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Cooper,AndrewScott.Theoilkings:howtheU.S.,Iran,andSaudiArabiachangedthebalanceof

powerintheMiddleEast/AndrewScottCooper.p.cm.

Includesbibliographicalreferencesandindex.1.UnitedStates—Foreignrelations—Iran.2.Iran—Foreignrelations—UnitedStates.3.UnitedStates—Foreignrelations—SaudiArabia.4.SaudiArabia—Foreignrelations—UnitedStates.5.Iran—Politicsandgovernment—1941–

1979.6.Petroleumindustryandtrade—Iran—History—20thcentury.7.Petroleum

industryandtrade—SaudiArabia—History—20thcentury.I.Title.E183.8.I55C662011

327.73055—dc22011008319ISBN978-1-4391-5517-2

ISBN978-1-4391-5713-8(ebook)

ToMyFamily

CONTENTS

IntroductionANoteontheUseofIranianImperialTitles

PARTONE:GLADIATOR1.AKindofSuperMan2.GuardianoftheGulf3.MaritalVows4.Contingencies5.OilShock6.CruelSummer

PARTTWO:SHOWDOWN7.ScreamingEagle8.PotomacScheherazade9.Henry’sWars10.TheSpiritof’7611.RoyalFlush12.OilWar

Epilogue:TheLastHurrah

AcknowledgmentsNotesBibliographyIndex

INTRODUCTION

“WhyshouldIplantatreewhosebitterrootWillonlyservetonourishpoisonedfruit?”

—AbolqasemFerdowsi,ThePersianBookofKings

OnNovember25,2006,U.S.vicepresidentDickCheneyflewtoRiyadhfortalks with King Abdullah of Saudi Arabia, the elderly autocrat whose desertkingdomishometoonefifthoftheworld’sprovenoilreservesandisthelargestproducerwithinOPEC,theOrganizationofPetroleumExportingCountries,theoil producers’ cartel. The kingwas evidently in need of reassurance from hisAmericanallies.EarlierinthemonththeU.S.wareffortinIraqhadbeendealtasetback after voters in midterm elections routed Republican incumbents andturned control of the Congress over to Democrats. Almost immediately,PresidentGeorgeW.BushacceptedtheresignationofCheney’spartnerinpowerSecretaryofDefenseDonaldRumsfeld,andoffered“to findcommonground”withcriticsofhisadministration’shandlingofthewar.Forthefirsttimeinsixand a half years the talk inWashington was not of victory in Iraq but of anorderlywithdrawalofcoalitionforces.TheSaudisexpressedconcernthat theirneighbor andhistoric rival Iranwould take advantageof theU.S. departure toassert itsregionalambitions.SaudiArabia’sambassadortoWashington,PrinceTurki al-Faisal, bluntly reminded theWhite House that “since America cameintoIraquninvited,itshouldnotleaveIraquninvited.”The price of oil also came up in the vice president’s meeting with Saudi

officials.Overthesummerof2006worldenergymarketshadtightened,drivingpricestorecordlevels.SoaringfuelpricesthreatenedAmerica’sprosperityandtheeconomiesof its tradingpartners.Oil ashighas$78abarrel alsoposedachallengetoU.S.foreignpolicyintheMiddleEast,whereoilproducersreapedwindfall profits. TheBushWhiteHousewas especially concerned aboutwhatthegovernmentof Iranwoulddowith itsnewbillions.“Iran’sprofits fromoilroselastyeartomorethan$45billionfrom$15billion,surgingataratenotseen

since 1974, when the country’s oil revenues tripled,” reported The New YorkTimes.ThesurgeinIranianoilprofitswasaccompaniedbyamarkedupswinginregionaltensionsandviolencethatincludedaferociousmonth-longwarfoughtin Lebanon between Israel and Hezbollah, the Shi’a group whose leadersreceived political cover and financial and military backing from Tehran. TheprospectofPresidentMahmoudAhmadinejadusinghiscountry’soilrevenuestospeed up Iran’s nuclear program, strengthen the Iranian military, and armHezbollahinLebanon,theradicalHamasIslamicgroupbasedinGaza,andpro-Iranian Shi’a militias in Iraq, was anathema to officials in Washington andRiyadh.TheSaudi royal family had seen this before.Back in the 1970sShahMohammad Reza Pahlavi of Iran had been the driving force behind high oilprices that he hoped would transform Iran into an economic and militarypowerhouse. Only the 1979 Islamic Revolution had put paid to the Shah’sambitionstodominatethePersianGulf,WestAsia,andtheIndianOcean.AlthoughPresidentAhmadinejadwouldhaveneverdaredadmitit,therewere

strikingparallelsbetweenhisefforttoprojectIranianpetropowerundertheguiseof pan-Islamism, and the Shah’s earlier drive to revive Iran’s long dormantPersian aspirations. Their strategic visions overlapped in ways that suggestedsomestrikingcontinuities.BothleaderssawIranastheregionalhegemon.Theyidentifiedoil revenuesandnuclearpoweras thekeys toattaining internationalstature and domestic self-reliance. They relished provoking the sameWesternpowersthatatonetimehadtreatedIranlikeacolonialvassal.Perhapstheirmostobvious shared traitwas aKingMidas complex. Like the Shah,Ahmadinejadwasabigspenderwhobelievedthathighoilpricesfreedhimfromtheneedtopractice fiscal restraint. “Critics said that his plans for generous spending tocreate jobs and increase salaries were politically motivated and fiscallyunsound,” noted one observer. “His budget relied on high oil profits likely toinviteinflation.”TheIraniancentralbankproposeda$40billionfiscalstimulusthatincludedsubsidiesforfamiliesandnewlyweds.Ahmadinejad’s spendthrift ways presented King Abdullah of Saudi Arabia

withagoldenopportunity.Withpetroleumresponsiblefor80percentofincomefrom exports, Iran’s economy was perilously exposed to an unexpected pricefluctuationintheoilmarkets.Tehranconfidentlyexpectedconsumerdemandforoil to stay high, guaranteeing equally high prices. But what would happen toIran’s budget assumptions if oil prices suddenly plunged? Oil-producingcountries base their spending plans and financial estimates on oil prices notfallingbelowacertainthreshold.Ifpricesdosuddenlyplungebelowthatlevel—andifproducershavenotleftthemselveswithenoughofafinancialcushiontoabsorb the blow from lost export receipts—the potential exists for a fiscal

meltdown. Billions of dollars in anticipated revenue would disappear. Tehranwouldbeforced toeconomizeanddecidewhether tospendmoneyongunsorbutter—whether to lavish aid on Hezbollah and Hamas or to prop up thecomplex systemof food, fuel, housing, and transportation subsidies that keepsIran’s middle class in check. Removing the subsidies would increase thepotentialforprotestsandclashesbetweensecurityforcesandoppositiongroups.Onlyonecountryhadthemeansandthemotivetoengineerapricecorrection

on that scale. With its giant petroleum reserves and untapped productioncapacity,SaudiArabiacouldfloodthemarketbypumpingenoughsurpluscrudeinto thesystemtobreak thepricingstructureanddrivepricesbackdown.TheSaudi royal family has always understood that petropower is aboutmore thancreatingwealth,developing its economy,andpreservingpower.Oil is also theSaudis’primaryweaponofnationalself-defenseandthekeytotheirsecurityandsurvival. Flooding the market is economic warfare on a grand scale, the oilindustry’s equivalent of dropping the bomb on a rival. A floodedmarket andlowerpriceswouldinevitablyresultinbillionsofdollarsinlostrevenuestotheSaudis.However,thethreatfromIranwasseenasoutweighingthatloss,andbylate2006KingAbdullahwaspreparedtotapSaudioilreserves.“A member of the Saudi royal family with knowledge of the discussions

betweenMr.CheneyandKingAbdullahsaidthekinghadpresentedMr.Cheneywithaplantoraiseoilproductiontoforcedowntheprice,inhopesofcausingeconomic turmoil for Iran without becoming directly involved in aconfrontation,”reportedTheNewYorkTimes.Floodingthemarketwould“force[Iran]toslowtheflowoffundstoHezbollahinLebanonandtoShiitemilitiasinIraqwithoutgettingdirectlyinvolvedinaconfrontation.”TheSaudismayalsohavehad inmindasecondmotive.Frompastexperience theyknewthat ifoilpricesstayedtoohighfortoolong,theUnitedStateswouldbeforcedtoreduceitsconsumptionofforeignoiland takesteps toencourageenergyconservationanddiversification.LessrelianceonSaudioilwouldtranslateintoareductioninSaudistrategicleverageoverU.S.policytowardIsraelandtheMiddleEast.OnNovember29,2006,fourdaysafterCheney’sreturn toWashington,The

Washington Post published an essay by Nawaf Obaid, a prominent securityadvisertotheSaudigovernmentandadjunctfellowatWashington’sCenterforStrategic and International Studies. Obaid’s article warned that one of theconsequencesofasuddenU.S.withdrawalfromIraqwouldbe“massiveSaudiinterventiontostopIranian-backedShiitemilitiasfrombutcheringIraqiSunnis.”Obaid reminded his readers that “as the economic powerhouse of theMiddleEast, the birthplace of Islam and the de facto leader of the world’s Sunnicommunity(whichcomprises85percentofMuslims),SaudiArabiahasboththe

meansandreligiousresponsibilitytointervene.”BuriedinObaid’sarticlewasachillingthreatthatofficialsbackinTehrancouldnothavefailedtomiss:

Finally,AbdullahmaydecidetostrangleIranianfundingofthemilitiasthroughoilpolicy.IfSaudiArabiaboostedproductionandcutthepriceofoilinhalf,thekingdomcouldstillfinanceitscurrentspending.Butitwouldbe devastating to Iran, which is facing economic difficulties even withtoday’shighprices.TheresultwouldbetolimitTehran’sabilitytocontinuefunneling hundreds of millions each year to Shiite militias in Iraq andelsewhere.

Obaid’s article drewmy attention because for severalmonths I had already

been studying the impact of an earlier little known and less understoodintervention by the Saudis in the oil market. In 1977, one year before theoutbreak of revolutionary unrest in Iran, oilmarkets had been paralyzed by abittersplitamongmembersofOPECoverhowmuchtochargeconsumers.TheShah of Iran had proposed a 15 percent price hike for the coming year.KingKhalid of Saudi Arabia had resisted the Shah’s entreaties and argued that nopriceincreasewaswarrantedatatimewhenWesterneconomiesweremiredinrecession.TheShahwonthedayandpersuadedtherestofOPECtojoinhiminadopting adouble-digit price increase for 1977.TheSaudi responsewas swiftandruthless.RiyadhannounceditwouldtakedrasticstepstoensurethatIran’snewpriceregimenevertookeffect.Itwoulddothisbyexceedingitsproductionquota, pumping surplus oil onto themarket, and undercutting the higher priceofferedbyitscompetitors.Overnight,Iranlostbillionsofdollarsinanticipatedoilrevenue.TheShah’sgovernment,reelingfromtheblow,wasforcedto takeoutabridgeloanfromforeignbanks.Itmadedeepcutstodomesticspendinginan attempt to balance the books and implemented an austerity plan that threwtens of thousands of young Iranianmen out ofwork and into the streets. TheeconomicchaosthatensuedhelpedturnIranianpublicopinionagainsttheroyalfamily.Thirtyyearslater,alltheindicationswerethatSaudiArabiawaspreparedto

replicateitsearlierfeat.Thereisstillmuchthatwedon’tknowaboutU.S.-Saudiefforts todestabilize Iran’s economyduringPresidentBush’s last twoyears inoffice.Whatwedoknow is that theSaudigovernmentpublicly reacted to theuproar over Nawaf Obaid’s article by formally severing its ties with theconsultant.DiplomaticobserversinWashingtonunderstoodthatthiswaspartofamuchbiggergame.“[Obaid]iswidelyexpectedtoreturntothegovernmentinsome capacity,” noted one expert. “The Saudi government disavowed Mr.

Obaid’scolumn,andPrinceTurkicanceledhiscontract,”reportedTheNewYorkTimes.“ButArabdiplomatssaidTuesdaythatMr.Obaid’scolumnreflectedtheview of the Saudi government, which has made clear its opposition to anAmericanpulloutfromIraq.”Then,oneweeklater,SaudiArabia’sambassadortoWashington,PrinceTurki,losthisjobandwasabruptlysummonedhome.Whatwasgoingonhere?WhatmessagewasKingAbdullah trying to send

Tehran andWashington? The best way to understand Saudi policy and whathappened next is to follow the price of oil over the next two years. SaudiArabia’s budget for 2007was reportedlybasedonoil prices not fallingbelow$42abarrelandproductionof9millionbarrelsaday.Bythesummerof2007,despite efforts to restrain theirmomentum, prices had returned to their earlierpeakfromayearbeforeof$78.Publiclyatleast,OPECmemberspledgednottoallowoiltosurpass$80abarrel.YetbytheendofNovember2007thepriceofabarrel of oil had rocketed to $98. In January 2008, President Bush personallyappealed toKingAbdullah to practice price restraint—theU.S. economywasbeginningtoshowsignsofbucklingunderthestrainofhighoilprices,mortgageforeclosures,creditdefaults,andshakybanks.TheSaudis, eager to reel inAhmadinejad,opened the spigots andexceeded

theirOPECproductionquotaby250,000barrelsaday. It turnedoutnot tobeenough. The Saudis cranked up their production yet again, this time from 9.2millionbarrelsadayto9.7millionbarrels.Thepriceofabarrelofoilbrokethe$100ceiling inApril,$118 inMay, and finally toppedout at$147.27 in July.Prices then fell sharply as Saudi oil flooded the system even as the U.S.economy sharply contracted.BySeptember,whenoil had retreated inprice to$107abarrel,itwastheturnofPresidentAhmadinejadtodisplayanxiety.TheIranianshadwronglyassumed that thepriceofoilwouldnot fallbelow$90 abarrel. They appealed to the Saudis to hold the line on prices.KingAbdullahrespondedbykeepingthespigotsopenandcollapsingOPEC’spricingstructure.ByDecember,thepriceofoilhadretreatedto$43abarrel.Satisfied,theSaudisreduced output to 8.5 million barrels a day. When prices plunged to $33 inJanuary 2009, the Saudis cut production still further, this time to 8 millionbarrels. The Iranian regime entered a crucial presidential election year havingsustainedadevastatingreversalofeconomicfortune.Thefraudulentoutcomeofitsmidyear electionwas accompanied by economic contraction and theworstpoliticalunrestsincethefalloftheShahthreedecadesearlier.InthemeantimeIhadlocateddocumentsthatrevealedthatPresidentGerald

FordandtopWhiteHouseofficialshadbeencloselyinvolvedinthefirstSaudieffort tofloodthemarketin1977.Thedocumentsraisedthepuzzlingquestionofwhy theUnitedStateswouldbackacoverteffort tomanipulateoilmarkets

knowing it would damage Iran’s economy and hurt its close ally the Shah.PresidentsRichardNixon andFord eachhosted theShah at theWhiteHouse,praised him as a statesman and friend, and furnished him with advancedweapons systems, thousandsofmilitary advisers, andevenoffered to sell Irannuclearreactors.Thedocumentsraisedtheprospectofasecretcrisisinrelationsat the highest levels, and that previously unknown tensions had led to a high-stakesshowdownoveroilpricesandthelong-termfutureoftheOPECcartel.AsIwroteintheOctober2008MiddleEastJournal:

Whilemuchscholarlyfocushasbeenontheinternalpolitical,cultural,economicandsocialoriginsof therevolution, theroleofstate finances—andoilrevenuesinparticular—hasreceivedfarlessattention.TheIranianrevolution shared similarities with two other great revolutions: France in1789 and Russia in 1917. All three upheavals were preceded by fiscalcrises. In Iran’s case the dramatic revenue fluctuations of 1977 wereacknowledged and duly noted at the time by Tehran-based foreigncorrespondents.ButtheunderlyingrationaleforSaudiArabia’sdecisiontotorpedo theDecember1976OPECoil price increase, andparticularly theFord administration’s role in that fateful decision, has not been explaineduntilnow.

My search for understanding uncovered a hidden history ofU.S.-Iran-Saudi

oildiplomacyfrom1969to1977,thebackstoryofthecrucialeight-yearperiodwhentheUnitedStateswentfrombeingtheworld’snumberoneoilproducertothe biggest importer of petroleum, and when Saudi Arabia’s House of Saudreplaced Iran’s Pahlavi king asWashington’s indispensable ally in the PersianGulf.Here,finally,istheinsidestoryofhowtwoAmericanpresidents,RichardNixonandGeraldFord,dealtwithIranandSaudiArabiaastheygrappledwiththechallengesofAmerica’sgrowingdependenceonforeignsourcesofenergy,howNixon’shandlingofU.S.-Iranrelationsinparticularduringtheenergycrisisoftheearly1970sset thesceneforapotentiallycatastrophicfinancialcrisis inthewaningdaysofFord’sadministration,andwhyFordeventuallyfelthehadnochoicebuttothrowhissupportbehindaremarkableplantobreakthepowerofOPECwiththehelpoftheSaudis.MybookmakesclearthattheU.S.-SaudioilcoupdirectedagainsttheShah’s

leadership ofOPECwasnot a conspiracy intended to topple him from Iran’sPeacock Throne. Revolutions are highly complex phenomena that cannot besimplified in conspiratorial terms or explained simply by one or two triggercauses. Yet there is no denying that theU.S. decision to breakOPEC caused

significant problems for the Shah, and at the worst possible time. It dealt aseverepsychologicalblowtohimbyundermininghisstatureasOPEC’sleaderandcreatingaperceptionofpoliticalweaknessathomeandabroad.Itsignaledalossofcontrolby theShahoverIran’sprimarysourceofstaterevenue.AnditshookthefoundationsofIran’stroubledeconomyjustasdomesticunrestagainsttheShahwasbeginningtocrest.U.S.-SaudicollusiontobreakOPECfromtheinside and deliver it into Saudi hands turned out to be a disaster for U.S.interests.Although notwholly to blame for the economic chaos that engulfedIran on the eve of the revolution, the U.S.-Saudi oil coup against OPECintensifiedandacceleratedtheprocessofcollapseinIran.

TheOilKings isamultilayerednarrativewritten throughtheprismofU.S.oil policy. The book can be interpreted in differentways: as a parable on thecorruptinginfluenceofoilonAmerica’snationalsecuritypolicy;asalessoninthe limits of American power in the wake of the retreat from Vietnam, theWatergate scandal, and the energy crisis of the 1970s; as a contest ofpersonalitiessuchasNixon, theShah,SheikhAhmedZakial-YamaniofSaudiArabia, Secretary of State Henry Kissinger, Secretary of TreasuryWilliam E.Simon,anddefensesecretariesJamesSchlesingerandDonaldRumsfeld;asanautopsyonempire,inthiscaseIran’sPahlavidynasty,andhowthefortunesofthePersiancrownroseandfellwiththeoilmarket;asthetriumphofnationalisminsettlingscoresbetweenoldrivalsIranandSaudiArabia;andasacautionarytale of what happened between friends of long standing and to old allianceswhenthegeopoliticsoftheColdWarcollidedwiththerealityoftheoilmarketand the global economy,whose rough outlinewas only just beginning to takeshapeinthemid-1970s.ItisanarrativethatinternationalizesU.S.-Iranrelationsand Iran’s revolutionbyplacingbilateral and internal events ina strategicandgeopolitical context outside the boundaries of the Persian Gulf. I found itimpossibletoaddresstensionsbetweentheUnitedStatesandIranoveroilpriceswithoutalso taking intoconsiderationevents in farawayGreatBritain,France,Portugal,Italy,Spain,andCanada.HowtheseeventsaffectedbilateralrelationsbetweenWashington and Tehranwill no doubt be debated for a long time tocomebyscholarsinthefield.The narrative includes stories told for the first time, that, for example,

illustrate the extraordinary degree of Iranian involvement—not to mentionoutrightmanipulation—inU.S.politicsandforeignpolicyinthe1970s,andtheextent towhich the tentaclesof theoil statesof theMiddleEast reached rightintotheOvalOfficetoinfluencepresidentialdecisionmakingtoanastonishing

degreeondomesticandforeignpolicy.WenowknowthattheU.S.responsetothe1971India-PakistanWar,the1972U.S.presidentialelection,theArab-IsraeliWarof1973, the1973–74Araboilembargo, the1974–75oil shock, the1975Middle East peace shuttle, and the 1976 U.S. presidential election all had anIraniancomponent.Thisbookprovidesanswerstolong-standingquestionsaboutU.S.-Iran military contingency planning, the Ibex spy project, Iran’s nascentnuclear program, and the mysterious dealings of Colonel Richard Hallock. ItsettlesdebatesoverthenatureofthesecretdealsworkedoutbetweenPresidentNixon and the Shah regarding oil prices and arms sales, the extent to whichWhiteHouseofficialswereawareoftheterroristthreattoU.S.nationalsinIran,awarenessoftherisingoppositiontotheShahfromhisownpeople,andwhetheranyone in the White House had any prior knowledge of the Shah’s secrettreatmentsforthecancerthateventuallytookhislife.SecretaryofStateHenryKissingeroncefamouslydescribedtheShahofIran

as“thatrarestofleaders,anunconditionalally,andonewhoseunderstandingoftheworldenhancedourown.”Forthirtyyears,wehavehadtotakeKissinger’swordfor it. In the1970sheconcludedanarrayofhighlysecretdealswith theShah worth billions of dollars involving the transfer of men, money, andmachineryonascalethateventodayisalmostunimaginable.Whereexactlydidallthatnationaltreasurego?Howwasitexpended?Inthreevolumesofmemoirstotaling3,955pagesand including193photographsof the former secretaryofstatewitheveryworld leader, foreignminister, andambassadorofnoteexceptthe Shah of Iran in the 1970s, onewonderswhyKissingerwas photographedwitha flockofgeese inChinabutnotpictured in thecompanyof themanheclaimedtosoadmire?His books tell us nothing of substance about the intimate workings of his

remarkable relationship with ShahMohammad Reza Pahlavi. As an example,Kissingerdevotesonlythreesentencestoasecretbilateraloildealthatisamajorfocus of the second half ofmy book. British authorWilliam Shawcross onceobserved that “readerswho seek understanding of the [U.S.-Iran] debaclewillnotfinditinKissinger’smemoirsanymorethaninNixon’sbeforehim.Indeed,the way in which the two men treat Iran shows how terribly inadequateautobiographiescanbeaspointsofreference,letaloneaccountsofhistory....Thisskimpytreatmentcanbeexplainedonlybyadesiretoconceal.”Kissingerwasnotalone.AsShawcrossnotes,NixonmadeonlytwobriefreferencestotheShahinhisautobiography,preciselytwomorethanhissuccessor,GeraldFord,inhisautobiography.RichardHelms,themanwhorepresentedtheirinterestsasU.S.ambassadorinTehran,wroteamemoirthatisamasterpieceofdissemblingandobfuscation.Iwondered:iftheShahwasworthdefending,whywashenot

worthtalkingabout?MybookutilizesthedeclassifiedmeetingnotesofGeneralBrentScowcroft,

Kissinger’s deputy and eventual successor to the post of national securityadviser. Scowcroft attended everymeeting of importance in theWhite Housethatpertainedtooil,Iran,andSaudiArabiaduringtheperiodfromlate1973tothe end of January 1977. I also drew on the declassified transcripts ofKissinger’sWhiteHouse telephone conversations; the translated diaries of theShah’ssenioradviser,ImperialCourtMinisterAmirAsadollahAlam;thediariesof former chairman of the U.S. Federal Reserve Arthur Burns; thousands ofpages of declassified cables, policy briefs, and memoranda from the StateDepartment, theDefenseDepartment, theCIA, theNational SecurityCouncil,and the Federal Energy Administration; Nixon’s and Ford’s personalcorrespondence with foreign heads of state including the Iranian and Saudimonarchs; approximately sixty bound volumes containing more than onethousand newspaper andmagazine articles and primary and secondary sourcematerials; oral history interviews; and interviews I conducted with the fewsurvivingofficialsoneithersidewhohadsomeknowledgeofthediplomacyofthetimeandwerewillingtotalkaboutit:GeneralScowcroft,formerSecretaryof Defense James Schlesinger, former head of the Federal EnergyAdministration Frank Zarb, former Iranian foreign minister and ambassadorArdeshir Zahedi, and retiredAmerican diplomats.As it turned out, even theyhadbeenkeptinthedarkaboutthefullextentofmanyofthedealsrevealedinthesepages.A feature of the Kissinger-Shah relationship was its emphasis on oral

agreementsandtheabsenceofapapertrail.Kissingercompartmentalizedtheirdealings,cuthiscolleaguesoutofhisbackchannelstothepalace,andwasnotaversetoengaginginelaboratedeceptionstothrowthemoffhistrail.FrankZarbdid not know that Kissinger sabotaged his negotiating stance during oil talkswith the Iranian government. It was only in the course of our interview thatformer Secretary of Defense Schlesinger learned the rationale behind a $500millionU.S. armsdeal to Iran thathehadvigorouslyopposedbutnonethelesswas required to implement.Duringmy investigation Ididnot turnupa singledocumentthatspelledoutinspecificdetailthetermsofeachofthesecretdealsbrokeredbetweenKissingerand theShah.Theremightbe referenceshereandthere, sometimes spoken, sometimeswritten, but never in one place and oftenmentionedoveraperiodofmonths,ifnotyears.Throughout the book I have tried to place the reader in the position of

governmentofficials in theUnitedStates,Europe,and theMiddleEastas theystruggled to deal with the dangerous new world unleashed by the 1970s

revolution in oil pricing. They faced a series of painful policy choices. In thewakeofthepulloutfromVietnam,theWatergateaffair,andtheenergycrisis,theUnitedStatesconfrontedaresurgentSovietUnion,oilshortages,andeconomicrecession.OvalOffice transcripts confirm thatU.S. officials, includingNixon,Ford, and Kissinger, were convinced that theWest was in crisis and that thefraught political and economic conditions of the 1930s were reassertingthemselves.Thedecisionstheymadewerebasedonthelessonsofhistoryfromthatearlierfrighteningperiod.Thismind-set—thatcatastrophewas justaroundthe corner—culminated in what I like to think of as the story of the greatestfinancial crisis never told, when in 1976 Treasury Secretary Bill Simon,ChairmanoftheCouncilofEconomicAdvisersAlanGreenspan,andChairmanoftheFederalReserveArthurBurnswarnedPresidentFordthatbanksonWallStreetwereatriskofcollapseifOPECraisedthepriceofoil.TheU.S.economyteeteredon the edge of a double-dip recession as governments in Europe slidtowardinsolvency.Itisascenariothatmaysoundfamiliartoday.To paraphrase the great historian Barbara Tuchman, America’s tortured

relationswiththeoilproducersof thePersianGulfhavetodatebeenonelongmarchoffolly.Asweentertheseconddecadeofthetwenty-firstcentury,moreandmore it isamarch that isbeginning tofeel forced.TheUnitedStatesnowimportsalmosttwothirdsofitsoilfromoverseasandhasgonetowartwiceinlessthanfifteenyearstosecureitsPersianGulfoillifeline.“Iamsaddenedthatit ispolitically inconvenient to acknowledgewhat everyoneknows: thewar inIraq is about oil,” Alan Greenspan wrote with admirable frankness in hismemoir.Hecontinued:

Thus,projectionsofworldoilsupplyanddemandthatdonotnotethehighlyprecarious environment of theMiddleEast are avoiding the eight-hundred-poundgorillathatcouldbringworldeconomicgrowthtoahalt.IdonotpretendtoknowhoworwhethertheturmoilintheMiddleEastwillbe resolved. I do know that the future of the Middle East is a mostimportant consideration in any long-term energy forecast. . . . Untilindustrial economies disengage themselves from, as PresidentGeorgeW.Bushputit,“ouraddictiontooil,”thestabilityoftheindustrialeconomiesandhencetheglobaleconomywillremainatrisk.

TheAmericaneconomy’schronicaddictiontocheapoilisobvious.Lesswell

known is the story ofwhen that addiction began and why the United Statesbecameso reliant inparticularonSaudiArabia for its continuedgoodwill andcooperation.ThesameistrueofAmerica’stoxicrelationshipwithIran.Thetwo

countrieshavebeenateachother’sthroatsforsolongnowthatitseemshardtobelievetheywereeverallies—letalonepartnersinasecretcontingencyplantoinvadeSaudiArabiaandseize itsoilwealth.Until these tensionsare resolved,anduntilbothcountriescometotermswiththeircomplicatedsharedhistory,itseems inevitable that the treeofAmerican-Iranian relationswillbearpoisonedfruitformanyyearstocome.Theproudmanatthecenteroftheeventsinthisbookstillloomslargeinour

collective conscience. More than thirty years have passed since ShahMohammadRezaPahlaviofIranlefttheworldstageasastatelessrefugee.Thestoryofhis triumphantriseandequallyspectacularfall isacautionary taleforother statesmen seeking to emulate his achievements. The question is oftenasked:WherediditallgowrongfortheShah?Thereisnosingleturningpointinhisfortune,thoughagoodplacetostartmaybeinthespringof1969,whenthe Iranian king traveled to Washington to attend the funeral of former U.S.presidentDwightEisenhower.Itwasatripthatdidnotatthetimeappeartoholdanygreat significance,either for theShahor forhishost,RichardNixon,whohadbeenpresidentforjusttwomonths.OnlynowcanweseethattheShah’stripwasanimportantearlysignpostontheroadleadingtorevolution.

A.S.C.Piraeus,Greece,2010

ANOTEONTHEUSEOFIRANIANIMPERIALTITLES

TheShahofIranwasbothkingandemperorofIran.DuringthereignofthePahlavidynasty Iranwas formally recognized in the international realmas the“EmpireofIran.”TheformaltitleofIran’sShahanshah,orKingofKings,was“MohammadRezaShahPahlavi,”whichistranslatedas“MohammadReza,thePahlavi king.” In his diaries, Imperial CourtMinister AsadollahAlam simplyreferredtotheShahas“HIM”or“HisImperialMajesty.”ItwasthesamewiththeShahbanou, a title that translates as the “Shah’sLady.” FarahPahlaviwasbothqueenandempress,thelatertitlegrantedafterthecouple’sjointcoronationin 1967. Asadollah Alam referred to her in his diaries as “HMQ” or “HerMajestytheQueen,”andtheShahusuallyreferredtohiswifeas“theQueen.”Indomestic and foreign media Farah’s titles, like her husband’s, tended to beinterchangeable.

PartOneGLADIATOR1969–1974

“Ifsomeonewrapsalioncubinsilk,Alittlewhelp,who’snotyettastedmilk,Itkeepsitsnaturestill,and,onceit’sgrown,Fightsoffanelephant’sattackalone.”

—AbolqasemFerdowsi,ThePersianBookofKings

ChapterOneAKINDOFSUPERMAN

“YourMajesty,you’reliketheradiantsunBestowinglightandlifeoneveryone:MaygreedandangernevertouchyourreignAndmayyourenemieslivewrackedwithpain.Monarchwithwhomnomonarchcancompete,Allotherkingsaredustbeneathyourfeet,NeitherthesunnormoonhaseverknownAkinglikeyoutooccupythethrone.”

—AbolqasemFerdowsi,ThePersianBookofKings

“Ilikehim,IlikehimandIlikethecountry.AndsomeofthoseotherbastardsoutthereIdon’tlike,right?”

—PresidentRichardNixon,1971

FIRSTAMONGEQUALS

TheycametoburyCaesar.Inthespringof1969thefuneralofDwightDavidEisenhower, the great wartime commander, Europe’s liberator from Nazioccupation,andAmerica’s two-termpresident,provedan irresistibledraw toageneration of world leaders who owed their freedoms, fortunes, and in somecasestheirlivestothesoldier-politicianfromKansas.OnMarch30,millionsoftelevision viewers in the United States watched as a stately procession ofcrowned heads and dignitaries including King Baudouin I of Belgium, KingConstantine II of Greece, Grand Duke Jean of Luxembourg, Lord LouisMountbattenofGreatBritain,andPresidentFerdinandMarcosofthePhilippinesgatheredintheCapitolRotundainWashingtontopaytheirrespects.Twofacesin the pantheon of greats stood out.Onlookerswere touched to see a stoopedseventy-eight-year-oldPresidentCharlesdeGaulleofFranceshuffleforwardtosalute his wartime comrade’s bier. The other statesman familiar toAmericans

was theShahof Iran, the fabulouslywealthyemperorwhose lavish titleswerematchedonlybyhis threebrilliantmarriages.Standingerect inelevatorshoes,still trimatage forty-nine,hishawkish features resolute,His ImperialMajestyMohammad Reza Shah Pahlavi, King of Kings, Light of the Aryans, andShadow of God, radiated the majesty of the fabled Peacock Throne andshouldered theweight of 2,500 years of Persianmonarchy.Wearing a ribbon-slashedmilitary tunic toppedoffwithenoughgoldbraidandordersofstate toornamentaChristmastree, theShahlookedforall theworldas thoughhehadjuststeppedoutofaHabsburgdrawingroomattheCongressofVienna.Mohammad Reza Shah’s decision to attend Eisenhower’s funeral was not

driven by sentiment toward the man who intervened to save Iran’s PeacockThronein1953.“Ipointedoutthatitwillprovideanidealopportunitytomeetthe newAmerican administration and he agreed,” wrote AsadollahAlam, theShah’sclosestadviserandministeroftheimperialcourt.AlamkeptaseriesofsecretdiariesinwhichherecordeddailylifeatthePahlavicourt.RichardNixonhad been sworn in as America’s thirty-seventh president less than ten weeksearlier and the Iranian king was anxious to reaffirm their long-standingacquaintance.IftheShah’sRuritaniansplendorseemedmisplacedintheyearofWoodstock,

theApollomoonlanding,andtheMansonFamilymurders,theempireofoilhehadreignedoverfortwenty-eightyearsmadehimthemanofthemomentintheNixonWhiteHouse.“TheShahisclearlythemostimportantpersoninIran,”theState Department advised President Nixon in 1969. “By Iranian tradition anyShahisakindofsupermanwhosepositionandprerogativeshaveevenmysticalsignificance.ThisShahaddstothistraditiontheweightofhisenormouspoliticalsagacity, his intelligence and cunning, his ability to get things done as anexecutive.”AtEisenhower’sfuneraltheShahwastreatedasfirstamongequals.Hisscheduledprivatemeetingwiththepresidentranoverbyahalfhour.Duringthe funeral ceremonies in the National Cathedral the Shah was seatedprominentlyinthefrontrowbesideNixon’selderdaughter,prettyblondTricia.Tricia’ssister,Julie,hadrecentlymarriedDavidEisenhower,Ike’sgrandson,andreceived from theShaha stunningblue andmaroonPersian rug as aweddinggift.AtaglitteringdinnertheNixonshostedfor theirforeignguests itwastheShahanddeGaullewho“stoletheshow,”observedAlam.“Noneoftheothersgotalookin.”

