essentially an agreement to phase out military assistance as
well, and when you move into a situation where you no longer
are giving it away, you find that you have got to find
different ways and means of handling your problem, and you no
longer have the absolute control that we had when we were in
the position of largesse to everybody giving it away.
Senator Symington. At any time did we suggest to the
Iranians that they purchase what they needed in the way of
additional military equipment somewhere else?
Mr. Kuss. Absolutely not. We, number one, opposed the
Russian program, made a major point of this.
Senator Symington. Yes, you answered the question, if it is
no, and you explained to us that you did oppose the Russian
plan.
* * * * * * *
EVENTUAL AIRCRAFT SALES TO IRAN AND PAKISTAN [P. 16]
Mr. Kuss. We expressed no objection to a Canadian-German
arrangement which would get them to Iran for the use of the
Iranian armed forces.
Senator Symington. Right.
How did they get to Pakistan?
Mr. Kuss. We found out through intelligence channels that
some of the airplanes were in Pakistan.
Senator Symington. You are going to let us know how many.
Mr. Kuss. And we are going to let you know how many, and we
also have found out that upon remonstration on our part, the
Canadian part, the German part, the newspapers have reported
that they have been returned. DIA has reported they have been
generally returned, but they are not sure about the number.
Senator Symington. Returned from where to where?
Mr. Kuss. From Pakistan to Iran.
Senator Symington. To Iran.
Did we ask the Iranians for an explanation of how they got
from Iran to Pakistan?
Mr. Kuss. We dealt, since our arrangements were with the
Canadians and the Germans, through the Canadians and the
Germans.
Senator Symington. Did we ask the Canadians and/or Germans
how they explained how the planes got from Iran to Pakistan?
Mr. Kuss. Yes, that is where the Germans stopped selling
any more equipment to Iran.
Senator Symington. What did the Germans say as to how they
got from Iran to Pakistan?
Mr. Kuss. The Germans indicated that the first Iranian
explanation was that they were in Pakistan for overhaul. As you
know, Pakistan does a great deal of overhaul for most countries
in that area. This was not satisfactory to anyone, and that is
why we have been pursuing this further.
* * * * * * *
RESPONSIBILITY FOR ARMS SALES [P. 17]
Senator Fulbright. But who makes the decision to sell arms?
Who determines the country's capacity to purchase without
endangering their economy? Do you as an official of the Defense
Department?
Mr. Kuss. It is my responsibility since the management for
funds must be put somewhere to see to it that that is managed
in a viable way.
But we have a government that has many elements to it and
in almost every case, and particularly in the Iranian case, the
machinery operated from the Teheran Embassy, economic aid
people, with the Central Bank people, to the AID people in
Washington, and it was as a result of their actions that the
program was reduced, the Shah requested, to a much, much
smaller program.
* * * * * * *
RATIONALE BEHIND SALE TO IRAN QUESTIONED [P. 18]
Mr. Kuss. Well, as you say, I probably wouldn't agree with
you.
Senator Fulbright. I don't think you would.
Mr. Kuss. But only because it is the machinery, the very
machinery that you propose to exercise which came to the
conclusion to provide the kind of arms and to eliminate
economic aid in 1962, to eliminate military assistance in 1964
on a phased basis, to provide arms on a very stringent basis,
and to not supply everything that the Shah wanted. It is this
very machinery that you speak of that came to that conclusion.
Senator Fulbright. I am sure Iran wants it.
I was there with Mr. Douglas Dillon in 1959. I suggested to
the Shah that if he spent money on the improvement of the
ordinary citizens, he would be more secure than trying to
protect himself with arms. But there is nothing I can do about
it, and I don't know that it does any good to bedevil you about
it. I realize you are an official in the Department of Defense.
I only hope you do not go too far in loading everybody down
with arms that can't afford it.
Mr. Kuss. Let me repeat again, Senator, that as far as the
underdeveloped country, arms sales are fairly meaningless to
us. They amount to 10 percent of our total program. My office
is occupied with doing things with people with whom we used to
be giving billions in foreign aid in our alliances.
When it comes to the application to these non-developed
countries, my responsibility is to see to it that if we do
extend credit they have got the money to repay it, that we
manage it on an appropriate basis.
Senator Fulbright. I am not arguing about their having the
money for purchases. I expect you will get it.
