“You heard the Shah sold out the Kurds?”
—Prime Minister Yitzhak Rabin, 1975
“Tehran continues to be worrisome from the standpoint of security.”
—Under Secretary of State Roy Atherton, 1975
By January 1975 a degree of competition, however slight, was returning to the world oil market. The days of $17 spot prices were over. By February spot prices of $9.50 and $10 had been recorded for Persian crudes. The steep falloff in demand from recession-hit Western consumers meant that oil producers risked pumping oil into a softening market. Most OPEC members accepted the new reality and reduced their output to avoid flooding the market with cheap oil. They reduced their overall output from 30 million to 26 million barrels per day. Not everyone went along with the majority view. The Saudis announced they favored a modest price reduction over less output. King Faisal had no interest in propping up the Shah’s market price and would have let prices drift back if he could. The new uncertainty in the market, with changing patterns of demand and supply, left Iran’s economy exposed. In August 1974 the Shah had approved Iran’s $69 billion Fifth Plan on the basis of an assured tight market that guaranteed consistently high levels of price and production. His biggest gamble yet, $30 billion in spending commitments against only $21 billion in government income, meant Iran was now running a giant deficit. OPEC’s existing price structure was a firewall that the Shah had no choice but to defend at all costs—or risk the implosion of his revenue base.
In the United States, the downward pressure in the oil market in early 1975 offered a glimmer of hope but little consolation to the Ford White House. Over the winter the American economy experienced its most severe contraction since the Great Depression. President Ford was prepared to consider the Shah’s under-the-table offer to buy Iranian crude oil at a discount because he faced his own domestic financial and economic crisis. “A sense of emergency engulfs Washington, as a recessionary U.S. economy spirals down faster than almost anyone had expected,” reported The Christian Science Monitor in the first week of January. When building construction ground to a halt, labor leaders warned that “other segments of the economy are collapsing.” The Department of Commerce reported that “the nation’s output of goods and services declined by an estimated 7½% in the last quarter of 1974, the biggest annual drop since World War II.” New car sales for December plummeted 26 percent and Detroit automakers shed seventy thousand jobs on top of the 300,000 workers already laid off. “With few exceptions, it was the bleakest New Year’s since the cold winters following World War II,” reported Newsweek. “In towns from Brest to Baltimore, long lines of the out-of-work waited patiently to sign up for their unemployment benefits.”
President Ford’s chairman of the Council of Economic Advisers, Alan Greenspan, wrote a memo to Vice President Nelson Rockefeller urging the White House to engage in some straight talk with the American people. The oil shock had altered the national economy. The halcyon days of the 1960s, when “the base of our society and the base of our economy were secure,” and when the average American family “rarely had national or international problems affect their daily lives,” were gone for good. Until now, Greenspan told Rockefeller, “Most of the world’s problems were perceived as quasi ‘soap operas’ narrated by Walter Cronkite . . . . Now the real world is beginning to press in on the average American and could very well devastate family life and standards of living if we do not confront our longer-term problems and protect the United States from the ever increasing dangers to which it is becoming exposed.” America had to confront its addiction to oil. “The immediate problem is oil,” Greenspan advised, “although I would list our national defense posture and fiscal erosion as equally critical. It is important for the American people to understand how the oil crisis emerged, what it is and what are its potential consequences worldwide if we do not come to grips with it.”
The pressure on the White House to jolt the economy back to life before the president ran for election in 1976 was intense. A Louis Harris poll showed that 86 percent of Americans disapproved of Ford’s handling the economy. “We are in trouble,” Ford conceded to a nationwide television audience on January 13, 1975. “But we are not on the brink of another Great Depression.” Early on in his administration, Ford had recalled Donald Rumsfeld from his post as ambassador to NATO in Brussels and assigned him the task of restoring order to a West Wing split between Ford loyalists and Nixon’s holdover barons Kissinger, Schlesinger, and Simon. The new forty-two-year-old chief of staff hired as his deputy Richard “Dick” Cheney, thirty-four, an earnest conservative from Wyoming who had first worked for him in 1969. “They’re like two peas in a pod,” sniped one colleague, and their way of doing business was likened to a German panzer “blitzkrieg.” “Mr. Rumsfeld has been accumulating power at a dizzying pace,” observed The New York Times. “[Rumsfeld] has complete and total control over the White House,” complained one Ford aide. “He has command over things big and little and decides who eats in the White House mess, who gets a White House car, and now has even decided that the carpenter shop should stop framing pictures for White House people.” Rumsfeld never denied harboring presidential ambitions of his own and at times seemed to be practicing for the role. On one occasion reporters from the Chicago Tribune interviewed President Ford in the Oval Office and asked him “who his next Cabinet change might be.” The president sat mute as a smiling Rumsfeld answered for both of them: “I never discuss Cabinet changes.” Ford quickly changed the subject.
Bill Simon walked into Rumsfeld’s rifle sight in late December 1974 when the president convened a two-day summit of his economics and energy advisers at Vail, Ford’s favorite getaway. The first family was spending the Christmas holidays at the luxury ski resort. Ford was under mounting pressure from conservative Republicans, and especially from former California governor Ronald Reagan, not to add to the national deficit by spending his way out of the recession. Simon and Arthur Burns, the Fed chief, made the case against a big fiscal stimulus. They wanted to keep federal spending under control and prevent the deficit from going over $20 billion. Budget Director Roy Ash and Ford’s political advisers took the opposing view. Driven by more practical concerns—such as the president’s election—they were eager to kick-start the economy to prevent even higher job losses. Bill Simon also fiercely resisted the Kissinger-Shah proposal to establish a floor price of $8 for a barrel of oil. Kissinger’s viewpoint was represented at Vail by Under Secretary of State Thomas Enders, a man not known for his humility, and he soon got into it with the treasury secretary. “That proposal set off the angriest debate at Vail, so intense that the president had to admonish officials not to interrupt each other,” with Simon “denouncing [the idea of a floor price] as a sop to oil companies and politically impossible.” Kissinger knew he couldn’t sell the idea without pitching it as beneficial for American workers and business interests. In his public statements and later to members of Congress, he avoided all mention of how the floor price would help Iran’s economy. Instead, he informed them that the measure
would protect American domestic production. We must protect domestic production by tariffs or a floor price or some other mechanism . . . . If the international price drops below the domestic price then our domestic producers will be badly hurt. If OPEC uses economic warfare, dropping the price that low, it would make us more dependent on them and wipe out our investment in alternative sources. Then they would raise the prices again and we would be more dependent on them than ever.
When details of the talks at Vail appeared in the press, Rumsfeld and Kissinger blamed Simon for leaking them and struck back hard. Reports circulated that President Ford was “irritated” with his Treasury secretary. Reporter Helen Thomas predicted that Bill Simon was “expected to leave the Cabinet soon.” Columnist Joseph Kraft, who was close to Kissinger and a staunch admirer of the Shah, dismissed Simon as someone with the temperament and skills “of a Wall Street bond trader . . . . He has been the prisoner of a theology which sees market forces as totally benign and government as evil. In the interests of driving inflation from the market, he has repeatedly fought against government programs designed to ease recession. Time after time he has gone public in ways embarrassing to the administration.” Kraft went so far as to publish a list of names “who would add distinction to the Cabinet and bring new competence to the Treasury.”
With Bill Simon’s future hanging in the balance, a great clamor arose from the conservative free market wing of the Republican Party against the president’s deficit spending plan and in favor of keeping Simon on. Ronald Reagan, Arizona senator Barry Goldwater, and Senator James Buckley of New York rallied to provide Simon and the budget hawks with cover. Arthur Burns also intervened on his colleague’s behalf. He told Ford that changing the guard at Treasury in the midst of the worst financial crisis since 1929 would be sheer “folly.” With his right flank protected, Simon called Ford’s bluff and in effect dared the president to fire him. “I am the chief economic spokesman for the President,” he declared. “If I am on the way out I have not been told.” Ford backed down, issuing a statement in which he said that Simon enjoyed his confidence and would stay at his post. This episode inoculated Simon against further attacks from his cabinet rivals. It also diminished Ford’s stature and emboldened his GOP critics.