ONEBIGGASOLINEBOMB

MohammadRezaShahPahlaviwasahardmantosaynotointhespringof1969.EverythinghadturnedinhisandIran’sfavorinrecentyears.TheUnitedStates was mired in a punishing land war in Vietnam, one that had bitterlydivided theAmericanhomefrontandexposed theperilsof trying toenforceaPaxAmericanaontheunrulyouteredgesofempire.Nixonhadpromisedtoendthewar anddrawdown theAmericanpresence inEastAsia.Theproblem forWashingtonwasthatGreatBritainhadmadeasimilarpledgetopulloutofthePersianGulf by the end of 1971, leaving theAsian continent’s western flankvulnerable to seizureor subversion from radicals andmischiefmakers alignedwith the Soviet Union. The cash-strapped British were ending more than acentury of gunboat diplomacy in an area that held two thirds of the world’sknownpetroleumreserves.OilfromthePersianGulfaccountedforonethirdofthepetroleumusedbythefreeworldand89percentoftheoilusedbytheU.S.military in Southeast Asia. The region’s booming oil industry generated $1.5billioninrevenuefortheUnitedStateseconomyandemployedtwelvethousandAmericanexpatriates.ThepitifulrealitywasthattheU.S.navalpresenceinthePersianGulfconsistedofaseaplanetenderandtwodestroyers“assignedanareafromMalaysiatoSouthAfrica.”ThePersianGulf’stopographymadeituniquelyvulnerabletosabotage.The

GulfwaslocatedatthecrossroadsbetweentheMiddleEastandSouthwestAsia,a jagged gash of water separating Shi’a Iran in the north from its Sunnineighborstothesouth.Oman,perchedatthemouthoftheGulf,wastornbyarebellionfannedbyleftistSouthYemen.Thepro-SovietregimeinpowerinIraqwasembroiledinfratricidalpurgeswhileitsharpenedtheknivesagainstKuwaitnext door. Saudi Arabia’s ruling Saud dynasty trembled and tottered even aspostage-stamp-sizesheikhdomsclungtoitscoastlinelikefingertipsclutchingata robe.AfghanistanandPakistanwere sinkingunder thewaves likegrandoldlinerstakinginwaterattheheads.Oilwastheprize.Fifty-fivepercentofNATOEurope’s oil and a staggering 90 percent of Japan’s petroleum supplies camefromthePersianGulf.If theGulfwasblockadedthelightswouldgooutfromTokyotoRome.Everydaytankersladenwith25millionbarrelsofoilleftportsin Iran, Iraq, Kuwait, and Saudi Arabia headed for the Arabian Sea and theIndianOcean,boundforRotterdam,CapeTown,andSingapore.Beforereachingopen water they had to pass through a tight choke point called the Strait ofHormuz, a razor-thin artery only twenty-onemileswide at its narrowest pointthatcouldbe“interruptedbyafewminesthrownoverthesideofafishingdhoworbyguerrillaattacksontheendlessparadeoftankers.”Everythirtyminutesatanker passed through on itsway tomarket. PresidentNixon and the Shah ofIran had talked about the fact that thewhole ofWestAsia needed shoring up

before it collapsed and took the free world’s oil lifeline down with it. Thegreatest fear ofWesternmilitary planners was that Soviet paratroopers wouldswoop inandseize theStraitofHormuzduringa regionalcrisis.“TheGulf isone big gasoline bomb,” warned an oil industry expert. “It could blow upanytime,especiallynowthattheBritishareleaving.”PresidentNixonandhismostinfluentialforeignpolicyaide,NationalSecurity

Adviser Henry Kissinger, were anxious to secure Persian Gulf oil fields andshippinglanesoncetheBritishsailedforhome.InJuly1969NixontraveledtoSouthVietnamtorallythetroops.DuringastopoverontheislandofGuamhedescribedhisvision forhowWashingtoncould reduce itsphysicalpresence inAsiaandavoidfuturelandwarswithoutcompromisingitsnationalsecurity.Hisremarks were later burnished for posterity as the “Nixon Doctrine” and theybecame Nixon’s contribution to the formulation of American foreign policyduringtheColdWar.Vietnam had exposed the limitations of American power. Under the Nixon

DoctrinetheUnitedStateswouldsimultaneouslydrawdowninAsiaevenasitrampedupitssupportforproxieswillingtoguardfreedom’sfortsfromTehrantoSydney.TheUnitedStateswouldprovidetheseallieswiththeweaponsandthetraining they needed to do the job on its behalf. “The U.S. is no longer in apositiontodoanythingreallyhelpful,”explainedaWhiteHouseofficial.“Thatwould be ‘imperial.’We’ll just have to rely on the peoplewho live there andmaybe it will go all right.” When it came to defending the mountainousapproachestoCentralandWestAsia,patrollingthewarmwatersofthePersianGulf,andproppingupthegatewaytotheArabianSeaandtheIndianOcean,theonly likelycandidate for the roleofAmericancenturionwas theShahof Iran.RichardNixonandHenryKissingerwere“dealingwiththeVietnamdrawdownand the reactions of the American people to Vietnam, and it drove theadministration to look outside for gladiators,” recalled James Schlesinger, thefuturesecretaryofdefensewhoinheritedthecomplexitiesandcontradictionsoftheir Iranpolicy. “Weweregoing tomake theShah theGuardianof theGulf.Well,ifweweregoingtomaketheShahtheGuardianoftheGulf,we’vegottogivehimwhatheneeds—whichcomesdowntogivinghimwhathewants.”ThedecisiontodelegateauthorityandpowertotheShahinWestAsiaseemed

logicalandpracticalatthetime.TheShahbelievedthatIran’sfuturelaywiththenon-CommunistWest.HeintendedtoreplicateJapan’ssuccessinpullingoffaneconomicmiracle in theaftermathof theSecondWorldWar.“Hisgoalwas tomake Iran a modern major power before he died; that was what made himmove,” recalled Armin Meyer, who served as President Lyndon Johnson’sambassador to Iran in the late 1960s. “Heopenly talkedof Iranbecoming the

‘JapanofWestAsia.’”By1969theShahwaswidelyregardedoutsideIranasaforce for stability, a championofprogressive reform, and thebold leaderwhobroke the power of Iran’s feudal landowning aristocracy and conservativereligious establishment to givewomen the vote and land to the peasantry.HeappointedWestern-educatedtechnocratstorunIran’sgovernmentandeconomyevenasheconcentratedrealpowerinhisownhands.The Shah admired the West for its technological advances and prosperity

while distrusting its motives where Iran’s oil was concerned. In 1941 GreatBritain and the Soviet Union had invaded and occupied Iran to prevent thecountry’s oil fields and rail links from falling intoGerman hands. TheAlliesforced theShah’s father,RezaShah, to abdicate in his son’s favor and live inexile.For the remainderof thewaryoungMohammadRezaShah reignedbutdidnotrule.Themonarchy’sprospectswerebleak.Theendofwarin1945didnotbringpeacetoIran.TheShahbarelysurvivedthreats tohis lifeandthronefrom right-wing religious fanatics and left-wing political extremists. Relationswith Iran’s northernneighbor theSovietUnion,withwhom it shared a 1,250-mile border,were especially problematic.Moscow initially resisted evacuatingits troops from Iran and tried to split the country by stirring up secessionistsentiment in the north. For the rest of his life the Shah remained deeplydistrustful of Russia and its intentions toward Iran, whose vast oil reservesplaceditonthefrontlinesinthenewColdWar.Thenext great crisis involved Iran’s former colonial overlordGreatBritain.

The British government had pulled out its troops but clung to the lucrativemonopolyithadexercisedoverPersianoilreservessincetheturnofthecentury.Iraniansofallpoliticalstripescheeredwhenin1951PrimeMinisterMohammadMossadeghdefiedBritishthreatsandnationalizedIran’soilindustry.Mossadeghwas a charismatic leaderwhosenationalist instincts later raised the hackles ofPrime Minister Winston Churchill and President Eisenhower. The politicalalliancethatMossadeghforgedwithIran’sCommunistTudehPartyhintedatacreepingSoviettakeoverofPersianoilfields.ChurchillwarnedIkethattheWestcould not allow an unstable Iran to fall into Stalin’s hands.He advocated theoverthrowoftheMossadeghgovernment.PresidentEisenhoweropposeddirectmilitaryinterventionandsettledonaplanofcovertaction.InAugust1953theWhiteHouseapprovedOperationAjax,ajointconspiracycarriedoutbyIranianroyalistswiththesupportoftheU.S.andBritishintelligenceservices.TheleadAmerican in the field was the Central Intelligence Agency’s Kermit “Kim”Roosevelt, grandson of President Theodore Roosevelt. Within the CIA,Roosevelt reported up the ranks to the agency’s chief of operations in theDirectorate of Plans, aman namedRichardHelms,whowould play a crucial

roleinIraninfutureyears.“Ijustknowthathewouldhavebeengenerallyundermyjurisdiction,”washowHelms latermodestlydescribed theirassociation.“Ithink itwas agreed thatRooseveltwould lead the field operation and that theBritish and American officers would work under him on this.” As the coupunfoldedHelmsfollowedeventsbytheflowofcablesthatarrivedfromTehran.Thecoupplotters succeededalmost in spiteof themselves.Atonepoint the

ShahlosthisnerveandfledIranwithhissecondwife,QueenSoraya,inasmallplane.YettheconspiratorscarriedthedayafterintensestreetfightingeruptedinTehran.MossadeghwasoverthrownandarrestedandtheShahreturnedtoIranintriumph.Predictablyenough,OperationAjaxleftamixedlegacy.ManyordinaryIranians assumed the United States had replaced Great Britain as the foreignpowernowpulling the strings, controlling theirkingand Iran’soil riches.TheShah never quite succeeded in removing the taint of illegitimacy or puppetry.Pahlaviloyalistswereunhappytoo,bitterlycomplainingwithsomejustificationthattheCIAlaterrewrotehistorybyexaggeratingitspartwhiledownplayingtheIranian contribution. Richard Helms would only admit that the CIA played a“rather important” role in bringing the coup about because “otherwise thingswouldnevercometoaboil.Idon’tmeanto,andI’mnot interestedinmakinggeneralizations, but organizing groups of people is not big in Persian life.”Helms’s view was that the CIA had acted as facilitator, cheerleader, andrainmaker for a powerful coalition of anti-Mossadegh groupswhose elementsincluded influential religious leaders, politicians, merchants, and generals.Helmsinsistedthathehadnotbeen“intimatelyinvolvedintheplanning.”ThesuccessofOperationAjaxledtoAmericanoverconfidenceinIran.U.S.

officials miscalculated when they concluded that the Shah understood that he“owed”theUnitedStatesandthathewouldinstinctivelytoeWashington’slinerather than look after his own national interests. Only later did it becomeapparentthattheShahdidn’tseeitthatwayatall.“TheCIAfelttheyhadsortofa proprietary interest in Iran, because they had helped get the Shah back,”explained Douglas MacArthur II, who served as President Nixon’s firstambassadortoIranfrom1969to1972.Thespyagency’sownconfusionaboutthe legacy ofAjaxwas reflected in the two code names it assigned the Shah,almostcertainlywithouthisknowledge.Was theShah“Ralph”andourguy inTehran? Or was he “No. 1” and the imperious Shahanshah to whom U.S.officialsdeferredforthenextquartercentury?Theagencynevercoulddecide.ForthefirstfifteenyearsafterthecoupU.S.officialskeptacloseeyeonIran.

PresidentsEisenhower,JohnF.Kennedy,andJohnsonworriedabouttheShah’spropensity for divertingmoney toward themilitary rather than developing thecountry’s economy and infrastructure. They feared another social explosion

unlesspoorIranianssawtheirlivesimprove.Liberalswereparticularlyskepticalof the Shah and of Iran’s future. At a closed-door session of the SenateCommittee on Foreign Relations in June 1961 Senator Frank Church franklysharedhislowopinionoftheShah.“IjustthinkitisgoingtobeamiracleifwesavetheShahofIran,”hesaid.“AllIknowabouthistorysaysheisnotlongforthisworld,norhis system.Andwhenhegoesdown,boom,wegowithhim.”Church’s colleague Hubert Humphrey voiced similar pessimism about thePahlaviswhenhesaid,“theyaredead.Theyjustdon’tknowit.Idon’tcarewhatrevolutionitis.Somebodyisgoingtogetthosefellows.Theyareout.Itisjustamatteroftime.”One of themain reasons for their concernwas that during the Shah’s reign

militaryexpendituresneveraccounted for less than23percent andoftenup toone third of the national budget.The Johnson administration in particularwasdeterminedtoholdthelineontheShah’stendencytooverspendonarmaments.Inthemid-1960sWashingtonerectedafiscalfirewalltoensurethattheShah’sappetite for military equipment did not drain too much capital from Iran’scivilian economy. The firewall was named after General Hamilton Twitchell,who headed up theU.S.militarymission to Iran. “The basis of the TwitchellDoctrine was that the Shah’s military procurement program should becompletelycoordinatedwiththetrainingprogram,andonlyequipmentcomeinthatIranianscouldoperateandmaintain,”saidAmbassadorMeyer,notingthatatthe time “there was a strong feeling inWashington that the Shah should notspendmoney onmilitary equipment.”Controlling the flow of arms to Tehran“maintainedourrelationship,”hesaid.“OurwholerelationshipwiththeShah,Ithink, depended on the military side of things. If we had left it to the Shah,duringmydays,theskywouldhavebeenthelimit.Hewantedeverything....Iwasalwaystryingtotalkhimoutofequipment.”KeepingarmssalesincheckalsohelpedWashingtonretaininfluenceinIran.

Supplying theShahwith toomanyweaponsmightstrengthenhim to thepointwhere he could pull away and pursue an independent foreign policy. “TheIranianswereforcedtogothroughanannualeconomicreview,”recalledMeyer.“Itwasaratherhumiliatingthingforthemtodo,beforetheycouldbuy—buy—fiftymilliondollarsworthofmilitaryequipment.”TheShah,whoalwayskeptawaryeyeonhisnorthernborder,was“alittleannoyed”athavingtodoitbut“herealizedhehadtodoittogettheequipment.Hewantedtostaywithus,althoughheneedledusbybuyingafewRussiantrucksandthingsofthatkindduringthatperiod.”Even if a future president diluted or scrapped the Twitchell Doctrine, a

secondarydikeexistedtoblockapotentialfloodofdefenseexpendituresbythe

Shah. Following Operation Ajax the Eisenhower administration established aconsortium of Western oil companies to manage the most lucrative 100,000squaremilesofIran’soilfields.DuringthenegotiationsIkesentVicePresidentRichard Nixon to Tehran to impress upon the reluctant Iranians the fact thateconomicaidwouldnotresumeuntiltheforeignoilindustrywasallowedbackin.BritishPetroleumeventually tooka40percentstakein thenewconsortiumandRoyalDutchShell14percent.Asecond40percentstakewenttoStandardOil(Esso),SoconyMobilOil,StandardOil(California),GulfOil,andTexasOilCompany (Texaco), the remainder parceled out to an agglomeration of U.S.-ownedcompanies.Asaface-savinggesturetotheShahthecompaniesdeclaredthat “the oil assets belonged, in principle, to Iran.” Yet the members of theconsortiumsplittheirprofitsfifty-fiftywiththeIranianstateanditwastheyandnot the Shahwho set crude oil prices and determinedwhether oil productionwouldincreaseordecrease.ThatIrandidnothavefullcontroloveritsownpursestringsposedaproblem

for theShah.ThePahlavidynasty, Iranianeconomist JahangirAmuzegaronceobserved, restedon“oily legs.”Oilwas theShah’s greatest sourceof strengthandalsohisAchilles’heel.PetroleumrevenuesgavethePahlavistateitslustroussheen of prosperity, not tomention its veneer of legitimacy. The Pahlavi eliteunderstood that “oil revenues are the foundation onwhich the present systemmaintains its stability.”The thinkingwas thata rising tideofoilwealthwouldliftallboats,guaranteesocialstability,buyoffandco-optpotentialcriticsoftheregime,andhelpavoidarepetitionofthedangeroussocialandpoliticalunrestofrecenttimes.By1970,whenoilrevenuestoppedthebillion-dollarmarkforthefirst time,Iran’sprimeministerboastedthat“public revenueswillpermitus toexpandtheordinarybudgetby23%andthedevelopmentbudgetby30%.”Yetdoubts persisted about the wisdom of relying so heavily on one stream ofrevenue to maintain political equilibrium and social harmony. What wouldhappenifthetideofpetroleumranoutorif,Godforbid,oilrevenuesflatlined?The foundationsof thePahlavi statecouldbeknockedout fromunder it. “HisMajesty must see to it that oil revenues perpetually increase,” wrote MarvinZonis.“Fortunatelyforhisstyleofrule,hehasbeensuccessful.”Toagreatextentthedynasty’ssurvivaldependedontheShahsimultaneously

increasingoilproductionandchargingconsumersintheWestmorefortheiroil.Theoilcompanieswere interested inprofitsandnotpolitics.Theyresisted theShah’sentreatiestoincreaseoutput.Thestagewassetforroundafterroundandyear after year of punishing clashes between the Shah and the oil companies.TheShahgavehelltooilexecutivesandWesternambassadors.Onedayin1970Britain’s ambassador telephoned the palace to offer the Shah advice on oil

policy.TheShahwasincensed.“TheBritishadviseme,”heexclaimed.“Iftheyhavethefuckingaudacitytoadvisemeeveragain,Ishallfuckthemsorigidthatthey’llthinktwicebeforecrossingmypathinthefuture.”TheShah’sfrustrationwasunderstandable.Oneoftheironiesofthepost-coup

oil arrangementwas that theAmericanoilmajorshadbeen reluctant to setupshopinIranafterMossadeghwasdeposed.TheyviewedIranasanunstableandrisky investment.That they had gone in at allwas due to the prodding of theEisenhower administration, which wanted to deepen the American strategicinterest in Iran. The companies were much more invested in the lower GulfstatesofSaudiArabiaandKuwait,whereproductioncostswerelowerandprofitmargins higher. The petroleum they produced, “Arabian light,” was oftenreferredtoas“lightandsweet”becauseitslowsulfurcontentmakesiteasiertoconvert togasoline. Iran’smostlyheaviergrade fueloildrewa lowerpriceonthe world market. Esso’s 7 percent stake in Iran’s oil consortium paled incomparison to its 30 percent share in Saudi Arabia’s national oil-producingcompany.GulfOilowned50percentofKuwait’snationaloilcompanybutheldonlya7percentshareinIran’sconsortium.Iran’sreturntothemarketin1954meantthecompanieswereforcedtocutbackproductionelsewhereintheGulfto avoid glutting themarketwith cheapoil.Even then they secretly agreed tosuppress production in Iran to hold up prices elsewhere. They did so in theknowledgethat“anydropinproductionorsaleofoilmeanlessrevenuetoIran.”TherewasnaturaltensionbetweenIranandneighboringSaudiArabiaoveroil

productionandpricing.TheShahwantedthesmallerandweakerGulfstatestoreducetheiroutputsoIrancouldraisetherevenuesdeemednecessarytodefendthe Gulf. He resented having to “bail out King Faisal’s defense budget,effectively making him our pensioner; the same King Faisal who complainsabouttheundueconcessionsmadetoIranthemomenttheoilcompaniesbeginto review quota allocations.” There were religious and cultural tensions, too,betweenthePersianIranians,whospokeFarsi,andtheArabic-speakingSaudis.King Faisal’s old ways repulsed the Shah, who modeled his court alongEuropeanlines.In1971hehostedaluncheonfortheSaudikingatwhichhehadendured the old man’s “absurd pronouncements” including the Saudi’s belief“thateveryJewhasasworndutytodunkhisbreadinthebloodofaMoslematleastonceayear.”The Shah was at heart a Persian nationalist who shared the ambitions and

imperialinstinctsofCyrustheGreat.TheempireofhispredecessorshadatonetimeextendedacrosstheGulftoincludewhatwasnowSaudiArabia’sEasternProvince,wherethedesertkingdom’ssuper-sizedpetroleumfieldswerelocated.TherewasperhapsmorethanatraceofwishfulthinkingtotheShah’soft-stated

beliefthatSaudiArabiawas“ripeforsubversiveactivities”andthatKingFaisalwasheadedfor“serious trouble.”TheHouseofSaud’s future—or lack thereofashesawit—fueledtheShah’sambitionsandconstitutedamajorsellingpointin his campaign to convince the Nixon administration that only “a militarilystrong Iran could safeguard the vital interests of theWest in the PersianGulfwithoutthewesternpowershavingtointervene.”Acomplicatingfactorinthisawkwardbalancingactwasthetacitacceptance

byPresidentNixonandhisnationalsecurityadviser,HenryKissinger, that theShahcouldonlyassumetheburdenofdefendingtheirinterestsifIran’srevenuestreamexpandedtogeneratethemoneytobuynewadvancedweaponssystems,which in turn meant engineering modest increases in the price of oil and atregularintervals.WhatreallyworriedNixonandKissingerwasnottheprospectof higher but lower oil prices. “It is not likely that the monarchies of Iran,Kuwait,AbuDhabi,andSaudiArabiawouldsurvive ifpetroleumprices fell,”argued one scholar whose views were shared by the White House. High oilprices were the necessary price of stability in the Middle East becauseconservativemonarchieslikeIranandSaudiArabiawere“leastlikelytoforceaconfrontationoverAmericansupportforIsrael.”Agreatershareofoilrevenuesallowed pro-U.S. oil potentates to develop their economies while buying theweaponstheyneededtodefendthemselvesandthefreeworld’soilsupply.ThecombinationofGeneralTwitchell’sfirewallandtheoilconsortiumgave

Washington crucial leverage over the Shah, built the foundations for Iranianprosperity,andprovidedprofitsfortheAmericanoilindustry.In1969Iranwashailedasadevelopmentsuccessstoryasitseconomyreachedthepointof“take-off”when investmentbecomes self-renewing.CheerfulAmericandiplomats inTehrankeptachartonhandthatshowedIran’sindustrialproductionclimbingata45degreeangleand“gettingsteeperall the time.”“Thegrowthof thegrossnational product now going on is comparable only to that of Japan in theimmediatepostwarperiod,andis,withtheexceptionofLibya,thefastestintheworld—an average of 9.5 percent per year over the past five years and 11.3percentoverthelastthreeofthoseyears,”gushedTheNewYorkTimes.“That’sabout twice as fast as the United States,” the paper of record reminded itsreaders.ItwasacomparisonthatdelightedtheShah.

THEPRESIDENTHASASTRONGFEELINGABOUTTHESHAH

Eisenhower’sdeathgavePresidentNixonandtheShahtheirfirstopportunity

in twoyears to talk inprivate.Theyhadmet several times in the1950swhenNixon served as Eisenhower’s vice president. During Nixon’s years in thepoliticalwildernessinthe1960stheystayedintouchthroughArdeshirZahedi,sonofGeneralFazlollahZahedi,whocommandedIranianarmyunitsduringthe1953coupandledIran’spost-coupmilitarygovernment.AftertheShahforcedFazlollah Zahedi to step down from the premiership, the general retired toSwitzerland.He left his son behind in Iran to continue the family tradition ofservice to thePersian crown.Ardeshir’s ownpersonal proximity to the thronewas cemented in 1957 with his marriage to Princess Shahnaz, the Shah’sdaughterwithhisfirstwife,PrincessFawziaofEgypt.AnindicationofthetrusttheShahplacedinhisson-in-lawcamein1959whenheaskedhimtoleadthesearchforathirdwife.TheShah’shappysecondmarriagetoQueenSorayahadendedindivorcebecauseofSoraya’sfailuretoprovideherhusbandwithasonand heir. The Shah was anxious to continue the hereditary line and secure astablesuccession.“ItwasZahediandShahnazwho founda tall young Iraniangirl, then studying architecture in Paris, whom they introduced to the shah,”wroteanIranianhistorian.“HernamewasFarah.ItwasinZahedi’shomethatthe original meeting between the shah and his future queen took place.” TheShah’smarriage toFarahDiba tookplace thesameyear.Zahediwasrewardedfor his loyalty with diplomatic postings in the 1960s as ambassador toWashingtonandLondon.BythetimehewasappointedIran’sforeignministerin1967hismarriagetoPrincessShahnazhadendedindivorce.Ardeshir Zahedi’s personal style as Iranian chief diplomat was distinctly

undiplomatic. The new minister spoke freely, even to the Shah. He made nosecret of his nationalist inclinations or his sympathies for the Arab cause,scoldedIran’sWesternalliesinpublic,andfrequentlythreatenedtoresignifhedid not get his way. The Shah indulged Zahedi as he might a hot-tempered,impetuous younger brother, even kicking him under the table at a diplomaticconferenceforanindiscreetremark.Ononeoccasion,whentheShahwasdeepinconversationwithHenryKissinger,Zahediarrivedandhailed theAmericanwithagreetingthatcouldmostcharitablybedescribedasirreverent.TheShahmutteredunderhisbreathinFarsi,“Don’tcreateaproblem,Ardeshir!”Over the years,Ardeshir Zahedi compiled a formidableRolodex of famous

names ranging from Hollywood celebrities to heads of corporations andpresidents, kings, queens, and prime ministers. As ambassador and foreignminister,Zahediwasespeciallyattentive to thegreatmenwhoruledAmericanpublic life during the Cold War and especially Republican politicians likeRichardNixon,NelsonRockefeller,BarryGoldwater, andRonaldReagan.Hewas aNixon favorite,whom he once describedwith great feeling as “a great

man.” After losing the California governor’s race in 1962 Nixon had walkedawayfrompoliticsandpubliclife.Zahedireachedouttohimandthetwostayedintouch.Oneeveninginearly1967,ZahedijoinedNixonandWilliamRogers,Eisenhower’sattorneygeneral,fordinneratthe“21”ClubinManhattan.Zahedirealizedduring theconversation thatNixonwasplanningapoliticalcomebackandmeant tomakeasecondrunfor thepresidency.Hereturnedtohissuiteatthe Waldorf Towers and telephoned the Shah, who was on his annual skivacationinSt.Moritz.In April, Nixon would be passing through Iran on his way home from a

private fact-finding tour of theNear and Far East.Why not invite him to thepalace for tea and a chat?TheShah,who closely followedAmerican politics,knewthatNixon’sstarhadlongsincewanedinWashington.Hedrollyaskedhisforeignministerhowmuchhehadhadtodrinkatdinnerthatnight.ButZahediput his foot down. “And I got kind of mad and sent letters to the court andforeignministry and to theShah,”he remembered. “Everyonewasagainst theNixonvisit toTehran.I invitedhim.Atthattimethecourtminister[AsadollahAlam]and theprimeminister [AmirAbbasHoveyda]wereagainstme.”Theywarned the Shah not to do or say anything that might antagonize PresidentLyndonJohnson,theDemocratwhowasgearingupforreelectionin1968.TheShahfinallyagreedtoreceiveNixonbutonlysolongasthevisitwasbilledasacourtesy call and not a formal discussion. In any event,Nixon’s 1967 visit toTehranturnedouttobemuchmorethanthat.TheShahwouldlaterreferfondlytohis“longhours”of talkswithNixonat

NiavaranPalace.WhatbeganasafriendlychatoverteainthelateafternoonofApril 22, 1967, turned into something much more substantial. The Shah andNixondiscoveredtheysharedviewsonarangeofforeignpolicyissuesaffectingtheir countries. After two hours, at 7:00 P.M. Zahedi drove Nixon back to hishouse,wheretheyconversedagainuntilfourinthemorning.“Wetalkedaboutsecurity, the Persian Gulf, the oil, about Soviet intrigues, about the Britishsometimes double-crossing us,” saidZahedi. “I briefed theShah the next day.This was an off-the-record talk.” No notes were taken and U.S. ambassadorArmin Meyer agreed to sit it out. “Nixon appreciated that and made MeyerambassadortoJapanaftertheelection,”saidZahedi.Nixon’s1967visit toTehranandhis talkswith theShahandZahediwerea

turningpointforNixonpersonally,forthefuturecourseofU.S.foreignpolicy,and for U.S.-Iran relations. ArminMeyer agreed that the Iranians left a deepimpression on Nixon, who was looking for new ways to engage the UnitedStates inAsia.“Inmyjudgement, theNixonDoctrinegerminatedwhenNixonvisitedIranin1967,”Meyerlaterconfirmed.NixonandtheShahagreedthatit

wouldbebetterfor“ourallies[to]takecareoftheirownproblems.Givethemtheequipment todo it.WhyshouldAmericanboys fight in Iran?”NixonalsoleftIranmoreconvincedthaneverthatright-wingauthoritarianregimesliketheShah’sroyaldictatorshipshouldnotbepressuredtoadoptWesternconceptsofdemocracy and human rights. Three months after he returned from Tehran,Nixon delivered a speech to the exclusivemen’s club at theBohemianGroveoutsideSanFrancisco.Thereheoutlineda themethat laterbecametheforeignpolicy benchmark of his presidency. After mentioning Iran as an economicsuccess story, Nixon reminded his listeners that despite Iran’s lack ofrepresentativedemocracy“theirsystemhasworkedforthem.Itistimeforustorecognize that much as we like our own political system, American styledemocracy is not necessarily the best form of government for people inAsia,AfricaandLatinAmericawithentirelydifferentbackgrounds.”Nixon never forgot the Shah’s hospitality or Foreign Minister Zahedi’s

friendship.LateronintheWhiteHouseheremindedhisstaffthatwhenhewasoutofofficeonlytheShahofIranandPresidentdeGaulleofFrancehadopenedtheirdoorstohimandtreatedhimwiththemeasureofcourtesyandrespecthefelt he deserved. The first time he welcomed Zahedi to the White House aspresidentitwaswithararehugandthegreeting,“You’vebeenagoodfriend.”TheNixon-Pahlavirelationshipwasbasedonasharedinterestingrandstrategyandgeopoliticsandamutual fascinationwithpowerand itsmanyuses.NixonandtheShahwerenotfriendsinthetraditionalsense.Nixonhadfewifanytruefriends,andthereservedShah,thoughherespectedNixon’stalentsandloyalty,wouldhaveneverdeignedtoacceptthesonofagasstationattendantandgrocerfromWhittier,California,ashissocialequal.Theywereessentially twolonelyandinsecuremenwhofoundreliefintheisolationtheirhighpositionsafforded.“IfItakealikingtosomeone,Ineedonlythesmallestshredofdoubttomakeme break it off,” the Shah once said. “Friendship involves the exchange ofconfidencebetweentwopeople,butakingcantakenooneintohisconfidence.Ieven observe certain distances with members of my family. I had to tell mymother,whoisaverydictatorialwoman,thatitwouldbebetterifshedidn’taskmeforfavors,forImighthavetorefuseher.”RichardHelmsworkedcloselywithbothleadersovertheyears.Hedescribed

speculationofafriendshipbetweenthemas

one of those myths. . . . And I can promise you that in the case ofRichardNixonevenintheUnitedStatesofAmericahehadnoclosefriendsorassociates.AndtheShahhadnoclosefriendsorassociateseither.Thatkind of person doesn’t go in for that. Therefore, they were no “bosom

buddies.” They simply saw an identity of interest. They were both goodgeopoliticians. They were pragmatic. And they made arrangements ofmutualinterest.

Evenso,theNixonsandthePahlavisenjoyedwarmrelations.Visitorstothe

Nixons’ homes in California and New York during their years in private lifecouldn’thelpbutnoticetheframedphotographoftheShahstrategicallyplacedbehindNixon’sdeskorthePersianrugs.Nixon’sWhiteHousequartersboastedsuchtreasuresasafourth-centurySassaniannecklace,a22karatgoldtray,twogold watches, a solid gold presentation box, and a clock with the words“GenerationofPeace”inscribedinside.Thepresident’ssympathyandadmirationfor theShahwereobviousenough

tomakehisadvisersnervousaboutwhatNixonmightagreetodoforIrannowthathewas in theWhiteHouse.“ThePresidenthasa strong feelingabout theShah,”washowHenryKissingerwarilytoldacolleague.Nixonwaswellknownformakingdecisionsoffthecuffbasedonafewjottingsonalinedlegalpadandmaybeacocktailortwoafterdinner.WhenitcametotheShah,Nixonwentwithhisgut,andthatwasnotnecessarilyagoodthing.WhilehewasinWashingtonforEisenhower’sfuneraltheShahmetwiththe

president’snationalsecurityteam.Twoincidentsstoodoutinhisconversationswiththem.IntalkswithSecretaryofStateWilliamRogersonApril1, thedayIke’sbodywastakenacrosscountrytoitsfinalrestingplaceinAbilene,Kansas,theShahquestionedAmericanmotivesandspecifically thewisdomof trustingan ally with a history of eating its young. He was referring to the Americanexperience in Vietnam, where a half million GIs were mired in a seeminglyintractablemilitarystalemate.TheShahchargedthatthecatalystforthedisasterhad been themurder of SouthVietnam’s presidentNgoDinhDiemduring anAmerican-sponsoredcoupd’étatin1963.Diem,protestedtheShah,hadbeen“astrongleader[who]wasmakingsomeprogressincombattingcorruption”whenhewasoverthrown.ThisbaldaccusationofAmerican regicideagainstaclientwho bore more than a passing resemblance to the Shah was telling. Rogerspolitely challenged theShah’s assertion that theUnitedStateshaddisposedofNgo Dinh Diem but agreed that “the US should not interfere in the internalaffairsofothercountries.”Later in theevening theShahmetwithKissingerat the Iranianembassyon

MassachusettsAvenue.TheShahwasjoinedbyIran’sambassadortotheUnitedStates,HushangAnsary.DuringadiscussionofSovietambitionsintheMiddleEast theShahmade the case for one-man rule.He toldKissinger thatStalin’sforeign policy had at least offered ameasure of stability and assurance to the

West incomparison to the“moreventuresome” foreignpolicy followedbyhisPolitburo heirs, who had adopted a consensual approach to policy making.Kissinger,aGerman-bornJewwhohadescapedNaziGermanyasateenagerandwho lostmany relatives in theHolocaust, said he “agreed generally”with theShah’s point about the merits of dictatorial government although there were“someexceptionssuchasHitlerwhereone-manruleprovedhighlydangerous.”ButtheShahdemurredandinsistedthat“whereonemanruled,heisnormallymorecautious.”Mohammad Reza Shah’s reference to Ngo Dinh Diem hinted at his basic

distrustoftheAmericans.Bytrumpetingthevirtuesofone-manrule, theShahwasmaking it plain that the days ofEisenhower,Kennedy, and Johnsonwereover—fromnowonhe,andnottheAmericanpresident,wouldcalltheshotsinIran.Iftherewasgoingtobearelationship,itwouldhavetobebetweenequals.The Shah also dangled a carrot.He offeredKissinger a secret deal to sell theUnited States one million barrels of oil a day over the next ten years at thediscountedpriceof$1.00foreachbarrel.HesensiblyproposedthattheUnitedStates put the oil away in case of a future emergency like a cutoff in the oilsupply. But the timing was not right. In March 1959 the Eisenhoweradministration had imposed mandatory quotas on the amount of foreignpetroleumthatcouldbeimportedintotheUnitedStates.Thequotasweremeanttoprotect thedomesticAmericanoil industry fromforeigncompetitionand toensurethattheUnitedStatesneverbecametoodependentonasinglesupplierofforeignoil.TheShah’soffertosellsuchavastamountofoilatareducedpriceshowed that hewas eager to increaseAmerica’s economic reliance on Iraniancrude.On April 3, 1969, hours after the Shah’s departure from Washington for

Tehran, theNationalSecurityCouncilGroupfor theNearEastandSouthAsiamettoconsidertheissueofarmssalestoIran.ItrecognizedthattheShahwasstretchinghislegsandtestingthenewadministration.Thiswastobeexpected.On the one hand, officials recommended a $100million extension inmilitarycreditstoIranandthesaleoftwoadditionalsquadronsofF-4fighterplanes.Butthey noted that “although Iran’s economic progress has been rapid, certainwarningsignshavedeveloped”witha“declineinforeignexchangereserves,agrowingdebtserviceratio,asubstantialandrapidincreaseinbudgetoutlayformilitarypurposes,andafairlystaticsituationinagriculturaloutput.”Thegroupagreedthat“thekeyquestioniswhether the increaseinIran’s incomefromoilwill keep pace with the shah’s demands and Iran’s expenditures.” They alsoagreed that theannualU.S.-Iran reviewof Iran’seconomy“shouldcontinue tobeakeypartofourconsiderationofIran’smilitarypurchasesfromtheUnited

States.”SecretaryofStateRogers reinforced thiscautionaryapproach inamemohe

senttotheNationalSecurityCouncilandwhichKissingerinturnforwardedtoNixonforreview.InthefirsttwoyearsofNixon’spresidencyitwasRogersandnotKissingerwho determined the parameters of administration policy towardIran.“Thegeneralissuesincethis[armssales]programbeganhasbeenitseffecton Iran’s economy,” read the memo. “So far it has proved financiallymanageable,butIran’sfuturesoundnessisstillfragile,dependingasitdoesonthe continued flowof oil revenues at a high level.”PresidentNixonhadbeeninformed—andnotforthelasttime—thatIranwashard-pressedtopayforevencurrent levelsofdefenseexpenditures.Rogerscautioned that theonlyway forthepaceof expenditures tokeepupwouldbe if Iran’soil revenues increased,andtheydidnotwantthattohappen.The Shah had also beenwarned.A fewweeks earlierCourtMinisterAlam

informed him that Iran’s treasury was almost empty. Expenses on giantinvestmentprojectssuchasagaspipelinethatswallowed$650millionagainstan initial estimateof$350million. “BriefedHIMon recent developments andraisedafewpointswhichupsethim,”wroteAlaminhisdiary.“Itoldhimthatthecountryisdisturbedbythesuddendoublingofwaterprices,thattheasphaltin the streets is falling apart, that corruption by the Customs men is on theincrease, that bank credits are being squeezed and that various businesses areheadingtowardsbankruptcy.FinallyIwarnedhimof thefinancialcrisis in theuniversities.”TheShah,whodidnotliketohearbadnews,losthistemperandsnapped,“Whatcanwedowhenthere’snomoneycomingin?”