What they are doing is taking it out of the hides of poor
peasants. That is what is creating a politically explosive
situation.
The Shah will get the money from the Majlis. You don't
dispute that?
Mr. Kuss. Let me make that clear. The Majlis has, as you
pointed out, voted $200 million that he could spend in one
year. We didn't agree with that. We didn't agree with that at
all. We dealt with the Central Bank, Mr. Sami, whom you
probably know is a very capable man there.
Next we dealt with our economic mission in Teheran; next
with the AID group. What we dealt with was a situation which
compared what each tranche of military equipment would involve
in the way of debt pre-payment against any balance of foreign
exchange that was left over after all of the feasible projects
could be administered for the economic development program. We
dealt with that as a given factor by our AID people who did not
take the Shah's estimates of all revenues, reduced them and who
did not take all of the Shah's estimates on what his economic
programs were feasible, and the programs that we are dealing
with here, all through it have a ceiling something like this,
and this curve here is the debt pre-payment capability which
our economic advisers told us was possible after covering the
other programs.
Senator Symington. If the chairman will yield.
Senator Fulbright. I will.
Senator Symington. It would seem clear from your testimony
that you felt the Shah had a right because of danger to his
country to make arrangements to obtain these airplanes. Is that
correct?
Mr. Kuss. Yes, sir.
Senator Symington. All right. Now, in the Peterson report--
--
Senator Fulbright. Danger from whom?
Senator Symington. I was going to get to that. In the
Peterson report it says, and I quote: ``The combined forces of
these latter three countries represent a overwhelming military
capability vis-a-vis Iran. But for the foreseeable future the
possibility of their making such a combined assault on Iranian
forces seems quite remote. A unilateral attack of Iran by UAR
forces is unlikely. But if it should come, it would be limited
to naval action unless the Israeli issue were first resolved or
unless the UAR achieved hegemony over the minor states of the
area, a circumstance not readily foreseen.''
Now, as I understand it, therefore, you believe that the
threat comes from Syria, the UAR, and Iraq primarily, is that
correct? The Pentagon feels that way?
Mr. Kuss. That is a result of the Peterson report, yes.
Senator Symington. All right. How many Mig 21's has Iraq
got roughly? I think this is very important.
Mr. Kuss. They have 18 on hand, and I believe another 18
coming.
Senator Symington. That is 36. How many has Syria got?
Mr. Kuss. Actual order of battle on hand, 18 for Iraq,
Syria 26, 102 for UAR.
Senator Symington. Wait a minute, you are ahead of me. How
many has Iraq got?
Mr. Kuss. Eighteen.
Senator Symington. And how many do you say they are going
to have?
Mr. Kuss. My records indicate they will have 18 more.
Senator Symington. That is 36.
Mr. Kuss. Yes, sir.
Senator Symington. How many has Syria got?
Mr. Kuss. The order of battle indicates 26 here.
Senator Symington. Twenty-six. That is a total of 62,
correct?
Mr. Kuss. Right.
Senator Symington. Now how many did you say Egypt has?
Mr. Kuss. 102. Those are just Mig-21's.
Senator Symington. But the SU-7 is an improved Mig-21, is
it not?
Mr. Kuss. Yes, sir. That is 38 additional SU-7's in the
UAR.
Senator Symington. Well, I mean do you not want to include
the best they have got? The figure I got in Cairo last month
was 60 SU-7's. But you have got 38; you have 102 and 38.
Mr. Kuss. Yes, sir. I would like to check.
Senator Symington. That is 140 and 62. That is over 200 of
the latest model fighters that those three countries have. Why
do you not sell more F-4's to Iran if you want to put them in a
balance of power position against these three countries? In
other words, what do you really do for the Shah by giving him
one or two squadrons of F-4's if your premise is correct that
these three countries are enemies and they have over a hundred
of the most modern Russian fighters. I am following Senator
Fulbright's thinking on this.
OUR MILITARY POSITION IN IRAN
You have been to Iran and so have I. It is a country where
there are very rich people and very poor people. What good does
it do to let them take their resources, and buy these airplanes
from us, if they get them at all, as against what they could do
with that money for the betterment of their economy because the
number of planes that you have agreed on does not make them
safe against these countries. Incidentally, all these latter
countries are really satellites of the Soviet Union, are they
not?