High oil prices had exposed deep cleavages within the Ford administration and ideological rifts within the conservative movement. Yet if there was one thing everyone agreed on, it was the need to break OPEC. How to do that became the subject of intense debate in the White House. High oil prices were “upsetting the established routine,” recalled James Schlesinger. “And the failure of the United States to crack the whip meant that the whip hand on such matters was passing away from the United States.” Ten days before the meeting in Vail, from December 14 to 15, 1974, the president’s men had retreated to Camp David to take a second look at the idea of sending the Marines into the Persian Gulf. At one point the conference participants, having been informed that by 1985 oil producers would have monetary reserves of $1.2 trillion at their disposal, read a note attributed to Frank Zarb that said, “Let’s try the low-cost option—war.” Gallows humor or not, the sentiments expressed in Zarb’s note reflected the belief among U.S. officials that time was running out to offer relief to financial markets, the banks, and flailing allies in Europe whose economies were tanking. In early January 1975 Kissinger made headlines around the world when he told BusinessWeek that although the use of force was “a very dangerous course,” the United States was prepared to use all available means “to prevent strangulation of the industrialized world.”
Pressure on the White House to move decisively on the military front came first and foremost from the outriders of the conservative movement, the neocons who advocated boots on the ground in the Middle East to secure America’s oil lifeline and the outright seizure of Saudi oil fields. Most neoconservatives were disillusioned liberals turned right-wing policy mavens, though not all became Republicans. The most prominent neoconservative on Capitol Hill was Democratic senator Henry “Scoop” Jackson, a determined critic of Nixon and Kissinger’s policy of détente with the Soviets and a passionate defender of arms sales to Israel. In January 1975 the neoconservative journal Commentary published a lengthy essay that considered the question of military intervention. The author proposed the outright seizure of the long strip of Persian Gulf coastline that extended from Kuwait down to Qatar and that held 40 percent of world oil reserves. It supposedly would be a logistical cakewalk because of the area’s lightly populated desert terrain, which ruled out the danger of a second Vietnam. If the Soviet Union tried to stop an American invasion of the Gulf by making a southward thrust from its proxy Iraq down into Kuwait, the author’s solution was for the United States to take Kuwait for itself.
The neoconservatives were on a roll and their opinions were shared by others in Washington as the energy crisis worsened. In March 1975 the current affairs journal Harper’s published “Seizing Arab Oil,” a lengthy and provocative essay by an anonymous author with the Latin name “Miles Ignotus,” translated as “Unknown Soldier.” A long-running parlor game ensued as to who the real author or authors might be. In his essay, Miles Ignotus called for a ten-year military occupation of Saudi Arabia’s oil-rich eastern provinces. He predicted an easy victory for American firepower in the Persian Gulf with virtually no chance of a protracted guerrilla insurgency, sabotage of oil installations, or terrorism. Saudi oil fields, pipelines, port facilities, and airstrips could be seized with a force of just forty thousand men. The author of “Seizing Arab Oil” noted that the only country in the region capable of resisting a U.S. drive into the Gulf was Iran. His suggestion: buy the Shah’s silence by offering up Kuwait on a plate:
Then there is Iran. Iran could in theory do a great deal to oppose intervention . . . . Why not then discreetly ask whether the Iranians might be willing to “protect” Kuwait—and, incidentally, appropriate their oil. This oil would offset Iranians’ loss of revenue on their own output as prices decline. To be sure, if the Iranians move into Kuwait the Russians may be tempted to invade northern Iran, but this would be a high-risk operation for the Russians, since Iran is already a protected area of the other superpower, the U.S.
The idea that the United States might be prepared to trade Kuwait to Iran in return for an American occupation of Saudi Arabia sounded farfetched. Yet it brought to mind something James Schlesinger had said to Henry Kissinger in early September 1973: “The Iranians could take Kuwait but not cross the Gulf.” The Harper’s essay took on new meaning when it turned out to have been the collective effort of several officials in the Department of Defense office responsible for developing contingency plans. To this day it remains a brilliant example of leveraging the mainstream media to conduct psy ops, psychological warfare, against an opponent—in this case the timid Saudi royal family, which still hesitated to challenge Iran’s oil pricing policy. The essay worked. “It has deeply shocked the upper echelons of the Saudi Government and King Faisal’s royal family,” reported The Christian Science Monitor.
King Hussein of Jordan came to the White House in the spring of 1975 and relayed a message of concern from the Saudi royal family. The Saudi cabinet had met in special session to discuss the article. “Prince Fahd [of Saudi Arabia] asked me to convey one thought directly to you,” King Hussein told Ford. “He is still deeply concerned about reactions in his country to any statements about possible U.S. intervention regarding the Saudi oil fields. There was an extensive and severe public reaction to this, and he asks if you can do everything possible to hold the publicizing of these statements down.”
“I don’t think there have been any statements recently since the one made some time ago,” said the president, an apparent reference to Kissinger’s “strangulation” threat from January. The president had not read the Harper’s article or been briefed on it.
“Prince Fahd is very sensitive on this issue,” Kissinger explained. “In March there was an article in Harper’s magazine by someone labeled as a defense analyst from a think tank. The article was written under a pseudonym and presented arguments for taking over the oil fields. It caused a severe reaction in Saudi Arabia.”
Critics on the left and right of American politics were beginning to grasp the connection between high oil prices and arms sales to Iran. The conservative American Enterprise Institute think tank published a major critique of U.S. arms policy toward Iran that concluded “excessive” arms sales were feeding the Shah’s appetite for higher oil prices and hurting America’s national security interests. Arms sales to Iran gave the Soviets an excuse “to respond by providing Iraq with more modern equipment.” Washington insiders noted that the foreword to the report was written by former Secretary of Defense Melvin Laird, stout defender of the Twitchell Doctrine and a longtime skeptic of the Shah. The AEI report urged placing “well-defined limits on further sales to Iran” because “if more weapons are bought then oil is the most likely source of new revenues for both arms and domestic projects.”
The wall of secrecy around Nixon’s secret arms and oil deals with the Shah was beginning to unravel. In December 1974, Representative Clarence Long, Democrat of Maryland, wrote to President Ford asking if it was true that President Nixon had expanded arms sales to Iran “without national security studies of the possible consequences.” A month later The Washington Post reported that indeed it was true, that neither the Nixon nor the Ford administration “has carried out a major National Security Council study of where the Persian Gulf arms race might lead 10 years from now, as is usually done with crucial issues.” One of Kissinger’s aides offered the rather startling excuse that the secretary of state viewed the sale of military equipment as “basically tactical, immediate foreign tools,” that he did not want to be tied down “to a hard policy that could come out of a study.” The Post quoted an unnamed Pentagon official who conceded, “There is no policy limit on the dollar amounts of what the Shah can buy.” A second expert was asked what would happen if the Shah used his weapons to “supersede, or erase, American influence” in the Persian Gulf and West Asia. His response was hardly reassuring: “Then we’d lose our gamble.”
Kissinger initially designated George Shultz, Nixon’s former treasury secretary, as his back channel with the Shah to discuss the terms of their bilateral oil deal. Shultz was now the president and director of Bechtel Corporation, an engineering firm that specialized in building nuclear power plants, dams, subway lines, and in the case of Saudi Arabia an entire industrial city. The Bechtel connection meant that private commercial motives were now entangled in the administration’s handling of sensitive policy discussions with the Shah concerning oil prices and nuclear energy, and specifically nuclear enrichment. Kissinger viewed the Shah’s nuclear ambitions, as he did oil prices and arms sales, in purely tactical terms. Shultz’s Iran trip had the dual purpose of following up on the oil talks while selling the Shah on the idea of building a U.S.-based uranium enrichment facility. “Also, at our instigation, approaches have been made by the Bechtel Corporation to Iran to encourage the Shah’s investment (on the order of $300 million) in a private uranium enrichment plant to be built in the United States,” Kissinger was reminded by an aide in December 1974. The administration calculated that if the Shah went ahead and acquired half his nuclear power program from the United States, the equivalent of between six and eight nuclear power plants, the United States stood to earn $6.4 billion in revenues. On top of that staggering sum, if the Shah followed through on his commitment to cover the costs of 20 percent of a privately run U.S.-based enrichment plant, the U.S. government stood to reap an additional $1 billion in receipts.