THEGIANTPOKERGAME

On the crisp fall evening of October 21, 1969, President andMrs. NixonwalkedoutontotheFrontPorticooftheWhiteHousetowelcometheemperorofIranbacktoWashington.JustsixmonthsafterPresidentEisenhower’sfuneralobservances,theShahhadreturnedforastatevisit.PatNixonusedtheoccasiontokickoffthefallsocialseasoninthenation’scapital.TheShahwastravelingalone. The official reason given for Queen Farah’s absence was that she wasexpecting the couple’s fourth child.Thiswas only partly true.Her visit to theKennedyWhiteHouse seven years earlier remained “a traumatic event inmymemory.”Anti-Shahprotesters—youngIraniansstudyingabroad—hadhoundedthecoupleateveryturn,protestingagainsttheperceivedinfluenceoftheCIAinIran and in support of democracy and human rights: “Theywere everywhere,

sometimeswithinafewyardsofus,tothepointwheremyhusbandhadtostrainhisvoicewhenheneededtospeak.Weheard themshoutingfrommorning tillnight,evenbelowourwindowsinthehotel.”Thequeen,whochain-smokedandsufferedfromanxiety,hadbeenbadlyshaken.ShewasappalledbythelaxityofAmericansecurityarrangements.“AfewyearslaterIrefusedtoaccompanymyhusbandonanofficialvisit there,”shesaid.She indignantly toldhim,“If Igothereonlytobeinsultedagain,IwouldbeofmuchmoreusehereinTehran.”Among the 105 guests enjoying the sumptuous festivities were Kermit

Roosevelt,DonaldRumsfeld of theOffice ofEconomicOpportunity,NationalSecurityAdviserHenryKissinger,Ambassador to IranDouglasMacArthur II,and Herbert Brownell, the attorney general under Eisenhower. The guestslistenedasthepresidentandtheShahlavishedpraiseoneachother.Nixonwentfirst.Heexpressed“loveandaffectionandadmiration”forIrananddeclaredthatwhenhefirstvisitedIranin1953theShah“madeaverydeepimpressiononmeand on my wife at that time.” He quoted the Persian philosopher poet OmarKhayyám,who“referredeloquently to theabilityofa leader,agreat leader, toheedtherollofdistantdrums.HisMajestyhasthatability.”AndhelaudedIranas “one of the strongest, the proudest among all the nations in theworld.” Inresponse,theShahsaidhewas“overwhelmedbythewarmthofyoursentimentswhich could only come from a true friend, someone who is sharing yourproblemsandsomeonewhoisunderstandingofyourproblems....Ipersonallywillalwaysrememberthelonghourswespenttogetherin1967.”The Shah’s state visit came in the midst of his latest fight with the oil

consortium.Theyearbefore,Iran’sgovernmenthadannouncedafive-year$11billioneconomicdevelopmentplantobefinancedmainlyfromoilrevenues.IfIranwasgoingtomeettheplan’sspendingtargets,theoilcompanieswouldhavetoboost theiroutputby20percentayear foreachof thenext fiveyears.Thisthey refused to do. What ensued was “a giant poker game,” though a moreappropriateanalogymightbeagameofchicken.TheShahhadapprovedafive-year budget knowing that his government lacked the income to meet itsobjectives. The fiscal commitments he approved could be paid for only withanticipated or future oil revenues. The Shah would have to hike oil prices togenerate the revenue. He had no scruples when it came to the oil industry.Alam’sdiarysuggeststhattheShahbankrolledKurdishguerrillasinneighboringIraq to blow up oil pipelines in order to cut Baghdad’s revenue stream andstampedeforeignpetroleuminvestmenttoIran.Inforeignaffairsasindomesticpolitics, the Shah’s brinkmanship was driven by a self-perpetuating moneychase.In theweekspreceding the Iranianstatevisit,briefingpapers flewbackand

forth across the Potomac warning that the Shah wanted to end the TwitchellDoctrine.WhiteHouseaidesfranklyworriedthatPresidentNixonwouldbeout-negotiated in his private talks with the Shah. Unlike Nixon, who couldn’t bebotheredreadinghisowndailyintelligencebriefsfromtheCIAandwholoathedhearing from those“impossible fags” at theStateDepartment, theShahwas avoracious reader and meticulous student of strategy and military affairs whoalwaysseemedtoknowmorethananyoneelseintheroom.HehadahistoryofcorrectingthePentagon’stopbrasswhentheytalkedaboutweaponssystemsthatwere still on the drawing board. Nixon squirmed to avoid personalconfrontationsandhadapropensityforbucklingunderpressure.OnOctober6,1969,EmbassyTehranlettheWhiteHouseknowthattheShah

waslookingforwaystojackupIran’soilproductionasameansofraisingfastmoney:“TheShahisindeadearnestinhisquestforadditionaloilrevenues,andIran’s current tight foreign exchange situationhas addedurgency toproblem.”The Shah expected President Nixon to intervene in his favor with the oilconsortiumand“nudgeoilcompaniestotakehisregionalresponsibilitiesaswellascommercialconsiderationsintoaccountintheirnegotiationsandthatwewillbesympatheticregardinganybarterdealsformilitaryequipmentthathemaybeabletoworkoutwithincurrentimportquotasystem.”Andifthatdidn’twork,hewas peddling a new variant of his proposal earlier in the year for theadministrationtoagreetobuydiscountedIranianoilinviolationofthe1959oilimportquotalaw.The Shah had been sold on the idea by Herbert Brownell, who now

representedacompanycalledPlanetOilandMinerals.InhisformercapacityasPresidentEisenhower’sattorneygeneral,Brownellwasmorethanfamiliarwithexisting U.S. law as it related to foreign oil imports. His plan called for theadministrationtogivePlanetOil licenseto import200,000barrelsofoiladayfromIran.PlanetwouldbuytheoilfordistributionintheUnitedStates“andIranwouldusetheproceedsonlyforIranianpurchasesintheUS.”AbarrelofoilthatwouldnormallycosttheUnitedStates$1.80wouldbemarkeddownbyadollartojust80cents.TheShahproposedthattheUnitedStatesusethisoiltocreateastrategic reserve in the event of an emergency such as an oil embargo. TheBrownell deal, like the million-barrel-a-day scheme, was shelved. Nixon wascautioned by his staff that “there have been some scandals involving oilallocationdecisions in the recentpast.Thepresshadnot fully exploited thosescandals, but I’m sure would put the worst possible interpretation on anydecisions by thisAdministration thatmight be of substantial benefit to one ofMr.Brownell’sclients.”ThepresenceofKimRooseveltandHerbBrownellatthestatebanquetwasa

reminder of the Shah’s close ties with former members of the Eisenhoweradministration,ofwhomRichardNixonwasthemostprominent.Whenitcameto Iran,Washington’s dividing lines between power, money, and access wereoftenblurred.Sincehelpingpull off the1953coup,Roosevelt hadbecomeaninternationalarmsbrokerworkingforthedefensecontractorNorthrop.Histwobiggest clientswereMohammadReza Shah of Iran andKing Faisal of SaudiArabia.TheShahflewtoNewYorkbeforeheadingdowntoWashington,andhisschedule for October 18 shows that he met with Roosevelt and Tom Jones,Northrop’spresident,inthemorning.Inadvanceofthepresident’smeetingswiththeShah,theStateDepartment’s

Bureau of Intelligence and Research warned that giving in to the Shah’sdemandswouldinevitablyleadtoadeclineinAmericaninfluenceovertheShahbecause “growing Iranian independence could result in less reliance on USsupportandlessattentiontoAmericanadvice,especiallyonregionalmatters....TheShahisconvincedthatIranmustplaythedominantroleinthePersianGulfandheisdeterminedthatradicalAraborSovietinfluenceshouldbeprevented,orat leastkept toan innocuous level.”TheStateDepartmentbelieved that theShahwasexaggeratingsecuritythreatstoIraninordertoextractfromtheWhiteHousepermissiontoraiseoilpricesandbuymorearms.Ithadrequireda“majorUSeffort”inrecentyearstomakesurethattheShah’sarmspurchasesfromtheUnitedStatesdo“notbecomeaseverestrainonIran’seconomicdevelopment.”But,accordingtotheStateDepartment,theShahappears“determinedtofollowthiscourse”eventhough“sharplyrisingmilitaryexpenditurescannotbutcauseproblems for Iran internallybyhindering itsdevelopmentplansandexternallybyperhapsalarmingandalienatingitsweakerArabneighbors.”The Department of Defense did not stay quiet either. Secretary of Defense

Melvin Laird, a former congressman and canny political operator, advisedagainstsendingU.S.AirForcetechniciansor“bluesuiters”toIrantomaintaintheShah’s fleetofnewF-4 fighterplanes.Hewantedciviliancontractors sentinsteadtoavoid“deepeningtheinvolvementofUSmilitarypersonnel inIran.”DuringarecentclashbetweenIranianandIraqiforcesoverborderboundariesonthe Shatt al-Arab waterway the Shah had requested that uniformed AmericanpersonnelbedeployedtoaforwardbaseinwesternIrantoprovidebackup.ThePentagonhadbeenalarmedbythebrazennatureof thisrequestandconcludedthattheShahwasgoadingIraqileadersevenattheriskoftriggeringawar.Lairddeclaredhimself“concernedabouttheimplicationsofthatsortofinvolvement”forUnitedStatesgroundforces,arguingthatithadechoesofthesortofcreepingescalation that lured America into Vietnam. The Shah’s request for militarysupport,ifitbecamepublic,wouldhurtU.S.-Iranrelationsandarouse“serious

Congressionalopposition.”HeremindedtheWhiteHouse that thewholepointof the Nixon Doctrine was to arm and train America’s allies to defendthemselves. When informed that American military personnel would not beallowed to move into western Iran, the Shah did not try to hide hisdisappointment—orhissenseofentitlement:“Whatistheuseoffriendshipifitisnotgoodwhen[the]chipsaredown?”Kissinger’saidesworriedthatNixonwouldgiveawaythestorewhenhewas

alonewiththeShah.“AlthoughwehavesuggestedthatthePresidenttrytosteerclearofdetailsof theShah’smilitaryandoilproposals, theShahhasawayofpressing hard for answers,” read one memo. “If the going gets heavy, thePresident may ask you on the spot what can be done or ask you to talk toSecretaryLaird.”Butthepresidenthadalsoscheduledseveraltwenty-totwenty-five-minute tête-à-têtes in which no one else would be present to offer help.Kissinger remindedNixon that theShah “is a persistent bargainer and hewillread any generally sympathetic answer as assent. Precise and frank talk abouthow far the US can and cannot go is important in avoiding latermiscommunications.”EventellingtheShahthat“wewillconsider”hisrequestswaslikelytobereadbythekingas“apromisetoconsiderfavorably.Toavoidunpleasantmisunderstandings, it isbestwherepossible to sayexactlyhowwewill handle his requests, explainingwhere necessarywhy it is not possible togiveafinalanswerimmediately.”TheNixonswelcomed their guest on to the grounds of theWhiteHouse at

10:30A.M.onTuesday,October21,1969.ThetwoleadersretreatedtotheOvalOfficeforaprivatemeetingthatlastedanhourandfortyminutes.AftermeetingwithNixon,theShahdeclaredthepresidenttohavean“excellentunderstandingofIran, itsproblemsanditsachievements.”HetoldtheWhiteHousestaff thatNixonhadpromisedtoboost Iran’s incomefromoilbyeithergrantingIran itsownspecialoilquotaorbyplacingpressureon theoil consortium to increaseproductionofoilinIran.NomentionwasmadeoftryingtocloseIran’sfinancialhole.Nixonhadapparently agreed todoeverything thathis aideshadadvisedhimnottodo.The Shah pledged to spend every penny he earned from the additional oil

revenues on American military and intelligence equipment. He confidentlyinformed administration officials that if Iranwas to defend itself andWesterninterestsinthePersianGulf,itsarmedforceswouldhavetoacquire“anoverkillcapability so that should anyone be tempted to attack Iran they would thinktwiceorthreetimes.”WhattheShahwasproposingamountedtoamassivenewundertaking that would cost hundreds of millions, perhaps even billions, ofdollars in new arms purchases. In private, Nixon’s national security aides

expressedconcern. Itwasone thing to fly the flag for theWest in thePersianGulf, another entirely to outfit Iran’smilitary to the pointwhere it could facedownIraqandIndia,crushregionalrebellions,andpacifynotonlythePersianGulfbutavastswathoftheMiddleEastandtheIndianOcean.Rearmamentonthe scale proposed by the Shah had the potential to bankrupt Iran. It wouldcertainlydivertpreciouscapital,technology,andtrainedpersonnelfrompopulardomesticprograms intended tobuttress the shakypillarsof theShah’sPahlavidynasty.The real bombshell landed afterMohammad Reza Shah’s farewell meeting

withNixonat10:45A.M.onThursday,October23.TheIraniancheerfullyexitedthe Oval Office to inform a startled Ambassador MacArthur that he and thepresidenthad talkedabout“theproblemof strengthening and equipping Iran’sarmedforces.”TheShahwas“undertheimpressionthattherewerenoproblemsofanykind,and thathecouldnowobtainvirtuallyanything thathewanted inthewayofmilitaryequipment.”TheambassadorknewthatnoAmericanally—not Great Britain, not West Germany, not Israel—enjoyed blank checkprivileges.ThePentagonwould never stand for it.MacArthur suggested therehad been amisunderstanding: “So I said to him, If you have that impression,there’snopointgoingbacktoTehranandhavinganymisunderstandings.IthinkyououghttoclarifywiththePresident,sinceyougottheimpressionfromyourprivatetalkwiththePresident.”WhenhereturnedtoTehran,MacArthurmadeapoint of raising the issue with the Shah. Did he and Nixon get thingsstraightenedout?“Hesaidno;hehadn’twantedtobringitup; theatmospherehad been so good; everythingwas going sowell that he hadn’twanted to getback, athis last littlemeetingwith thePresident justbeforehewas leaving toreturntoTehran,hehadn’twantedtogetdownintothedetailsandsoforth.”TheWhiteHousestaffspentthenextfewmonthstryingtofathomtheextent

ofNixon’sverbalcommitments.OnOctober23,Kissinger telephonedLaird totellhimthatthepresident“didn’tcompletelypromise,butheindicated”thathewasinfavorofarequestfromtheShahtoincreasethenumberoftrainingslotsopen to Iranianair forcepilots in theUnitedStates.TheShahalsowanted theAir Force to send over more blue suiters to work with his pilots in Iran,somethingtheDefenseDepartmenthadexpresslyopposed.WhenanexasperatedLaird replied that the United States had its own shortage of technicians,KissingertoldhimthatNixonwasanxioustoshowthattheShah“gotsomethingoutofhismeetingshere.”MacArthurwasrattledwhentheShahtoldhimthatNixonhadgivenhimhis

personalguarantee that “awaywill be found to permit Iran to increase its oilexports to the United States and that [the Iranians] are counting heavily on

allegedPresidentialassurancestotheShah,givenduringhisOctoberstatevisit.”Thiswasa realproblembecauseNixon’sowncabinet taskforcereviewingoilimport quotas was about to come out publicly against granting specialexemptions to individualcountries suchas Iran.“Predictably, theShahwillbesharply disappointed if these recommendations become US policy,” the StateDepartmentchidedKissinger.AnaidetoSecretaryofStateRogersmadeatartlywordedrequestforadditionalinformationfromtheWhiteHouse:“AsthereisnowrittenrecordofthePresident’sconversationswiththeShahwefinditdifficultto assess theShah’spresent expectations.Wewould appreciate it if you couldshedlightonthiscriticalpoint.”NixonwasthusforcedtobacktrackonthepromiseshemadetotheShahon

IranianoilproductionoutputandU.S. importsofPersiancrude.Heplaintivelywrote:“Thereare,asyouknow,limitsonwhatweasagovernmentcando,andIcannotreportanybreakthroughsatthispoint.”Meanwhile,theShah’sbadgeringofMacArthur sent the envoy into apanic. IfWashingtondidnot extendmoremilitarycreditstoIran“weshouldhaveno—repeatno—doubtthatresultwillbemajor crisis and end of special relationship Shah feels for us.” The panickycommunication was typical: the sky was always about to fall in Tehran.MacArthurremindedhiscolleaguesinWashingtonthatthe“specialrelationship”with the Shah had resulted in “special privileges and facilities for us,” areference to CIA listening posts built along Iran’s northern border with theSovietUnion.ThetopbrassatthePentagonrefusedtobudge.“TheShahcontinuestoplay

hard on the same themes with us,” was how Kissinger relayed the views ofGeneral EarleWheeler, chairman of the Joint Chiefs of Staff, to Nixon. “Heseems in fact to be testing the limits of our capacity to help him.” Wheeleropposed the sale of four additional squadrons of F-4s to Iran because theIranians“wouldhavetroubledigestingalloftheequipmenttheyhaveinmind”to purchase. They lacked the pilots to fly the planes and the specially trainedpersonnel tomaintain them.The Shah alsowanted thirty-six additionalC-130transportationplanes.HehadtoldWheelerthatheneededtobeabletomovehistroops around “threatened areas.”Wheeler suspected the Shahwas building acontingencyplantomovelargeamountsoftroopsintoSaudiArabia“shouldtheneed arise.” He knocked down MacArthur’s canard that if the United Statesrefused to sell arms to Iran the Shah would turn elsewhere, perhaps buyingFrenchor evenSovietweapons.The Iranian armed forceswere too integratedinto the American defense structure, France was an unreliable supplier ofmilitaryspareparts,andtheShahwouldneverallowSoviettrainersorpersonnelin Iran.Wheeler suggested that the Shahwas a hypocrite for pressing the oil

consortium to boost Iranian oil production when Iran had recently lashed thegovernmentofKuwaitfordoingtheexactsamething.InOctober1970SecretaryLairdbluntlyinformedhiscolleagueRogersover

atState that theShah’s request for another four squadronsofF-4scrossed theline.TheShahhadmorethanenoughplanestodefendIran.HispurchaseswouldonlypromptneighboringIraqtoturnclosertotheSovietUnionandacceleratearegionalarmsracethatcoulddestabilizetheentirePersianGulf.ItwouldplaceseverestrainsonIran’seconomyandmanpower.“ThereislittlequestionthattheShah will be unhappy over our unwillingness to sell him all that he wants,”warnedLaird.“Nonetheless, Iconsider thecoursehe follows tobe inimical toIran’sinterestsandourown,andIthinkthetimehascometotalkbluntlywithhim about arms stability in the Persian Gulf area, as well as the excessivemonetary and personnel costs which these programs would entail.” Laird’sdeputysecretary,DavidPackard,implicitlyrebukedMacArthurwhenhepointedouttotheambassadorthattheShahdidnotappeartohaveasoundgraspof“theuniquenatureofTehran’sspecialrelationshipwiththeUnitedStates”aspartnerandally.YetevenasWheeler,Laird,andRogersheldtheline,theywerebeingunderminedby theCIAand itsdirector,RichardHelms,andbya sympatheticHenryKissinger.

MR.HELMSINSISTS

DuringtheShah’s1969statevisit,“No.1”hadenjoyedalongbreakfastwithCIAdirectorRichardHelmsintheupstairsstudyofBlairHouse, theresidenceacross the street from the White House where the Iranian monarch wasquartered.HelmshadmetMohammadRezaShahforthefirsttimein1957whenhe traveled to Tehran to negotiate the installation of a CIA radar station onIraniansoiltomonitorRussianmissile-testingrangesacrosstheborderinSovietKazakhstan.“Heagreedthathewouldsponsorit,andwhathedecidedtodowastomake the installationan IranianAirForce installation,have the Iranian flagflyover it, and thenhave theAmericansdo thework thereunder theguiseofadvisors and consultants to the Iranian Air Force,” Helms recalled. A secondbasewasestablishedinthe1960s.TheCIAregardedthepostsasessentialinitsefforts to give the United States an edge in missile superiority and to verifySoviet compliance with arms accords. Helms had an indirect personalconnection to theShah throughhisyoungerbrother,Pearsall,whohadbeen inschoolwithCrownPrinceMohammadRezaPahlaviatLeRoseyinSwitzerlandinthe1930s.EverytimetheShahcametoWashingtonhereceivedDickHelms.

InadditiontobriefingtheShahonintelligencematters,thedirectorthankedtheShahforpermittingconstructionofadditionalCIAfacilitiesalongIran’sPersianGulf coast. According to Helms’s notes from the 1969 meeting, “The Shahnoddedhishead,expressedhisinterestintheproject,thenwentontosaythataslong as we are not interested in having USA shining in neon lights on ourinstallations,heispreparedtohaveuslocateinIranalmostanykindoftechnicalcollectionwedesire.”This was music to Helms’s ears. Documents show that it was Helms who

repeatedlyanddecisivelyintervenedontheShah’ssideinthedebateoverarmssales.LikeWheeler, Laird, andRogers,Helms frankly dismissed the strategiclogicbehindtheShah’smilitarybuildup.Heconfessedthattheking’sargumentswere easily rejected “on grounds of cost, lack of urgency, limited capability,undesirableprecedentandotherarguments.”ButtoHelmsthatwasallbesidethepointwhenamuchbiggerprizeexisted in theformof theCIAspybases.Iranhosted intelligence facilities “vital to our national security.”WithAfghanistanbarely a functioning state and no longer politically feasible as an alternativecenter for espionage against theSovietUnion, “there is noplace towhichwecouldtransfertheseactivitieswereIrandeniedus....The[facilities]areentirelydependent on the continuedwillingness of theShah to permit them tooperateandtotransmitpromptlytheinformationtheycollect.”EchoingHelms’ssentimentinamemodatedApril16,1970,Kissingerpraised

Iran toNixonasan“islandofstability.”He concurredwithHelms that “thereseems little reason not to give the Shah whatever he wants.” Thisrecommendation came even after he noted that the main argument againstextendingmilitary credits to Iran had been to keep Iran’s debt burden “withinsafe limits.” It was an undeniable fact that the Shah had gone on a spendingbinge. Iran’s debt service costs “are already high,” observedKissinger. But itwasequally“difficult,ofcourse,tosaywhatistoohigh;whatcanbesaidisthatthe level is high enough tobe cause for concern in Iran aswell ashere aboutraising itmuch higher. . . . The problem arises as he pushes the limits of hisresources and ours.He is understandably aman in a hurrywhowill press allresourcesavailable to their limits.”Kissingeralso recitedHelms’sopinion that“there is room to question whether the direct military threat to Iran from thePersianGulfisasgreatastheShahfears.”Onemonth later, at 3:00P.M. onMay 14, PresidentNixonwelcomed to the

White House foreign ministers in town for a meeting of the Central TreatyOrganization,CENTO,theallianceofanti-communist“northerntier”countries:Iran,Pakistan,Turkey,andGreatBritain.AttheendoftheformaldiscussionshebeckonedArdeshirZahediintoasmallroomofftheOvalOffice.Hewantedthe

foreignministertopassonamessagetotheShah.Nixon’ssubsequentremarkssuggested hewas fed upwith the bureaucraticwrangling over arms sales.HewantedtodosomethingfortheShahandshort-circuitLairdandWheeler.Afterdiscussing Iran’scash flowproblems, and theShah’sdesire togeneratehigheroilrevenues,Nixonmadearemarkableanddecisiveintervention.“TelltheShahyoucanpush[us]asmuchasyouwant[onoilprices],”hetoldForeignMinisterZahedi.“AslongasyoumakethismoneyforthegoodoftheIranianpeopleandthe progress of Iran [then] Iwill back you.”Thiswas the news the Shah hadbeen longing to hear, that he could raise oil prices at will and finally bringpressuretobearagainstWesternoilcompaniesandoilconsumers.Betterstill,hecoulddososecureintheknowledgethathehadthebackingoftheWhiteHouse.The presidentwas letting himknow that hewould support in privatewhat hemight be obliged to oppose in public. It is an extraordinary fact that Nixon’sbackchannelonanissueofsuchcriticalimportancetotheAmericanandworldeconomywasapparentlymadewithoutbenefitofanysortofcostassessmentorriskanalysis.ItevidentlydidnotoccurtoNixonthathehadplacedinthehandsof the Iranian leader the power to redistribute national wealth from theindustrializedWesttotheoilkingsoftheMiddleEast.ThattheAmericanwayof lifewas built on a fragile foundation of affordable energy seemed to haveeludedhim.Nixon’saideswereoblivious tohis interventionandcontinued todebate the

merits of lifting restrictions on arms sales to Iran. During one briefing inWashington Ambassador MacArthur assured skeptical colleagues from thedepartmentsofStateandDefensethat“hewasnotsuggestingthatwegiveIranablankchecktobuywhateveritwishedfromtheUnitedStates,but[he]wishedtostress that in his view it might be preferable for us to cede to a sale.” Theambassador’s viewwas that themore arms the administration sold to Iran themoredependentIranwouldbeontheUnitedStatesasanarmssupplier.“Arewenot in a better position to limit the arms race more effectively through ourinfluenceovertheShahthanbyhisexercisinghisfreedomtopurchasewhathewantsfromothersuppliers?”hetoldthegathering.HewasapparentlyunawareofGeneralWheeler’scontentionthatnoothercountryhadtheabilitytoreplacetheUnitedStatesasIran’smostimportantarmssupplier.Whenaskedifhe“wasnot concerned with the impact of Iran’s military purchases on the [Iranianeconomy] over the next five years,”MacArthur said hewas not. Iran’s creditwasindeedtight,henoted,whichwaswhyhesupportedamixofcreditandcashsales.InSeptember1970HelmsagainstruckhardagainsttheDefenseDepartment

whenhelobbiedKissingertokilloffastudybeguntoassessthemilitarythreat

facing Iran. Helms correctly saw this as nothing but a stalling tactic by thePentagonbrass.HetoldKissingeritwasjustthesortofthingtoirritatetheShahandputatrisktheCIAinvestmentinIran.HeremindedKissingerthatthefutureof U.S. electronics eavesdropping along the Soviet Union’s southern border“rests very directly on the Shah’s support.” Failure by the administration tocooperatewiththeShahwouldleadto“increasedpressureonoilinterests,andpossibly termination of US special facilities [i.e., spy bases] and militaryoverflightrights.”Remarkably, Helms was pleading a case that his own analysts opposed in

private.ItwasanothersignofthedysfunctionthatepitomizedAmericannationalsecurity policy toward Iran. A study of data collected from the Americanmilitary mission in Tehran found that the Iranians were buying “exoticequipmentwhich they are not prepared to use and, inmany instances, cannotaffordtopurchase.”Anevenmoreremarkablestudyfrom1971linkedweaponspurchaseswith future financial collapse. “We don’t know just how keenly theShah appreciates the limits of financial elasticity,” wrote the CIA’s Office ofNational Estimates. It was an eerie and remarkably prescient analysis of theshockthatawaitedIran.AlthoughIranianoilrevenueshadriseninrecentyearsandcontributedtoageneralsenseofprosperity,theycouldn’tkeeppacewiththeShah’s spending and “presently planned total expenditures are far larger thanprojectedrevenues.”TheShahwasdigginghimself—andhiscountry—intoapitofdebt.“Atsomepointinthenextseveralyears,Iranwillhavetomakepainfulchoices as between military hardware and development priorities. Decisionswouldnotrequirescalingdownthemilitaryexpendituressomuchasrestrainingitsgrowth.Onpast form, theShahwillonlyeaseoffonmilitaryexpendituresafter several prophets of doomhave sounded Iran’s economic death-knell, butbeforedisasterhasactuallysetin.”Behindthepubliccoverofstatebanquets,eloquent toasts,andjointmilitary

exercises, what had once been a convenient patron-client relationship wasbeginningtoresembleastraitjacketfortwo.Itbecameeventighterwhenattheendof1970 the issueofmilitarycreditswas resolved in favorof Iranmakingcash sales for itspurchasesofU.S. arms.Then inNovember,PresidentNixondecidedthathenceforthU.S.strategicpolicyinthePersianGulfwouldrestonastrong Iran supported by SaudiArabia in a clearly subservient and secondaryrole.Thisbecameknownasthe“TwinPillars”policy.

HERUNSADAMNTIGHTSHOP,RIGHT?

At 3:56 on the afternoon of April 8, 1971, President Nixon welcomedAmbassadorMacArthurbacktotheWhiteHouse.TheywerejoinedbyGeneralAlexander Haig, Kissinger’s deputy. Photographs were taken, small talk wasexchanged, and the ambassador had just settled in when the president gotstraighttothepoint.WithlessthansixmonthstogobeforetheBritishevacuatedtheGulf,Nixonwashearing from thePentagon that Iranstillwasn’tup to thejob of taking over regional defense responsibilities. He said hewas “strongerthanahorseradish”fortheShah.Butheneededtoknow:“Aretheycapableofit?”MelvinLairdandthegeneralsweretellinghim,“Well,theShahjusthasn’tgot thestuff, is that rightAl? Isn’t thatwhatwe find?Theydon’t think—theyjustdon’tthinkhe’sgotthestroketodoit.”“Thereisafeeling,yessir,”Haiganswered.“Thathecan’tdoitalltheway.”“If he could do it, it’d be wonderful because he’s our friend, right?” said

Nixon.“Yessir,”repliedMacArthur.“Absolutely.”“Herunsadamntightshop,right?”inquiredthepresident.“Hedoes,”saidMacArthur.“Yourinfluenceonhimisextraordinary.Hesaid

to me—I’ve got a very good relationship with him, he said, he talks quitefrankly, he said, ‘You know, I admire your President. He understands theinternational world and this part of the world much better than either of hispredecessors [Presidents Kennedy and Johnson].’ He said, ‘They really didn’tunderstandtheMiddleEastatall,withallitscomplexities.’”Sixty-two-year-oldMacArthurwasthenephewandnamesakeofWorldWarII

andKoreanWarcommanderGeneralDouglasMacArthur.Beforetakinguphispost as ambassador to Tehran in September 1969, MacArthur had served asAmerica’s top diplomat in Japan, Belgium, and Austria. MacArthur’s staffworriedabouthistendencytowiltintheShah’spresence.Oneformercolleaguerecalledthattheambassadorwas“scaredstiff”oftheShah.MacArthur’sflatteryand obsequious behavior was duly noted by Iranian courtiers. DouglasMacArthurhadonceevengonesofarastohelpcoverupanattemptonhisownlifelestitcausetheShahembarrassment.On the evening of November 30, 1970, the ambassador’s Cadillac was

ambushed by gunmen firing at point-blank range only a few hundred metersfrom the gates of the American embassy. “These boys opened fire, but webrushedthecaraside,”MacArthurlaterrecalled.“Theyshotthewindowsoutofthecar.Oneofthemhadanaxe,obviouslytoattackthewindowifItriedtolockmyselfin.Theythrewtheaxe.Ithitmeinthearm.”Thecover-upbeganalmostimmediately.“I am particularly anxious that thismatter be treated publicly inwaywhichwillnotrepeatnorembarrassGOI[GovernmentofIran],”hecabled

the State Department. “Accordingly, CourtMinister Alam (after consultationswith Shah and Prime Minister Hoveyda) and I have agreed that we willvolunteernostatementaboutincidentbutifwearequeriedresponsewillbethatwhilereturningtoresidencefromadinnerlasteveningourcarwassideswipedbyahit-and-rundriverwhowasproceedingatahighrateofspeedandthatcarsufferedbrokenwindowand someotherdamagebutnobodyhurt.Wecannotspeculate on whether accident was deliberate or part of hit-and-run driver orsimply result of very bad driving for which Iran is known.” The cover storyconcoctedby theShah,Alam, andMacArthur beggaredbelief.The embassy’sguards had seen the Cadillac hurtling through the gates the night before witheveryone inside in a state of panic, its windows shot out, and its windshieldshattered.Mechanicsattheembassymotorpoolhadfoundabulletlodgedinareardoorframe.Anaxehadstrucktheambassadorinthearm.Whatdidpeoplethinkhadhappened?FourmonthslaterintheWhiteHouse,NixonaskedMacArthurifperhapsthe

Shahmightnotbe“thinkingtoobig,” ineffect takingonmorethanIrancouldhandle. MacArthur didn’t disagree. “Well, he may be thinking a bit big,” heagreed.“ButIcan’tsaythat—whatwe’retryingtodoisgethimtoprogram.Togethim—youknow,insteadofjustsortofsaying,‘Ineedthis,Ineedthat,Ineedtheotherthing.’Becauseifyousay,‘youdon’tneedthisthing,’it’sthroughtheroof.”“Sure,”gruntedNixon.Hell,hehadgonethroughtheroofhimselffromtime

totime.MacArthursaid that toavoidupsetting theShahhehadnot talkedwithhim

about the costs that would be associated with Iran’s military buildup or “theinfrastructure that’s needed to support them. And then very important, thepersonnelthatyouhaveandwillneedtomarrythemandcostthewholething.Andthatthisservesthebasisforidentifyingprioritiesanddevelopingafive-yearplan.”What theambassador saidhewasdoing insteadwasworkingwithU.S.governmentofficialstosecureanewlineofcreditfortheShahtomakeallthepurchaseshefeltheneededtogetthejobdone.NixonlovedwhatMacArthurwastellinghim.Gettingthejobdonewaswhat

counted.Screwthered tapeand theexperts.“Whenever theysendanything inherethatIcansign,Ido,”hesaid.“Heshouldknowthat.”Thepresidentsaidhehad had to overrule the State Department a couple of times “on the damnthings,” but the fact remained thatwhen it came to theShah and Iran, “I likehim,IlikehimandIlikehiscountry.AndsomeofthoseotherbastardsoutthereIdon’tlike,right?”“Right,” repeated MacArthur. He reminded the president that Iran was

America’s only natural ally between Japan and Europe. “And, Mr. President,betweenJapan,NATO,andEurope,it’stheonlybuildingblockwe’vegotthatisstrong, that is sound, that is aggressive, and that above all regards us as justaboutitsfirmestfriend.Elsewherewe’retryingtoshoreupweaknessesandit’saproblem.”TheambassadorwashauntedbyaremarkmadebyJosephLuns,theDutch foreign minister and future NATO secretary general. MacArthur onceaskedLunswhathethoughtwouldhappenifEuropeannationswerefacedwiththechoicebetweenacutoffof theirPersianGulfoil suppliesandcaving in toblackmail from oil producers. Luns offered a grim prognosis: “I fear thatWestern Europe would have no choice but to reach some form of anaccommodation,becausethealternativewouldbeatotalcollapseofitseconomyanditsnationallife.”WhenRichardNixonlookedoutattheworldfromtheWhiteHouseinApril

1971hehadlittletocheerabout—withthepossibleexceptionofIran.ElsewhereinAsia, “thePhilippines is a canofworms,” and “Burma’s always in amess.Alwayswill be. And you know the Burmese, they just chew that weed. Thatblack tea.” Pakistan was going to hell. Iran somehow comfortably straddleddifferentworlds.“Butthepointis,thatbyGodifwecangowiththem,andwecanhavethemstrong,andthey’reinthecenterofit,andafriendoftheUnitedStates,Icouldn’tagreemore—that’ssomething.’Causeitjusthappensthat,whoelsedowehaveexceptforEurope?TheSouthernMediterranean,it’sallgone,”hemused.“Morocco,Christ,theycan’tlast,”neithercan“allthelittlemiserablecountries around—Jordan and Lebanon and the rest. They’re like—they godownliketenpins,justlikethat.”Unlike every other Muslim country in the Middle East, Iran maintained

unofficialbutcloserelationswithIsraelanddidn’tpunishtheUnitedStatesforsupporting the Jewish state. The Shah was “awfully good on that subject,”affirmed Nixon. The Shah saw Iran and Israel as natural allies in the region,outsiders in an Arab sea, two bastions of tolerance, moderation, and anti-Communismwithoverlappingstrategicinterests.“Bothourcountries, Israelononeside,andIranontheother,areconfrontedbyaradicalArabnationalismandexpansionism,” explained an Iranian official to the Associated Press in 1969.Israel’s unofficial representative in Tehran—no one liked to use the word“ambassador”—worked out of the Israeli trade mission, an unmarked andheavily secured compound located at 5 Takht-e Jamshid Avenue, near theAmericanembassy.TheShahtookgreatprideinprotectingIran’sreligiousandethnicminorities,particularlythesixtythousandIranianJewswhohadchosentostayonafterIsraelwasestablishedin1948.Theircommunity,oneof themostancientJewishentities,hadtieswiththePersiansgoingbacktobiblicaltimes.

