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ACTION SS-25
INFO OCT-01 ISO-00 /026 W
--------------------- 013956
R 150919Z APR 75
FM AMEMBASSY TEHRAN
TO SECSTATE WASHDC 1074
S E C R E T TEHRAN 3445
EXDIS
E.O. 11652: XGDS-1
TAGS: PFOR, IR
SUBJ: SUBSTANTIVE PREPARATION FOR SHAH'S VISIT
REF: TEHRAN 3058
1. AS REPORTED REFTEL, THE SHAH WANTS TO ENGAGE IN
SUBSTANTIVE DISCUSSIONS IN WASHINGTON AIMED AT DETERMINING
HOW WILLING AND ABLE UNITED STATES IS TO COOPERATE WITH
IRAN ON ECONOMIC, MILITARY AND TECHNICAL ARRANGEMENTS TO WHICH
HE ATTACHES KEY IMPORTANCE. IF WE RESPOND BY DEFERRAL OR
CONDITIONING OR OBFUSCATION, HE IS LIKELY TO CONCLUDE THAT WE
ARE NOW ASSUMING A NEGATIVE POSTURE TOWARD IRAN BEING A FULL
AND TRUSTED PARTNER OF THE UNITED STATES AND THAT IT MAY BE
NECESSARY FOR IRAN TO EXAMINE ALTERNATIVE OPTIONS FAR MORE ACTIVELY.
2. IN THE CIVILIAN SECTOR, IN OUR VIEW, IT IS THE NUCLEAR
ENERGY AGREEMENT AND RELATED US PARTICIPATION IN IRAN'S
NUCLEAR POWER AND DESALINIZATION PROGRAM AND IRANIAN
PARTICIPATION IN THE US URANIUM ENRICHMENT PROGRAM THAT IS OF
PARAMOUNT INTEREST TO THE SHAH. AS WE ARE SPELLING OUT IN MORE
DETAIL IN A SEPARATE MESSAGE, WE BELIEVE AGREEMENT ON THESE
MATTERS PRIOR TO, OR TO BE CONCLUDED AT THE TIME THE SHAH IS
IN WASHINGTON, ARE CRITICAL TO THE SUCCESS OF HIS VISIT.
3. A SECOND MAJOR ELEMENT OF THE SHAH'S INDUSTRIALIZATION
PLAN IS THE DEVELOPMENT OF MAJOR PETROCHEMICAL INDUSTRIES IN
ASSOCIATION WITH US AND OTHER FOREIGN COMPANIES. SOME OF THESE
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PROJECTS DEPEND ON ACCESS TO THE US MARKET AND SOME INVLOVE
COUNTERPART JOINT VENTURES BY IRANIAN PUBLIC CORPORATIONS IN
PETRO-CHEMICAL PROCESSING IN THE UNITED STATES. TO OUR KNOWLEDGE
NONE ASSUME USG SUBSIDIES AND/OR SPECIAL PROTECTION. AS THESE
WERE ALL MATTERS RAISED DURING COMMITTEE MEETINGS OR THE
MEETING OF THE JOINT COMMISSION ITSELF IN MARCH, IRAN WILL DOUBT-
LESS HOPE THAT WE CAN RESOLVE SUCH ENERGY AND INWARD INVESTMENT
POLICY ISSUES AS WE MAY HAVE BY THE TIME OF THE SHAH'S
VISIT IN MAY. A POSITIVE DECISION TO APPROVE AT LEAST ONE OF
THE MAJOR PETROCHEMICAL PROJECTS WOULD EVIDENCE SERIOUS
US INTENT TO DEAL WITH IRAN IN THE SPIRIT OF THE JOINT COMMISSION
COMMUNIQUE.
4. ON ANOTHER TOPIC, WE APPRECIATE THAT THE MAJOR EL PASO/IRAN
LNG PROJECT RAISES MORE DIFFICULT AND PROFOUND US ECONOMIC AND
ENERGY POLICY ISSUES AND MAY REQUIRE SOME TIME BEFORE THEY ARE
RESOLVED. IF THIS CANNOT BE ACHIEVED BY THE TIME OF THE SHAH'S
VISIT, WE WOULD HOPE THAT AT A MINIMUM WE COULD REASSURE HIM
THAT OUR FINAL CONCULSIONS WOULD NOT DISCRIMINATE AGAINST IRAN
AS A SOURCE OF LNG FOR ANY REASON OTHER THAN COMPETITIVE PRICES
FROM OTHER SUPPLIERS.
5. WHILE THE PROSPECTS OF AN OIL CONSUMER/PRODUCER CONFERENCE
AND ITS OUTCOME ARE STILL UNCERTAIN, WE CAN EXPECT THE SHAH TO
CONTINUE TO PRESS HIS CASE FOR MAINTAINING PARITY FOR OIL
VERSUS INDUSTRIAL GOODS PRICES AND FOR OUR LATEST THINKING ON
THIS SUBJECT. HE HAS ALREADY STATED PUBLICLY THAT IF AGREEMENT
CANNOT BE REACHED FURTHER UNILATERAL OIL-PRICE INCREASES MAY
BE IN PROSPECT AND ALSO THAT THESE PRICES MAY BE DENOMINATED
IN OTHER THAN DOLLAR TERMS.
6. AS REPORTED REFTEL, SHAH WILL PROBABLY EXPRESS CONCERN THAT
USG, RESPONDING TO PRESSURES FROM OUTSIDE EXECUTIVE
BRANCH, MAY TIGHTEN ARMS SUPPLY POLICY, POSSIBLY HALTING
DELIVERIES OR IMPOSING RESTRICTIONS ON SALES. WE BELIEVE HE
MAY ALSO VOICE DISPLEASURE AT RAPIDLY RISING PRICES FOR
EQUIPMENT AND SERVICES. THIS HAS BEEN A RECURRING THEME WITH
GENERAL TOUFANIAN OVER PAST WEEKS. EARLIER IRANIAN INTEREST
IN PUSHING FORWARD TOWARD MAVERICK CO-PRODUCTION PROJECTS
SEEMS TO HAVE BEEN TAKEN OFF AGENDA BY RECENT PRELIMINARY
UNDERSTANDING WITH HUGHES. GOI-HUGHES DISCUSSIONS RE CONTRACT
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TERMS, ESPECIALLY ROYALTY PAYMENTS, ARE SCHEDULED THIS MONTH.
IF TWO PARTIES ARE UNABLE TO COME TO TERMS BEFORE SHAH'S
DEPARTURE, THIS ITEM MAY ALSO BE BACK ON AGENDA.
HELMS
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