A nuclear deal consummated between the United States and Iran would be the crowning achievement in Kissinger’s ambitious plan to recycle Iranian petrodollars and integrate the two countries’ economies. He knew that Iran, as a signatory to the Nuclear Non-Proliferation Treaty, was “obligated to place all its nuclear facilities under IAEA [International Atomic Energy Agency] safeguards and to refrain from acquiring peaceful nuclear explosives.” Yet Kissinger was also explicitly warned by his advisers that pursuing a nuclear accord with Iran carried with it a potential for conflict later on. Failure to bridge differences between the two governments over the handling of nuclear fuels “could have serious, as well as long-term, adverse effects in our relations . . . . Should we not be able to resolve our differences the shah is likely to view our unwillingness to treat Iran as we have other NPT parties as a reflection on Iran’s stability and the integrity of its commitments as well as an indication that the U.S. cannot be relied upon because of the uncertainties of our political process.” Indeed, the Shah might conclude that he should look elsewhere for nuclear fuel suppliers who were “less cautious” than the United States.
Shultz was ushered into the Oval Office on February 7, 1975, to give President Ford, Kissinger, Brent Scowcroft, and Charles Robinson, the under secretary of state for economic affairs, a report on his talks with the Shah at the Pahlavis’ ski chalet in Switzerland. “The Shah was very cordial and anxious to do what he could to be friendly,” said Shultz. He had come away impressed with the Pahlavi king. “It was a beautiful setting in St. Moritz. We talked for an hour and a half. He is a broad-gauge, secure, and very impressive man.” This conversation was Ford’s first real exposure to the Shah as a man and as a leader. A transcript reveals he knew virtually nothing about him but was curious to learn more. “Where was he educated?” the president asked.
“In Switzerland,” Kissinger interrupted. “He is very tough-minded.”
Shultz explained that the Shah was offering to sell oil to the United States as part of a side deal. The two men had not discussed the number of barrels or price. But the Shah said Shultz wanted Ford to know that “the U.S. should regard Iran as her country in the Middle East. It is important to the United States that Iran develops—Iran is a western country. He places great value on the [U.S.-Iran] Joint Commission.”
“I agree: he is profoundly a friend of the United States,” Kissinger affirmed. “He is a cold-blooded realist. He needs the money and there is a level below which he won’t cut the price.” Kissinger explained that the administration was putting together a $10 billion program of investment with Iran that would be ready for the president’s signature for when the Shah came to Washington in May. He seconded Shultz’s enthusiasm for the bilateral oil deal.
President Ford knew very little about the Shah. He asked his age, and queried Kissinger on how the Shah had come to the throne. Kissinger, who was vague himself, explained that “His father or grandfather, was a sergeant,” and that “[the Shah] took over as a very young man and was kicked out by the leftist Mossadegh. Then Mossadegh was overthrown with CIA help, and the Shah was put back on the throne. He runs the country himself. He is a total autocrat, but a man with a global vision. He is convinced that we can’t fight another Middle East war from our basic structures. So he is thinking of buying some 747 tankers to help us. He is a good friend of the United States except on oil pressures. He can’t afford to cut his oil production because he needs the income. If we shifted some of our imports from Saudi Arabia to Iran, we could increase the pressure on Saudi Arabia.”
“The price of oil is likely to erode,” Shultz confidently predicted. “A buyers’ market is returning. Bilateral deals are an indication of weakness.”
From the outset there were questions about the legality of the United States buying oil under the table from a foreign government. “It was a tough issue because the U.S. government buying oil from another government and redistributing it to the private sector was an entirely different arrangement to the marketplace,” recalled Frank Zarb, Simon’s successor as chief administrator of the Federal Energy Administration. Red tape hadn’t stopped Henry Kissinger before. But in Washington’s brave new post-Watergate era the merest whiff of illegality would be enough to ignite a political and media firestorm. President Ford asked Zarb to evaluate the merits of the deal. Consider every angle. Don’t rush into anything. Above all, it had to make sense from a financial point of view. “My take on all of that was that [President Ford] really wanted to determine whether it was feasible, whether the economics would work, whether we would get behind it and find a way to get this oil at a discount to OPEC, thereby putting some pressure on OPEC, probably creating a little strain between Iran and the rest of OPEC,” Zarb recalled. “And if it looked like it was doable from an economics and logistical standpoint then pursue the legal questions. I did raise it with the president and I told the president there was no legal authority to do this and I was concerned with newspaper leaks.”
Ford still enjoyed close ties with legislators on Capitol Hill and so he advised Zarb to quietly talk to Senator Henry Jackson and Representative John Dingell, the Democrats who oversaw his agency. This would ensure “we had air cover from those two guys as we were pursuing [the deal],” Zarb recalled. “The last thing I wanted to do was to be sitting in Tehran and have this hitting the newspapers and have an uproar on the Hill. So the president authorized me to go tell them. And from that we got their protection. Not to do the deal but certainly pursue the numbers to see if it was doable.” The irony for Kissinger was that one of Bill Simon’s protégés would now be responsible for negotiating the terms of one of his secret deals with the Shah—a deal that held enormous significance for both men.
Over the next eighteen months Zarb held meetings with Hushang Ansary, the Shah’s minister of finance, in a variety of settings, including London, Paris, and Tehran. Although he was not introduced to the Shah during this period, “I was in the same room with him at one point.” Ansary, he remembered, “was a perfectly good negotiator. Very smart. He clearly had the ear of the Shah.” But Kissinger was unhappy with his colleague’s tough negotiating stance. Zarb never understood why the talks dragged on for month after month with no resolution in sight. “There was a great deal of stress over this transaction,” he remembered.
In late February 1975 Kissinger traveled to Zurich to pursue the oil deal and other matters with the Shah. It was a meeting that garnered a great deal of media interest. Everyone wanted to know if Kissinger would leave with a commitment by the Shah to lower oil prices. The world economy hung in the balance. Both men relished the drama of the moment. The Shah interrupted his ski vacation at St. Moritz to fly in by helicopter. Onlookers described him as looking tanned from weeks of skiing in the Alps. Kissinger was thirty-seven minutes late to the hotel where they retreated behind a wall of security. “Swiss police patrolled the airport and the streets of the city,” reported The Washington Post. “Police were stationed five feet apart along the roadway to the hotel.”
At the end of their talks Kissinger and the Shah held a press conference at which the Iranian leader confirmed he would not join a future oil embargo and that Iran would keep selling oil to Israel. “We have never boycotted anybody,” declared Iran’s king. “Once the tankers are loaded it is of no importance; we don’t know where it goes.” Kissinger regarded the Shah’s pledge to keep Israel supplied with oil as the most important outcome of their talks. He was still trying to broker a disengagement agreement between Israel and Egypt that would allow the Israelis to pull back from their October 1973 forward positions on the eastern side of the Suez Canal. The Israelis were reluctant to withdraw because it would mean handing back the oil wells they had captured at Abu Rudeis in the Sinai in 1967. Oil was a strategic resource and also an important source of revenue for a country faced with a balance of payments gap estimated at between $200 and $400 million. The Shah’s pledge meant the Israelis could no longer argue that leaving Abu Rudeis would hurt them militarily. A financial aid package put together by the United States would meanwhile offset their budget troubles.
Quite aside from the trade pact, the oil deal, and guaranteeing oil sales to Israel, Kissinger and the Shah discussed another matter in Zurich whose sensitivity required the utmost discretion: the future of the Kurdish operation in Iraq. As with everything Kissinger did, the Kurds became part of a bigger package deal, a carefully balanced piece of strategic architecture that, depending on one’s viewpoint, resembled either a beautifully constructed Alexander Calder sculpture or a precarious house of cards.
On Tuesday, March 4, Kissinger brought good news to the Oval Office. He said that he and the Shah had discussed the bilateral oil deal and also a trade pact that included American nuclear reactors to Iran worth $12.5 billion over five years. “The Iranian stuff is going well,” he explained. The Shah had agreed to sell the United States 500,000–700,000 barrels of oil a day at a price below the OPEC price, though tied to military purchases. “The oil deal will bring pressure on the price structure, because the purchasers will have to find where else they can make a cut of that size,” said Kissinger.