By1970,about$40millionworthofIranianoilwasexportedtoIsraeleveryyear.TheShahmadethesomewhatspeciousclaimthat thesaleofoil toIsraelwasabusinessarrangementworkedoutwiththeoilconsortiumthathadnothingto dowith his government.YetTehran’s newest supermarket sold Israeli foodandpublications,andHebrew-languageliteraturewasopenlysoldinbookstoresandatnewsstands.Inacountrythatlovedcinema—Tehranboastedeightymoviehouses—Israeli nationals ran three of the four biggest film distributioncompanies.Israel’sstateairline,ElAl,flewtworegularlyscheduledflightseachweekbetweenTelAvivandTehran,flyingoverTurkeytoavoidArabairspace.Israeli engineers and advisers, meanwhile, were helping their Iraniancounterparts dig deep water wells in Qazvin north of Tehran and irrigatefarmland on the southern slopes of the Elburz Mountains. Iran’s JewishcommunityandIsraelwereonthefrontlinesoftheShah’scrusadetomodernizeIranandeliminateclericalinfluence.TheShah’sconciliatoryapproach to Israeldefied thewishesofmanyofhis

own people, particularly young university students enamored with Nasserismand the Palestinian struggle for an independent homeland. Israel’s lightningvictoryover Iran’sMuslimbrethren in the1967SixDayWarhad led tostreetprotests,anupsurgeinsupportforthePalestiniancause,andatendencytolumpAmericans with the Israelis as a common foe. The decision by the Shah’sgovernment toraisebusfaresandalterbusroutes inFebruary1970had led tostreetclashesbetweenhundredsofstudentsandriotpoliceinTehran.TheU.S.embassy cabledWashington that the protests quickly took on nationalist andanti-American, anti-Israeli, and antigovernment overtones even as MacArthurhastened to assure Washington that the sentiments expressed by thedemonstratorswere“insignificant.”Twomonthslater,morethanthirtythousandsoccerfanschantedanti-Israelislogansandtookto thestreetswhentheir localteamdefeatedthevisitingIsraeliteam.The Shah’s support for Israel was matched by his commitment to defend

Saudi Arabia and the massive oil reserves of the lower Persian Gulf. If theSaudisandtheiroilfieldsgotintotroublewithdomesticradicals,theShahhadoffered togo inandsort themout. InhismeetingwithNixon,MacArthur toldthepresidentthattheproblemwithSaudiArabia’sKingFaisalwasthathehadstarted too late in thegame to reformhis feudalmonarchy; thingswouldhavebeendifferent“ifhehadstartedbackwhentheShahhadmadehisgreatsocialrevolution,andsir,itisacompleterevolution.”MacArthurwasreferringtotheShah’s1963WhiteRevolution,anambitious

package of progressive social and economic reforms meant to reassure theKennedy administration that the Pahlavi crown was on the side of progress.

Iran’sforestsandwaterwayswerenationalized.Theroyalestatesandtheking’svastprivatelandholdingswerebrokenupinfavorofpeasantownership.Womenwere granted voting and political rights. Health corps, literacy corps, andreconstructionanddevelopmentcorpswerecreated.Workers’profitsharingwasintroduced.TheShahwassuccessfulinco-optingmanyofthecrown’scriticsontheleft.ButtheanticlericalnatureofthereformsenragedIran’sShi’areligiousestablishment.Religious leaders, themullahs,were especially offended by theemancipation ofwomen, and they understood that the breakup of their estateswould weaken their hold over the peasantry and make them financiallydependent on handouts from the Pahlavi state. They damned the WhiteRevolutionasunconstitutionalandun-IslamicanddenouncedalawtograntU.S.military personnel immunity fromprosecution if they committed criminal actson Iranian soil.TheShah struckback, comparing themullahs to “anumbanddispiritedsnakeandlicewhofloatintheirowndirt,”andhethreatenedthat“thefistofjustice,likethunder,willbestruckattheirheadinwhatevercloththeyare,perhapstoterminatetheirfilthyandshamefullife.”On June 3, 1963, a charismatic cleric by the name of Ruhollah Khomeini

denounced the Shah in words remarkable for their slanderous tone and bitterinvective.“OMr.Shah, dearMr. Shah,” he adjured, “abandon these improperacts. I don’twant people to offer thanks should yourmasters decide that youmustleave.Idon’twantyoutobecomeyourfather.”Khomeini’sdetentionatthehands of SAVAK, the state security police, triggered violent clashes in citiesacrossIranthatbrieflythreatenedthemonarchy.TheprimeministerduringtheshowdownbetweenchurchandstatewasAsadollahAlam,anditwasAlamwhoissuedtheorderfortroopstoopenfireonthedemonstrators,restoringorderatthecostofaboutonehundredlives.ThequestionofwhattodowithKhomeinivexed the palace. The head of SAVAK during the crisis was GeneralHassanPakravan,oneofthefewinfluentialfiguresatcourtwithcleanhands.Duringhistenure as security chief torture was banned and the government kept open adialogue with the opposition. Queen Farah described him as “aman of greatculture, intelligence, and humanity.” The Shah was won over by Pakravan’sadvice that the bestway to keep peace at homewas to exileKhomeini ratherthanhavehimexecutedfortreason.KhomeiniwassentfirsttoTurkeyandthentoIraq,wherebothgovernmentskeptacloseeyeonhim.WithKhomeinioutoftheway,theShahfeltsurehehadseenoffthethreatfromIran’sreligiousrightwith a few rounds of grapeshot. Now he could get back to the real work ofmodernizingIranandfulfillinghisimperialdestiny.ThatwascertainlyhowtheWhite House viewed events. U.S. officials were confident that the Shah hadpassedhisgreatcrisisandwasnowhomefree.

“Basically there isgreat stability [in Iran],”AmbassadorMacArthurassuredPresident Nixon, disregarding the recent attempt on his life. The Shah had“totallydisarmedtheCommunists—theTudehParty.”Respondingtoaquestionabout student unrest in Iran, he replied that “about ten percent are activists.”Nixonearneda roundofguffaws fromMacArthurandHaigwhenhecracked,“Wellthat’slessthanwehave.”“It’saboutfiftypercentofours,”Haigadded.“Theywantagreatervoiceinthething,”MacArthurconceded.“ButtheShah

iswiseenoughtoknowthatwhenyoutakeapeoplethatarefromfeudalism,andyoudragthemoutofthewomboffeudalismlikeamidwifedrivingachildoutofthemother’swomb,youletloosegreatelementalforces.Andthisiswhathe’sdone.Nowherunsafairlytightshop,buttochanneltheseenergiesandforces.”“He always tries to keep one foot ahead of them, huh?” Nixon noted with

admiration.“Hedoes.Hesaid tome theotherdaybefore theoil talks,hesaid—hewas

talkingabouthowtheyneedmorerevenue—hesaid,‘Mr.Ambassador,’hesaid,‘Ineedmorehospitals.Ineedmorehealthservicesinmyvillages.Ineedmoreworkers’housing.Ineedmoreschoolsformypeople.’Hesaid,‘Imustdothesethings.’”“Hmm.”Thepresidentwasclearlyimpressed.“He’sgotaprofound,he’sdevelopedaprofoundsocialconscience.”“I just wish there were a few more leaders around the world with his

foresight,”Nixonmused.“Andhisability,hisabilitytorun,let’sfaceit,avirtualdictatorship in a benign way. Because, look, when you talk about having ademocracyof our type in that part of theworld, goodGod, itwouldn’twork.Wouldit?”Democracywasn’tworkinginAfricawherethepeople“arejustoutof trees.” At least Iran had “some degree of civilization in its history.”Democracywasaluxurythatveryfewnationscouldafford.“Andit’sgottobethatway.Theyaren’tready.Youknowthis.You’vegottorememberittooktheBritishahellofalongtimeofblood,strife,choppingofftheheadsofkingsandtherestbeforetheyfinallygottheirsystem.”

ChapterTwoGUARDIANOFTHEGULF

“Iranwill get all available sophisticatedweapons short of the atomicbomb.”

—TheShah,1972

“NowistimetocashincreditwithIranians.”

—HenryKissinger,1972

THESHAH’SREVENGE

Shell blasts and the crackle of rifle fire punctuated the first light of dawnover the Persian Gulf on November 30, 1971, the moment when IraniancommandosstormedthreesmallislandsstrategicallylocatedatthemouthoftheStraitofHormuz.ThreeIraniantroopsandfourlocalpoliceofficerswerekilledin a brief firefight before the Pahlavi standard was raised in victory. Iran’slightning strike brought to an end lengthy and ultimately inconclusivenegotiationsbetweenTehran,London, and localArab sheikhsoverdivisionoftheislands,Britain’slastimperialspoilsintheregion.TheShahhadagreednotto challenge the decision by Bahrain, a former Iranian territory, to declare itsindependencebuthewasn’tabouttosurrenderhisclaimtotheislandsandsawthemasfaircompensation.ForeignMinisterArdeshirZahedihaddismissedtheterritorialclaimlodgedbyonesheikhwiththememorablerejoinder,“Iwillwipemyasswiththispaperandthenflushitdownthetoilet.”WithIran’sannexationofAbuMusa,GreaterTunb,andLesserTunb,MohammadRezaShahPahlaviwasnowconfirmedinhisself-designatedroleas“Guardianof theGulf” inanact of daring that subsumedwhatever remaining doubts RichardNixonmighthavehadaboutIran’smilitaryprowessortheShah’sabilitytodefendAmerica’senergylifeline.ButIran’sArabneighborsrecoiledattheideaofcedingevenaninchofArab landto theirPersianneighbor. IraqbrokeoffdiplomaticrelationswithTehranandexpelledsixtythousandIraniannationals,drivingthemoverthe

border in wintry conditions. Libya’s Colonel Muammar al-Qaddafi blamedBritishdiplomacyforthefiasco.HeusedtheseizureoftheislandstonationalizeBritishPetroleum(BP)assetsinhiscountryandtowithdraw“closeto$1billionofLibyandepositsinBritishbanks.”IranandIraqexchangedinsultsandrushedtroopsintopositiontodefendnorthernmountainpassesandtherichoillandstothesouth.WhileQueenFarahtouredrefugeecamps,herhusbandtraveledtoaborder town,where he proceeded to taunt Iraqi leaders. “Wewill not use ourfist,” he declared. “They are dying of envy at our progress and the thingswehaveaccomplishedinIran.”ThefireworksintheGulfbroughttoanendanotheryearoftriumphforIran

anditsincreasinglyconfidentruler.TheShah’slatesthigh-wireshowdownwiththe oil consortium, begun the previous November when he squeezed anadditional 5 percent profit share out of its operations, had ended in February1971 when under the terms of the Tehran Agreement foreign oil companiesoperating in thePersianGulf agreed to raise thepriceof abarrelofoil by35cents to $2.15 and settled on a complex formula to stagger additional priceincreasesoverthenextfiveyears.DemandforMiddleEastpetroleumwasrisingworldwide.Theeraofcheapoilwasdrawingtoaclose.DuringthenegotiationsAmbassadorMacArthurhadgonetothepalacetoappealforrestraint.WhathegotinsteadwasanimperialrejoinderfromtheShah:“AmIhearingthebigvoiceofasuperpower?”FortheShah,whooversawthenegotiationsbetweentheoilcompaniesandtheirhoststates,thenewoildealmarkedatriumphandaturningpoint.Asoneforeignobservernoted,“FinallyIranwasabletorelyonoilasaprincipalsourceofrevenue.Between1970and1972productionincreasedfromanaverageof3.82millionbarrels perday to5.02millionbarrels perday andrevenuesfrom$1.12billion to$2.39billion.” Iranswelledwithnationalpride.The Shah boasted toAlam that the days when the Americans or anyone elsecould overthrow an Iranian leader were over. There would never be another1953.The Shah again took center stage when in October 1971 the royal family

celebrated2,500yearsofIranianmonarchyinalavishcelebrationatPersepolis.TheShahputgreat store in the ritual symbolismof statevisits and the sortofgrand pageantry that he hopedwould further strengthen his standingwith theIranianpeople and identify thePahlavi dynastywith its glorious predecessors.Millionsofdollarsandyearsofplanninghadgoneintomakingthisthecomingoutpartyofthecentury.AsfarastheShahwasconcerned,Iranhadnowarrivedontheworldstageasacountryofstature.TocoincidewiththepubliceventstheIraniangovernmentbuiltroads,touristfacilities,publichealthclinics,and3,200newschools.Incitiesaroundtheworld,exhibitionswereheldbringingPersian

cultureandmusicforthefirsttimetoaglobalaudience.Buttherewassnipingfrom the foreignmedia over thewisdomof building aMarieAntoinette–styletentvillageinPersepoliscateredbyMaxim’sofParisatatimewhenTehranstillhadopensewers.Ardeshir Zahedi had resigned as foreign minister over the summer after a

bitter clashwith PrimeMinisterHoveyda.Now ensconced in his late father’svillainSwitzerland,ZahediwroteastronglywordedlettertotheShahprotestingtheextravaganceandSAVAK’sdetentionofhundredsofyoungpeoplesuspectedofbeingleftistsympathizers.TheShahignoredZahedi’scriticism.Ifhebetrayedanydisappointment itwaswithRichardNixon,who sentVicePresidentSpiroAgnewtorepresenttheWhiteHouseattheimperialgala.FromtheperspectiveofthePahlavicourt,Agnewwasanonentity,a“plebeianlookinggentleman.Notwellliked,withsmalleyesandthefaceofanotparticularlyintelligentsheep.”Agnew in turn had not enjoyed the Carnival Cruise atmosphere and resentedbeing relegated in the pecking order behind eight kings and queens, thirteenpresidents, two sultans, Prince Rainier and Princess Grace of Monaco, andEmperorHaileSelassieandhispetchihuahua—somuchsothatheretiredtohischandeliered tent in the desert to sulk and play chesswith his Secret Servicedetail. He refused to acknowledge the nine American reporters travelingwithhimandsnatchedfilmfromaphotographerwhotriedtotakehispicture.Totopitoff,AgnewcamedownwithanastycaseofwhatIranianscalled“theShah’srevenge,”promptinground-the-clockattentionfromcampnurses.The White House failed to make the connection between the Shah’s oil

brinkmanshipandIran’sworseningfiscalproblems.DuringthefirsttwoyearsoftheNixonpresidencyIranhad“acquirednearly$750millioninAmericanarms,roughlytheamountithadreceivedduringtheperiod1955–1969.”ThatwasinadditiontopurchasesfromcountriessuchasGreatBritain,WestGermany,andFrance. Defense expenditureswere already acting as a drag on Iran’s civilianeconomy.Apatternhademergedofoverspending followedbyaneed tocatchup. InMarch1971 theCIAreported thatat theendof1970Iran’sholdingsofgoldandforeignexchange“hadfallentoasix-yearlow(about$210million),orless than two months’ imports.” The spy agency concluded that Iran’s “rapideconomic andmilitary expansionhas led to considerable deficit financing andbalance-of-paymentsproblems.TherevenueincreasesgeneratedbytheFebruaryoil settlement afford Tehran an opportunity to push economic developmentfurtheror topayoffburdensomeshortand long-termdebt. Itseemslikely thattheShahwillchooseexpansionandwillspendtothelimitofIran’sresources.”BarelytendaysaftersettlingwiththeoilcompaniestheShahproposedabudgetforFY1971–72“thatnotonlywillconsumeall the increasedoil revenuesbut

willalsorequiresubstantialdeficitfinancing.Thenewbudgetwillincludea$1.3billion deficit, or one-fifth of the expenditures, which will be covered bydrawdownson foreign loansorabout$800millionanddomesticborrowingofapproximately$500million.Bothformsofborrowingwillexacerbateanalreadydifficult financial situation.”TheCIA ended its analysis on a cautionary note:“By expanding its domestic borrowing, the government is using up creditnormally available for private investment. Thus Iran will continue to walk anarrow financial tightrope.”At theendof1971, Iran’smilitaryabsorbedmorethan10percentofGNP.Importedarmshadcaused$380millionindebt,“four-fifthstovariouswesternstates,theresttotheUSSR.”TheCIAreportedthatIranwouldshortly“nothaveenoughmoneytopayfortheinvestmentrequiredbyanambitiousdevelopmentplanwhileservicingitsforeigndebt,andprovidingtheconsumergoodsthatmakeforpoliticaltranquility.”

AREYOUSURETHEBACKCHANNELISSAFE?

OnDecember2,1971,threedaysafterIranseizedtheGulfislandsinaclearbreach of international law, Secretary of State William Rogers remindedPresident Nixon that “the Shah of Iran is counting upon you to keep thecommitmentyoumadein1969,andreaffirmedin1971,tovisitIranduringyourpresentterminoffice.”TheShahwasa“proudandsensitiveman”andlikelytotakegraveoffenseifTehranwasnotaddedtotheWhiteHousetravelitineraryin1972. The Shah felt increasingly “apprehensive of Soviet Union long-rangedesigns upon Iran and the Persian Gulf. He feels encircled by the SovietpenetrationoftheMiddleEastandtheIndiansubcontinent.”RogerswarnedthepresidentthatameetingwiththeShahwasnecessarytoavert“serioustrouble”withTehran.HisImperialMajestywasfeelingslighted.A few hours later the Shah’s neighbor and ally Pakistan launched an ill-

advised attack against its old foe India.Relationsbetween the two antagonistshadbeen strained sincePakistanpresidentYahyaKhan’smerciless crackdownagainst opposition leaders in his country’s far-flung eastern province, whichclung to India’s eastern frontier on the other side of the subcontinent. ThePakistaniarmyhadgoneonarampageinEastPakistan,slaughteringatleasthalfamillionpeopleandtriggeringamassexodusof10millionrefugeesintoIndia.PrimeMinister Indira Gandhi made it clear that she would not stand idly bywhilehercountrywasswampedbymillionsofrefugees.KhanwasafavoriteoftheNixonWhiteHouseandthepresidentrefusedGandhi’sappealtointervene.Pakistan,likeIran,wasoneoftheso-calledNorthernTieranti-Communiststates

that blocked theSovietUnion from theMediterranean andPersianGulf.Mrs.GandhihadrecentlycommittedtheultimatesininNixon’seyesbyconcludingatreaty of friendship with the Soviets. He intended to bring “the bitch,” as hecalled the primeminister, to heel. ItwasNixon’s belief thatMrs.Gandhi haddeceivedhimwhenhehostedherattheWhiteHouseonlyafewweeksbeforethewarbrokeout.“Iwas treatingherasa leader rather thanawomanandallthat,”hecomplainedtoKissinger.Thiswashowsherepaidhim:“Dammit,youknowshe’ssmarterthansheis.”Nixonwantedtosendherastrongmessageand“let the Russians know that they aren’t going to screw around down there.”Kissingereggedonthepresident,ashewaswonttodo,denigratingthepeopleofIndia as “Russian stooges.” To exact revenge on Mrs. Gandhi, Nixon andKissingerdecidedtorousetheirPersiangladiatorfromhislair.On December 4, 1971, as fighting raged across the Indian subcontinent,

KissingeraskedIran’sambassadortoWashingtontorelayanoralmessagefromthepresidenttotheShah,“Becausewearesympathetictoanythingyoucandotogivehelp[toPakistan].”UnderU.S. lawtheadministrationwasconstrainedfromsendingmilitarysuppliestoeithersideintheconflict.NixonandKissingerdecidedtoskirtthelawbyaskingtheShahtorushshipmentsofhisownU.S.-madearmstoPakistanwiththepromisetoreimburseandcompensateIranatalaterdate.KissingerphonedNixonattheWhiteHouseresidencetolethimknowthat“anotherthingwehavedoneistosendabackchanneltotheShahfromyousaying that, trying to find out whether he wanted to give some support toPakistanandsayingifhedidwewouldlooktoseewhetherwecouldfindawayofletting,ofreplacinghis...”Nixoncuthimoff:“Areyousurethebackchannelissafe?”“Yes.”“I wouldn’t do it through MacArthur,” cautioned Nixon, who wanted to

prevent his own secretaryof state fromdiscovering their ploy.Besideswhich,DouglasMacArthurhadearnedareputationasthehousehysteric.“No,no,that’swhyIdidn’tdoitthatwayandwedidn’tputitasamessage,”

Kissingerassuredhim.“Weputitastalkingpointssoitcanbedisallowed.”Nixonwasdelighted:“Good,wellwe’llhavesomefunwiththisyet.God,you

knowitwouldreallybepoeticjusticehereisifsomewaythePakscouldreallygivetheIndiansabloodynoseforacoupleofdays.”Six days later, on Friday,December 10, a high-poweredWhiteHouse team

consisting of Kissinger, Deputy National Security Adviser General AlexanderHaig, U.S. ambassador to the United Nations George H. W. Bush, andKissinger’saideWinstonLordmetinNewYorkCitywithChina’sambassadorto the United Nations. Washington and Beijing were coordinating their

diplomaticefforts to isolate Indiaandprevent thedismembermentofPakistan.Communist China harbored long-standing grievances of its own against IndiaandenjoyedwarmrelationswithPresidentYahyaKhan’smilitaryregime.Theytoo wanted to give the Indians a bloody nose. Kissinger briefed AmbassadorHuangHuaonthesituationontheground.ThePakistaniarmyinWestPakistanhadonlytwoweeksoffuelleft.“Wethinkthattheimmediateobjectivemustbetopreventanattackon theWestPakistanarmyby India.Weareafraid that ifnothingisdonetostopit,EastPakistanwillbecomeaBhutanandWestPakistanwill become a Nepal. And India with Soviet help would be free to turn itsenergies elsewhere.” The United States had informed Soviet leader LeonidBrezhnev that an IndianassaultonWestPakistan“could lead toaU.S.-Sovietconfrontation” because Pakistan is a “friendly country, towardwhichwe haveobligations.”AU.S.navalflotillaincludinganaircraftcarrier,sixdestroyers,atanker,andahelicoptercarrierwassteamingtowardtheBayofBengalfromthewesternPacifictoreinforcethepresidentialwill.DiscussionmovedontotheroletheShahandotherregionalalliescouldplay

in helping Khan stave off defeat. “This is terribly complex,” Kissinger toldAmbassadorHuang.HeexplainedthattheUnitedStateswasbarredbylawfromsupplying equipment to Pakistan, and also from permitting its friends to sendtheirAmericanarmsandequipmenttohelpthePakistanis.TheWhiteHousehadquietly informed the leadersof Iran, Jordan,SaudiArabia,andTurkey that“iftheydecide that theirnational security requires shipmentofAmericanarms toPakistan,weareobligedtoprotest,butwewillunderstand.Wewillnotprotestwith great intensity. And we will make up to them in next year’s budgetwhateverdifficulties theyhave. . . .AmmunitionandotherequipmentisgoingfromIran.”Kissingeradded,“Thisisveryconfidentialobviously,andwearenoteagerforittobeknown.AtleastnotuntilCongressgetsoutoftowntomorrow.”The effort to resupply Pakistan through Iran was not a success—India

defeated Pakistan and the country’s eastern provinces broke away to form theindependent nation of Bangladesh. But the operation set the tone for futuresecret collaborationswithTehran.The idea took root in theWhiteHouse thatIrancouldserveasanAmericanaircraftcarrierinAsia,asortofgiantregionalarms dump and landing pad fromwhich U.S. firepower could be quietly andquickly inserted and extracted atwill.Asking the Shah to do favors for themmeantthatNixonandKissingercouldbypassU.S.domesticlaw,avoidscrutinyfrom the media and the Congress, and avoid explaining their actions to theAmericanpublic.ItalsomeantthateachtimetheyaskedtheShahtohelpthemoutofatightspot,theyowedhimsomethinginreturn.Thedangerwasthatifanoperation of this sort ever came to light, it would likely prompt Congress to

probedeeperintorelationsbetweentheWhiteHouseandTehran.KissingerhadassuredNixonandnodoubttheShahthathisbackchanneltoNiavaranPalacewassecure.Washeright?Thatdependedonwhomyouaskedamongthesmallarmyofintelligenceand

military officials listening in. Secretary of Defense Melvin Laird used hiscontacts at the CIA and the National Security Agency, an electronicseavesdroppingfacility, tomonitorKissinger’sback-channelcommunications toforeign leaders. Laird also had the U.S. Army Signal Corps tap Kissinger’soverseasphonecalls.“HenrywasveryMachiavellian,but Iknewhow tobeathim at his own game,” Laird remembered with a dollop of pride. Laird wasdetermined to defend his department’s interests and not be shut out of thenationalsecurity loop.“Heworkedhis techniquemarvelously,” recalledJamesSchlesinger, who succeeded him at Defense. “Not always scrupulously. Butmarvelously.” The Joint Chiefs went one step further, planting a spy inKissinger’s office to keep tabs on him. For more than a year Navy YeomanCharles Radford rifled Kissinger’s briefcase, combed through burn bags andoffice files, and obtained transcripts of Kissinger’s telephone conversations,which thenationalsecurityadvisersecretlyrecordedwith theaidofdeadkeysinstalledonphonesinhisoffice.Radfordhandedhisstashtohisliaison,AdmiralRobertWelander,whointurnmadethedocumentsavailabletoAdmiralThomasMoorer, chairman of the Joint Chiefs. The Radford spy ring, exposed in thewinter of 1971 but kept under wraps for many years, confirmed that foreignleaders who established back-channel communications with the Nixon WhiteHousedidsoatconsiderablerisk.Thedangeralwaysexistedthatotherearswerelisteningin.Bycoincidence,youngRadfordwasasocialfriendofWashington’smostprominentMormonpersonality,WashingtonPostcolumnistJackAnderson,themost famous—and feared—muckraker in the country.Hewas also amanwithvisceraldislikeoftheShahofIran.AtNewYear’s1972,Iran’sprimeminister,AmirAbbasHoveyda,reminded

AmbassadorMacArthur—“with considerable feeling tingedwith bitterness”—thatthepresidenthadstillnotmadegoodonhisearlierpromisestovisitTehran.The next dayMacArthur accompanied Senator Stuart Symington to NiavaranPalacetotalkwiththeking.WhenSymingtoncordiallyexpressedthehopethattheShahwouldvisit theUnitedStatessoon, themonarchdrewhimselfupand“repliedstonilythathehadvisitedusagreatmanytimesandhethoughtitwas‘perhapstimeforsomeonefromovertheretovisitIran.’”MacArthurfiredoffapanickycabletoWashingtonwarningthatalthoughhewasabouttostepdownasambassador, and so “will not have to try to pick up the pieces,” U.S.-Iranrelationshunginthebalance.

MacArthur needn’t have worried. Kissinger seconded the recommendationfromRogers thatNixon visit Iran in 1972. India had just snappedPakistan intwolikeatwig:“WhileIhadmydoubtspreviouslyInowbelievethatwiththemomentousdevelopmentsinSouthAsiaandthepotentialintheMid-East,avisittoIranisaseriousproposition.”

TWENTY-FOURHOURSINTEHRAN

President and Mrs. Nixon deplaned from The Spirit of ’76 in brilliantsunshine at 4:04 P.M., local Tehran time, on Tuesday, May 30, 1972. A coolbreeze rippled down from snowcapped mountains that hugged the metropolislikeawallofsoftmeringue.TheNixonsweregreetedatMehrabadInternationalAirport by the Shah and Shahbanou. During their fifteen-mile drive from theairporttoNixon’sguestquartersatSaadabadPalace,theShahandthepresidentstoodintheopenroofoftheirautomobileto“absorbandreturntheaffection”ofanestimated250,000people.HerewerepeoplewholikedAmericans.“Tensofthousandsofordinarycitizensturnedouttosmile,waveandcheer,”reportedTheNewYorkTimes.Onecorrespondentwrotethatitwaswithoutadoubt“themostjubilant overseaswelcomeMr. Nixon has received since he toured Europe in1970.”The turnoutwas deceptive.A great deal of planning had gone intomaking

sure the streets were packed to create the appearance of spontaneity andenthusiasm. On his way to the airport CourtMinister Alam noticed “that thestreets were not nearly so well-lined with people as we’d planned. I’dapportionedschoolchildrentoonepartoftheroutebutmyordershadnotbeenimplemented; likewise the political and corporate representatives had beenplacedtoofaroutofthecity,alongtheroadtotheairport.Icannotdescribemyfuryat this.”Fivethousandpeoplewerequicklybusedinsidethecity limits toact ascrowd fillers.Alamalsonoticed thatduring thewelcomeceremony, thewindblewthecapofftheheadoftheflagbearer,andhetookthisasabadomen.TheShahhadaskedhiscourtministertodrawupanitinerarythatcalledfora

privatemeetingwithNixon.Nowthathecouldraiseoilpricesatwill,theShahhadtheTwitchellDoctrinesquarelyinhissights.WiththedefeatofPakistansixmonthsearlier, all that remainedofhisneighbor to theeastwasa traumatizedrumpstate scratchingat Iran’sbackdoor forhandoutsofgunsandbutter.Therealgamechanger,asfarasNixonandKissingerwereconcerned,cameonApril9, 1972,when Iraq followedEgypt and India in signing a treaty of friendshipwith the Soviet Union. The Shah had repeatedly warned them that Iran was

beingencircledbytheCommunistsfromallsides.NowtheSovietsseemedonthevergeofestablishinganavalpresenceinthePersianGulf.TheShahfrettedthatNixon’spolicyofdétentehademboldenedtheSovietstoprobesouthtowardthewarmwatersoftheGulf.HewantedassurancesfromNixonthattheUnitedStateswould not cut any side dealswith the Soviets that compromised Iran’ssovereignty.TheU.S.embassyinTehranandtheCIAhadinthemeantimebeguntracking

a sudden upsurge in terrorist activity in Iran.OnFebruary 8, 1971, a band ofidealisticyounganti-regimezealotsattackedagendarmeriepostatSiakalneartheCaspianSea.Ifthebrazen,amateurishnatureoftheassaultsuggestedthatinIran long-suppressed discontents were beginning to stir, the regime’s ham-handed response indicated that it was poorly equipped to wage a dirty waragainstitsownpeople.TheInternationalCommissionofJuristslaterdeterminedthat two of the thirteen men convicted and executed for the Siakal incident“couldnotpossiblyhave takenpart in theattackas theywere inprisonat thetime.” The guerrillas stepped up their efforts to embarrass the Shah. GeneralZiaddinFarsiou, thechiefofIran’smilitarycourtsandthemanresponsibleforprosecuting thedissidents,wasgunneddownonhisowndoorstep.The Shah’snephew barely escaped an attempted kidnapping. In January 1972, bombersstruckAmericanlandmarks inTehran, including theU.S.embassycommissarywhereAmerican nationals did their grocery shopping, the headquarters of thePeaceCorps, andaculturalcenter.Thenextmonthonepersonwaskilledandfive injuredwhenbombs ripped through a pro-government political rally. Theembassy reported that “criticism and dissatisfaction with the United States isgrowing,especiallyamongstudents,andtherearenoindicationsthistrendwillbe reversed in the near future.”TheCIA concurred: “The past year or so hasseenanumberofmanifestationsofdiscontent.”Therewere“softspots,realandpotential in the Iranian situation.” The universities were in turmoil. Guerrillafighters had infiltratedTehran and fought gun battleswith the security forces.The Shah was isolated and there was “a regrettable lack of communicationupwardtohimfromhisministers.. . .EvenforeignambassadorscringebeforetheShah’sresponsestoofficialpresentationswhichdispleasehim.”Sycophancyatcourtstifleddiscussionandanalysis.“Themannerinwhichthe

Shahprojectshisroyalwilladdstothediscontent,andmoreincidentsarelikelyinthefuture.”TheShah’stendencytooverspendonweaponswasboundtohavepolitical consequences: “Financial difficulties arising fromoverspending couldhurt the development programwhich divertsmuch Iranian energy away frompolitical affairs. . . . Iran’s fundamental vulnerability lies in the uniqueconcentrationofpower in thehandsof theShah.”Ominously, theCIAwarned

thatwithout theShahat thehelmthePahlavistatemightfall inonitself:“Hisdemisewillusherinchange,perhapsinvolvingtumultandchaos.”TheWestWingwasawareofthegrowingunrest.Ontheeveoftheirdeparture

for Tehran, Kissinger had informed Nixon that the Shah’s reforms were“producing increasing internaldislocations andpressures against abackgroundofchanges in theareasaround Iran.”He reminded thepresident that theShahhimself had “voiced concern” that Iran’s “stability and progress are tooexclusivelydependenton[his]firmpersonalleadershipandthatinstitutionsandleadersarenotevolvingthatcouldmakeanorderlytransitionifheweretopassfromthescene.”Inadvanceof thesummit theShahpresented theadministrationwithawish

listof fivebig-ticket items.Hewanted tobuy1) laser-guidedbombs, 2) threesquadrons of F-15 fighter planes and “a few F-14with Phoenixmissiles,” 3)MaverickmissilestofitouthisF-4squadrons,4)twoadditionalsquadronsofF-4Es and F-5Es, and hewanted to obtain the services of several hundred bluesuiters, the uniformed American military personnel who maintained andoperatedU.S.weaponssystems.UnderstandingtheflowofpaperworkthatfollowedtheIranianrequestsiskey

tocomprehendingthescopeandscaleof thedisaster thatensued.TheDefenseDepartmentrecommended“inprinciple”tothesaleoflaser-guidedbombs.ButitadvisedholdingoffontheF-14sandF-15s.Thesesophisticatedfighteraircrafthad not even rolled off the assembly line. The Shah was once again gettingahead of himself. By the time the planes were produced under contract,conditionsintheMiddleEastcouldwellhavechangedtothepointwhereasalewould be “counterproductive to US Government interests . . . we anticipatefavorable action on the sale but themattermust be held in abeyance until theprograms become more stable and predictable.” Defense approved the futuresale of Maverick missiles, which were still in the test phase, and additionalsquadronsofF-4EsandF-5Es.But thedepartmentcautionedthatsendingbluesuiters shouldbehandledon a case-by-casebasis.TheUnitedStates faced itsownshortageoftechniciansandSecretaryLairdwashesitanttostationanymoreuniformedpersonnelinIran.Inresponse,Kissingerdraftedamemorandumthatdisregardedtheadvicehe

hadreceived.WeknowthatNixonread itbecausehiscopywasstamped“THEPRESIDENT HAS SEEN . . .” Kissinger recommended that Nixon turn down therequest for laser-guided bombs because “they represent our most advancedtechnologyandareinheavydemandinSoutheastAsia.”RegardingtheF-14/F-15sale,“WeanticipatesellingthemtoIran,butwewant tobesurewehaveagood product beforewe commit ourselves.” TheUnited Stateswould sell the

ShahtwoadditionalsquadronseachofF-4EsandF-5Es.ButKissingermadenomention of Maverick missiles or the Shah’s request for several hundredAmericanmilitarybluesuiters.ThemostcharitableexplanationforKissinger’smemo is that it was prepared in haste. He had forgotten his own golden rulewhendealingwiththeShah:“PreciseandfranktalkabouthowfartheU.S.canandcannotgoisimportantinavoidinglatermiscommunications.”WithintenminutesoftheirarrivalatSaadabadPalaceinthelateafternoonof

May 30, the president, the Shah, and Kissinger retreated for the first of twoprivate two-hour discussions in which no other American or Iranian officialswerepresent.Theirfirstsessioninvolvedanexchangeofviewsondétente, theoil supply, and instability inWestAsia.TheShahsaidhehopedNixonwouldmake American blue suiters available to help Iran’s military become “self-reliant” and that the administrationwould supply himwith “themostmodernweapons”because“Iran, like Israel,mustbeable to standalone.”The leadersdiscussedSovietsupportforIraqandthepotentialfortheregion’slargeKurdishpopulation,whichoverlappedthebordersofIran,Iraq,andTurkey,tobeusedaspawnsby the Iraqis to stir up trouble vis-à-vis Iran.The leaders agreed that awayhadtobefoundtofunnelmoreU.S.armstoPakistanbeforetheirallywas“jumped”againbyMrs.Gandhi.Thatevening,afterthestatebanquet,PrimeMinisterHoveydatookKissinger

out clubbing. At one point a Persian belly dancer sat in Kissinger’s lap forseveralminutes. Iranian security officers failed to prevent photographers fromrecordingtheencounter.Kissingerlaughedofftheincident.NadinaParsawas“adelightfulgirl”whois“veryinterestedinforeignpolicy.IspenttimeexplaininghowyouconvertSS-7missilestoY-classsubmarines.”CourtMinisterAlamwasstill at work in his office when he spotted Kissinger skulking back to hisguesthouseat3:00A.M.WhileKissingerwasoutenjoyingTehran’snightlife,PresidentNixonandthe