Mr. Kuss. They certainly are.
Senator Symington. Therefore, if the Soviet Union wanted to
move against Iran, the military imbalance is still stronger, is
it not?
Mr. Kuss. It certainly is. May I answer the question?
Senator Symington. I am just asking a few as we go along.
As I understand it, we are selling military equipment to
them, sophisticated military equipment; and the Soviet Union is
selling them unsophisticated military equipment, plus a
tremendous steel mill, for which they are going to be paid in
natural gas, and in oil. Is that correct?
Mr. Kuss. That is correct.
Senator Symington. Would you say that in our effort to
preserve a military position which is at best theoretical, we
are passing over the economic control of the country to the
Soviet Union?
Mr. Kuss. I do not see it that way. With a few projects, I
do not see it at all. I would believe that the relationship of
our western influence in both the economic area and the
military area is probably about on the order of the $1.4
billion military to $100 million Soviet.
SOVIET INFLUENCE IN IRAN
Senator Symington. But we are putting the Soviet Union in
about equilibrium when it comes to economic control.
Mr. Kuss. I do not believe so.
Senator Symington. You do not think so?
Mr. Kuss. No, sir.
Senator Symington. You think we still control the economy
of Iran?
Mr. Kuss. First of all, I do not believe that the word
``control'' is one that the Soviets use.
Senator Symington. What do you think the word should be?
Mr. Kuss. I believe that the good influence, if you will,
that we have in Iran is sufficiently great, in a preponderance,
in a majority, to warrant the course of action that we took,
and that was the on balance decision of both our economists,
our political people, and our military people.
Senator Symington. You told the subcommittee this afternoon
that we did our best to prevent the sale of the Russian
military equipment to Iran, but we were unsuccessful. Is that
correct?
Mr. Kuss. Yes, sir.
Senator Symington. And at the same time you also told the
committee that the Iranians are working out with the Russians a
big steel mill, and that they are going to have, with the help
of the British and the Russians, a $400 million gas pipeline
with which they are going to pay for this military equipment,
along with gas. Is that correct?
Mr. Kuss. That is right.
Senator Symington. So there is a major recent economic
influx of the Soviet Union into Iran, and also a major and
unprecedented movement of military equipment into Iran from the
Soviet Union, correct?
Mr. Kuss. Not in proportion to our influence.
Senator Symington. But there is a major influx.
Mr. Kuss. Yes, sir; there has been a change.
Senator Symington. And all told, the operations of the
Soviets, economic and military together, for say the last 18
months, is greater than our own; so in effect we are moving
more out of the picture with our grant-in-aid and our military
sales, and our economic sales; and the Soviets are moving more
into the picture.
Mr. Kuss. We are----
Senator Symington. Is that correct?
Mr. Kuss. No, sir. We are hardly moving out of the picture
militarily. We have found other monies have been given away to
substitute for the military side of the equation.
* * * * * * *
ARMS SALES TO WEST GERMANY [P. 21]
Senator Fulbright. You said the decision to sell in Teheran
was made at the highest level after considering all aspects. I
assume you mean the relative need of their domestic economy,
and you finally came up with a decision that they needed these
arms, is that correct?
Mr. Kuss. As well as the politics of whether we can stand
the Russian situation.
Senator Fulbright. Politics.
* * * * * * *
[P. 22]
Mr. Kuss. All of these have to be considered. It has to be
required, must be more economically purchaseable in the United
States. Then they will endeavor to do it. Now, the problem
today is not in meeting the basic part of that agreement. The
problem today is essentially the basic internal German economic
problem, a budget that cannot be changed materially because of
a revenue system that is dependent upon revenues from the
States, a requirement for a complete tax reform system.
Today the German armed forces have one-half the procurement
budget in 1967 that they had in 1963. So you can imagine just
that kind of a change. Why? Because they have not been able to
go along with the increases that would have been necessary to
keep up their total establishment because of the revenue
limitations in the total federal program.
Now, this is something we cannot control It is something
that they must control, and I want to make clear that our
agreement with them is that yes, they will balance, they will
endeavor to procure equipment, if it is required, and if it is
economical to do so, and for five years they have done so.
* * * * * * *
[Whereupon, at 4:20 p.m., the subcommittee was recessed, to
reconvene subject to the call of the chair.]
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