Kissinger was getting too far ahead of himself in claiming success for a deal that had yet to be legally signed off on and whose technicalities had not yet been negotiated. Negotiator Frank Zarb began to question the finer points of the deal: it was beginning to resemble a straight oil-for-arms swap.
At midday, on March 9, 1975, Henry Kissinger was riding in the back of an official car with Syria’s foreign minister, Ab al-Halim Khaddam. Kissinger was on a tour of Middle East capitals. He had flown in from Saudi Arabia, where King Faisal had confided to him that he was “frightened of being assassinated.” The radical Arab tide exemplified by Syria’s Hafez al-Asad, Libya’s Qaddafi, and Iraq’s Saddam Hussein was lapping at Faisal’s front door. Kissinger told Khaddam that he appreciated the lavish welcome laid on by his hosts, especially the roadside flags that lined the route into the capital. “Why are all the flags up?” he said. “I appreciate it. You didn’t have to do it.” The foreign minister set him straight: “It’s a national day.”
It was the beginning of a very rough afternoon for the American delegation. Kissinger had flown to Damascus in an effort to persuade President Asad of the merits of joining the leaders of Egypt and Israel in signing a treaty to end hostilities. Three days earlier, at a summit meeting in Algiers, the Shah and Saddam Hussein of Iraq had met for four and a half hours and agreed to settle their differences. The Shah had agreed to turn off the CIA-backed Kurdish insurgency. Saddam Hussein reciprocated by making territorial concessions to Iran on the river boundaries at the mouth of the Persian Gulf. The Iraqi had also agreed to allow Iranian Shi’a pilgrims to cross the border to visit holy sites at Karbala and Najaf.
The Shah’s decision to turn off the Kurdish operation was motivated by the need to ease tensions on Iran’s northern border with the Soviet Union, Baghdad’s ally. During the Shah’s recent trip to Moscow, the Soviet leader, Leonid Brezhnev, had berated him for stoking superpower rivalries in the Gulf and meddling in Iraq, and slammed his fist down on the table. He specifically mentioned Iranian support for the Kurds in Iraq and challenged the Shah’s military buildup in the Persian Gulf. The Shah was apparently affected by Brezhnev’s blunt-force diplomacy and concluded that the Kurdish operation had outlived its usefulness. He had also concluded that the Kurds were losing ground and that Iran could not risk being drawn into open warfare with an Arab neighbor. The costs associated with the Kurdish operation now outweighed any possible benefits. Ardeshir Zahedi had opposed the operation from the outset. The Shah, he remembered, did not mince words when he “very plainly” announced his intentions to Kissinger in Zurich. He did not want any misunderstandings over the matter. What did Kissinger say in response? “He didn’t say anything,” remembered Zahedi. “His face went completely white.”
Over the past three years the role of the CIA in Iraq had mainly consisted of providing the Kurdish leadership with psychological support. The $16 million the agency spent on the operation was a good-faith gesture to the Shah and to Kurdish leader Mustafa Barzani. A postmortem conducted by the U.S. House Select Committee on Intelligence concluded that the Kurdish leadership had always distrusted the Shah and relied heavily on American assurances provided by Kissinger. The United States “acted in effect as a guarantor that the insurgent group would not be summarily dropped by [the Shah].” U.S. participation in the Kurdish operation was seen as yet more recompense for the Shah’s willingness to host CIA bases on Iranian soil. Right at the outset the CIA and Kissinger understood that the Shah would most likely trade in the Kurds if the opportunity arose to settle Iran’s perennial border dispute with Iraq. From a CIA memo of October 17, 1972: “[The Shah] has apparently used [another government’s] Foreign Minister to pass word to [Saddam Hussein] that he would be willing to allow peace to prevail [in the area] if [Saddam Hussein] would publicly agree to abrogate [a previous treaty concerning their respective borders].” A CIA cable from March 22, 1974, captured the cynicism of the whole operation when it described the Kurdish nation as “a uniquely useful tool for weakening [Saddam Hussein’s] potential for international adventurism.” Mohammad Reza Shah meant to stoke the conflict but not to the point where it might inflame Kurdish communities on the Iranian side of the border. “Neither [the Shah] nor ourselves wish to see the matter resolved one way or another,” said the CIA.
For three years the Kurds fought. They endured thousands of casualties and tremendous suffering but were heartened by Kissinger’s promises of protection. The secretary of state insisted they continue the struggle even when Saddam offered a path to peace. Kurdish leader Mustafa Barzani frequently told the CIA that although he distrusted the Shah, when it came to the United States “he trusted no other major power” and asserted that if his cause were successful he was “ready to become the 51st state.” Barzani went to great lengths to show his appreciation to Kissinger and even sent him “a gift of three rugs and later on the occasion of Dr. Kissinger’s marriage, a gold and pearl necklace.” Congressional investigators uncovered a memorandum to Brent Scowcroft dated May 20, 1974, which explained the need to keep Barzani’s gifts to the Kissingers a secret: “As you are aware, the relationship between the United States Government and the [Kurds] remains extremely sensitive. Knowledge of its existence has been severely restricted; therefore, the fact that Dr. Kissinger has received this gift should be similarly restricted.”
In Damascus, President Asad told Kissinger that the Shah’s decision to abandon the Kurds was proof that Iran was distancing itself from Israel and moving closer to the Arab world. Asad now saw no need to sign any sort of diplomatic bargain with Israel. He picked up on the theme of American impotence in the wake of Vietnam and Watergate. “In the long run we believe Americans will have to give up their support for Israel,” he predicted. “We are not going to wait that long! But it’s the natural thing: America has her interests. Because for a great power to stand by a little aggressor is not in the interests of America. We can quote examples—countries that America has stood by but circumstances forced America to stand aside and say goodbye to: Cambodia, Formosa, Turkey.” Like Vietnam and Cambodia, which the United States was also abandoning, Israel would one day find itself cut loose. Even the Shah was losing faith in American power and American promises. “Again, generally speaking, the Arabs see the long run is favorable for their interests. And there are possibilities, military and economic. For example, yesterday the eradication of the problem between Iran and Iraq. Regardless of differences between Iraq and us, I regard it as a strategic victory for the Arab world.”
“I agree with you,” Kissinger admitted in what must have been a moment of intense discomfort.
Kissinger’s long day wasn’t over yet and the worst was yet to come. He flew directly to Jerusalem and the prime minister’s residence for a late working dinner with Prime Minister Yitzhak Rabin, Minister of Defense Shimon Peres, and other top Israeli officials. Kissinger told them about Asad’s confident prediction that “history is on the side of the Arabs,” that it was just a matter of time before the Americans walked away from Israel the way they had discarded Taiwan, Cambodia, Vietnam, Turkey, and Portugal.
Questions about loyalty and betrayal were clearly on Rabin’s mind that night: “You heard the Shah sold out the Kurds?”
“I told Yigal [Allon, Israel’s deputy prime minister]; I told Simcha [Dinitz, Israel’s ambassador to Washington] two weeks ago,” Kissinger said.
“Yes.”
“I warned the Shah against it and he did it anyway,” said an embarrassed Kissinger. The collapse of the operation showed just how little influence he had in Tehran. “That was part of [Asad’s] review of the international situation. He said the trends were in his favor . . . . He was sort of implying that there would be war between the Arabs and the United States. He said he could afford to lose 50 million [people] and we weren’t, so they had an advantage. I got tough with him. He mentioned the Iran-Iraq agreement which frees the Iraqi strategic reserve. He said there were difficulties between him and Iraq but they could be bridged easily for the sake of anti-Israel.”
The Israelis had until now relied on the Kurdish operation to keep Iraqi forces pinned down on the country’s eastern frontier with Iran. With that pressure now relieved Saddam was free to move his troops and tanks to the west within striking distance of Israel. Israeli perceptions of trust, a matter of vital importance to a small country surrounded by hostile states, had been rudely violated.
“There are three events recently that are psychological political facts,” Rabin explained to Kissinger. “First, the fact that the Shah took such a decision to agree with the Iraqis to sell out the Kurds. Though that is not known to the public, it’s known to us. It has to be taken into account.”