Shahwerehavingaquiettête-à-têtebackatthepalace.Thepresident’sofficialdailyschedulemadenomentionoftheirmidnightrendezvous.ButtheShahhadinstructedAlamtomaketimeforhimandNixontomeetaloneandhiswisheswerecorroboratedbyasinglesentenceburiedinKissinger’spreparatorymemotoNixon:“Inconnectionwiththeschedule,itisworthnotingthattheShahplansa substantive talk after his dinnerwithyou.”Asusual, theShahhaddonehishomework. The state banquet didn’t conclude until midnight. The presidentwould be tired after a long day of travel. Drinks had been served at dinner.Nixonhada“fondnessformartinis”anda famously lowtoleranceforalcohol.Nixon’s close aide John Ehrlichman confirmed that “the only time [thepresident]drankalotwasintheeveningwithfriends....Itdidn’ttakeawhole

lotofgin togethimsloshed.”Thepresident’s imbibingunsettledhis staff andespeciallyKissinger. On the occasionswhenNixon phonedKissinger’s officeafterhours,thenationalsecurityadviserwouldgivethesignalforhishorrifiedstaff to pick up their phones and listen in while the president slurred“obscenities” down the line. Kissinger took to calling Nixon “my drunkenfriend,” “that drunken lunatic”with “themeatballmind”who at anymomentcould“blowuptheworld.”TheShah,ontheotherhand,rarelytouchedthestuffandmaintained a reptilian focus.All the ingredientswere inplace for anotherserious miscommunication or presidential lapse in judgment on par with theShah’s1969WhiteHousevisit.Thepresidentialpartywasstillhungoverfromthenightbeforewhenthefirst

bombs went off, striking a Pepsi-Cola plant, the British cultural center, theoffices of an Italian oil company, and, at 5:45 A.M., the offices of the UnitedStates Information Service in Tehran. They blew out windows but caused noinjuries.Amuchlouderboomwasheardat6:30,shatteringthedawncalmandattractingtheattentionofAlam,whowasalreadybackathisdeskinthepalace.Suspectingabomb, thecourtminister telephonedGeneral Ja’farqoliSadri, thechiefofnationalpolice,foranexplanation.Sadritoldhim:“Oh,it’snothingveryserious,acar’sbrakesfaileddescendingthehill.Ithitalamp-postandthepetroltankwentupinflames,sowhat?”Infact,explosiveshadblownupacarbeingdriven by United States Air Force Brigadier General Harold Prince. Princeescapedwith lacerations and twobroken legs,but amother andchildwalkingbesidethevehiclewerekilled.Yetanotherbigblasttwohourslatersignaledthatamajorterroristoffensivewasunderwayinthecapital.Barelyforty-fiveminutesbefore President Nixonwas due to lay a wreath at 9:30 at the sandstone andmarble tomb of the Shah’s father, Reza Shah, and while American televisioncameracrewswerealreadymovingintopositiontorecordtheevent,aloudroarshooktheareabehindthem,bringingdownawallinacloudofdustandbrick.Afaultytimerhadpreventedamajordisaster.The tomb was a potent symbol of the Pahlavi dynasty’s modernist and

anticlericalcredentials.RezaShah,thelatefatherofMohammadRezaShah,hadseizedpowerin1921astheilliterate,ambitious,andstrong-willedRezaKhan,theheadofPersia’sRussian-trainedCossackBrigade.In1926hewascrownedShah and adopted “Pahlavi” as his dynastic name. Reza Shah epitomized the1920s idealof the strongmanonhorsebackdetermined to restorehiscountry’snational pride. Over the next two decades he instituted a series of draconianreformsthatalternatelyexhilarated,traumatized,anddisorientedIraniansociety.Hisuseof thewhiphandwas inkeepingwith thestyleofPeter theGreat, theRussian czar who frogmarched his people out of the bogs of Slavdom in the

1700s. Persiawas renamed Iran.TheArabic lunar calendarwas scrapped andreplacedwiththePersiansolarcalendar.Womenwereliberatedfromtheveilandall Iranians were ordered to wear Western dress. Iran’s Shi’a clerics werestrippedoftheirroleinpubliclifeandchildren’seducation.Thearmywascalledout to pacify Iran’s tribal lands.A national taxation systemwas established, amodernjudiciaryfounded,andstatefinancesoverhauled.RezaShahpersonallyoversaw construction of the Trans-Iranian Railway, which united the country.Light industry was developed, factories built, and a network of irrigationchannelsdug.But theold shahwentout ashe came in, at thehandsof Iran’scolonialoverlordsGreatBritainandRussia.Afterthewar,hisson,MohammadReza Shah, brought his father’s body back from exile in South Africa andreburiedhiminthemausoleumthatborehisname.ThetombremainedabitterreminderofPahlavipowerovertheayatollahs.Thepresidentwasalready inhis car ready todrive to themausoleumwhen

news of the blast reached Saadabad Palace. The Secret Service activated itsemergencyproceduresandorderedNixontostayinthevehicleuntiltheyhadaclearer sense of what was going on. Alam lambasted the incompetence ofSAVAK,whichenjoys“everyadvantage,yet theycouldn’tsomuchasguardasack of potatoes let alone a national monument.” He was further incensed tolearn that First Lady Pat Nixon’s motorcade had sped off in the oppositedirection to the wrong engagement, leaving the queen cooling her heels atNiavaran Palace. The two first ladies had been scheduled to leave together tovisit a children’s library and crèche.Alam urged the Shah not to let terroristsdisrupt thepresident’sschedule lest theregimebeembarrassedbefore theeyesoftheworld.HedashedtoSaadabadPalacetofindNixonstillsittinginhiscarafteranhour.HecouldseethatNixonwasnervousandhastenedtoreassurehimthathewasinnodanger.Nixonagreedandthemotorcadespedoff.Thepresident’scarleftthepalacesurroundedbytwodozenjeepsloadedwith

soldiersandaspecialmotorcycleguard.Thewreathlayingwentoffpeacefully.White House press secretary Ron Ziegler denied that “any of the reportedincidentstodaywereaimedatthewell-beingofthePresidentoranymembersofhis party.”Hewas immediately contradicted by the StateDepartment back inWashington.SpokesmanJohnKingadmittedthatthebombingswerethelatestina“seriesofattacksinIranoverthelast18months,”andherepudiatedZiegler’sdenialofanti-AmericansentimentinIran:“I’mgoingtowithdrawthestatementthat there isno connection [with theUnitedStates].Pretend that it never tookplace.”Backatthepalacetheleadersheldafinalroundoftalksthatlastedfrom10:30

A.M. tonoon.Nixonwaswoundup.Whathadbeenbilledasasentimental trip

for theNixons,who first visited Iran in 1953, and a triumph for thePahlavis,who saw thepresidential visit as theAmerican equivalentof apapalblessing,was ending in confusion and bloodshed. To make matters worse, news camethroughofabrutalattackcarriedoutafewhoursearlierbythepro-PalestinianJapaneseRedArmyagainst touristsdisembarkingatLodAirport inIsrael.TheLod terminus resembled a slaughterhouse with more than one hundredcasualties, including seventeen massacred Puerto Rican pilgrims. Kissinger’smeetingnotesshowthattheShahbegantheconversation“withadiscussionofterrorism and the pressures on him from the left wing.” Iraq’s Soviet-backedregimewasmostlybehindthetrouble,he insisted.TheissueofSaudiArabia’sfuturecameup.TheSauddynasty“wasbackward; therewasno inclination toreform.”TheShahsaidhewasconvinced“theSaudiswouldnotbesparedbythe Egyptians once the Israeli problem was settled. They had a superiorityproblembuttheywerelousyfighters.”TurningtotheMiddleEastpeaceprocess,“Israel, theshahaffirmed,wasIran’snaturalally.”Nixonwassympatheticandanxious to reassure the Shah thatAmericawould stand by him.According toKissinger’snotes,asthemeetingdrewtoacloseNixongrandlyannouncedthathehaddecidedto“furnishIranwithlaserbombsandF-14sandF-15s.”Nixonappealed to the Shah to understand American policy. “Protect me,” he said.“Don’t look at detente as something that weakens you but as a way for theUnitedStatestogaininfluence.”TheNixonDoctrine“wasawayfortheUStobuildanewlong-termpolicyonsupportofallies.”RichardNixon’ssourmoodhungoverthefinaleventofthetrip,an intimate

luncheon for twenty-one American and Iranian dignitaries hosted by thepresidentandhiswife in theirguestquartersatSaadabadPalace.The terroristattacksapparentlytriggeredbadmemoriesforNixonofhisoldstrugglesagainstthe left. To his guests at the luncheon, the president denounced Americanantiwar student protesters back home, saying they were working against thenational interest and that “he’d like to see the culprits executed.”Mrs.NixonwonderedwhyterribleeventsliketheLodmassacreneverseemedtohappeninCommunistcountries.CourtMinisterAsadollahAlamassuredherthatfreedomcarriedwith it risks and that onlyunderCommunismwould culprits beput todeathwithoutatrial.Alam’slogicranafineline.OnlyaweekearlierfiveyoungIranians accused of subversive activities had been summarily executed afterbeing convicted by a kangaroo court run by a secret military tribunal. Iran’sdreaded secret police, SAVAK, censored all newspaper, magazine, radio, andtelevision content; screened applicants for government jobs; approved theissuanceof passports; engaged in espionage and counterespionage activities athomeandabroad;andusedsystematictorturetoextractfalseconfessionsfrom

detainees.Nixonstoodtomakehisfinalremarksofthetrip.AccordingtoAlam,Nixon

declared that “the Kremlin may be a palace but an eight-day stay there wasabsolutepurgatory.Onlynow,intheShah’sprivateresidence,couldhelearntobreathe freely again. Indeed he considered it to be very much a home fromhome.” The president found Iran to be very much to his taste. Watching thespectaclefromhisseatnexttothefirstlady,Alamrecalledhissurpriseathearingaforeignheadofstatespeaksobluntly.TheShahthenrosetoexpresssimilarlywarmsentiments.The Nixons and Pahlavis left for the airport by convoy. As their stately

procession passed the halls of Tehran University, students ran out and hurledrocks from an embankment overlooking the highway. The lead vehicles,including theNixons’, sped off.But others, includingAlam,weren’t so luckyand their vehicles were pelted with debris. There was to be no dignified exitfromIranforRichardNixon.TheSpiritof’76liftedofffromTehran’sMehrabadAirportat2:06P.M.onWednesday,May31,boundforWarsaw.TheAmericandelegationdidn’t leaveempty-handed.TheShahhad instructedCourtMinisterAlam to “ensure that Nixon and his entourage, especially Kissinger, arepresentedwithgiftstrulyworthyoftheoccasion.”Thenextday,AlamfoundtheShah in a cheerful mood: President Nixon “seems to have agreed to everyrequest that was put to him,” wrote Alam in his diary. This was not anexaggeration:accordingtoaDefenseDept.documentatsomepointduringthetripPresidentNixon“agreedtosellU.S.nuclearpowerplantsandfuelstoIran.”

ALLWEAPONSSHORTOFTHEATOMICBOMB

Fourdayslater,onJune5,1972,MajorGeneralEllisWilliamson,HamiltonTwitchell’ssuccessorastheheadoftheAmericanmilitarymissioninIran,wassummonedtoNiavaranPalace.HefoundtheShahinanebullientmood.Itwasfrom a foreign head of state, and not from his own government, thatGeneralWilliamson learned the sensational news: “Iran will get all availablesophisticatedweaponsshortoftheatomicbomb.”WilliamsonwasalsotoldthattheShahhadbeenpromisedenoughbluesuitersfor“Irantoadvanceitsarmedforces as rapidly as possible.” In his talks with the Shah, Nixon had secretlyagreed to match the level of American military technicians in Iran with thenumberofSoviettechnicianshelpingouttheEgyptians—whichmeanttheShahexpected the Pentagon to supply Iran with as many as twenty thousandpersonnel! Nixon’s visit had given the Shah “complete satisfaction” and

provided “a great psychological boost to this part of the world.” RelationsbetweenIranandtheUnitedStates“werethebesttheyhaveeverbeen.”The next shock for General Williamson came when the Iranian air force

presented him with plans that called for U.S. military personnel to occupy“operationalpositions in Iranianunits.”TheU.S.embassy inTehranasked theWhiteHouse to clarify its position.Had the president promised the Shah thatAmericanGIswould“operatesomecombatelementsof theIranianforces”?Itassumedtherehadbeenamisunderstanding.TheIranianplanswereoutlandish.The congressional implicationswere obvious and so toowas the risk that theUnitedStateswouldbedrawnintoaregionalconflict.Thewholeideaviolatedthe spirit of the Nixon Doctrine. America’s new ambassador to Iran, JosephFarland,askedKissingerforguidanceonthematter.HeandKissingerwerewellacquainted.AsambassadortoPakistan,FarlandhadhelpedfacilitateKissinger’ssecretdiplomaticinitiativestoCommunistChina.FarlandwasaformeragentintheFederalBureauof Investigation andhadworked closelywith theCIAandRichardHelmsduringpreviousassignmentsabroad.Kissinger’sreplyhintedatthe enormity of the deals cooked up byNixon and the Shah.He conceded toFarlandthat“thisisoneofthosecaseswherethecommitmentmadewasabroadonewithoutspecificreferencetothekindofdetailswemustnowaddress.”Yetwhile itwas the case thatUnited Statesmilitary personnelwould not take onoperationalroleswiththeIranianarmedforces,“itwasveryimportantthatthisnot be handled in such a way as to dissipate the advantage gained from thePresident’sveryforthcomingresponse.”ItwasinthisconfusedatmospherethatKissingeronJune15,1972,informed

thesecretariesofStateandDefensethatNixon“waswillinginprinciple”tosellF-14 and F-15 aircraft and laser-guided bombs to Iran, and that theadministration was assigning “an increased number of uniformed militarytechnicians from the US services.” Kissinger neglected to mention thecommitmenttopegthelevelofAmericanbluesuitersinIranwiththenumberofSoviettechniciansinEgypt.Still,thememolandedonDefenseSecretaryLaird’sdesklikearoundofshrapnel.“WOW!”someonescrawledinthemargin.Eventsweremoving rapidly on another front too. In early July,Nixonsent

JohnConnally,theformergovernorofTexasandhispreferredsuccessorintheWhite House, to meet privately with the Shah in Tehran. Connally was alsoplaying a crucial role in helping to manage and raise money for Nixon’sreelectioncampaign.HetoldtheShahthatthepresidenthadinstructedtheCIAtostartfunnelingweaponstoKurdishguerrillasfightingthegovernmentofIraq.Thepresidentwas fulfilling one of the secret deals the two leaders had cut inTehransixweeksearlier.TheKurdishmissionwasregardedassosensitivethat

membersofthe40Committee, theadministration’shigh-levelpanelofexpertswhoauthorized covert operations,werepresentedwith a single pieceof paperthatcontainedaone-paragraphdescriptionoftheventure,whichtheywereaskedto initial. Their opinions were not solicited. The Shah had lobbied Nixon forseveral years to arm the Kurds. Ambassador MacArthur and the CIA hadpreviouslyexpressed reservationsabout thewisdomof“encouraging separatistaspirations” in Iraq. Such an adventure, they cautioned, might provoke theSovietstomeddleintheregion.“Furthermore,theroadisopen-endedandifwebegin and then decide to withdraw there might be misinterpretations of ourreasons which could adversely affect our relations with [our ally].” When asenior CIA official—most likely Director Helms—was asked by the 40Committee why the agency’s “negative views were not presented moreforcefully,” he replied that “the Committeemust realize that CIAwas told toprepare a paper on ‘how’ the project could be done, not ‘whether’ the projectcouldbedone.”FromTehranonJuly12,Farlandback-channeledKissinger tocomplain that

GeneralWilliamson “has hesitated to push US armament sales since there isdefinitelyapointofviewincertainechelonsUSG[UnitedStatesGovernment]toeffectthatweshoulddothatwhichispossibletopreventIran,inourstudiedwisdom, from over-buying.” In Farland’s opinion, “as long as Iran canfinancially affordguns andbutter there isno reason forus to lose themarket,particularlywhenviewedover theredinkonourbalanceofpayments ledger.”TheShah’srecentdecisiontoorderfromGreatBritaineighthundredtanksatacost of $250million was the result ofWilliamson’s reckless caution. FarlandaskedthatWilliamsonbe“counseledaccordingly.”TheShahalsokeptupthepressureontheWhiteHouse.Hewantedtoknow

whenNixonwouldfollowthroughonhisprivatecommitmenttoliftrestrictionsonallU.S.armssalestoIran.“AndwhataboutKissinger?”theShahremindedAlam. “He told [Prime Minister Hoveyda] that Nixon would have given meeveryweaponinAmericaifonlyI’daskedforit.”The National Security Council official who dealt with Iran was Harold

Saunders. He proposed a straightforward solution to the squabble betweenFarland andWilliamson. The administration, advised Saunders, “should leavedecisions onwhat to buy to theGovernment of Iran and confine ourselves toassuringthattheIranianGovernmenthasgoodtechnicaladvicefromourpeopleonthecapabilitiesof theequipment involved.”Saundershad transferred to theNSCfromtheCIAintheearly1960s.HehadaccompaniedKissingertoTehranand was sensitive to the linkages between economic development and armspurchases. “The decision to let the Shah buy what the Shah wanted or the

decisionnot tohave the[economic]review,allof thatwasvirtuallyfouryearsbehind,threeyearsbehindusinanycase,”helaterrecalled.“Iseetheso-called‘Blank Check Talk’ as simply a ratification of a posture that had long sincecrystalized.” There was truth in this. The speed with which Kissinger tookSaunders’srecommendationandadopteditasbroad-strokeadministrationpolicysuggeststhathetoosawunrestrictedarmssalestoIranasthelogicalnextstepandnotasaradicaldeparturefromexistingpolicy.ItcertainlyreflectedNixon’sfeelings on the matter. But Kissinger went a step further when he instructedFarlandinaJuly15cable“toencouragepurchaseofU.S.equipment.”Hewasplacinghisowndiplomatsintheroleofpeddlingweapons.The floodgates had opened. Two days later, Ambassador Farland met with

CourtMinisterAlamandapprovedthesaleofweaponsanditemstheShahhadpreviously requested, includingnewLockheed10-12s,F-15s, andF-111s.Thelast twotypesofaircraftwerestill in thedesignstages.TheWhiteHousealsoagreed to let Iran’s national airline begin flights to LosAngeles, the home ofmanyIranianexpatriatesandcriticsofthePahlaviregime.Nixon’spolicyonarmssalestoIranwasformallyenshrinedonJuly25,1972,

whenKissingersentacrisplywordedpresidentialdirective tosecretariesLairdandRogers,confirmingthesaleofF-14andF-15aircraft, laser-guidedbombs,and sending blue suiters to Iran. To ram home his point, Kissinger told bothsecretariesthatfromnowon,“ingeneral,decisionsontheacquisitionofmilitaryequipment shouldbe leftprimarily to thegovernmentof Iran,”and that itwasnowup to the Shah and not them to decidewhether or not hewanted to buy“certain equipment.” Kissinger left them an inch of wiggle room when heinserted the words “in general” and “primarily” in his original directive. Butthere was no doubt in anyone’s mind about what had just happened: theTwitchell Doctrine had been euthanized. The White House directive “prettymuchgives us carte blanche towhistle up businesswith defense contractors,”exultedaStateDepartmentofficial.Anotherdiplomatleftacopyoftheedictinhis office safe in a front drawer so he could refer to it and use it as a policyguide.Iran’seconomicindicatorswerenolongerfactorstobetakenintoaccountby

theUnitedStateswhensellingarmstoIran.TheShahknewwhatwasbestforhiscountry’snational interestandtheadministrationwouldgetoutof theway.Theairofunrealitysurroundingadministrationpolicywasconfirmedthatsamemonth when Egypt’s president Anwar al-Sadat publicly expelled all twentythousand Soviet technicians from Egypt and ripped up the Moscow-Cairofriendship treaty.Sadat’sboldmoveshouldhavenullified the logicbehind theShah’sinsistencethatlevelsofAmericanpersonnelinIranbepeggedtothoseof

theSovietsinEgypt.Buttheypouredinregardless.

WEMUSTWAITFORNIXONTOMAKETHENEXTMOVE

The last week of July 1972 was one of frenetic deal making—andconsiderable intrigue—inWashingtonandTehran.OnWednesday, July26, thesamedayEmbassyTehranlearnedoftheShah’sblankchecktobuyarms,WhiteHouse aide John Ehrlichman was reassuring the president’s personal lawyer,HerbertKalmbach,ofthelegalityofraisinghushmoney.Fiveweeksearlier,intheearlymorninghoursofJune17,fivemenhadbeenarrestedforbreakingintotheofficesof theDemocraticNationalCommitteein theWatergatecomplexinWashington.Policediscoveredthatthemen,whohadbeentryingtowiretaptheofficesoftheDNC,wereaffiliatedwithPresidentNixon’sreelectioncampaign.Whiletheyhuntedforcluestothemotivesoftheburglars,Nixonandhisaideswere engaged in an effort to shut down the investigation lest it reveal theircomplicity in this and other acts of political espionage and corruption.Ehrlichman toldKalmbach that hundredsof thousandsof dollarswasurgentlyneededtopaythedefendants’legalfeesand“otherexpenses.”Hewarnedthatifthepresslearnedaboutthesolicitationsandsuitcasesfullofcash,“They’dhaveourheadsintheirlaps.”On Thursday, July 27, Court Minister Asadollah Alam was in Birjand

ProvincewithAmbassadorJosephFarlandontheseconddayofathree-daytourof military facilities. During a six-hour aerial inspection, the subject of theupcomingAmericanpresidential election arose.He recorded in his diarywhathappenednext:“Turningtothepracticalitiesoftheelection,theambassadorputarequesttomethatevenfiftyyearsfromnowIcouldneverdivulgeforfearitwouldirreparablydamagerelationsbetweenourtwocountries.WhileIdarenotsetdownhisrequestinblackandwhite,IcansaythatitdemonstratestheextenttowhichNixon iswilling to relyonHis ImperialMajesty.”Alampromised torelayNixon’srequesttotheShah.Back inWashingtononFriday, July28—andwhileAlamandFarlandwere

stillinBirjand—GovernorNelsonRockefellerofNewYorkplacedatelephonecall toKissinger at 2:58 P.M. Rockefeller andKissinger enjoyed a particularlyclose relationship. “Rocky” as he was popularly known, was the most high-profile of the heirs to the Rockefeller Standard Oil fortune and a perennialcandidateforthepresidency.HeenjoyedwarmrelationswiththePahlavifamilyandregardedKissingerashispersonalprotégé,someonehecouldcallontoget

thingsdone.RockefellerexplainedtoKissingerthatanimportantlocaldefensecontractor,

GrummanCorporation,wouldgobankruptunless itwonabignewcontract tomanufacturetheproposednewF-14jetfighter,along-rangeaircraftsuitableforuseonaircraftcarriers.LongIsland–basedGrummanhadjustlostthecontracttobuild the space shuttle.Without an injectionofnewcash itmightnot survive.RockefellerknewthattheShahhadexpressedaninterestinpurchasing“someF-14s”fromtheUnitedStatesbutthathewasmainlyinterestedinpurchasingthreesquadronsofF-15s.TheShahdidn’thaveanyaircraftcarriers,sotheF-14madenologicalsenseasaprioritypurchasefortheIranianimperialairforce,butnomatter.RockefellerwantedKissinger toask theShahtoorderenoughF-14s tomaketheaircraftcommerciallyviableformassproduction.ThenhewantedtheShah to select Grumman as Iran’s contractor of choice. Rockefeller wasessentially asking the national security adviser to rig a defense contract. Heexplained that Defense Secretary Laird wanted to kill the plane but AdmiralElmoZumwalt of the JointChiefswas in favor of the F-14 andwasworkingslylybehindLaird’sback toget it.TheShah’s interventioncouldbecrucial toswingingthefightZumwalt’sway.Rockefeller also explained that saving Grumman was essential to carrying

NewYorkstate for theNixon-Agnewticket inNovemberandproppinguphisstate’s faltering economy: “Well Henry this could save both politically andfinanciallyourwholeLongIsland–NewYorkareaanditwouldbe...savethe,thecompany.”WhenKissingerrepliedthathetoofavoredthedeal,Rockefellerwas ebullient: “Oh God, if this comes through now it would be the hottest,greatestthingandwouldsavethecompanyfrombankruptcyandalsosavetheF-14whichotherwiseI’mafraidcanbelost.”The next day was Saturday, July 29. At 1:45 P.M. Kissinger phoned

Rockefellertogivehimthegoodnews:“I’velookedintothatsituationandwehavetoldDefensethattheyshouldgoaheadandtalktotheIranians,ofcourseitdependsontheIranianswhethertheywanttobuyit,butwehavetakenawaytheroadblock.”Kissingerwasbeingdisingenuous.ThenotionthattheShahmightnotbereceptivetoanoffertobuymoreF-14s—evenifhedidn’tneedthem—was absurd. It was like offering a nightcap to an alcoholic. Kissinger andRockefellerwereplayingtotheShah’sworstinstinctsandmostself-destructiveimpulses, endangering the Iranian economy to further Rockefeller’s politicalends. “[The Shah] had no control over his own appetites for moderntechnology,” former Secretary of Defense James Schlesinger later ruefullyobserved.“Hehadnocapacitytoresistthosesales.”Kissinger told Rockefeller that he would “back-channel our ambassador,”

whichmeantaskingJosephFarlandtohaveaquietwordonthesidewithAlam.As the Shah’s most trusted aide at court, Alam was the Shah’s preferredintermediarywithAmericanambassadors. Itwasmostconvenient thatFarlandwaswithAlaminBirjandatthatverymoment.Alsoon July29,Alam flew toNowshar tobrief theShah.The entry inhis

diaryrecordsthathemadethetriptorelayNixon’sresponseandthattheShah,whenheheard it, gavehis approvalon the spot.Thebackchannels continueduntilatleastAugust14.Thenthetrailgoescold.Whatarewe tomakeof the summer’s tumbleofevents?FarlandandAlam

discussedNixon’selectioncampaign in the sameseventy-two-hourperiod thatKissinger back-channeled Tehran offering the F-14 contract—a deal that asRockefeller noted had important political overtones. Rockefeller had toldKissingerthatanorderfromTehrantobuy$500millionworthofaircraftwouldsave the nation’s fifth largest defense contractor from bankruptcy, help theeconomyofLongIsland,aRepublicanbastion,andbolstertheRepublicaneffortto carry New York in the November election. Grumman had also beenapproachedin1972bytheNixoncampaigntocoughupamilliondollarstohelpthepresidentwinreelection.Basedontheevidenceathand,themostplausibleexplanationforAlam’smysteriousdiaryentriesrelates to the jointeffort tofixthe F-14 contract to everyone’s advantage. It is more than likely that eitherKissinger or Farland hyped the deal’s political significance, perhaps implyingthatwithoutitthepresident’sreelectioneffortcouldbeinjeopardywhen,infact,Nixonwasvirtuallyguaranteeda landslidewinoverhisDemocraticopponent.His Imperial Majesty eventually placed orders for eighty F-14 fighters fromGrummantotaling$2billion. It shouldbe remembered that Iran’soil revenuesforthefiscalyear1972–73cameto$2.8billion.ThestraintheordersplacedonIran’seconomywasincalculable.Yetonecannot ignore thepossibility thatFarlandapproachedAlamtoaska

favorofadifferentsort,perhapsinadditiontotheF-14deal.Foryearsrumorshave swirled that the Shah’s oil money was in some way implicated in theWatergateaffairandNixon’s1972presidentialelectioncampaign.WhileFarlandandAlamwereontheirtriptoBirjand,EhrlichmanandHerbertKalmbachweretalking about the need to quickly come up with hush money to keep theWatergatedefendantsquiet.TheWatergatebreak-inhadbeenfinancedbymoneyrerouted from a secret $10 million Nixon presidential campaign fund andlaundered throughabank inMexicoCity.Themoney trail southof theborderwas dubbed Nixon’s “Mexican laundry.” Bank records for Watergate burglarBernardBarker,aformeremployeeoftheCIAandaleadplannerinthebotched1961 Bay of Pigs invasion of Cuba, contained four cashier’s checks worth

$89,000drawnfromtheBancoInternacionalinMexicoCity.WithindaysoftheWatergatebreak-intheWhiteHouseaggressivelymovedtoshutdowntheFBIinvestigation of the Mexican money trail. White House aides H. R. “Bob”HaldemanandEhrlichmancalledCIAdirectorHelms to theWhiteHouseandtoldhimthatitwasthepresident’s“wish”thattheCIAstoptheFBI’sspadeworkinMexicoCity, but didn’t saywhy. TheywantedHelms to lie and concoct acover story suggesting that the bureau’s probe would endanger one of hisagency’sundercoveroperations.ColumnistJackAndersonwasclosetoWatergateburglarFrankSturgis,even

to thepointofvouching forhim incourtwhen theself-proclaimed“soldieroffortune”wasarrestedandarraigned following thebreak-in. In themonths thatfollowed,Andersonbegan receiving tip-offs that Iranianmoneywas somehowconnectedtoNixon’sMexicanslushfund.Twodisgruntledformerhigh-rankingIraniangovernmentofficialstoldAndersonthat“theShahhadroutedhundredsof thousands of dollars to the Nixon campaign.” He started digging. SwissbankingsourcesconfirmedtoAndersonthat“theShahhadtransferredmorethan$1million from his personal, numbered accounts in the SchweizerischeBankGesellschaft to the Banco de Longres yMexico inMexico City.” This madesensebecauseitwasknownthattheNixoncampaigndiscourageddonationsoflessthanamilliondollars.Senateinvestigatorsprobedtoo,buttheIraniananglewasneverapriorityforthemand,likeAnderson,despitetheirbesteffortstheywerenotabletocomeupwithadocumentimplicatingtheShahinNixon’sdirtypool. But suspicions lingered that the full truth about the Shah’s possibleinvolvement in Watergate had yet to emerge. “It’s all very mysterious,” oneinvestigatortoldAnderson.Later, in1974,Andersongleefully recalled thathe andUnitedFeatures, the

wire service that syndicated his column, came under intense pressure fromIraniandiplomatsand fromWilliamRogers,Nixon’s former secretaryof state,whose law firmnowrepresented theShah, tobackoff the storyentirely. “Ourinquiries, includingoverseascalls toTeheran,Geneva,Bonn,MexicoCityandother faraway places, have got the Iranians in a dither,” wrote Anderson.“Suddenly,wefoundIranianofficialswereexpectingourcallsbeforewemadethem.”Anderson enjoyed such adventures.At one point in 1972CIAdirectorHelms assigned sixteen of his men to spy on the journalist and his team ofinvestigativereporters,even invitingAnderson to lunch toaskhimtobackoffone particular line of inquiry. The CIA’s surveillance operation, OperationMudhen, ended only when Anderson turned the tables on the agents anddispatchedhisnineyoungchildrenarmedwithcamerastosnaptheirpictures.Iran’sforeignminister in1972wasAbbasAliKhalatbary, itsambassador to

WashingtonAmirAslanAfshar.NeithermanwaspartoftheShah’sinnercircle.Ardeshir Zahedi was insistent that the Shah’s money never influenced anAmericanpresidentialelectionwhileheservedaseitherambassadororforeignminister.YetZahedi’sabsence from thepolitical scene in1972coincidedwiththemost intense dealmaking betweenNixon and the Shah. If paymentsweremade,Zahediwouldlikelyhavebeenkeptinthedark.Alam’sdiaryrecordsthathe andAmbassador Farland served as the back channel onmatters related toNixon’s reelection. When Anderson’s allegations surfaced two years later,ZahediwasbackinWashingtonforhissecondtermasIranianambassador.HeaskedRogerstosuethecolumnistbutdroppedthematterwhenRogersrepliedthat theShahwouldhavetoappearasawitnessfor theprosecution.AndersonmistakenlybelievedthattheiratephonecallsfromIranianembassyofficialsandfromRogers’sofficeat the timewereevidenceof theShah’sguilt; in fact, thecallsweretheresultofZahedi’sefforttoclearhisname.Wewillmostlikelyneverknowthetruthofthematter.Inanyevent,therewas

noquestionaboutmotive.TheWatergatebreak-inshowedthatwhenitcametopoliticking,RichardNixonhadnoscruples.“ThePresident’spreoccupationwiththeelectionfrightensme,”chairmanoftheFederalReserveArthurBurnswroteinhisjournal.“Isthereanythingthathewouldnotdotofurtherhisreelection?Iamlosingfaithinhim,andmyheartissickandsad.”IfNixondidneedtohustleupsomefastcashinthelastweekofJuly1972,noquestionsasked,hehadtheperfect money mule in Ambassador Farland. Farland had already proven hisvalueanddiscretionbyhandlingNixonandKissinger’ssensitiveback-channelcommunications during the opening to China. Farland’s record in Tehranhighlighted the extent to which he dealt directly with Kissinger, the man towhom he owed his prestigious appointment. A telephone transcript fromFebruary1972recordsKissinger’ssenseofobligation:“WehavetofindFarlandsomething.HehelpedusonChinaandhadaroughtimeofitandwepromisedtoget him out of there.” Farlandwas the perfect appointee to Tehran during anelectionyear.YearslateraformercolleagueapproachedhimandaskedhimwhathehaddiscussedwithAsadollahAlamduringtheirtriptoBirjand.Heteasinglyreplied,“Mylipsaresealed.”