“I agree,” said Kissinger. Under the circumstances he could say nothing else.
“If half our oil comes from him, if someone on whom we rely takes a whole different outlook here . . . ” The other two points were a recent Palestinian terrorist attack in Tel Aviv and the injection of Syrian troops into parts of Lebanon under the control of Yasser Arafat’s PLO. “Those are three completely new points,” said Rabin. As he saw it, the Shah’s decision to turn off the covert operation without first consulting him meant that he could not accept the Shah’s guarantees to keep Israel supplied with oil in any future Arab-Israeli conflict. To do so would not only be foolish—it could be suicidal. And if Israel could not accept the word of an ally it could hardly accept the word of Anwar Sadat, whom it had gone to war against. The Abu Rudeis oil fields were not going anywhere. The deal was off.
Kissinger conceded that the Shah had introduced a dangerous element of uncertainty and distrust into the peace process. “Let me be fair. Let me be as honest as I can,” he pleaded. “I’ll give you my judgment, but my judgment has to include the possibility of Sadat’s changing course in the future. What the Shah did, he’s capable of doing . . . . I was shaken too by the Iranian decision. Because we had participated in it too. The brutality of it.”
In the hill country of Iraq the slaughter was already underway. The day after the Shah sealed their fate in Algiers, Saddam Hussein launched a surprise attack that overwhelmed the Kurdish resistance. On March 10 Mustafa Barzani issued a frantic appeal to the CIA for help: “There is confusion and dismay among our people and forces. Our people’s fate in unprecedented danger. Complete destruction hanging over our head. No explanation for all this. We appeal you and USG [United States Government] intervene according to your promises and not letting down ally, to save [Barzani’s] life and dignity of our families, to find honorable solution to our problem.” The CIA station chief followed up with his own plea to headquarters for something to be done. “Is headquarters in touch with Kissinger’s office on this; if USG does not handle this situation deftly in a way which will avoid giving [the Kurds] the impression that we are abandoning them they are likely to go public. [The Shah’s] action has not only shattered their political hopes; it endangers thousands of lives.” After asking for some sort of intervention the station chief concluded, “It would be the decent thing to do.”
Barzani also wrote to Kissinger. The lights were going out all over Iraqi Kurdistan. His people were being butchered. He still had no idea that Kissinger had known for two weeks about the Shah’s intention to betray them yet had given no warning. Barzani plaintively wrote that “our hearts bleed to see an immediate by product of their agreement is the destruction of our defenseless people in an unprecedented manner as [Iran] closed its border and stopped help to us completely and while [Iraq] began the biggest offensive they have ever launched which is now being continued. Our movement and people are being destroyed in an unbelievable way with silence from everyone . . . . Mr. Secretary, we are anxiously awaiting your quick response and action and we are certain that the United States will not remain indifferent during these critical and trying times.”
Barzani never heard from Kissinger. “No reply has been received from Secretary of State Henry Kissinger to the message from [Barzani],” the CIA station chief cabled the State Department on March 15. He described scenes of “acute anxiety” among Kurdish leaders who sought an extension of the cease-fire and “the peaceful passage of . . . refugees to asylum . . . . Hence if the USG intends to take steps to avert a massacre it must intercede with [the Shah] promptly.” The Ford administration made no effort to rescue the Kurds or extend humanitarian aid to the 200,000 refugees who poured over the border into Iran. Even when the Shah forcibly repatriated forty thousand Kurdish women and children to Iraq, where they awaited almost certain incarceration, torture, and mass murder, “the United States Government refused to admit even one refugee into the United States by way of political asylum even though they qualified for such admittance” concluded a congressional probe. Asked later by congressional investigators to justify his inaction Kissinger delivered a cynical answer that said more about his methods than any memoir ever could: “Covert action should not be confused with missionary work.”
The Algiers accord between Iran and Iraq had two other major consequences. Kuwait was left pitifully exposed to its neighbor’s predations. On March 19, Kuwaiti ambassador Salem al-Sabah met privately with President Ford. Kissinger’s absence may have encouraged him to speak with a greater degree of candor than usual. Iraq laid claim to Kuwaiti territory and its oil. The ambassador feared that Saddam Hussein was sharpening his knives with a view to heading south. “It’s like the wolf and the lamb,” the envoy told Ford. “They still have their eyes on us. With the Kurds problem solved, they may turn their eyes to the south . . . So it is a little distressing over the long run.”
The Algiers accord also led to blowback for the Shah. As part of the agreement Saddam Hussein would permit Shi’a pilgrims from Iran to cross into Iraq to visit Shi’a holy places. If the Shah thought this gesture would bolster his standing at home among the clergy he was sadly mistaken. Many of the faithful sought out Ayatollah Khomeini, who was living in exile in Iraq. “People knew about Khomeini,” said Ambassador Richard Helms. “This was particularly true after the Algiers Agreement of 1975, when Iranian pilgrims were again permitted to visit the holy shrines in Iraq at Karbala and Najaf. Some pilgrims brought tapes back from Khomeini, and one began to hear reports of their being played in the mosques and circulated clandestinely. So that as a political factor, people were aware of him.”
In March 1975, from Lisbon to Saigon, American power was in retreat. The collapse of Kissinger’s peace shuttle in the Middle East raised the prospects of another armed conflict and oil embargo. In Europe, Portugal went to the brink of civil war when opponents of the left-wing government mounted a coup attempt. Communist guerrilla fighters launched offensives against the U.S.-backed regimes in Cambodia, South Vietnam, and Laos. At the end of the month the world’s attention swung back to Saudi Arabia. On the morning of March 25, King Faisal and Sheikh Zaki Yamani were welcoming a visiting delegation of Kuwaiti officials. A Saudi television crew filmed what happened next. As the king was greeting his guests with the traditional salutation, his American-educated nephew Prince Faisal ibn Musad Abdel Aziz rushed forward, pulled out a revolver, and fired three rounds, each bullet striking the seventy-year-old monarch in the head—one severed the king’s jugular vein. Mortally wounded, King Faisal crumpled to the floor in a pool of blood while palace bodyguards lunged at the assassin, whose eyes were now trained on Yamani. The guards wrested the revolver from the young man’s hand. King Faisal was quickly succeeded by his brother, Crown Prince Khalid, with Prince Fahd exerting real authority behind the scenes. The speed and ease with which the brothers assumed power reassured Washington and Tehran that this was a random act of violence and not a radical coup. Yet although young Prince Faisal had a troubled past he was not the “mentally deranged” killer portrayed by Saudi authorities. While living a bohemian existence in California and Colorado he had been arrested for conspiracy to sell LSD and become involved with an assortment of radical left-wing and anti-Zionist groups. The prince was haunted by the execution of his older brother, Khaled, whose embrace of fundamentalist Islam had led him years earlier to launch a terrorist attack against a television transmitter in Riyadh. When he returned to Saudi Arabia Prince Faisal embraced conservative Islam, shunned contact with members of the royal family, and proudly refused to accept the royal stipend offered to all male members of the royal house. His decision to assassinate the king was an act of vengeance against the throne and a bid for martyrdom. He got his wish. The young prince was beheaded in public and his head placed on a stake in Riyadh’s town square before a large crowd.
“An extraordinary conjunction of forces shook the world last week,” commented Time, “a historic seven days in March that saw the decline of old hopes and the rise of new dangers.” It was a month that irretrievably damaged the mystique of Henry Kissinger’s diplomacy. The romance of his personality wouldn’t work now. He knew it too. “Our Middle East policy has been smashed,” he bitterly lamented to Max Fisher, a prominent leader in the American Jewish community and back channel to Israeli leaders. Kissinger blamed Israel and American Jewish groups for sabotaging his shuttle mission, conveniently forgetting that the Shah’s abandonment of the Kurds had destroyed Israeli faith in promises of oil and security. “I have to tell you as a friend—the failure of this negotiation is the worst disaster since the Yom Kippur War [October War], not because of what we will do but because of what will develop,” he told Fisher. “We have lost control.”