NOWISTIMETOCASHINCREDIT

NixonandKissingerwereconfidentthattheyhadbuiltupsubstantialcreditwiththeirpartnerinTehran.TheyhadgiventheShahthego-aheadtoraiseoilprices.TheyhadliftedrestrictionsonarmssalesandagreedtoprovidetheShah

with his wish list of laser-guided bombs, missiles, fighter jets, airliners, bluesuiters,andCIAsupportfortheinsurgencyinIraq.TheF-14contractwashisforthe taking. They had even thrown in the lucrative commuter air corridorservicingTehranwithLosAngeles,wheremany Iranianexpatriates andexileslived.YetNixonandKissingerhadagainunderestimatedtheShah.OnOctober20,1972,seventeendaysbeforethepresidentialelection,Nixon

and Kissinger decided to cash in their chips. Ambassador Farland received anoticefromtheWhiteHouseviatheStateDepartmentinstructinghimtoseekanimmediateaudiencewiththeShah.Hewastoldto“indicateyouare[acting]oninstructions fromPresident.”Thecable explained thatPresidentNixonwantedtheShah’shelponamatterofthe“highesturgency”involvingKissinger’ssecretdiplomaticefforttobringthewarinVietnamtoanendbeforeElectionDay.AdayearlierKissingerhadpresentedAmerica’sallyinthewar,PresidentNguyenVan Thieu of South Vietnam, with a fait accompli. Kissinger had secretlynegotiatedapeacesettlementwithNorthVietnambehindThieu’sback.Itcalledfor Communist guerrillas to remain in the South after U.S. troops had gonehome. “I wanted to punch Kissinger in the mouth,” Thieu recalled of themomentwhen the termsof thedealwereexplained tohim.Kissingerhad justwheeled the equivalent of the Trojan Horse into downtown Saigon. WhenKissinger’sownstaffraiseddoubtsaboutthemoralityofthedeal,hebellowedatthem,“Youdon’tunderstand.Iwanttomeettheirterms.Iwanttoendthiswarbeforetheelection.Itcanbedone,anditwillbedone.”Tomake the terms of the settlementmore palatable to President Thieu, the

WhiteHousehurriedlylaunchedaworldwideundercoveroperationtoairlift$2billionworthofmilitary supplies tobolsterSouthVietnam’sdefensesbeforeapeace treaty freezing troop and armament levels took effect. The Shah wasquietly approached to participate inOperation Enhance Pluswith the promisethat his donated equipmentwould be replacedwithmore advancedweaponryand machinery. The Shah’s role in the enterprise was deemed critical.Kissinger’sbackchannelcalledonthekingtorelinquishhis“entireIranianairforce(90aircraft)ofF-5As.”Itwasanextraordinaryrequest.TheaircraftweretobeimmediatelydisassembledanddeliveredtoSouthVietnam.Kissingersaidherecognizedthe“unprecedentednature[of]thisrequest,whichisdoneonlyforreasonsofunparalleledimportance.”Heinsistedthatheneededananswerfromthepalacewithintwenty-fourhours.ToAmbassadorFarland, theWhiteHousedispensedwiththeusualdiplomaticlanguageandbluntlycoucheditsrequestinterms that leftnopossible roomformisinterpretation:“Nowis time tocash incredit we have built up with Iranians. We cannot guarantee that Vietnamsettlementwillbeassuredby thismove,butwithout itprospects forpeaceare

substantiallydimmer.”TheShah, sensing thathehad theupperhand,decided toplayhardball.He

insistedthathetoowantedtohelpbringaboutpeaceinSoutheastAsia.ButhewaspreparedtoturnovertoNixononlytwosquadronsofF-5Aaircraft,atotalof thirty-twoplanes.Heexplained toFarland that taking toomany jet fightersoutofservicewouldconstraintheIranianairforce’snewtrainingprogram.Ascompensationhedemanded“accelerateddeliveryofmilitaryequipment”suchasnewF-5AandF-4Aaircraft,the“rapidapprovalandassignment”oftechniciansto Iran, and a commitment by the United States to increase the number oftrainingslotsopentoIranianpilots.According to Kissinger’s biographer Walter Isaacson, who interviewed the

formerpresident,Nixonpreferredtokeepthepeaceprocessonthebackburneruntil the electionwasout of theway.ButOperationEnhancePluswas in fullswing and Kissinger kept pushing things along. On October 25, to Nixon’ssurpriseandfury,KissingerleakedtoaNewYorkTimesreporterthenewsthathehad negotiated the terms of a cease-fire in Southeast Asia. The next dayKissingerstoodbeforeabankof televisioncamerasanddramaticallydeclared:“We believe that peace is at hand.We believe that an agreement is in sight.”Newsofthepeacedealelectrifiedthecountry,ralliedthestockmarket,andsentNixon’spollnumberssoaring.TheAmericanelectoratereactedasthoughadealhadfinallybeenreachedwheninfactithadnot.PresidentThieu,weepinginhispalace,continuedtoholdoutforabetterdealandsqueezedWashingtonformoreconcessions.OnOctober30,justaweekbeforetheelection,Farlandwastoldtogobackto

the palace to ask for an additional sixteen aircraft. The ambassador’smeetingwiththeShahtookplaceat3:00P.M.thenextday.TheShahrepeatedhisinitialconcerns about disrupting his air force training program and then added thathandingovermoreplaneswouldcompromisethedefenseofIranianairspaceandleavethecountryvulnerabletoanIraqipreemptivestrike.Farlandtookthisasahintthatheneededtosweetenthepot.WhenheexitedtheShah’sstudyheleftbehind a piece of paper listing the goodies the U.S. was prepared to deliver,including a promise that “Iran’s military support needs will be given mostexpeditioushandling.”TheambassadorcabledWashingtonthat“wewillhavetooffer[theShah]somethingmoreattractive”towinhiscooperation....Believeweshouldmakeeveryeffort to reciprocateShah’sgenerousofferwithequallygenerous credit for transferring aircraft and special measure to deliverreplacementaircraftasearlyaspossible.”ThreedozenaircrafthadalreadybeenshippedtoSaigon,andthedeliveryof

thefinalshipmentofF-5AsfromIranwasstillbeingnegotiatedinthefirstweek

of November when the Defense Department inadvertently went public anddiscloseddetailsofOperationEnhancePlus.TheShahwasincensed—orsosaidAmbassadorFarland inadispatch to theStateDepartment.Nodoubt theShahwasfuriousthathisconfidencehadbeenviolated.ButitwasalsotruethatCourtMinisterAlamnevermissedanopportunitytoputthewinduptheambassador’sback. He and the Shah used the leak as an opportunity to extract even moreconcessionsfromNixon.ButFarlandwasconvincedoftheShah’sdistressandfiredoffanemotionalcabledeclaringthatthe“atmosphereandspiritofgoodwillandcooperationgeneratedby[the]Shah’sforthcomingresponsetoourrequest”had been “badly shattered.” The Shah’s confidence had been violated by this“incrediblegoof.”Kissinger’s peace ploy helped catapult Nixon to his smashing reelection

victory on November 7, 1972. In the meantime, South Vietnam suddenlyacquired theworld’s fourth largest air force.With the electionout of theway,UnderSecretaryofStateAlexisJohnsongavehisambassadorinTehranthebackof his hand. He dismissed as bogus the Shah’s argument that taking sixteenadditional planes out of service would have compromised Iran’s air defensesagainst Iraq: the Pentagon had already studied the matter before placing therequest.JohnsonpointedlyremindedhisambassadorthatIraqwashardlylikelytoattackIranwhenitsownKurdishminoritywasinopenrebellionthankstotheCIA. Other factors constraining a possible Iraqi attack included infightingbetween Iraqi strongman Saddam Hussein and his rivals, financial problemsbrought on by falling oil revenues, and a dispute between Iraq and Syria.Johnson assured Farland that the United States would appease the Shah byspeedingup thedeliveryofnewF-5EsandF-4Esandprovidingmore trainingslotsforIranianpilots.Inaddition,theambassadorwasgivenpermissiontotellthe Shah that the administration would sell Maverick missiles to Iran in thespringof1974eventhoughitadverselyimpactedtheU.S.AirForceandNATO.The Shah would also be given discounts on “several sales previouslyconsummated”totheamountof$16,564,000.Ambassador Farland let the Shah know that after Nixon was sworn to a

secondterm,hewould“doeverythingthatwerequire,”althoughhewouldhavetobecarefulnottoantagonizetheSenateForeignRelationsCommittee,whosechairman, Senator J. William Fulbright, had taken a keen interest in energypolicyandMiddleEastaffairs.

ChapterThreeMARITALVOWS

“Wewelcomeyouhereasnotonlyanoldfriend,asaprogressiveleaderofyourownpeople,butasaworldstatesmanofthefirstrank,”

—PresidentRichardNixon,1973

“Nixonhastheaudacitytotellmetodonothingintheinterestsofmycountry until he dictates where that interest lies. . . . I say to hell withspecialrelations.”

—TheShah,1973

IT’SNOTSOMETHINGIHAVETHESLIGHTESTCOMPETENCEIN

Inthesummerof1972,afewweeksafterNixon’smeetingwiththeShahinTehran,theSaudismadeitcleartheywantedtorenegotiatethetermsoftheoilproductionmonopolyenjoyedbyAramco,theArabianAmericanOilCompany—Saudi Arabia’s version of Iran’s oil consortium—as an alternative tonationalizing its operations outright. King Faisal wanted the oil companies toagree to joint ownership and to commit to surrendering control of theirconcession within ten years. The Saudis and Aramco’s American partnercompanies began discussing the terms of a new contract. The outcome of thenegotiationswasboundtohaveimportantimplicationsforAmerica’slong-termenergy needs and national security. A strategic energy alliance between theUnitedStatesandSaudiArabiawasalreadytakingshape.Americanoil imports fromSaudiArabia totaled$13.5million in1970, rose

sixfold in 1971 to $76.8 million, and surpassed $79 million in the first sixmonthsof1972.Bythefallof1973SaudiArabiawouldbe“theswingproducerfortheentireworld,”wroteoilindustryanalystDanielYergin,accountingfor21percentofglobaloilproductionandmakingitthelargestexporterofcrudeintheworld.LiketheShahofIran,KingFaisalofSaudiArabialookedtoWashington

formilitaryaidandassurancesofsupportagainstunfriendlyregimes inLibya,Egypt,andIraq.Administration officials took note that Faisal rejected the use of oil as a

potential tool for political blackmail and favored onlymodest increases in thepriceofoil.“Oilisn’taweapon,”thekinginsisted.“Itisaneconomicforcewithwhich we can buy weapons which can be used in battle.” Saudi minister ofpetroleumandmineralresourcesZakiYamaniexplainedhisgovernment’sviewonoilpricesthisway:“Mymainworrywasthatifweincreasedthepriceofoiltoomuchwewouldmerelyreducedemandforitinthefuture.Ihavealwaysfeltpriceincreasesshouldcomeinsmalldoses.Afterall,theeconomicstabilityandthepoliticalstabilityofthewestisveryimportanttous.. . .Suddenandsharpincreasesdisturbtheeconomyofacountry.Gradualincreasescanbeabsorbed.It’s very dangerous for everyone involved when price increases come as ashock.”The Saudis were entering the negotiations with Aramco from a position of

strength.Demand for oilwas surging, priceswere tickingupward, and energymarketshadneverbeentighter.TheoilcompaniesappealedtotheWhiteHouseforassistance,confidentintheknowledgethattheadministrationunderstoodtheimplications if theywere steamrolled.Their trust in thepresident andhismenturnedout tobemisplaced. In1972every facetofWhiteHousedomestic andforeign policy was subordinated to the greater goal of securing a landslideelectionvictoryinNovember.TheNixonadministrationlackedeventhebarestsemblance of a national energy policy—or a foreign economic policy for thatmatter.“Fuelpolicyemanatesfromeverywhere,fromtheBureauofMines,fromtheAtomicEnergyCommission,fromtheEnvironmentalProtectionAgency—from 64 government agencies in all,” reported Newsweek. None of the menaround the president had a sound grasp of petroleum economics or theimplicationsofAmerica’sgrowingdependencyonMiddleEastoil.Chairmanofthe Federal Reserve Arthur Burns described a meeting at the White Houseattended by Kissinger, Connally, and George Shultz, Nixon’s director of theOffice of Management and Budget. “Here we were,” Burns confided in hisdiary: “Kissinger, a brilliant political analyst, but admittedly ignorant ofeconomics; Connally, a thoroughly confused politician . . . Shultz, a no lessconfused amateur economist; I, the only one therewith any knowledge of thesubject,butevenInotarealexpertonsomeaspectsoftheintricateinternationalproblem!What a way to reach decisions! No one from the State Departmentthere,notechnicalexpertstoaidus!”Nixonwasconvincedthathisnationalsecurityadviserlackedtheexpertiseto

grapple with oil policy and energy security. When the president hired Peter

Petersonashisspecialassistantforinternationaleconomicshewarnedhimthateconomicswas “a field Kissinger knew nothing about,” and the two advisersrepeatedly clashed over policy. “Peterson, that’s just a minor economicconsideration,” Kissinger lectured his colleague on one occasion, to whichPeterson replied, “Henry, for you that’s a redundancy because you see everyeconomicconsiderationasminor.”KissingerhadmadeitclearheexpectedtoberewardedwiththepostofsecretaryofstateinNixon’ssecondterm.Nixonwaswary.“IdidnotreallywanttomakeHenrysecretaryofstate,”helaterconceded.“IfeltwhatweneededatStatewassomeonewitheconomicexpertise.Ithoughtthat Henry had absolutely no competitors when it came to geopolitics, buteconomicsisnothisareaofexpertise.”In addition to acting as a courier between the White House and Niavaran

PalaceontheKurdishinsurgencyinIraq,formerTexasgovernorJohnConnallywasNixon’spointmanontheSaudinegotiationswithAramco.Inthesecondofthree volumes of memoir, Years of Upheaval, Kissinger denied any directinvolvement in the showdown between the Saudi government and the oilcompanies.“Ihadnotbeeninvolvedinthenegotiationbutattherequestofthecompanies I had a long talk”with a Saudi government envoy, he laterwrote.Kissinger was being too modest by far. Transcripts of Kissinger’s telephoneconversationsrevealthatheandConnallyweredeeplyinvolvedinanegotiatedsettlement that not only cost U.S. oil companies their strategic toehold in theSaudi oil industry but also hundreds of millions of dollars in financialcompensation.Theirmeddlingledtoablunderofepicproportions.OnAugust2,1972,ConnallyphonedKissingertodescribeaconversationhe

hadjusthadwithanenvoysentbyKingFaisal.SaudideputyoilministerPrinceSaudal-FaisalhadarrivedintownlookingforguidancefromtheWhiteHouseon the negotiations with Aramco. “I suggested to Saud that they just holdeverythinginabeyanceuntilaftertheelection,”ConnallytoldKissinger.“Isaid,Nowfrankly,thingshavereachedthepointwherewedon’twanttheAmericanoilcompaniesnegotiatingforeignpolicyforusandIsaidyouandIaredeeplyengaged in foreign policy.” He said he had told Prince Saud that the UnitedStates

hasbeenderelict innotestablishingover theyearsamorespecificoilpolicy and an energy policy, but this President wants to do it and we’regoingtodoit.Butwecan’tdoitinthenexttwoweeks[theSaudishadsetadeadlineforaction]andwedon’twantyoualltotakeanyactionthatwouldset you on a course that would make a confrontation with us inevitablebecausewe’regoingtobeagreat[oil]consumingnation.We’rethelargest

consuming nation in theworld.You’re going to be the largest producingnationintheworld.Youarenow.Nowfranklywedon’twantyoutosetacourse thatmakes it absolutely impossible for us towork and coordinatepolicywithyou.

Aramcowas initiallyprepared tooffer theSaudis a20percentparticipation

deal. The Saudis wanted a full quarter sharewith the promise of an eventualtakeover.Oil executives lobbied theWhiteHouse in search of political cover.They came up short. After tacitly accepting they would have to acquiesce toSaudidemandsforparticipation,thecompaniesrefusedanysettlementdealthatdid not include a generous compensation package. Oil executives warnedKissingerthattheSaudisweretryingtolowballthembutbalkedathisoffertomediate.Kissingerwantedtocontrolthenegotiations.Heregardedtheoilcompaniesas

irritants.OnAugust5,hemadenoefforttohidehisirritationduringaphonecallwiththechairmanofStandardOilofNewJersey,KenJamieson.“I’vesortoflosttrackofwhatitisyoureallywant,”Kissingersaid.JamiesonremindedKissingerthat theoilcompanieshadtobepaidfairlyby

theSaudisfortheirlossesandalsoguaranteedcontinuedaccesstoSaudicrudeproduction:“Whatwewantisreallyadequatecompensationandthenalsosomesecurityonthesupplysideofpetroleum.”“But oncewe’ve said that youwon’t tell us what you have inmind,” said

Kissinger.“Youmeanasfarascompensation?”“Ipersonallycouldn’tcarelessbecauseit’snotsomethingIhavetheslightest

competencein,”Kissingersaiddismissively.Ifhecouldn’tcontrol theprocess,Kissingerpreferredtowashhishandsofitentirely.InaphonecalltoConnally,hegrousedthattheoilcompanies“wereusingustosetsomethingup,andthentheyweregoingfor thehomerun.Thestupidbastards.Theycouldhavegivenmeafigure$100millionhigherthanwhattheyweregoingtosettlefor.”WhatKissingerandConnallyfailedtograspwasthattheSaudishadtimedthe

talkspreciselybecausetheyknewtheWhiteHousewouldbedistractedwiththepresident’s reelection campaign. Denied political cover by the Nixonadministration, Aramco quickly folded. The Saudis secured their 25 percentparticipationdealwiththepromiseof51percentmajoritycontrolin1982.KingFaisalhadwonastunningvictory.TheSaudiking’snegotiatingstrategydifferedfrom the Shah’s, but when it came to outright nationalization and higher oilprices,thetwomonarchshadsimilargoals.Oneplayedthetortoise,theotherthehare. Either way, sooner or laterWestern consumers would pay much higher

pricesatthepump.YearslaterKissingerseverelycriticizedthewayJamiesonandhiscolleagues

handled the negotiations with the Saudis. By bowing to the Saudi terms “thecompanies would become instruments of nations whose interests did notnecessarily parallel our own.”Kissinger’s telephone transcripts tell a differentstory.HeconfidedtoConnallythathehadindeedgivenPrinceSaudthegreenlighttoproceedagainsttheoilcompanies,atthesametimeremindinghimthatitwasnotintheSaudis’interesttopushtheUnitedStatestoofarbecause“iftheyget intoaconfrontationwithus, theywillhave to lean tostateswhose interesthas to be to undermine them.”Kissinger frankly admitted toConnally that “itwasnot inourinterests toimposeasettlementon[theSaudis] thatmadethemcomeoutworse thanother states.Becauseweare interested in their stability.”This was Kissinger’s way of letting King Faisal know that the Nixonadministration understood his need to raise oil revenues to build up theSaudimilitaryand thatheneednot fear retributionby imposing toughconditionsonthecompanies.

THEMANWHOKNEWTOOMUCH

After Nixon won reelection in November 1972, he ordered his cabinetofficers and all presidential appointees to resign. The president intended tosmash the power of theWashington establishment and bend its agencies andbureaucracies to hiswill.CIAdirectorRichardHelms ignored thepresidentialdirective,citingtheprecedentthatdirectorsoftheCIAandFBIshouldremainattheirposts“duringachangeofadministration”—aprovocativestancegiventhatnosuchchangehadoccurred.Helms’sactofdefiancewasanintolerableaffronttoapresidentdetermined to laydown the law.NixonstruckonNovember20.He summoned the director to Camp David, the presidential retreat. “ThePresident rose froma small sofa,we shookhands, and I took a chair,”Helmsrecalled.“Asusual,[Bob]HaldemanassumedhisplaceatthePresident’sleft.”Aftermakingseveral“disjointed,ramblingobservations,”NixontoldHelmsthathe thought “new blood” was required at CIA. It was time to “make somepersonnelchanges.”RichardHelmshad justbeenfiredasdirectorofCentral Intelligence.Nixon

hadneverhiddenhiscontempt for theCIAor itsdirector, thepatriciangoldenboyofthesameclubbyestablishmentthathadneveracceptedNixon’spoliticallegitimacy.HeintendedtoguttheCIAandbreakitsautonomy.“Helmshasgottogo,”Nixonrailedseveralweeksbeforetheelection.“Getridoftheclowns—

cutpersonnelby40percent. Its info isworthless.”Nixon’s lowopinionof theagency went back to his heartbreaking loss in the 1960 election to John F.Kennedy.HestillblamedformerspychiefAllenDullesforthrowingtheelectionKennedy’swaybyleakingintelligencedataclaimingthattheSovietshadpulledaheadoftheUnitedStatesinmissileproduction.Nixonhadneverproducedtheevidencetosupporthisallegationsbuthishatredoftheagencywascertain.Thecontemptwasmutual.“The explanations for [Nixon’s] attitudes, which in some cases seemed to

blind his judgment, is best left to board-certified medical specialists,” Helmslatermemorablyobserved.Helmshadbeenagoodfootsoldier inNixon’swaragainsttheleftathomeandabroad.Hehadcompromisedhisagency’sintegrityand sanctioned lawbreaking when he unleashed the CIA against domesticantiwar protesters. He was not averse to lying to the public and his ownemployeeswhenhedeniedordering surveillanceofAmericancitizens.To thisday his knowledge of the Watergate break-in and cover-up has never beensatisfactorilyexplained.“NixonandHelmshavesomuchoneachother,neitherofthemcanbreathe,”SenatorHowardBakersaid.OnceNixon finished his little speechHelms pointed out that under agency

regulationshewasalreadyobligedtostepdownonhissixtiethbirthdayinfourmonths’ time. He asked if he could stay on until then. By Nixon’s reactionHelmscould tell that thepresidentwas“surprisedat theAgencypolicyandatwhatIhadassumedtobetheindisputablefactofmyage.”Nixonhadjustfiredaman who was about to retire and collect his pension. The blunder wascompoundedwhenHelmshadtocorrectthepresident’sintimationthathewasapolitical appointee and not a career intelligence professionalwith thirty years’experience serving his country. At this point Nixon, a man who by his ownestimation was not “a good butcher,” lost the nerve to finish the job.Backtracking,heagreedHelmscouldstayonuntilMarch.Healsodecidedthathe needed to get Helms out of the country for a while. The director’s wife,Cynthia,laterdescribedthescene:“Suddenly,asifitwereatotallynewidea—DickfeltithadnevercrossedthePresident’smindbefore—Nixonsaid,‘Wouldyouliketobeanambassador?’Dicktoldhimhewouldhavetothinkaboutit.“Ifyouweregoingtobecomeanambassador,wherewouldyouwanttogo?”askedNixon,warmingtotheidea.Thepresidenthadanidea:“WhataboutMoscow?”Helmswas“flooredbytheprospectofwinteringintheMoscowembassy.”TheideaofsendingtheCIAdirectortorepresentWashington’sinterestsintheSovietUnion showed just how little thought the president had given to the proposal:“I’mnotsurehowtheRussiansmightinterpretmybeingsentacrossthelinesasanambassador.”

“That’s a good point,” admitted the president. “But what about some othercountry?”“Tehranmight be amore plausible choice,”Helms answered. “But I’m not

surebut[that]it’stimetoleavegovernmentandtotrysomethingnew.”“Iran sounds good,” said Nixon, who wanted the issue settled. “I’ve got

somethinginmindforJoeFarland.”Nixon’sdecisiontoofferHelmsadiplomaticpostingabroadmayhavebeena

wayofmakingamendsforthecrudemannerofhisdismissal,butitwasalsoasmarttacticalmove.Helmswasthequintessentialcompanymanwhoknewtoomuch.TheWatergatescandalcontinuedtosimmer.Thepresidentknewthathisrequest back in June to have Helms turn off the FBI probe into hisMexicanlaundryhad implicatedbothmen in a criminal cover-up. Itwasbetter tokeepHelmsonhissideandoutofsightratherthanturnhimloosewiththesecretsheknew.Helmstoldhiswife thatevening thathechoseTehranoveraEuropeanpost

because“IranisinanareawheretheinfluencesofbothEastandWestcometobear. With the West’s increasing need for oil and the Shah’s plans formodernization, I think itwouldbechallengingtobe thereat thisextraordinarytime.”Iranwasthemostobviouspostforamanofhisbackgroundandinterests,datingbacktoOperationAjax.UndertheShah’sleadershipIranwasassumingacrucialroleinstabilizingWestAsiaandsecuringAmerica’soillifelinethroughthePersianGulf.ThereweretheCIAlisteningpostsandtheKurdishoperationtoconsider.FromhisperchinTehran,HelmswouldhaveafrontlineseatatthecomingstruggleformasteryofMiddleEasternoil.Besideswhich,theShahwasoneofthefewheadsofstatewhowouldtoleratehostingAmerica’stopspyasitsdiplomatic representative. “Dick and I talked for long hours” before finallydecidingtogo,CynthiaHelmsrecalled.Nixonalsoneededconvincing,itturnedout. Days passed before Haldeman phoned Helms to pass on the president’sblessing:“Hefeelsmorepositivelyaboutitandhereallywantsyoutogo.”HenryKissingerknewnothingaboutanyofthis.Nixonwasstillfuriouswith

Kissinger for prematurely declaring “peace is at hand” in Vietnam themonthbefore. With the peace talks stalled yet again Nixon blamed Kissinger forweakeninghisabilitytogetabetterdealfortheSouthVietnamese.HerefusedtotakehiscallsorinvitehimtoCampDavid.HaldemanandEhrlichmangossipedthatKissingerwasoutofcontrol,thatheblamedthepresidentforthecollapseofthe negotiations, and that he had had a breakdown. “He’s been under care,”HaldemaninformedNixon.“Andhe’sbeendoingsomestrangethings.”ItwasinthisbloodiedatmospherethatKissingerfirstlearnedofamysteriousmeetingatCampDavid’sAspenLodge.Perhapsfearingthathehadbeenthesubjectof

discussion, and frantic to find out what was going on, Kissinger confrontedHelmsatameetingoftheNationalSecurityCouncil.“IwassilentforamomentbecauseIthoughthesurelyknew,andIdidnotwanttoviolateNixon’srequestthatIkeepmydismissaltomyself,”Helmsrecalled,notknowingthatKissingerhadbeendeliberatelykeptinthedark.“Henrybristledabitandsnapped,‘Ifyouwon’ttellme,I’llcallHaldeman.’”Armed with the bare facts, Kissinger phoned Haldeman anyway. Their

conversation on the evening ofNovember 28, 1972, began innocently enoughwith Haldeman complaining that Nixon’s nominee to take over the post ofUnitedStatesambassadortoNATOinBrusselswasdemandinganarrayofperksandprivileges includingcabinet rank, a limousine inBrussels, a secondcar inWashington, and the use of a private plane.Haldeman thought these demandswere“alittlepsycho”andevidenceperhapsthat thenomineewas“powermadorsomething.”Theconversation turnedtoVietnam.Kissingersearchedfor therightopeningtomakeitlookasthoughHelmshadcasuallyofferedupthenewsofhisdismissalandreassignmenttoTehran:“Oneotherthingwhichisnotmajor—isthereanybodywithwhomIamworkingwho’sbeenofferedsomething—letmetellyouwhatIhaveinmind—IranintoDickHelmstodayatameetingandafterwardshesaid I looked forward tocooperatingcloselywithyou.Andhe’sbeenofferedtheambassadorshipinIran—andIthoughtthatitmeantthathewasstayingon—”“No,no,”saidHaldeman.“HehasacceptedIran—I’vegottogothroughthat

wholecyclewithyoubecausewehavetoworkoutthewhole—whatyoudo...”“Ithinkitisaverygoodappointment,incidentally,soit’snotareflectionon

thatcount—itjustmakesmelook—”“Iunderstand—hecalledmethismorningandgavemethatandIshouldhave

let you know, but I was going to cover it with youwhen I got down there.”Haldeman wanted Kissinger to believe that he had only just heard the newshimselfandthatithadbeenNixon’sideatosendHelmstoTehran.Basedonpastexperience,Haldemanmayhaveworried that ifKissingerever learned thefulltruthabouttheunpleasantsceneatAspenLodge,subscriberstoTheWashingtonPost would read about it the next morning over their breakfast cereal. Theirconversation ended with Kissinger agreeing to join Nixon in Florida thefollowing Saturday. Donald Rumsfeld’s appointment as the new U.S.ambassadortoNATOwasannouncedthenextweek.The Shah was happy to have Helms in Tehran. But Alam had his doubts.

Iran’s Farsi- and English-language newspapers splashed the news of theappointmentacrosstheirfrontpages.TheeverperceptiveAlammadesuretheyplayed down Helms’s intelligence background. American diplomats cabled

Washingtontoreport that“weunderstandwordhasgoneouttolocalpressnotrepeat not allude to Ambassador Helms’ past connections with CIA.” WhenAlamphoned theU.S.embassyonDecember9 toofferhiscommiserations toJosephFarland,theambassador“wasliterallyintearsofgrief.”TwoweekslaterFarland was still pathetically trying to receive official word of his fate. Justbefore Christmas he placed a phone call to Kissinger imploring him “for 15minutesofyourtimetoday.Iwanttotalktoyouaboutthischangeinmyplans,thisHelmsthing.”In themeantime,Kissinger andHelmshad spoken again.OnDecember15,

Kissinger tried to console the director, assuring him that “you’re the bestintelligenceprofessional Iknow. . . .Youknowyou stayed threeyears longerthantheintentions.”“Yes,Ithinkthat’sright,”Helmsanswered.“Mysoulisatpeace.”KissingersaidhehadhadatalkwithNixonthepreviousday“aboutyourrole

in your new job, and also I want to talk with you about some things we arethinking of doing.And Iwondered if you could comeover to seeme at yourconveniencetoday?”TheyagreedtomeetinKissinger’sofficeat3:00P.M.Thewheelswere turning again.ButNixon felt the need to twist theknife one lasttime.RichardHelmswas atwork on February 2, 1973,with sixweeks to gobeforehisofficialretirementwhenacallcamethroughtoinformhimthatJamesSchlesingerhadjustbeensworninashisreplacement.Helmsbarelyhadtimetocleanoffhisdesk,packhisboxes,andsayfarewelltohisstaff.Helms was an accidental ambassador. There is a tendency to ascribe dark

motives to random acts and deep meaning to illogical decisions. Many havetheorized that theHelms appointmentwas evidence of amalign intent on thepart of theNixon administration to influence internal Iranianpolitics.Helms’sbiographer Thomas Powers noted that there was no taping system at CampDavid.Haldeman,Nixon, andHelms are dead.All threemenwere eventuallydisgracedandimplicatedincrimesthatinvolvedcover-upsandlies.Helmswasaconvictedperjurer.Butwouldhehaveallowedhiswife,Cynthia,topublishhermemoir knowing that it contained lies, and all thewhile knowing that one ofNixon’s smoking-gun tapesmightonedaysurface toexposeherasa liar too?Hardly.NorcouldhebeaccusedoftryingtocoverupforRichardNixon—thetwomenloathedeachother.Additionalevidenceexists tocorroborateHelms’sversionof theCampDavidmeeting.Alam’sdiaryand theKissinger telephonetranscriptsconfirmthattheappointmentwasunplannedandcameasasurprise.ItshouldalsobekeptinmindthatNixon,Kissinger,andHelmsdidnotbelieveIranian politics needed to be influenced—the status quo suited their purposesperfectly.TheHelmsappointmenthighlightstherealitythatthetruthreallyisas

banalasitappearstobe.

POPEYEISRUNNINGOUTOFCHEAPSPINACH

On a moonlit winter night in late January 1973 the oil tanker OverseasAleutian began unloading its precious cargo at a depot on New York’s EastRiver. The fuel was pumped into trucks lined up along the pier, ready to betransported the next morning to homes and businesses throughout themetropolis.NewYorkCity, in thegripofunusuallyfrigidwinterweather,wasrunning lowon suppliesofnaturalgas,propane, andheating fuel.Texaco, thecompanythatservicedNewYork’sthreeregionalairports,hadalreadyexhausteditssupplyofaviationfuel.PassengerjetsflyingtotheWestCoastcouldgetonlyasfarasPittsburghbeforetheyhadtorefuel.ShortageswereevenworseintheWestandMidwest.Naturalgassupplieswerecutofftomanyfactories,schools,churches, and office buildings in Iowa, Illinois, Ohio, Indiana, Nebraska, andColorado.TheDenver school system shut down because therewas no fuel toheatclassrooms.OfficialsatStapletonInternationalAirportreliedonbodyheatto keep the airport terminal warm. In the Ohio township of Bellefontaine aneternalflamededicatedtowarveteranswassnuffedouttoconserveenoughgastoheattwoaverage-sizehomesayear.InSiouxCity,wherefifty-fivebuildingswere forced toclose theirdoorsandwhere thecity fathers scavenged for fuel,theEdwardsandBrownCoalCo.sentacrewtopumpathree-year-oldsupplyofoilfromthebasementofafuneralhome.TheSouthwasnotsparedeither.Therewere blackouts in Miami. The University of Texas postponed resumption ofclasses for38,000students.Mississippi’schickenbroiler industrywascrippledwhengas supplieswere requisitioned toheat hospitals andprivatehomes. Joblosses related to the crisis totaled forty thousand in the Jackson area alone. InTennessee, barges were requisitioned to rush fuel to the Memphis Naval AirStationandCityofMemphisHospital.Whatatfirstappearedtobeaseriesoflocalcuriositiesquicklyescalatedinto

a national emergency in December 1972 and January and February 1973. “Ifanyonestillneedsevidence that thiscountry’s jerrybuilt systemforsupplyanddistributionoffuelshascollapsed,lookaround,”observedTheNewYorkTimesin an editorial. The federal government drew up guidelines to implement fuelrationing.“We’ve had a happy era of low costs, low risks and high benefits,”conceded Pete Peterson, the outgoing secretary of commerce. “But Popeye isrunningoutofcheapspinach.”Theseverityofthefirstwaveofwhatcametobeknownasthe“energycrisis”

washighlightedbythepointoforiginoftheOverseasAleutian.Afterdisgorging250,000tonsofU.S.wheatattheBlackSeaportofOdessaintheSovietUnion,thetankerhadfilledupanequalamountofheatingoilforthereturnjourneytotheEastCoast.EvenasRichardNixonsoldMohammadRezaShahunrestrictedquantitiesofmilitaryequipmenttokeepPersianGulfoilsafefrommalignSovietinfluence,hisadministrationacceptedemergencyshipmentsofSovietfueloiltokeep the lightsonathome. In return, theWhiteHouseagreed toputbreadonRussian tables by dumping surplus stockpiles of American wheat stored ingovernment-subsidizedgranaries.The fuel-for-wheat exchangeover thewinterof 1972–73 symbolized the moral ambiguity of détente: the same twosuperpowersthatpittedtheirregionalproxiesIranandIraqagainsteachotherintheGulfwerepreparedtoshoreupeachotherwithabarterexchangeoffuelandfood.AsRichardNixonwas sworn into office for a second term,American guns

finallyfellsilentinSoutheastAsia.ThatsamemonthapowerfulconvergenceofeconomicsandgeopoliticsusheredinaneraofenergycrisisandinsecuritythattheUnitedStateswasremarkablyill-equippedtomeet.RegulationsdatingbacktotheGreatDepressionstillkeptgaspricesartificiallylowanddiscouragedbothexploration and conservation. The electrical power grid had already collapsedonce during theGreatNortheastBlackout ofNovember 1965 but nothing hadbeendonetofixit.Indeed,theJohnsonadministrationhadproducedaninternalreportayearlaterthatconcludedthat“thenation’stotalenergyresourcesseemadequatetosatisfyexpectedrequirementsthroughtheremainderofthecenturyat costs near present levels.” The United States was still the world’s biggestproducerofoil in1970.But thatyearAmericanoilproductionpeakedat11.3millionbarrelsperdayendingahappyeraoflowinflation,fullemployment,andrising living standards. To fill the growing chasm between consumer demandandenergysuppliestheNixonadministrationloosenedtheimportquotasoftheEisenhower era, then discarded them entirely in April. Foreign crude importsrocketedcommensuratelyfrom2.2millionbarrelsofoilperdayin1967to6.2million barrels per day in 1973. The figures were even more striking whenviewedinpercentageterms,risingfrom19percentofdomesticconsumptionin1967to35percentsixyearslater.By1980,U.S.oilimportsweresettosmashthroughthe45–60percentbarrier.WithinaremarkablyshortperiodtheUnitedStatesbecamevulnerabletothe

vagariesoftheworldoilmarket.ThebulkofAmerica’spetroleumimportsstillcame fromVenezuela, but 70 percent of theworld’s proven oil reserveswerelocatedintheMiddleEastandespeciallythePersianGulf.Theworld’scenterofeconomicgravitywasshiftingtowardtheGulfmonarchiesofIran,SaudiArabia,

United Arab Emirates, and Kuwait. By September 1973 the United Statesimported 28million barrels of oil, 26 percent of its total imports, fromArabstates—astatisticthatrepresentedastomach-churning35percentincreaseoverthe same period the year before. “Like it or not, during the next decade theUnitedStateswillhavetoimportalotofAraboil—orfaceanationaleconomiccatastrophe,” warned the Chicago Tribune. But the entry of the Americanleviathan into the global energy marketplace brought with it a slew of othercomplications. America’s thirst for cheap oil quickly soaked up any excesscapacity, tightening themarket to thepointwherepricesbegan spiraling in anupward direction for consuming nations everywhere. As oil industry analystDanielYerginexplained,in1970therewereabout“3millionbarrelsperdayofexcesscapacityintheworldoutsidetheUnitedStates,mostofitconcentratedintheMiddleEast.”Butby1973, “the surplusproductioncapacity that couldbeconsidered actually ‘available’ addedup to only 500,000barrels per day.Thatwasjustonepercentofworldproduction.”TheUnitedStateswas now competing against its own allies inEurope and

Japanforaccesstothesameshrinkingpoolofoilandgas.Whathadhistoricallybeen abuyer’smarket hadnow turned in favorof sellers. In1973 theMiddleEast oil market, already vulnerable to an interruption in supply caused by an“event”suchasawar,embargo,actsofterrorism,severeweatherconditions,oroutrightpoliticalmanipulation,hadreachedtheprecipice.TheShahhadwatchedwithinterestAramco’sabjectsurrenderandtheNixon

administration’sdecisiontolooktheotherway.Agameofleapfrogbegan.TheShahnaturallydemandedmorefavorabletermsfromtheWesternoilcompaniesthatoperatedmostof Iran’spetroleum industry.Hewanted Iran’sdomesticoilproductioncompany,theNationalIranianOilCompany,toassumecontroloverIran’s oil production in its entirety, reducing the fifteen-member foreign oilconsortium to theessentiallypassive roleof customersbuying Iranianoil.ButtheShah’stimingwasoff.TheWhiteHousehadfinallyfocusedontheneedtodevelopanationalenergypolicy. Ina toughlyworded letterdated January19,1973,Nixonurgedhisoldallytorethinkhistakeoverbid,issuinghisappeal“inlightofourlongfriendshipandourmutualconcernforstabilityinyourareaofthe world. My concern is that the most recent proposals of Your Majesty’sgovernment could seriously affect the entire area and thewhole course of ourmutual relationship.” Nixon asked that action be postponed until he hadcompleted peace negotiations in Southeast Asia and given the issue the fullattentionitdeserved.Taking“aunilateralstepwhichdoesn’tmeetthelegitimateinterestsofbothsidescouldhaveseriousconsequencesfortheobjectiveswearepursuingtogether.”

TheShahwasincensed.HehadhelpedNixonwinre-electionandforwhat?To be treated like a puppet? Alam counseled restraint, but the Shah bitterlydenouncedNixonforissuinginstructionsandmeddlinginIran’snationalaffairs. . . “I say tohellwith special relations,” he said. “We shall accept no furtheradvicefromfriendorfoe.”TheShahmadehisbreak thesameweekNixonwassworn in tohis second

term.OnJanuary23,speakingtofivethousandworkersandfarmersgatheredtomark the tenth anniversary of the White Revolution, the Iranian leaderannounced that theforeignoilcompanies responsible forproducing92percentof Iran’s oil production would not have their contracts renewed when theyexpired in 1979. Instead, he would offer them two immediate choices. Theycould continue operating as they had under the terms of the 1954 accord, inwhich case they would be required to double their production output from 4millionbarrels to8millionbarrelsperdayandnotsell itatapricelowerthanthat paid elsewhere. The consortium instead settled for the Shah’s second andpreferred option: they agreed to yield their operational role in Iranian oilproductiontotheNationalIranianOilCompanyinexchangefora twenty-yearpreferredaccesscontracttosellIraniancrudeoilontheworldmarket.TheShah’sdecisiontoseizecontroloftheoilconsortium’soperationshadas

much to do with fiscal pressures as national pride. Iran’s government wasreadyinganewfive-year$32.5billioneconomicdevelopmentplanduetocomeintoeffectonMarch21.Itaimedtoincreasethecountry’seconomicgrowthrateby a startling 11.4 percent each year for five years.Once again the Shah hadapprovedeconomicgoalshistreasurycouldn’tpossiblymeetwithoutamassiveinjectionofnewoil revenues.Yetbygiving theoilmajorspreferredaccess tobuy Iranian oil the Shah had added another element of uncertainty to Iran’seconomic equation. The companies were not required to buy Iranian oil. Achange inmarket conditionsmight cause them to slash their purchase orders.Andthat in turnmightmeanthat theShah,whomeant todoublehiscountry’spetroleumoutput,couldbeleftwithmillionsofbarrelsofunsoldoil.In fact, Nixon’s letter to the Shah urging restraint had been a bluff. In the

wakeoftheVietnamWartheUnitedStatesseemedtohavelostthewillandtheability to back up threats with force. Yet the question remained: just how farcouldtheShahpushhisallywithoutcrossingaline?TheNixonDoctrinegavetheShahmore leeway tomaneuverbut italso increased thepossibility thathewould overreach either at home or abroad. He already had a track record ofprovoking his neighbor Iraq.AsadollahAlam’s diary suggests the Shah neverfullytrustedNixonandKissinger.TheyhadallowedtheirallyandhisneighborPakistantobedismemberedbyMrs.Gandhi.TheyhadforcedPresidentThieuof

South Vietnam to sign a peace settlement that resembled a suicide note. TheShah even saw Nixon’s hand in Morocco, where King Hassan had barelysurvivedseveralspectacularcoupplots.PresidentDiem’sbloodyendwasneverfarfromhisthoughts:“Butifit’stheAmericanswhoaretoblame,whyisitthattheyhaverefrainedfromcurbingmyindependence?”Agladiatorhadtolookafterhimself.Inthesametwelve-monthperiodthatthe

ShahtookcontrolofIran’soil industryandNixonagreedto liftall restrictionson conventional weapons sales to Tehran, Iranian arms orders exploded from$500millionin1972to$2.5billionwithinayear.TheShahwasonthewaytomakinghimselfbothindispensableanduntouchable.ItsaidsomethingabouttheexigenciesoffatethatthenexttimeAmbassador-

designate Richard Helms saw President Nixon, at 11:16 A.M. on Wednesday,February 14, hewas now themanof the hour.History hadpivoted. From thevantage point of the new year the Helms appointment looked like an act ofcunning strategic foresight on the president’s part. The Saudi move againstAramco,thefuelshortagesoverthewintermonths,theShah’sattackontheoilconsortium,thetighteningworldoilmarket,andhigherpricesforcrudeoilhadall contributed to a growing sense of panic in theWest.Who better than theformerdirectorofintelligencetohelptheadministrationdevelopaplantosecurethefreeworld’soillifeline?Alonewiththepresidentandhisnotetaker,GeneralBrentScowcroft,HelmsbriefedNixononhisdepartureplans.HelmssaidhehadconferredwithJohnConnallyandtheBritishgovernmentonissuesconcerningtrade,oil,andregionalsecurityinthePersianGulf.TheShahwasinSt.MoritzuntilMarch15.Helmswouldpresenthiscredentialsbefore theShah left townagaintospendtheIranianNewYearatKish.Nixon’sinstructionstohisenvoyshowedjusthowfocusedhenowwasonthe

MiddleEastandAmerica’spetroleumlifeline.“Iwantyounot just to thinkofyourCIAbackground,”hetoldHelms.“Itisimportant,butapplyyourselftotheoilproblemgenerally.Thequestion iswhether theUScanprotect its interestsadequatelywithoutgovernmenttogovernmentagreements.”Nixonrepeatedhisadmonition: “Immerse yourself in the oil problem.”WhatNixon had inmindwas for Helms to perform duties far beyond the scope of an ambassador. HewantedHelmstoactashisplenipotentiaryforthePersianGulfandWestAsia,includingPakistan.HelmswastohelpMohammadRezaShahPahlavifashionastrategic architecture that would place Tehran at the center of a new regionalorder.HelmslaterrecalledthathewasorderedtoactasNixon’seyesandearsintheregion:“Asamatteroffact,whenIwentouttoTehranIwastoldorallybyPresidentNixon that hewantedme to also keep an eye on thewhole PersianGulfarea....ThePresidentwantedregularreportsaboutwhatIthoughtabout

thepoliticalandmilitarysituationthroughouttheGulf.”At 11:40 the president asked Scowcroft to leave the room so he could talk

withHelms inprivate.No recordexistsof their twelve-minutediscussion.ButHelmsandNixonmayhavetouchedonanincidentthathadrattledHelmssevendaysearlierduringhisambassadorialconfirmationhearingonCapitolHill.Inanunusualmove,senatorshadcalledaclosed-doorhearing,swornhimtoanoath,and cross-examined him about his knowledge of theWatergate cover-up,CIAsurveillance of American nationals at home, and reports circulating about theagency’sallegedinvolvementincoupplanninginChile.Helmshadbeencaughtbysurpriseatthedetailandintensityoftheirlineofquestioning.Hehaddeniedeverything.Andhehadperjuredhimself.HelmsencounteredHaldemanintheWhiteHousecorridors.“Whathappened

to our understanding that my exit would be postponed for a few weeks?” heasked. “Oh, Iguesswe forgot,” saidHaldeman.His face, saidHelms, showed“thefainttraceofasmile.”

FIRSTBLOOD

OnMay21,SenatorJ.WilliamFulbrightofArkansasroseontheflooroftheUnitedStatesSenate to talk about the impact the energy crisiswas having onAmerican foreign policy. The chairman of the Senate Foreign RelationsCommitteewasexpectedtodeliverperfunctoryremarksaboutanissuethathadbeenpushedoff thefrontpagesbythelatestrevelationsintheWatergatesaga.The fact that the speech made even minor headlines during the Watergatesummer was testament to its sensational content. With no quick fix in store,another cruel winter of fuel shortages approaching, and Arab oil producersthreatening to cut off oil supplies to supporters of Israel, Senator Fulbrightwarned in the most dire terms that “our policymakers and policy-influencersmay come to the conclusion that military action is required to secure the oilresources of theMiddle East, to secure our exposed jugular.” There was “noquestion”thattheUnitedStatescouldtakeoverthe“oil-producingstatesoftheMiddleEast”ifitwantedto.Theywere“militarilyinsignificant”andtheirmereexistencepointed toapowervacuumin thePersianGulf.Butwhydo itwhenotherscoulddothejobforus?“Wemightnotevenhavetodoitourselves,withmilitarily potent surrogates available in the region,” continued Fulbright, whothen lobbed the verbal equivalent of a grenade onto the floor of the chamber.“TheShahofIranisknowntoaspiretoa‘protecting’rolefortheGulfregion,”intonedFulbright,“andtherehasbeenominoustalk”ofIranandIsraeloffering

to“solvetheenergyproblemfortheUnitedStatesbytakingoverKuwait,therebeing no force in the desert between Israel and the Persian Gulf capable ofresistingtheIsraeliArmy.”FulbrightwarnedSaudiArabiainparticulartotakecare: “Themeat of the gazellemay be succulent indeed, but thewise gazelledoesnotboastofittolions.”Fulbright’s speech resonated because of its timing and specificity. Was he

privy to classified information? Had someone tipped him off? Eight weeksearlier,onMarch20,IraqitroopshadcrossedoverintoKuwait.Theyoccupiedanunarmedborderpostaboutfifteenmilesinlandandshelledasecondpostonthecoast.Itwasaclassicprobingmaneuver.BaghdadwantedtogaugeKuwait’sabilitytodefenditselfandtestthereactionsofitsneighborsandallies.TheShahdecidedtocallSaddamHussein’sbluff.Iraqiforcespulledbacktotheirsideoftheborderfiveweekslater.U.S.diplomatswastednotimeinlettingitbeknownthat theirgladiatorhaddrawnhissword.Attheendof thatsameweekIsrael’sforeignminister,AbbaEban,paidasecretvisittoTehrantotalkwiththeShah.EbanwasinWashingtononMay12tobriefKissingeronhisTehrantrip.“I

foundtheShahveryrelaxed”onthesubjectofthePersianGulf,Ebanreported,“andfortworeasons:HewasverysatisfiedwiththeUnitedStatesforthefirsttime. They are usually very querulous that he can’t get enough; now he can.Secondly, on oil, he feels there is a United States interest now.” KissingerlearnedthattheShah“wantstobestrongenoughtoresistanythreatexcepttheSovietUnion.HethinkstheSovietsareshiftingawayfromEgypttothePersianGulfbecauseoflessAmericanresistance.”TheShah’sthinkinghadbeengreatlyinfluencedbyIndia’ssuccessfuldefeatofPakistanin1971.Treatiesanddefensepactscouldeasilyberenegedon.“Hefeels thatdocumentsarenot important,”saidEban.“Forinstance,theIndia-Pakistancrisisshowedthis.Butheiscreatingan American interest there which is more.” The Shah envisioned a strategicposture that comprised a “triangle—Israel, Ethiopia, and Iran—which ifbuttressedbyUSsupportwillbeastabilizinginfluence.”TheShah’sperceptionwas thatNixonhad lefthisallyYahyaKhan tohang

because therewasnopoliticalprice tobepaidathomefordoingso.ThebestwaytoavoidKhan’sfatewouldbetodeepentheAmericanstakeinIrantotheextent that anattackonTehranwouldbeviewedbyWashingtonasakin toanattack on Chicago or New York. When the Shah talked about “creating anAmericaninterestinIran”hemeantaco-dependencyintheareasofoilsecurity,military cooperation, and commerce. He meant to increase the number ofAmericancitizenslivinginIran.WashingtonmightnotbepreparedtofightforIranians but it would not hesitate to defend the lives of its own citizens.Americanmen,women,andchildrenwouldbetheShah’sinsurancepolicy—his

double indemnity. He did not intend the American presence in Iran to bepermanentorprotracted.Herecognizedthatthisstrategywasriskyandrifewithcontradictions: even as the Shah sought to reduce his reliance on the UnitedStates in the long term he saw a need to temporarily deepen military andcommercialtiesuntiltheIranianmilitarywasstrongenoughtoholditsown.TheAmericans “should be out of here in a few years,” explained an Iraniangovernmentofficial.“That’sthetheoryatleast.”TheShahhadtoholdoutuntilaround1980,whenIranwouldbemilitarilyself-sufficient.YettheShah’sgamblecarriedgraverisksforAmericans.TheCIA,theState

Department,andtheDefenseDepartmenthadbluntlywarnedtheWhiteHousethat the Shah overspent on arms, that anti-American sentiment in Iran wasbuilding, and that a financial crisis could helpmobilize theShah’s enemies athome. But Nixon and Kissinger chose to disregard the advice of theirgovernment’s trained professional analysts. By May 1973 there wereapproximately five hundred American soldiers, sailors, and Marines based inIranwithafurthersixhundredservicemenandtheirfamiliesduetoarriveoverthesummer.TheywerethefirstwaveofbluesuitersandtechnicianspromisedbyNixon to helpmake the Shah’s $2 billion worth of new defense contractsoperational.“HewantsthelateststuffandhethinkstheUnitedStateshasgotthebest,”aU.S.embassyofficialinTehrancheerfullytoldonevisitorinthespring.The Shah would be getting “most everything short of atomic weapons. . . .Whether he needs it or not is his decision. His military knowledge isextraordinary and he knows what he wants.” On one occasion the Shahinstructed Alam to approach Helms with an urgent request for artillery andfighterplanes.AmbassadorHelmsdeliveredareplymoresuitableforanIraniancourtminister:“IfHisImperialMajestycommandsit,IshalldomybesttogetWashingtontoapprove.”Not even themurderof anAmericanmilitaryofficer inTehrancausedU.S.

officials to reassess the logic behind their buildup.On themorning of June 2,Lieutenant Colonel Lewis Lee Hawkins, forty-two, a military adviser to theIranianarmedforces,waswalkingfromhishousetothecarpoolthattookhimtoworkeachday.“Ashepassedakucheh,asmallalleyway,gunfirestruckhimin the back, spinning him around,” recalled Cynthia Helms, who received ahorrifying description of the crime back at the ambassador’s residence. TheHelmseshadarrivedinTehranthefirstweekofApriltotakeupRichard’spostasambassador.“Morebulletshithiminthechest,andhewentdown.”Hawkinsdied where he lay in a pool of blood. His two assailants made off onmotorcycles.ThedeathofColonelHawkinswastreatedasarandomevent.

THEHUSH-HUSHPLAN

TheShah’sfour-daystatevisittoWashingtoninthelastweekofJulycameduringasummerofhighanxietyforAmericans.WithgaspricessoaringandtheMiddleEastchurning,thepro-Westernmonarchofthemostpowerfulpetrostatein theworldwaswelcomedwithopenarms.Nixon’sdecisionayearearlier tolavish aid on theShah seemedmore than justified. “Itwas like coming homeagain,” gushed The New York Times of the king’s arrival, and it noted withapproval a story currentlymaking the rounds inWashington and Tehran. TheSovietambassadorhadreportedlyaskedIran’sPrimeMinisterHoveyda,“Aren’tyou annoyed that the Americans sent Richard Helms, the CIA chief, asAmbassadorhere?”WithoutmissingabeatHoveydareplied,“Well,atleasttheAmericans sent their top spy.” The paper reported that “in Washington, theanecdote is repeated to illustratespecialattention, reservedonlyfor theclosestofallies,thattheUnitedStatesgivesIran.‘TheShahwantsthebest,andhegetsthe best,’ a State Department official said here the other day.” But to someIranians,Helms’s appointmentwas a source of humiliation.American scholarJames Bill recalled the reaction of a prominent Iranian writer to Helms’spresenceinTehran:“WhyelsehasHelmsbeensenthere?WhyhastheUnitedStatessent itsheadspyasambassador toourcountry?Couldnotyourcountryhavehadthedecencytoatleastremainoutofsightwhileyouhelptheshahpullthestrings?”NoonewasmorepleasedtoseeIran’sShahandShahbanouwalkacrossthe

South Lawn of the White House in the sweltering July heat than PresidentNixon. He welcomed the distraction they offered from his own mountingtroubles. Onlookers noted that Nixon was still looking pale from his recenthospitalization for viral pneumonia. America’s first family was enduring ahellish summer. TheWatergate scandal had exploded. Televised congressionalhearingshadintroducedtheAmericanpeopletoRichardNixon’sdarkside,theone that understood hush money and its uses, black bag jobs and break-ins,private investigators andwiretaps. “MayGod saveAmerica!”wrote Fed chiefArthur Burns in his diary as scandalous revelations poured forth on nationaltelevision. Americans were informed that the Shah “evidently was the firstforeignvisitorsincethespringof1971tomeetthePresidentintheOvalOfficewithoutthepresenceoflisteningdevices.”Batteredbyeventsanddepressedbytheforcedresignationsinthespringofhis topaidesJohnEhrlichmanandBobHaldeman,NixonshowedsignsofbucklingunderthestrainwhenontheeveofthePahlavistatevisithecollapsedwithpneumoniaandwasrushedtoBethesda

NavalHospital.KissingerphonedBethesdatoupdatethepresidentontheShah’spending arrival. Kissinger seemed pleased to have Nixon safely tucked awaywhile he made the rounds with visiting officials.When the president said hewouldcheckoutonFridayand“probably comedown to theoffice for one ortwohoursandthengotoCampDavidforSaturdayandSundayandbebackintheofficeasusualonMonday,”Kissingersuggestedhelingerawhile:“Iwouldtakeiteasy,Mr.President.”“We are only going to concern ourselves on the things thatmatter,” replied

Nixon,whohadatendencytorefertohimselfwiththeroyal“we.”“TheShahwillbecominginTuesdayandthatreallyactuallywillbeavery

importantmeeting,”Kissingerremindedhim.“Of course itwill,” agreedNixon.Hebatted asideKissinger’s offer to “see

[theShah]onsomedetailsinordertospareyousometimeifyouwantedmeto.”Nixon, perhaps suspicious ofKissinger’smotives, said hewouldn’t hear of it:“No,no.Iwanthimtohavethefulltreatment.”HealreadyhadajobinmindforKissinger.ForNixon,givinghisfriendtheShahthe“fulltreatment”extendedtolining

upasong-and-danceactfortheKingofKings.Andthatmeantaskinghislong-suffering national security adviser to call in a few favors. Nixon regardedKissinger’s fondness for all things Hollywood—and especially “all thosebeautifulbroads”hemetduringtripstoLosAngeles—ascomparabletoamoralvice. Yet Kissinger’s show business contacts came in handy when theWhiteHouseneededthem.Andsobeganthe“DannyKayeaffair.”Thepresidentaskedhis daughter Julie Eisenhower to phoneKissinger to see if he could persuadeKayetoperformforthePahlavisattheWhiteHousestatebanquet.“Wouldyoube willing to do that or do you not want to have to be asking him?” askedEisenhower.Kissingersaidhedidn’tmindmakingthecall“butIcantellyounowhewon’t

do it.” Kaye had cut back his concert appearances in recent years and hadalready turned down one request from Kissinger to perform for the Nixons.KissingerandJulie tiptoedaroundtheelephant in theroom:bookingtalentforthe Nixons had become much harder in recent months—the first family waspracticallyradioactive.Still,Juliewasasinsistentasshewaspolite:“TheShahwouldreallylikehimverymuch.”A fewminutes later the man whose stealth diplomacy had garnered him a

Timemagazinecoverstoryas“Nixon’sSecretAgent”mountedadifferentsortof charm offensive. He telephoned to try to convince the United NationsChildren’sFundambassadortohoofitupforthePahlavis.Kissingerbeganwithhis trademark flattery.HewantedKaye to know that he had been singing the

actor’s praises to the president and that the idea was his: “Danny, what I’mcallingyouaboutisthePresident—I’vebeenravingsomuchaboutyourvarioustoasts—thePresidentwonderedwhetheryouwantedtodosomethingatadinnerhe’s giving for the Shah of Iran on July 24. I’m not urging it, I’m justtransmittingtherequest.”“No,thatI’mnotgoingtodo,”Kayedeclared.“No,Ireallydon’twanttodo

that.”Kissingerwastakenabackbytheactor’svehemence.“Ijustdidn’twantyou

to—Ididn’twanttoexploitapersonalrelationship.”“No,no, as far asperforming, that’soutof thequestion, Idon’twant todo

that,”repeatedtheactor.Hecouldn’tpossiblygetabandtogetherintwoweeks’time.Hismusicalcollaboratoroftwenty-fiveyearshadjustdied.“Ican’tputittogether,”hesaid.WhenKissingerpressedagain,thistimeperhapsalittletoohard—“Well,you

didn’tdobadlyatthe[filmdirector]JohnForddinnerandifthatwasn’tformallyperforming—”Kayegotstraighttothepoint.“The Shah of Iran I am not too crazy about doing it for anyway because I

couldn’tgettoseehimwhenIwasontheUNICEFmissioninTehran.”DannyKaye’s refusal todoa favor for thekingwhohad snubbedhimalso

reflectedgrowingpublicawarenessanddismayoverIran’sscandalousrecordonhuman rights.ButKissinger had nowayof knowing just how eager theShahwastosecureDannyKaye’sattendanceatthebanquet.QueenFarahwasafanofthestar.Inhermemoirsheexpressed“greatadmiration”forhimasanactorandas someone “who has done a great deal for UNICEF and has organizednumerous soirees for the benefit of deprived children.”The queen had carvedouta role forherself in Iranasapatronof theartsandas themostprominentadvocateforwomen’sandchildren’srights.But on the eve of her departure forWashington with her husband she had

threatenedtopackherbagsandleavethepalaceforgood.TheShah’sinfidelitieswerewidely rumored inTehran, a citywhosewhisperinggrapevine seemedattimes toreachright into theroyalboudoir.MohammadRezaShahenjoyed thecompanyofcontinentalblondesincludingLufthansastewardesses,girlssuppliedbythelegendaryMadameClaudeofParis,andabevyofyoungwomenbroughttocourtbyfriendsand“pimps”suchasAmir-HushangDavallu,aQajarprinceandwho,inthewordsoftheShah’sbiographer,GholamRezaAfkhami,wasa“borncourtier,cleverandcorrupt,awell-informedconversationalist,tastefulindressanddécor,asycophantparexcellence,andanopiumaddict.”PhilanderingwassomethingthatHisImperialMajestyhadincommonwithhiscourtminister,Asadollah Alam, who described their conquests in his diaries. The Shah’s

romances tended to be fleeting. “The encounters did not always conclude insexual intercourse,”wroteAfkhami.“Oftenaconversation,adance,oradrinksufficed. But these occasions were soothing, and the shah enjoyed them. Hecalled them gardesh, outings.” Farah was nineteen years younger than herhusband and aware of his infidelities. “Farah knew about her husband’sadventures and was generally good-natured about them, but not always,”concluded the biographer. “At times she would grumble and cry, and on rareoccasionseventhreatentoharmherself.Theworstcrisisofthissortoccurredinthesummerof1973.”HernamewasGilda.Shewasthatmostdangerousofparamours—anineteen-

year-old with dyed blond hair, big ambitions, and a vivid imagination. ShedecidedthattheShahmeanttoexercisehisrightsasaMuslimhusbandandtakea secondwife and set about telling the news to asmany people as she could.Thiswas just the sort of farfetched rumor that Tehranis loved to repeat abouttheirroyalfamily.Forinstance,in1960thequeenhadmadethedecisiontogivebirthtoherfirstchildinapublichospitalamidtheslumsofsouthTehran.SheandherhusbandmeantitasagestureofsolidaritywiththecommonpeopleofTehran.Butwild rumors soon began circulating that the newborn heir, PrinceRezaCyrus,wasnottheShah’ssonatall,andthathewasadeafmute.“Theyhave spread the rumor that the prince cannot speak, that his hands [are] likethoseofaduck,andthatthequeen’searsaresolargethattheyhadtocutthem,”observed Fatemeh Pakravan, the wife of the Shah’s aide General HassanPakravan. “They said absolutely anything, anything—the most fantasticrumors.”Alamfelt that the insidiousgossipaboutGildahadgone too far, impugning

thequeen’shonorandslandering the throne, sohebroached the topicwithhisoldfriendandmaster.HefoundtheShahsurprisinglycontrite,morethanalittleworried,butgratefulfortheofferofhelp.When these rumorsof a secondmarriagewerebrought toFarah’s attention,

herdistressknewnobounds.OnereportclaimedthatshefledtoEurope.Third-partymediationwascalledforandontheeveningofSaturday,July21,lessthanforty-eight hours before the scheduled departure for Washington, Farah’sformidablemother,FaridehDiba,forcedtheissuewithAlamandlaiddownthelaw.Withoutoncementioningtheword“divorce,”sheleftAlaminnodoubtthatherdaughterwasprepared towalk.Together, theShahandAlamcookedupaschemetomarryoffGildatoasuitablehusband,andtheaffairended.The Iranian party flew to Virginia. There they rested the night in Colonial

Williamsburg,journeyingthenextmorningtoWashington,wheretheylandedinahelicopterontheSouthLawntobegintheirformalfour-daystatevisit.Ifthe

Pahlaviswereunderstrain theydidn’tshowitwhenthey joinedawaxenDickandPatNixonona“sun-drenchedred-carpetedplatform”infrontofhundredsoftouristsbackedupagainsttheWhiteHouserailing.Everyonesmiledandnoddedand waved throughout the twenty-five-minute official welcoming ceremonyamidafanfareoftrumpets,amilitaryhonorguard,andahandpickedcrowdofenthusiastsandofficialsapplaudingandwavingtinyIranianandAmericanflags.“Wewelcomeyouhereasnotonlyanoldfriend,asaprogressiveleaderofyourown people, but as aworld statesman of the first rank,” declaredNixon. TheShah in turnexpressedappreciation for “theopportunityof talking toyouandhavingwiseadvicesthatyoucanalwaysgive.”Bothcouplestriedtoignorethetwo hundred protesters across the street in Lafayette Park whose sound truckblared“CIAgetoutofIran!”“ShahisaUSpuppet!”“USgetoutofIran!”The Shah had ostensibly come to Washington to secure pledges from the

administrationtosellhimF-14jetfightersfromGrumman.Thiswasofcoursearuse.Thedealhadbeenfixedinsecretayearbefore.Butbothgovernmentshadtogo through themotions forappearances’ sake,with theShahexpressinghisinterest, Nixon giving his approval, the Pentagon putting the contract out totender,andGrummanplacingthewinningbid.TheF-14dealalsoobscuredtherealreasonfortheShah’svisit.SenatorFulbrighthadbeenmoreperceptivethanperhapsevenheknew.Afterthewelcomingceremonieswereover,NixonandKissingerescortedthe

Shah to theOvalOffice for a two-hour tête-à-tête.Ardeshir Zahedi,who hadsince rejoined the Shah’s government and been posted to Washington for asecondtermasIranianambassador,wasblockedbyKissingerfromsittinginonthesession.TheantipathybetweenthetwocouldbetracedbacktoKissinger’scontemptforZahedi’sfriendSecretaryofStateWilliamRogers.Kissingeralsowantedtomakesurethatasthesolenotetakerintheroomhecouldcontroltheofficialtranscriptofwhattheleadersdiscussed.TheShahlatertoldZahedithatKissinger,havinghadalatenightoutonthetown,hadyawnedhiswaythroughthemeeting.Six days earlier King Mohammad Zahir Shah of Afghanistan had been

overthrowninaleftistcoup.TheShahhadbeenwarningtheadministrationforsome time that theSovietUnionhad set its sightsonAfghanistan. “Even if itwas not a Russian coup, theymust have known about it,” he toldNixon. Hewarned that Moscow planned to “push to the Indian Ocean. It is the sameprobleminIraq.”TheShahsaidhehadtoldSovietpremierAlexeiKosyginnottooverstepthemarkbecause“wecandestroyIraqinafewhours.Ifwehavethepoweryoucanaffordtobewise.WemusthavethedeterrentpoweroftheAirForce.”TheShahalsoinsistedtoNixonandKissingerthatIranwouldnotaccept

thepartitionorcollapseofthePakistanistatethathademergedfromtheruinsofthe1971secessionistwarintheeast.Oneof the signaturesof the latePahlaviperiodwas Iran’sgenerallycordial

relationswith its neighbors and the nuclear powers. The Shah’s balancing actextended to creating not only an American interest in his country but also aEuropeaninterest.“IamhavingapipelinebuilttoEuropesothattheyfeeloursecurityisinseparablefromEuropeansecurity,”heexplained.“Theonlyviableoil-producingcountryforEuropeisIran.IfIcanlinkmycountrytoEuropebyagas line, they have to pay attention to us. ThusRussia can’t use détentewithEurope and toughness with us; they must link détente with us to détente inEurope.”Nixon andKissinger didnot blanchwhen theShah said they shouldexpect additional increases in the price of oil. Higher prices were seen asproviding insurance for the Shah and enabling Iran to fulfill its securityguarantees:“Oilpolicyissufficientlycrucial.Wehaveaskedforatomicstationsevenfor Iran.Thenormal trendwillbe thatoilwill rise inpriceuntil shaleorgasification of coal becomes profitable.We have produced stability in the oilnegotiations.Noothercountrycandothis.”TheShahaskedforhelp inbuildinganIraniannavy.Hesaidhehadinvited

Hughes andWestinghouse to establish an electronics industry in Iran.Hewasalso keen to start co-production in the defense industry.Nixon said hewouldhelpIranattainnuclearpoweriftheShahwantedit.“Ithasbeenveryhelpfultoget your survey of the situation,” the president concluded. “Your analysisconvincesmethatitisindispensablethatwehaveapolicyoftotalcooperation.IwantDr.Kissingertofollowthroughonnavalforces,[nuclear]breederreactors,etc.IseetheworldandthepartIranplaysprettymuchasyoudo.”Nixon did not attend the second round of talks,which began in the Shah’s

reception room at Blair House at 5:00 P.M. and lasted for an hour and a half.Zahedi put his foot down and insisted he sit in with the Shah. It was in thismeeting that the Iranians and Americans in the room—the Shah, Zahedi,Kissinger, andHelms—talked in detail about developingmilitary contingencyplanswithrespecttoKuwait,SaudiArabia,andPakistan.TheShahwasdeeplyconcernedabouttheintentionsoftheSovietUnionanditsregionalproxiesIraqandIndia.Hesaiditwasimportantthat“wemakeitcleartotheothersidethatwe arenot going to accept anymonkeybusiness, theywill think twicebeforedoing anything foolish.As I explained to the President . . . just the power ofbeingabletoknockoutSovietprotégéswillmakethemthinktwice.”“YoumeanIraq?”Kissingerasked.“All the countries who lean on them [the Soviets] for support,” the Shah

replied.“Ourpolicyisnottoinsultthembuttoshowthemthatadventuresinour

areawillnotwork.”Kissingerconcurred,assuring theShah,“Weare trying tocheckmate Soviet influence wherever it appears and to exhaust them in anyadventurestheymaypursue.WewanttocreateaframeofmindinthePolitburothatistiredofcostlyadventuresintheMiddleEastwhichdonotproduceresults.Wewanttodothiswithoutconfrontingthem.Wewantthemsimplytorecognizethat they pay a price for that kind of policy.” Their joint project to support aKurdish rebellionwas justone facetofa strategymeant todrainSovietproxystateslikeIraqoftheirnationaltreasure.The Shah expressed indignation that Iran’s conservative Arab neighbors

refused tocooperatewith Iranonmattersof regionaldefense. Iraq’sattemptedtakeoverofKuwaitinthespringwasstillfreshinhismind.“Kuwaitissosmallthat its early warning system will never be adequate to permit defense byfightersintime,”explainedtheShah.“Bombscanevenbedroppedfromplanesalmostacrosstheborder.KuwaitmustbeprotectedbyJordanorSaudiArabia.”It was at this point that Ambassador Zahedi raised the “additional idea” of

developingaU.S.-Irancontingencyplan tosafeguardGulfoil fields.ThiswasanupdatedversionofaplanfirstdevelopedafterthemassacreoftheIraqiroyalfamilyin1958byleftistradicalsinBaghdad.AtthattimetheShahhadquietlyagreed that if Iraq invaded neighboringKuwait,American andBritish aircraftwould be allowed to use Iranian airspace and airfields during an evictionoperation.HenowwantedtoformalizeandupdateemergencyplanningtotakeintoaccountIran’ssuperiormilitarystrength.AlthoughPresidentAhmadHassanal-BakrwasthetitularheadoftheIraqistate,theShahwaskeepinganeyeonarising young official named Saddam Hussein, whose radical credentials,reputationforbrutality,andnationalistinclinationswerealreadycausingconcernthroughouttheGulfregion.InthemeetingatBlairHouse,ZahediaskedhowtheWhite House would react if Iran “were to help Kuwait” without receivingpermissionfromtheinternationalcommunitytodoso:“Forinstance,wouldtheUStakeastrongstandsothattherewouldbenodifficultiesintheUN?”WhattheShahwantedtoknowwaswhethertheUnitedStateswouldprovideIranwithdiplomatic cover to preemptively invade Kuwait in order to forestall animminentIraqiinvasionofthesheikhdom.Kissinger was intrigued by the Iranian proposal. He asked the Shah and

Zahedi to outline their intentions.Discussion turned to themodel formilitaryinterventionofferedupbytheSovietUnionwhenitinvadedCzechoslovakiain1968. The Shah feared that the Sovietswould repeat the tactic in the PersianGulf. The Shah thenwondered aloudwhether a contingency planmight havesaved the recentlydeposedAfghanking:“Ifwehadhadanunderstanding, forinstance,with theKing ofAfghanistan, hemight have been flown secretly to

somepointinAfghanistanaftertherecentcoupandappealedforhelp.”“Does YourMajesty have plans?” Kissinger inquired. “Or would the plans

havetobedeveloped?”“Theplanswouldhavetobedeveloped,”repliedtheShah.“Thediplomaticscenariowillbeveryimportant,”concurredKissinger.“Ina

situationlikethisitmaybedesirabletomovequickly.”“Yes,”agreedtheShah.“Weshouldtakethisup.[transcriptredacted].Kuwait

wouldnotbeeasy.IfIraqbeginsaninvasionatbreakfasttime,theycouldtakeKuwaitbynoon.”ThentheShahobserved,“Atthesametime,itisimportanttonote that a coup in Saudi Arabia may have nothing to do with Soviet granddesign.Itcouldcomeaboutentirelyfromtheirownforces.”“As you develop your contingency plans for Saudi Arabia, it should be

discussedwithnooneexceptHelms,”warnedKissinger.“Itcannotbediscussedintelegrams.ThatwillmeanAmbassadorZahediwillnotbeabletobeinformedbywrittencommunication.”“I agree,” said the Shah. “Wedo the same for our communicationwith the

Kurds.Wehavenothingbutoral communication.”TheShahwantedNixon topour even more weapons into Iraq’s escalating ethnic conflict with the IraqiKurds,arequestthatKissingerpromisedtolookatsympathetically.Buthehadaconcern.“Canwekeepthemfromcomingtoterms?”heasked.HeworriedthatSaddammightmake Kurdish leaders an offer they couldn’t refuse. The ShahadvocatedsettingupapuppetKurdishgovernment-in-exileinIraq’snorth.Thatway they could restrain the Kurds from signing a peace deal without theirpermission.HethendirectedtheconversationbacktoKuwaitandSaudiArabia.“Any contingency planning on Saudi Arabia must be most hush-hush,” heinsisted. “Saudi Arabia is different from Kuwait. I would not think this formyself.IthinkofitasusefulmorefromtheEuropeanviewpoint.”“Weshouldagreeunderwhatcircumstancesanyplanthatisdevelopedshould

be implemented,” said Kissinger. “We would need to know what was beingtriggered. . . . AfterYourMajesty returns to Tehran, perhaps a plan could bedeveloped.”HeturnedtoHelms:“Whoshouldbeinvolvedhere?”“NooneotherthanacoupleofpeopleintheWhiteHouse,”saidHelms.“Your Majesty can tell Ambassador Helms when you are ready,” added

Kissinger. “We can communicate either by sending someone out there or bysomeonecomehere.Weprobablyshouldnotevenputthisintoourbackchannelcommunication.”“Thatcanbedoneeasily,”affirmedHelms.“In the meantime, we should think about getting some Saudi like [Prince]

Fahdor[Prince]SultantostartanofficialcooperationwithIran,”confirmedthe

Shah, who was thinking about the need for a cover plan to throw off Saudisuspicions. “Obviously we need to have a contingency plan. But as acomplement,weshouldtrytodevelopofficialcooperationwiththeSaudis....IwilltalktoHelmsaboutthecontingencyplan.”Hesmiledandadded,“Iwillnottalk to theSenateForeignRelationsCommittee about it tomorrow.”Kissingerlaughedat thisand threwina jokeofhisownrelating toWatergate:“Itmighttaketheheadlinesawayfromourdomesticconcerns.”Militarycontingencyplansaredeveloped foreveryeventuality.But thisone

assumed that a contingency plan hatched in Iran and based on Iranian threatperceptionsalsoreflectedtheAmericannationalinterest.Itdidnot.Ifactivated,theplanwouldalterthebalanceofpowerintheMiddleEastandWestAsiabymaking Iran themonopoly producer of PersianGulf oil and gas, ensuring theWest’scompleterelianceontheShah’sgoodwillasitsprimaryenergysupplier.Itwasaplanthathadthepotentialtoigniteareligious-basedwarpittingShi’aIranagainstitsSunniArabneighborsandpotentiallydrawintheSovietUnion.The Shah was advocating regime change in Kuwait and Saudi Arabia undercoverofdeclaringanunspecifiedregional“emergency”or“crisis,”mostlikelyone involving Iraq and its patron theSovietUnion.The problemwas that theShah was hardly an unbiased observer. Arab governments distrusted hisambitionsandwonderedhowtheyfittedintohisnewlyreconstitutedEmpireofIran.Iran’sunilateralseizureofthethreeislandsin1971stillrankled.Thenewsecretaryofdefense,JamesSchlesinger, lateraptlysummedup the

1973statevisitas“arenewalofvows,as itwere—arenewalofmaritalvows”betweenNixonandKissingerononesideandtheShah:“TheShah,asyoumayknow, since hewas an absolutemonarch, tended to spin out these theories inTehran,andashedidsohewassurroundedbyagroupofmenwho’dsay,‘Howwiseyouare,YourMajesty,howinsightful!’Andsohetendedtobeunchecked,as it were, in the development of his strategic views, some of which weresoundlybased,butsomeofwhichwereprettyfanciful.”ThateveningtheNixons,thePahlavis,and115guestswereentertainedaftera

sumptuousdinnerbysingerTonyMartin,whosefirstgoldrecordwasin1938.He sang “Tea for Two” and somewhat inauspiciously crooned “There’s NoTomorrow” for the two first couples. But the president was in good cheer,inexplicablysportingasuntananddisplaying“unusualfriendlinesstoreporters,”even speaking to some.Themodestly attired queenwas outshone by socialiteCristinaFord,thewifeofautomogulHenryFordII,whostartledin“astraplesstubeof sequins” topped off by “a necklace of crown-jewel proportions.”VicePresidentSpiroAgnewtriedtojokehiswayoutofquestionsaboutWatergatebygamelytellingreporters,“Ican’tunderstandwhatit’sallabout,canyou?”