“American foreign policy has not since the early days of the cold war had at the edges so many actual or threatened losses, so many intractable and unresolved problems, and so much reason for anxiety about some of these problems as today,” wrote Joseph Harsch in a lucid analysis published by The Christian Science Monitor. “For the President and his Secretary of State, the Ides of this March are certainly not propitious. To keep it all in perspective it must be remembered that except for the political deterioration in Portugal these troubles lie around the outer fringes of American interests and influence, not the center. But there are plenty of them. They have piled up in the short span of three weeks.” Harsch blamed the Nixon Doctrine for what amounted to a systemic collapse of American power on the edge of empire:
Essentially the Nixon Doctrine contemplated a fallback of American power from the mainland of Asia, and reliance everywhere on air and sea power rather than land power. But this process of going over from a forward to a defensive national strategy is extremely difficult to execute. It means distress around the fringes. The loss of one client makes all others uneasy. On the frontiers, no one can be quite sure where the contraction is going to end. If Washington lets Cambodia and Vietnam go, who else might be abandoned?
It was a question that held obvious—and ominous—implications for Mohammad Reza Shah Pahlavi. American foreign policy was in crisis and Kissinger’s realist approach was coming under sustained attack from the right by the likes of Senator Henry Jackson, and his brash young aides, Richard Perle, Elliott Abrams, and Paul Wolfowitz. The neoconservatives argued that the Shah’s decision to abandon the Kurds dealt a blow to Israel’s security. Jackson wrote to Kissinger on March 22 demanding that the Ford administration reopen its decision to sell nuclear reactors to Iran. The Shah’s foreign policy, said Jackson, showed a lack of “reliability and continuity.” For that reason Iran had forfeited the right to be treated as an unconditional ally worthy of American support: “Such transactions as the transfer of a sizable nuclear power production capability, with its plutonium byproduct, need to be assessed in light of disturbing evidence that . . . Iran is capable of policy shifts so precipitous as to border on the quixotic.”
The tensions spilled over to infect relations between the Iranian and Israeli leaders. When Senator Jacob Javits telephoned Kissinger to ask whether it would be all right for him to bring the Israeli ambassador to Kissinger’s forthcoming luncheon in honor of the Shah, the secretary thought not: “Well, I think not, frankly. The Israelis have antagonized him by accusing him about the Kurds.”
U.S. relations with Iran were also indirectly affected by Ambassador Helms’s mounting legal troubles back home. Congress had launched a sweeping investigation into allegations that the CIA had tried to sabotage democracy in Chile in the early 1970s. Investigators suspected that Helms had lied to senators during his February 1973 ambassadorial confirmation hearing when he denied knowledge of agency dirty tricks in Chile. The ambassador was recalled from Tehran thirteen times over eighteen months to give one hundred hours of testimony to Senate and House investigators. “In those days, if the weather and flight connections were perfect, the trip from Tehran to Washington, with a change of aircraft in London, averaged from seventeen to eighteen cramped, chairbound hours in the air,” Helms recalled. The ambassador’s legal problems and heavy travel schedule prevented him from focusing on his work in Iran. In April he broke down outside Vice President Rockefeller’s office when he spotted a crowd of waiting reporters, including Daniel Schorr, the journalist who had first reported the CIA plots. “You sonofabitch!” Helms shouted before a crowd of startled onlookers. “You killer! You cocksucker! ‘Killer Schorr’—that’s what they ought to call you!”
On the eve of the Pahlavi state visit to Washington in May 1975 President Ford received an extensive briefing paper from his secretary of state outlining the history of U.S.-Iran relations. It offered a rare window into Kissinger’s knowledge of the Shah’s intentions and what he knew about conditions inside Iran. The memo included a frank admission of U.S. arms policy toward Iran though with caveats that had not been included in the original policy adopted three years before. “After President Nixon visited Tehran in May 1972,” wrote Kissinger, “we adopted a policy which provides, in effect, that we will accede to any of the Shah’s requests for arms purchases from us (other than some sophisticated advanced technology, armaments, and with the very important exception, of course, of any nuclear weapons capability . . .).” Ford was advised that although the Shah was in firm control at home, “student/intellectual unrest and a persistent terrorist movement are causes for concern.” One of the regime’s weak spots was the state of the Iranian economy: “Iran does face inflationary problems and shortages of skilled manpower and communications.”
Kissinger was much less concerned about Iran’s internal situation than with the Shah’s restlessness, his foreign policy adventurism, and his growing belief that American power was waning and that Washington’s assurances of support for allies like Iran were now in doubt. “He is worried about our ability to continue to play a strong world role, to retain a dominant position over the USSR in the Middle East and Indian Ocean, and to maintain close cooperation with Iran in the political, military, and economic fields.” America had abandoned its gladiators in Taiwan, Cambodia, Vietnam, and Turkey—the Shah feared that Iran might be next, that “Congress and America may be moving toward isolationism.” Kissinger told Ford that the Shah was a difficult but important ally: “He may have some excessive ideas of his importance and some people consider him arrogant, but there is no gainsaying the sharply rising economic and military strength of which he disposes.” Within a few short years the Shah “will have the key, if not the controlling, role among the regional powers in helping to assure stability in the Persian Gulf area.”
The briefing paper described bilateral tensions over oil policy and arms sales and an ally who did not like being second-guessed. “Closer to home, the Shah is upset by Congressional and American public criticism of Iran’s oil pricing policies; widespread criticism in the U.S. of our military supply to Iran, now our largest foreign buyer of weapons; and problems in completing some major proposed deals with private American corporations.” Kissinger advised the president not to antagonize the Shah by raising the issue of high oil prices. “I see little point in your trying to argue with the Shah that prices were raised too fast and too much, inasmuch as he is utterly convinced of the correctness of what was done and easily takes umbrage at suggestions to the contrary.” This was remarkable advice to give a president whose political fortunes had fallen into the trough of an oil-induced recession. More than anything, Kissinger’s advice confirmed just how little he grasped the intense political and economic pressures bearing down on Gerald Ford in the spring of 1975.
At 9:45 on Thursday morning, May 15, President Ford and Secretary Kissinger were in the Oval Office waiting for the Pahlavis to arrive. Both men were physically and mentally drained by the events of the previous night. America’s disastrous military involvement in Southeast Asia had ended a few hours earlier in one final, bloody convulsion when U.S. Marines rescued American merchantmen seized by Khmer Rouge gunboats from the freighter Mayaguez off the coast of Cambodia. Communist regimes had already been declared in Cambodia, Laos, and South Vietnam. President Ford hailed the air, land, and sea operation to liberate the crew of the Mayaguez as a crucial first step to restoring American prestige in the world. In reality, the operation reinforced the limits of American power and resulted in a near-fiasco that cost as many lives as it rescued. The Mayaguez episode is remembered today as the botched precursor to a second, riskier rescue mission—the ill-fated attempt to liberate U.S. diplomats held hostage in Iran in 1980.
As they waited for the Shah, Kissinger’s remarks revealed his anxiety. He wanted Ford to impress the Shah, to talk to him the way Nixon used to. “Tell him you used more force than necessary,” he urged the president. “The Shah is a tough, unemotional, and able guy. He has a geopolitical view.
“On the oil deal, he will do it if we can do it secretly,” he reminded Ford. “We haven’t figured out how to do that. One way would be to pay in non-interest-bearing notes, if we could do it secretly. He would prefer a swap of military equipment for oil, with high prices for the equipment. But we haven’t figured that out.” Then there was the whole issue of high oil prices: “I would go over the energy thing. He will slap you down, but it would be good.” Kissinger also used those few minutes to inform Ford about U.S.-Iranian contingency planning in the Gulf. Contingency planning had not appeared in Kissinger’s briefing paper because it was a secret oral agreement. Now Kissinger told him about it. Ford had no time to ask questions let alone digest what he was hearing. “Ask him about the Middle East,” said Kissinger. “He is worried about Saudi Arabia. We told him we would support a paratroop operation in Saudi Arabia in a crisis. You could say you are aware of this contingency planning.”
The Fords welcomed the Pahlavis on to the South Lawn of the White House with a twenty-one-gun salute and an honor guard. Across the street several hundred masked demonstrators gathered in Lafayette Park to chant slogans calling the Shah a puppet and murderer. While Betty Ford had tea with Empress Farah, the men retreated to the Oval Office for the first of two ninety-five-minute introductory sessions. Once again Kissinger cited protocol as the reason to block Ardeshir Zahedi from sitting in, and the ambassador was forced to wait in the Cabinet Room with other officials.
Ford, the Shah, and Kissinger began by reviewing the Mayaguez incident and the Middle East peace process. Brent Scowcroft, took notes. The Shah began by providing them with his customary overview of strategy and geopolitics. But this time his observations about Middle East politics revealed a troubling disconnect from the region’s realities. He blamed Israel for the failure of Kissinger’s peace shuttle. He claimed that the Syrians “don’t like our rapprochement with Iraq.” He was defensive on the subject of the Kurds: “I had to make a quick agreement on the Kurds. I have to say this in the face of all the press reports that I had abandoned them. They weren’t fighting—we were.” He said he had acted on the advice of the Egyptian, Jordanian, and Algerian leaders, who saw the accord as a way to weaken Russian influence in Baghdad. He was even convinced that the accord actually strengthened Kuwait’s security because Saddam Hussein was now more likely to pursue a regional treaty for the joint defense of the Gulf.
Following King Faisal’s assassination, the Shah had flown to Saudi Arabia to take the measure of the new generation of Saudi leaders. President Ford raised the issue of the contingency plan: “Henry told me what he told you we would do if there were a Qaddafi-like development in Saudi Arabia. I reaffirm it.”
The Shah was pleased. He told his hosts that Egypt should also participate in an invasion scenario, though in a limited capacity. He predicted trouble in the region if the landing party was entirely non-Arab.
Now it was apparently Kissinger’s turn to be surprised. The Shah was seriously proposing a joint Iranian-Egyptian invasion and occupation of Saudi Arabia. Not only that—he had apparently already given the idea a great deal of thought. He wanted his friend Anwar Sadat to share in the spoils of occupation. Contingency planning was rapidly evolving into something far more ambitious and extensive than Nixon and Kissinger had ever intended. One of the primary motivations behind sending blue suiters to Iran and to engage in contingency planning had been to balance Egyptian aspirations in the region. “I would worry about an Egyptian army in Saudi Arabia,” said a wary Kissinger. “Political support is good; maybe a few troops.”
That night the Fords hosted a white-tie state dinner for the Pahlavis.
The first lady had asked Ann-Margret, the star of Bye Bye Birdie, Carnal Knowledge, and lately, Tommy, to provide the after-dinner entertainment with a medley of song-and-dance numbers from her acclaimed Las Vegas show. “We picked her because the Shah of Iran likes pretty women,” the first lady told reporters, apparently missing the implied innuendo. “And so does my husband.”
The atmosphere inside the White House was elegant and subdued, like Scheherazade on the Potomac. “The Air Force String Players walked among the tables playing romantic melodies while dessert was served,” recalled Cynthia Helms. The crowd formed a bobbing sea of low bows and deep curtsies around the royal couple and strained to get a glimpse of Shahbanou Farah, whom Washington wags playfully dubbed the “Shahbunny.” In attendance at the Pahlavi state dinner were fixtures of the Washington establishment, the captains and kings of American industry, ambassadors, Hollywood stars and Broadway legends—Kissingers, Rockefellers, Rumsfelds, the Fords of Detroit and the Bloomingdales of Palm Springs. Bob and Dolores Hope were there, so too were Fred Astaire, Pearl Bailey, Dionne Warwick, Douglas Fairbanks Jr., and Andy Warhol, a favorite of the queen. Everyone was there, it seemed, except Bill and Carol Simon.
The Shah was back in the Oval Office the next day, Friday, at 5:30 P.M., for a second session with Ford and Kissinger. Kissinger was late to the White House meeting. While he was out of the room, Ford gingerly raised the taboo subject of oil prices. Politically, he had little choice; an American president could hardly avoid raising the subject of oil, with the so-called Emperor of Oil, in the White House. The Shah did not bite. “I know you have a great knowledge here and look at the world picture,” Ford told his guest. “We have to recognize the rights of the producers and they must see our problems. Any suggestions you have would be appreciated.”
“This is a very important subject, Mr. President,” the Shah answered. “The U.S., as champion of the Free World, almost doesn’t have the right to let itself be dependent on the outside. As a matter of fact I will take up with Dr. Kissinger a swap.”
“He has told me,” said Ford. “It sounds like a fantastic arrangement.”
“Yes,” said the Shah. “But the United States has to be independent. So the oil price has to be equal to other forms of energy. In the meantime, maybe a swap would work. It would not create petrodollars.” The Shah had just told President Ford that he would not now be offering much if any price discount in return for the United States taking 500,000 and 700,000 barrels of oil a day off Iran’s hands. The Shah wanted to swap oil for more arms. Kissinger walked in and the president updated him on what he and the Shah had just discussed.
The Shah had spent the day at Andrews Air Force Base inspecting planes carrying AWACS, airborne early warning and control systems. Each Boeing 707 cost $110 million and the Shah wanted to buy at least four or five of them. He also decided Iran’s air force needed Fairchild A-10 attack bombers and more Grumman F-14 fighter jets. From there he helicoptered to the Pentagon for a talk with Secretary of Defense James Schlesinger. The Shah told Ford and Kissinger that he had raised with officials at the Pentagon “the matter of exorbitant price of spares, and leasing the C-5s.”
Kissinger reminded the Shah, “We have to overcharge some way so you can send spares [on to third parties] and we replace them.”
“On the grounds my technicians are using too many,” the Shah concurred. “But your people must keep their mouths shut.” Turkey was running so low on spares “they can’t hold maneuvers. We need your people to keep quiet on the spare parts deal.”
The second session drew to an end. Both leaders exchanged best wishes and pleasantries. “Thank you for inviting me here,” said Mohammad Reza Shah. “I am grateful for establishing these personal contacts. We need you like the rest of the world needs you. Maybe we can be of some help.” President Ford returned the compliment and thanked the Shah for gifts he had brought for himself and the first lady. “Henry has told me if I wanted to talk to someone who has an objective view of the world, it was you. I have confirmed that.”
“I hope you win the election,” replied the Shah and left the Oval Office.
The Shah held a farewell press conference at the Iranian embassy on Saturday afternoon, May 17. Tea and cookies were served. The Washington Post’s Sally Quinn thought the monarch looked very pleased with himself. “He posed for photographs, adjusted his cufflinks, swung his slightly elevated shoes, leaned casually back on the satin pillows of the sofa smoking occasional cigarettes, and brushed off tough questions with questions of his own,” she recalled. It was quite a performance. The Shah was in the final stages of negotiating a $300 million deal in which Iran would lend Pan Am $245 million in return for board representation and a controlling stake in the airline’s Intercontinental Hotel chain. Pan Am held a special place in the United States defense establishment. It was the largest U.S. flag contributor to the civil reserve fleet and the backup for the Air Force in case of a national emergency. Then the Shah dropped a bombshell. He announced that oil would have to go up in price again when OPEC met in September. “We have lost 30 to 35 percent of our purchasing power because of world inflation,” he complained. The Shah didn’t mention a percentage amount for this new increase in price. That came two weeks later when the governor of Iran’s central bank, Mohammad Yeganeh, announced that the Shah would push for a 30–35 percent oil price increase as direct compensation to Iran for its loss in purchasing power. As he surely knew, the world economy had still not successfully absorbed the price shocks of 1973. Another increase in oil prices of that magnitude would be not only excessive but frankly dangerous. It was a remarkable snub to the president who had just hosted him so generously.
The official kowtowing was too much even for newspaper columnist Joseph Kraft, who admired Kissinger and the Shah. In a column entitled “America Bows Low as the Shah Pays a Visit,” Kraft severely criticized Kissinger for avoiding all discussion of oil prices during the Shah’s visit. He argued that it was time for the Ford administration to put its foot down. “[The Shah] has embarked Iran on a vast program of economic and military expansion that depends heavily on American products, American expertise and American money, which he will soon have to be borrowing again,” wrote Kraft, who knew nothing about Kissinger’s secret arms and oil deals. “But you would never have heard it by what happened here last week. The Shah was feted in a well-nigh shameless way by the President, the Vice President and the secretary of state.” Kraft said he had personally asked the Shah during his stay whether President Ford had raised the subject of oil prices. “Only casually,” the Shah had replied. Kraft then asked the Shah whether he believed the Ford administration was prepared to live with the present price. “Not only live with the price, but accept further increases,” the Iranian leader retorted. “The message that the Shah received from the bowing-down of American officials is the message the whole world will get,” Kraft scolded the White House. The Ford administration “has no foreign economic policy. Positions are taken as a result of haggling among the White House, the State Department and the Treasury. The result is an appearance of jitteriness that will continue as long as the President depends so heavily on a secretary of state whose basic feeling about economic problems is that they should go away.”
Kraft’s brutal dissection of Kissinger’s handling of U.S.-Iran relations was more than a case of friendly fire. Kissinger was losing the confidence of his realist admirers in the press. He seems to have understood at some level that the Shah’s threat to hike prices another 30–35 percent unless the Ford administration found a way to help him shift Iran’s stockpile of unsold oil amounted to blackmail.
Each morning a car with an Iranian driver collected the two Air Force colonels from outside their homes in northern Tehran. On May 21, 1975, Colonel Paul Shaffer bid his wife and two children goodbye and climbed into the waiting car with his colleague Lieutenant Colonel Jack Turner, whose wife was getting their three children ready for school. Shaffer, forty-five, from Dayton, Ohio, and Tucker, also forty-five, from Carbondale, Illinois, both worked for the United States military mission in Iran. Security for Americans living in Tehran had deteriorated to the point where senior U.S. military officers and diplomats were assigned chauffeurs and bodyguards. Junior employees were shuttled back and forth from work in armor-plated shuttle vans whose bulletproof windows were sealed shut. The death toll in the ongoing antigovernment insurgency waged by extremist Muslim and leftist groups against the Pahlavi state was running upward of two hundred. In the past few weeks two government officials had been assassinated in the capital and nine young detainees shot in Evin prison. On that third Wednesday in May the capital was bracing for the Shah’s return from Washington. The colonels’ driver made the decision to avoid heavy traffic by turning onto a side street, and it was here that the three men came to grief. “A car blocked the path of their vehicle while another rammed it from behind,” an embassy statement recorded. “Three gunmen surged out, shouted at the Iranian driver of the car to lie down and opened fire at point-blank range. Then they drove off in a third car, leaving a propaganda leaflet behind with the two dead officers in the bloodstained car.” The murders were followed by the bombing of the American cultural center in Mashhad.
The attack on the colonels’ car was in revenge for the extrajudicial executions at Evin. It made for quite a homecoming for the Shah and was a reminder of rising anti-American sentiment throughout Iran. Ambassador Helms initiated a broad review of security for Americans living in the capital. “There was concern on my part,” recalled Ambassador Helms. “I felt that the American presence was getting too large. It was 10,000 when I arrived. I think at one time it got as high as 40,000 or more all through Iran. I felt this was wrong and unnecessary. I attempted to take actions to alleviate it.” Iran was overloaded with men and matériel pouring in from the now defunct war theater in Southeast Asia and also from Turkey, where a U.S. arms embargo was in effect. “As things were closed down in Turkey there was great pressure to use Iran as a physical location for various kinds of equipment,” recalled Helms. “And particularly during the latter two years I was there, I tried to fight these off. I thought it was a great mistake to put more assets, military or otherwise, into that country. There was too much there already in my opinion.” The ambassador’s efforts to reduce the American imprint in Iran never gained traction. “I did away with the Peace Corps,” he insisted, even though the Peace Corps was one of the very few American governmental agencies to have earned the respect of the Iranian population. Its small staff of ten Americans managed 142 volunteers working on a variety of language training, urban planning, and community development projects. The closure of the Peace Corps was a purely symbolic act at a time when fifty retired military personnel arrived in Iran each month to take up employment as defense contractors.
The city of Isfahan, where Grumman and Bell Helicopter employees were stationed, was ground zero for the backlash against Americans in Iran. Iranians were especially shocked by incidents in which American citizens defiled Shi’a mosques. On one occasion in 1975 three American women wearing tight shorts and halter tops “strolled into the ancient Friday Mosque where, laughing, gesturing, and talking in loud voices, they toured the holy place in their own good time.” In their off-hours, Bell helicopter crews “passed the time by drinking, fighting and even racing motorcycles into a mosque.” American teenagers were seen racing motorbikes through another house of worship. It was hard to imagine similar scenes being played out in Catholic churches in San Antonio or Baptist churches in Oklahoma City. Women wearing chadors were accosted by American men in the streets. American defense contractors recently relocated from Saigon “had their own way of life,” recalled one U.S. diplomat—some put their bargirl wives into business as prostitutes. An Iranian taxi driver was shot in the head by an American in a dispute over the fare. Iranians were referred to in their own country by Americans as “sand-niggers,” “ragheads,” and “stinkies.” Muslim radicals spread rumors through the bazaars of Tehran: “Americans are desecrating mosques, insulting Iranian women.”
“That’s where Nixon and Kissinger went wrong,” said former U.S. ambassador Armin Meyer. Meyer was one of the old Iran hands appalled by the scenes he witnessed when he visited the country in the mid-1970s. “They allowed thousands and thousands of Americans to come,” recalled Meyer. “Isfahan became a fleshpot. All these helicopter crews were down there, some bringing in their Vietnamese prostitutes. In my judgment, this cultural issue was very much a contributing factor to the blow up in Iran.” At the Pentagon, James Schlesinger was receiving alarming reports of similar outrages. American behavior in Iran was, he remembered, “a disaster area. Here you had these Americans in these bases, sort of semi-colonies, but they were behaving like Americans, women running around in bikinis, you had this Iranian population and particularly outside Tehran that was immensely conservative and the American behavior was just offensive to their sensibilities.”
American nationals living in Iran experienced their own traumas. The State Department set up a hot line to help Americans suffering social or psychological problems or to help them deal with rampant drug use among American teenagers. Some families complained with good reason that they had been given just seven days’ notice before being transferred to Iran. The culture shock they experienced upon arrival was in its own way as intense as that felt by their Iranian hosts. By 1976 Grumman was offering its employees classes in Farsi, and other corporations held orientation classes to help their employees assimilate. They set up buddy programs for new arrivals. But it was a case of too little, too late. “Companies started sending workers to Iran too fast,” said Betty Chapman, who ran the Iran Resource Center in Los Angeles, which tried to help employees adjust to their new surroundings. “They gave them no preparation.” The helicopter pilots employed by Bell believed that they were being unfairly cast as villains. They bitterly accused Bell of luring them to Iran with false promises of quality housing, schools for their children, and health insurance. The trouble began when the pilots threatened to form a union. SAVAK informers began sitting in on their meetings. Ambassador Helms refused to meet with the pilots and made it clear to them that his sympathies were with the Iranians. One Bell executive told a pilot’s wife that the company regarded men like her husband as “much the same as migrant workers.”
The conclusions of Embassy Tehran’s security review were presented to Secretary of State Kissinger and senior State Department officials at their daily 8:00 A.M. staff meeting on July 7, 1975. Earlier in the week gunmen had shot and killed the driver of a U.S. embassy car in downtown Tehran after mistaking him for a CIA agent. “Well, in addition to Beirut, Tehran continues to be worrisome from the standpoint of security,” said Under Secretary of State Roy Atherton.
We’ve had a report that the embassy has identified 65 possible members of the mission [at risk from assassination]—mostly officers. It looks like surveillance by people who could be connected with the guerrilla group there. And they recently killed two medical officers, and it’s an almost impossible situation totally to deal with because of the large American community—the fact that they’re scattered all over town—the fact that they have to travel in certain very crowded groups, going back and forth to the office. That’s why [Defense has] been sending out teams; sending out more equipment, armored vehicles. The Iranians have given help to the limit. They can’t put a bodyguard on every American. It’s almost inevitable that we’re going to have another bad situation there.
Kissinger listened in silence to Atherton’s presentation, which ended with a few words on India. The secretary limited his feedback to a single word: “So?”