ThenextdaytheShahheldanewsconferenceatBlairHouse.HerepeatedlycomparedIrantoBritain,France,andWestGermany“andrejectedcomparisonwithcountriesof theMiddleEast.” Iran,hesaid,was thenewest“bigpower.”Heannouncedthathe“definitely”plannedtobuyF-14sbutrefusedtosayhowmany.He saidhewould also take a look at theF-15producedbyMcDonnellDouglas—he described the planes as “sophisticated toys.” Their MajestiesarrivedinParisonSunday,July29.IntheafternoonCourtMinisterAlamjoinedtheShahandhis fourchildren for a three-hourwalk in theBoisdeBoulogne.TheAmericans,heassuredAlam,hadgivenhimeverythingheaskedfor.

ChapterFourCONTINGENCIES

“It’s America’s inaction, or possibly America’s impotence, that haslandedusallinthismess.”

—TheShah,1973

“Can’tweoverthrowoneofthesheikhsjusttoshowthatwecandoit?”

—HenryKissinger,1973

WE’REHERETOGRABTHEOIL

InanynormalAugust,SouthernCalifornia’sMojaveDesertwouldbeaquietrefugeof triple-digit temperaturesbakingabarren landscapeof sagebrush andsand.ButAugust1973 fit noone’sdefinitionof “normal.”Against a soberingbackdropofscandalandpoliticalparalysisinWashington,thetightestoilmarketin history, and rumors of war in the Middle East, the largest desert warfaretrainingexercisesinthehistoryoftheU.S.MarineCorpsbegan.Fortwoweekscloudsofdust rosehighabove theMojaveas thousandsofmenandmachinesengagedinpitchedbattle.Surroundinghillsidesechoedwiththecrackleofrifleshotsandthedull thudofmortarrounds.Overhead,PhantomjetsshriekedandHueyCobra gunships and Chinook helicopters kicked up curtains of dust andsandwhileoffloadingsuppliesandmen.Therewas littledoubtwhat itwasall for.“Officially,noparallelsaredrawn

between Operation Alkali Canyon and the Middle East,” noted one of thehandfulofciviliansinvitedtoobservethemaneuversatTwentyninePalms,theMarines’ 932-square-mile desert warfare training facility in the Mojave.“AlthoughmosttroopswerelecturedonMiddleEastdesertpoliticsandsurvival—andthe‘aggressors’wereclothedinkhakishirtsandredcollarinsigniasimilartothosewornbytheLibyanarmy,nooneissupposedtotalkaboutArabs.”Asonereservistearnestlyexplained,“Theytoldusnottosayanythingpolitical.Wecan’tevenuseIsraelasahypotheticalexample.”Addedoneofhiscolleagues,

“ThePentagonhasacomputerplanfortheinvasionofeverycivilizedcountryintheworld.TheMiddleEastistheobviouspowderkeg,andwe’dbefoolsifwedidn’tprepare.”SevenmonthsafterendingcombatoperationsinthejunglesofSoutheastAsia,

andfourweeksafteragreeingtodrawupcontingencyplanswithIrantoinvadeKuwaitandSaudiArabiainanemergency,theNixonadministrationwasgearingup for war in the desert sands of the Middle East. The Alkali Canyon 73exercises called for five thousand Marine Corps regulars and four thousandMarinereserviststosplit intotwoopposingsides.EighthundredMarinesfromthe fictional communist state of Yermos were ordered to invade peace-lovingArgos to the south. Although “the entire war, all its battles and the eventualoutcome,hadbeenprogrammedinadvancebycomputer,”thingswenthaywirefrom the get-go. Many of the reservists made it clear that with the war inVietnamover, they justwanted to sign theirdischargepapersandgohome.“Ican give you my opinion of this entire operation in two words: F——it,”declaredPrivateWillieWilkinsofAkron,Ohio.The reservists seemed more interested in reaching for their bottles of

Coppertonethantheirrifles.Theyretreatedtotheirtentswithcratesofbeerandgot drunk.Confusion abounded.Men fainted in theheat.An exchange officerfrom the British Royal Marines, Captain Duncan Christie-Miller, sat out the“war”inhistentwritinganarticleonskiinginEurope.“Ourunitwassupposedtobeinatankbattlelastnight,butsomeoneforgottobringthetanks,”grousedSergeantBobMusmann fromPittsburgh. “CanyoupictureHogan’sHeroes, FTroopandMASHalltogether?We’vegotit.”LieutenantColonelRichardDennislost his cool when he learned that his telegrapher had gone to chow withouttelling him, forcing a delay in calling up air strikes. “Goddamn!” screamedDennis. “This iswar!What’s thematter?Doesn’t anyone take this seriously?”OnewhodidwasStaffSergeantGregAnderson.Clamberingaboardhistanktorallyhistroops,Andersoncalledthemtoarmswiththeirresistiblecry,“Comeonmen!We’reoutheretogetpracticesowecangrabtheoil!”

LIBYAISGOINGTOKNOCKTHEMOFF

The trigger man for mayhem that summer turned out to be not Iran’sMohammad Reza Shah Pahlavi but a man from the next generation, ColonelMuammar al-Qaddafi, the thirty-one-year-old ruler of Libya. Libya was arelative newcomer to the world oil market. Armand Hammer’s OccidentalPetroleum had struck it big in Libya in 1966with gushers in the SirteBasin,

located a hundred miles inland from theMediterranean. Libya’s proximity toEurope’s southern underbellymeant thatwithin six years itwas supplying thecontinentwith30percentofitsoil.LibyanpetroleumwasinhighdemandintheUnitedStatesbecauseiteasilymettheNixonadministration’stoughnewcleanairstandards.Libya, three times the size of France but with a population of less than 2

millionpeople,reinvestedtheprofitsfromitsdailyexportsof2.3millionbarrelsofoilintoawelfarestatethatboastedfreeeducation,healthcare,andhousing.Qaddafihadstakedoutareputationasthemostmercurialandradicalleaderofthe Arab world, espousing a hodgepodge of “isms”: panArabism, pan-Africanism, Islamic fundamentalism, anti-Zionism, socialism, anti-Americanism,andanti-Communism.HecanceledmilitarybaseagreementswiththeUnitedStatesandexpelledLibya’sItaliancommunity,threateningtoemptyItaliangraveyardsof theirdeadandship the21,000corpses toRome.HeusedLibya’sfortunetoacquirethebiggestcashandgoldreservesintheArabworldwhile lavishing aidonEgypt,Syria, andYasserArafat’sPalestinianguerrillas.Qaddafi’smostpotentpurchase todatewasa$200millionorder fora fleetof114FrenchMirage fighter-bombers. The aircraft threatened to tip themilitarybalance of power in North Africa. Qaddafi’s military pretensions and radicaltendenciesengenderedenormousconcerninTelAvivandTehran.“ThisQaddafiisarealnut,”theShahwarnedKissinger.“Heismakingtrouble.”WesternoilcompaniesoperatinginLibyapresentedQaddafiwithasofttarget.

In1970heforcedOccidentalPetroleumtoraisethepriceofitsoilbythethenunheardofsumof30centsabarrel.Thenegotiationswereconductedoverrollsandarevolver—aftertheLibyanrepresentativeofferedAmericanoilexecutivescoffeeandrolls,hesethisrevolveronthetableinfrontofthemasareminderofjusthowmuchthemarketinpetroleumhadchangedinrecentyears.Itwasthefirst timetheoilmajorshadbrokenranksandsurrenderedtothedemandsofahost government. Kissinger explained in his memoirs that the White Houseassumed it was witnessing “commercial bargaining and not a revolutionaryupheaval” in theoilmarket,and that“thedimensionsof theproblemwerenotimmediately apparent. And because the symptoms, the price increases of theearly1970s,wereextremelymodest,noissueofdomesticeconomicpolicy—nottospeakofnationalsecurity—seemedtobeinvolved.”Kissinger’slogicwasspecioustosaytheleast.Althoughindividualincreases

in the price of oil appeared at the time to bemodest, their overall cumulativeeffectwas striking enough—the price of oil jumped 72 percent between 1970andSeptember1973.Noone couldmiss the fact that oil priceswere trendingupward.KissingerwrotethattheU.S.government“didnotasageneralpractice

involveitself incommercialdisputes”althoughhis involvementintheAramconegotiations and his frequent contacts with the oil companies suggestedotherwise. Kissinger unfairly laid the blame for what he termed the Nixonadministration’s policy of “noninvolvement” in the oil market on WilliamRogers, Nixon’s first secretary of state. “Our hands-off policy ordained theresult: thecompaniesyielded,”Kissingerexplained.He insisted thatheon theother hand had been “increasingly alarmed by the escalating demands of theproducers” in the spring of 1973. Yet Kissinger’s declassified telephonetranscripts tell a different story. They reveal missed opportunities, ignoredwarnings, and preciousmonths lost to prepare theAmerican economy for thewavethatwasabouttobreakoveritsbow.OnMay15,1973,DeputySecretaryofDefenseWilliamClementstelephoned

Kissinger to ask for “a quick word because I know you don’t like surprises,Henry.” Clements had it on “good authority that the Libyans will likely thisweek starting today, perhaps tomorrow for sure supposedly, start nationalizingtheAmericaninterestinLibya.”“Sowhat?”wasKissinger’sresponse.Clements, a former oilman who enjoyed close ties with Middle East

governments,askedthatLibyanoilnationalizationbe“putontheagendatoday”becauseof the “enormouspressure that’s buildingup as an interfacewith thatproblem in Saudi Arabia. The two are related.” King Faisal had in the pastpromisednottoturnhiskingdom’sgiantoilreservesintoaweaponintheArab-Israelidispute.But theoldkingwas losinggroundto thesirencallofQaddafiandhisradicals.InearlyMayFaisalwarnedAramcoexecutives“withextremeurgency” that theNixonadministrationshould takenoticeof rising tensions intheMiddleEast.ClementssaidtheWhiteHouseneededtocomeupwithaplan“because I don’t think anyone is now addressing that problem or thinking intermsofhowwewillrespond.”“Tothenationalization,”saidKissinger.“Right. And the people are there and some of the other things that may

happen.”DefensewasworriedaboutthesafetyofAmericanciviliansworkinginLibyawhowerevulnerabletohostagetakingorassassination.“Iagree,”saidKissinger,whohadstillnotgraspedtheextentoftheproblem.

“You’renottalkingabouttheflights,you’retalkingabout...”“Ohhell,no,I’mtalkingaboutthetakeoverof3billionormore,3billionplus

ofourassets,”answeredClements.Kissingeragreedthatsomethingshouldbedone.ButtwoweekslaterDeputy

SecretaryofStateKennethRushphonedwithawarningofhisown.“Ihadinalltheheadsof thecompaniesdoingbusiness inLibya,”he explained. “Theyare

really—theirbacksareagainstthewall.WhatLibyaisgoingtodoisknockthemoffonebyoneandthenleap-frogovertotheMiddleEast,andtheShahhastoldmehedoesnotwanttoraisethepriceofoil,butthatifwe[don’tact],thenhe’sgottodoitatleastbacktoLibyaandbackandforth.Andalltheheadsofthesecompanies say we’ve got to do something to show—to calm the emotionalupsurgeintheMiddleEast.”RushhadjustreturnedfromTehran,wherehehadheld talkswith theShah.TheIranian leaderwas lettingKissingerknowthat ifQaddafi charged more for Libyan oil, then Iran would follow suit penny forpenny,dollarfordollar.Thatwouldbelikestrikingamatchinapaperfactory—it would ignite a bonfire of price gouging and profiteering among Gulf oilproducers. By now, alarm bells should have been ringing at the NSC. ButKissingerinsteadbrushedasideRush’swarning.Unlikehiscolleague,heknewthattheShahalreadyhadNixon’spermissiontoraisethepriceofoil.“Buttheyarealwayswrong,Ken,”he lecturedhiscolleagueand rival. “Everyyear theyhaveanotherpetprojecttocalmit,andtheyareneverright.”Asoundknowledgeofglobalfinance,commodityprices,andexchangerates

wouldbeascrucialtonavigatingtheshoalsofthenewdecadeasmovingflagsandarmiesaroundthechessboardofgreatpowerrivalries.Nixon’sdecision inAugusttoreplaceRogerswithKissingerassecretaryofstatecamewithNixon’srecognition thathisnewsecretaryof state lackedessential expertise inoil andeconomics. Kissinger held on to the pivotal post of national security adviser.“HenrywantedState,felthedeservedit,andletmeknowthathewouldresignifhedidn’tgetit,”Nixonrecalled.“WiththeWatergateproblem,Ididn’thaveanychoices.”ThepainfulscenesthatfollowedwerereminiscentofNixon’sbotchedhandling of Richard Helms’s dismissal as CIA chief the previous November.When White House chief of staff Alexander Haig asked Secretary of StateRogers to do the right thing by the president and resign, the usually affablesecretary of state exploded in a fury: “Tell the president to go fuck himself.”Rogersexpectedamorehonorablewayoutthantobepresentedwithapistolonaplate.Kissingerunderstoodthat“forNixonmyappointmentwaslessanactofchoice than a step taken against his will in the hope it would mitigatecatastrophe.”ArthurBurnswroteinhisdiarythatKissingerhadbeeninofficeonlyamatter

of days when he asked for help “in reducing Treasury’s role in internationaleconomicarea,sothatState’srolemaybeenhanced.”BurnswrotewithhorrorofthewayKissingerusedeconomicsandinternationalfinanceastactical toolsto settle scores and punish leaderswho stood in hisway.On one occasion heasked Burns to come upwithways in which the Fed could “cause economictroublefortheFrench?WhatcanU.S.do,ortheFedalone,tocauseeconomic

trouble for the French?” Burns was shocked by Henry’s suggestion that theadministrationshoulddestabilizetheeconomyofoneofitsmostimportantalliesandtradingpartners:“H.attimesstrikesmeasamadman;agenius,yes;buthehasalustforpower—agoodpupilofNixon’sandHaldeman’s,orperhapsoneoftheirteachers?Whatoutrageousthinkingonhispart!”

WE’REPLAYINGFORREALMARBLESNOW

Colonel Qaddafi struck on the evening of September 1, 1973. Duringfestivities to mark the fourth anniversary of his coup the Libyan leaderannouncedtheexpropriationof51percentoftheassetsofforeignoilcompaniesoperating in his country. As predicted, Qaddafi selected several companies,including Occidental, to test American resolve. When no resistance wasforthcoming, he swept the board. Pressure now mounted on more moderatePersianGulfoilproducerstotearuptheirparticipationagreements,joinLibyainhikingtheiroilpricesby30percent,andrefusepaymentindollars.That same day news broke that during a recent unannounced visit to Saudi

ArabiaPresidentAnwarSadatofEgypthadwonapledgefromKingFaisal to“restrictoilproductionincreasestothelevelof10percentannuallybytheendoftheyearifAmericanpolicyintheMiddleEastdoesnotchange.”TheproblemfortheUnitedStateswasthatithadbeencountingonSaudiArabiatomorethandouble production from its current output of 8.5million barrels to 20millionbarrels per day by 1980 to meet the growing chasm between domestic oilproduction and America’s galloping rate of oil consumption. America couldproduce nomore than 11million barrels of oil per day even though it wouldshortly require 24million for the economy tomaintain current growth levels.WesterneconomiesincludingJapanwereprojectedtoseetheiroilconsumptionrise from 1.6 billion tons in 1970 to 2.8 billion tons by decade’s end.Wherewoulditallcomefrom?MiddleEastoilproducershadsofarmanagedtokeeppacewithWestern consumer demandbyboosting their production rates by anannual6.9percent.SaudiArabia’soilproductionhadsoaredby30percentinthepast year alone. But Faisal’s threat to reduce rather than increase productionthreatenedtodriveWesterneconomiestothewall.Inastrokeitwouldwipeoutsurplus capacity in the market, pit consumers against each other in a madscramble for scarce energy resources, and potentially destabilize financialsystems worldwide by provoking a severe recession. The Saudi king had ineffectplacedhisthumbonthewindpipeoftheAmericaneconomy.“Faisalisnoblufferandwe’replayingforrealmarblesnow,”aworriedWhiteHouseofficial

admitted to Newsweek. “We’re talking about the flywheel of our economicsystem;ifanythinggoeswrongwithit,Americastops.”

TOTHEBRINK

Despite explicitwarnings provided to them by the leaders of Iran, Jordan,SaudiArabia,andtheSovietUnionthatEgyptwasrearmingwiththeintentionofattackingIsrael,NixonandKissingerdeferredtotheconfidentassurancesofIsraeligovernmentofficials,whoregardedsuchpredictionsaspreposterous.Onewarm Saturday morning in mid-May, Henry Kissinger sat down with Israeliforeignminister Abba Eban inWashington. Eban rejected intelligence reportswarning thatEgyptand itsallySyriawerepreparing tohit Israel.They lackedthefirepowerandtacticalexpertisetopulloffasurpriseattack.PresidentSadatwouldnotbesofoolishastogamblehishouseonawarhecouldnotpossiblywin. “The result would be catastrophic for them, militarily, politically,domestically, and internationally,”EbanassuredKissinger. “Thehumiliationathome;theSovietUnionwouldsaywetoldyouso.”NorwasanAraboilboycottof theWest a realistic option. Besides, their friend the Shahwould step in tobreakitbyreleasingadditionalcrudeintothesystem:“Butaboycottwouldn’twork,becauseIranwouldn’tgoalong.”Eban andKissinger gossiped aboutAnwarSadat’s supposed lackof smarts.

“Sadatisnotbright,buthecanthinkafewmovesahead,”observedEban.“Heisnotsovolatile.”“That isnotmyimpression,”repliedKissinger.“Heshowsnocapacity for thinking moves ahead.” Kissinger explained why the NixonadministrationwassittingonitshandsandrefusingFaisal’sentreatiestoinvolveitself more in the Middle East. “As I have told your Ambassador, Americanpassivity is due to a fortuitous combination of circumstances and cannot becountedonindefinitely.Ifyoulookattheconstellationofleadingofficials,youcannotcountonthecontinuationofthepresent....Sofar,theEgyptianpolicyissostupidthereisnoparticularchallenge.”HetoldEbanthathewas“reluctanttogetusintoapositionwherebothsidescanshootatuswithoutconsideringanyscheme.” The Israeli delegation returned home confident that Kissingerunderstoodtheirconcernsandsharedtheirstrategicassessmentofthesituation.In August sixty-seven-year-old King Faisal received Aramco executives in

Geneva.HemadeitclearthatSaudiArabiawasunderenormouspressurefromits Arab brethren to turn its oil resources and revenues against Israel and itsfriends.Timewas runningout for theNixonadministration to reengage in theMiddleEastandnudgeIsraeltowarddialogue.Itwasn’tuntilFebruary1974that

Americans learned the detailed nature of the king’s warning. At a luncheonhosted inWashington by the Propeller Club, amerchantmarine organization,guest speaker and Aramco vice president Michael Ameen Jr. described howKing Faisal “told us in August, 1973, there would be another war within sixmonths,andthathewouldhavenoalternativebuttouseoilasaweapon.”TheSaudi monarch even confided that Arab states were prepared to sustain fiftythousandcasualties.“Hiswarningswentunheeded,”recalledAmeen.TheWhiteHousenever returnedhiscalls,Ameensaid.“We talked to theCIA, theNavy,theArmy,theMarineCorps.Theytoldus,‘Mike,you’reoutofyourhead—theydon’twant to get thehell kickedout of them.’They said, ‘Don’tworry aboutKingFaisal—we’regoingtogivethemPhantoms.’”King Faisal also took to the airwaves and granted rare interviews with

Americanforeigncorrespondentstoexplainhisconcerns.Hecalledforbalancein U.S. foreign policy in the Middle East and explained that it was notnecessarily in Saudi Arabia’s interest to boost its oil production just to meetconsumerdemandintheWest.“Logicrequiresthatouroilproductiondoesnotexceed the limits that can be absorbed by our economy,” he said. Pumpingbillionsofdollarsinoilrevenuesbackintoaneconomyalreadyregisteringtheworld’shighestgrowthrateof16percentcouldbedisastrous.Modernizationhadtoproceedgraduallyandinstages.ThekingannouncedthatSaudioilproductionwouldnotbeincreaseduntiltwoconditionsweremet.First,hewantedtheWesttohelpindustrializeanddiversifytheSaudieconomy.Second,“amoresuitablepolitical atmosphere, hitherto disturbed by the Middle East crisis and Zionistexpansionistpolicies,mustbepresent.”The White House was thrown into confusion. On September 5 Henry

KissingermetwithSecretaryofDefenseJamesSchlesingerforaneighto’clockbreakfastmeetingatthePentagon.ThetwoonetimeacademicrivalsatHarvardwouldshortlyhavetodealwithacascadeofcrisesintheMiddleEastagainstabackdropofdomesticpolitical turmoil.Their immediate, if admittedly forlorn,objectivewasto“keepthePersianGulf[oilproductionandpricing]issuesawayfromtheArab-Israeliconflict.”“Let’s talk contingency plans,” said Schlesinger. “The Iranians could take

KuwaitbutnotcrosstheGulf.”“The Shah wants to know if the F-14 and F-15 mix,” Kissinger replied.

“[Israel’sYitzhak]Rabinsaidhewouldn’thavetheF-14.”Their brief but revealing exchange confirms that military contingencies,

including plans involving Iran and Israel, were being reviewed by theWhiteHouseinthefirstweekofSeptember.Thetimingofthediscussionissignificantbecause it came onemonth before war broke out in theMiddle East and six

weeks beforeArab states embargoed oil sales to theUnited States.HistorianshaveassumedthattheuseofforcewasseriouslyconsideredbytheUnitedStatesonlyafter the oil embargobegan to bite inNovember.Wenowknow that thetriggereventsforinterventionwerenottheoutbreakofwarortheimpositionofthe oil embargo—two events that Kissinger had already decided wereimplausible ifnot impossible—butLibyanoilnationalizationandSaudi threatsto reduce the flow.Traditionally, theuseof force in international affairs is thepolicyoptionoflastresort,tobeactivatedonlywhendiplomacycomesupshort.But in the absence of diplomacy itself, military action becomes less a choicethananecessity.TheendofsummerbroughtwithitthecruelrealizationthattheUnitedStateshadalloweditselftobemarginalizedintheMiddleEast.Ithadlostcontrolofitsoillifelineevenasitallowedbillionsofdollars’worthofassetstobeexpropriated.LaterinthedayofSeptember5,PresidentNixonhintedatwhatwasgoingon

behind closed doors when he spoke to reporters. He insisted that he wascommittedtoseekingapeacesettlementintheMiddleEast.ButhewarnedAraboil states not to push him too far. “Oil without a market, as Mr. Mossadeghlearnedmany,manyyears ago,doesn’tdoa countrymuchgood,” saidNixon.Nixon liked to keep his adversaries on edge in the belief that he might usemassive force against them—he called it his “madman” theory. That monthNixonandKissingerwerecloselyfollowingeventsinChile,wheretheCIAwasinvolved in efforts to overthrow the elected government ofPresident SalvadorAllende, a Marxist who, like Colonel Qaddafi, had nationalized Americancorporateassets.ItislikelythatAllende’sfatewasweighingheavilyonNixon’smind when he invoked the specter of the deposed Mossadegh. But thepresident’s decision to prise Mohammad Mossadegh from his crypt during astandoff with Middle Eastern governments—and at a time when Watergateinvestigators were probing his financial ties to the Shah—was a pointlessprovocation. For two decades American presidents had observed a discreetsilenceon thesubjectof the1953coup,notwishing toembarrass theShahbyresurrectingoldaccusationsofpuppetry.NixonhadalsounwittinglytippedtheissueofU.S.-Iranrelationsandhisdeal

making with the Shah into the shark tank of Watergate congressionalinvestigations andmedia scrutiny.The resultwaspredictable. “Becauseofourrelationship with Nixon, they started hitting us,” remembered AmbassadorZahedi.HewasparticularlyworriedaboutthetoneofTheWashingtonPost.“ItwashardlymarketforcesthatthrewMr.MossadeghoutofofficeaspremierofIran in1953,”Post editors scoldedNixon inaparticularlyvociferouseditorialthat outed the Shah’s CIA connections. “After a bitter dispute over his

nationalizationofBritishoilconcessions,hefellinacoupablyandsuccessfullysupported by this country’s Central Intelligence Agency.” Washington Postcolumnists Rowland Evans and Robert Novak piled on the opprobrium,ridiculingNixon’sattempt tocompareconditions in1973with thoseof twentyyearsbefore.HisthreatofretaliationagainstArabgovernmentswas“dangerouspoppycock . . . a hip-shooting challenge utteredwithout careful forethought.”Thepresidenthad“surprisedhisownaides”and“stunned theoil statesof theMideast,mostparticularlySaudiArabia.”TherewasbacklashinArabcapitalstoo.Nixon’sthreatcoincidedwitharash

of news reports of the Marine exercises in the Mojave and an article in theFrenchweeklyNouvelObservateurthatdescribedajointAmericanandBritishplan“todropparatroopersinstrategicoilandcommunicationscenterswiththehelpofIranandIsrael.”InvasionrumorsswepttheMiddleEast.Atop-rankingSaudiofficial asked, “Do they think inWashington it is so easy to occupyoilfieldswithtroops?Letthemcomeandsee.”InLibya,ColonelQaddafiwarnedthat the “Nixon gang” wanted to take over his country. “The backlash isdefinitely there,”a seniorU.S.diplomat toldTheWashingtonPost.“Moreandmore,Arab officials are convinced that justification for some kind ofmilitaryoperation against the oil countries is being built by the United States. Thisfeedback is in itself becoming a factor in our relations with the Arabs—anegativefactor.”The president’s own advisers were appalled but for a different reason—it

dawnedonthemthatNixonstillbelievedWesternconsumersretainedinfluencein the oil market. “My God, doesn’t he realize that every single incrementalbarrelofoil todayhas tocomefromtheMiddleEast,”complainedanadviser.AskedbyareporterwhyNixonhaddecidedtodredgeupMossadegh’snametothreatenArabgovernments,aWhiteHouseofficialsnappedback,“Becausehewas advised by a fool.” The president, said the official, had since been“readvised.”Oilproducersmadetheirfeelingsclearwhentheyannouncedplanstomeetin

ViennaonOctober8toraiseoilpricesandscrapthetermsofthe1971TehranAgreement. The contracts they had previously signed with the oil companies“arenolongercompatiblewithprevailingmarketconditions.”

BUTWHICHCOUNTRYAREWEOCCUPYING?

ThecombinedarmiesofEgyptandSyriaattackedIsraelonOctober6,1973,thehighholydayofYomKippur.Theypunched throughIsraeli lines,pouring

acrosstheSuezCanalinthesouthandstormingtheGolanHeightsinthenorth.TroopsfromSaudiArabia,Iraq,Jordan,Kuwait,Morocco,andTunisiarushedtojointhefray.ThefourthArab-Israeliwarwasunderway.In Tehran, the Shah summoned his chief of staff and army commander to

discussIran’soptions.TheShahwasdistressedthathiswarningstoNixonandKissinger about theprospects forwarhadbeen ignored.Hewiselydecided tokeepIranonthesidelines.HeagreedtolendIranianaircraft totheArabstatesforstrictlydomesticuse,refusedMoscow’srequestthatSovietmilitaryaircraftbeallowedtoflyoverIranianairspace,andquietlyassuredtheIsraelisthatIranwouldkeepsellingthemoil.Buthe instructedhiscourtminister toconveyhisfrustrationtoAmbassadorRichardHelms:“Tellhimhe’sunderanobligationtofindsomesortofsolutiontothisblastedwar.It’sAmerica’sinaction,orpossiblyAmerica’simpotence,thathaslandedusallinthismess.”IsraelileadersinformedtheNixonadministrationthattheycouldnotholdtwo

battlefronts for long. Facedwith the prospect of Arab armies sweeping downfrom theGolan into Israeli towns and settlements,PrimeMinisterGoldaMeiractivatedIsrael’snucleardeterrentandhadaMirage jet loadedwithanatomicbombreadiedfortakeoff.Themessagewasclear:Israelwouldnotburnalone.Officials inWashingtonwatched in shock as their strategic assumptions aboutIsraeli military superiority crumbled. Early on the morning of October 10,SchlesingerphonedKissinger to informhim that theSovietswere resupplyingArabforcesandthatKingFaisalhadcommittedSauditroops.HemadeitclearthatasfarasthePentagonwasconcernedalloptionsconcerningtheSaudiswerenow on the table. Faisal had crossed the line and thrown in his lot with theradicals.“SoIthinkthatwearegoingtogetintoapositioninwhichallofourinterests in SaudiArabia are at risk and itmight be desirable to examine thefundamentalsofourposition—”“Well, what are the fundamentals of our position as you see it?” asked

Kissinger.“Well, the fundamentals are thatwemay be facedwith the choice that lies

cruelly between support for Israel, loss of SaudiArabia and if interests in theMiddle East are at risk, the choice between occupation or watching them godownthedrain.”“Occupationofwhom?”“Thatwouldremaintobeseen—itcanbepartial.”“Butwhichcountryareweoccupying?”“That’soneofthethingswe’dliketotalkabout,”saidSchlesinger.“Who’swe?”“Me.”

“Okay, I have heard an urgentmessagewhich I’ve got to take upwith thePresidentandI’llbeback toyou later thismorningandwe’llget together thismorning,”saidKissinger,endingtheconversation.Kissinger’sdayofintensedramahadjustbegun.Hiseffortstoreachacease-

fire in the Middle East while discussing plans for U.S. military interventioncame to a dramatic and historic pause at 2:05 P.M. when he received VicePresidentSpiroAgnew’sformalletterofresignation.Itwasaprocedurerequiredunder the terms of the Presidential SuccessionAct of 1792.Agnew had beenunderinvestigationforgraftduringhistermasgovernorofMaryland.Underaplea bargain reached with prosecutors, the unhappy vice president agreed toresigninordertoavoidaprisonsentence.WithinanhourprivatecitizenSpiroAgnew stood in a Baltimore courtroom and “with barely trembling hands”pleaded no contest to charges of tax evasion. Two days later PresidentNixonnominated Gerald Ford, the sixty-year-old Republican minority leader in theHouseofRepresentatives,toreplacehim.There was drama too in Vienna, where Persian Gulf oil producers

renegotiating the terms of their contractswithWestern oil companies abruptlyquit the talks and threatened unilateral price increases.AbuDhabi, Iran, Iraq,Kuwait,andSaudiArabiawereinnomoodtocompromiseagainstthebackdropof war in theMiddle East and crisis inWashington. They threatened to hikeprices by 50 percent, well above those set by Libya and Algeria. Industrynegotiators refused and warned them that such a big increase “would haveexceptionallyseriousandwide-rangingimplications,notonlyforthecompaniesbutfortheworldeconomyatlarge.”InflationwouldriseintheWestandsucharapidtransferofwealthcoulddestabilizetheinternationalfinancialsystem.Arableaders decided to reconvene in Kuwait City in two weeks to discuss theiroptions.TheIsraelismeanwhilewereboggeddown,havinglostaquarterof theirair

forceandsufferinghundredsofbattlefieldcasualties.At12:49A.M.onSaturday,October 13, Kissinger and Schlesinger held a tense telephone conversation inwhichthesecretaryofstateimploredhiscolleaguetogetmovingwithanairliftofmilitaryequipment.Kissingerwaspanicked.Israelicommandershadtoldhimtheywererunningsolowonammunitionandsparepartsthatacounteroffensivethey hadmounted against the Syrians in the GolanHeights was in danger ofcollapse.Kissingerknew that foradiplomaticdeal tobebrokered, the Israelismustbeinastrongermilitaryposition.SchlesingerinsistedthattheIsraelishadgivenhimnoindicationtheywereintrouble.“Welltheysimplycannotbethatshort of ammo,Henry,” he countered. “It is impossible that they didn’t knowwhattheirsupplywas—andsuddenlytheyrunoutofit.”

KissingerneededtokeepIsraeligunsinactionforatleastanothertwenty-fourhoursuntilacease-fireresolutionwentbeforetheSecurityCouncil.HeconfidedtoSchlesingerthatIsraeligeneralswereafraidtospeakcandidlyabouttheirdirepredicament because “they don’t trust the people in the room.” Israeli armyheadquarterswasinashambles.“Look, theyhaveobviouslyscrewedupeveryoffensive they’ve conducted and they are not about to take the responsibilitythemselves,”heexclaimed.“Ihavenodoubtwhateverthattheyareblamingusfortheirfailures.”“Are they short of ammo or aren’t they?” demanded Schlesinger. The

distinctionwascriticalbecause,asthedefensesecretaryknew,anydecisionbytheUnitedStates toairliftmilitarysupplies to IsraelwouldprovokeretaliatoryactionfromAraboilproducersandpossiblyleadtoanoilembargoagainsttheWest.“How the hell would I know,” snapped Kissinger. The White House was

operating inan informationvacuum.Schlesingerworried that the Israelisweretrying to,asheput it, “suckus in.”Henry’sbehaviorwasalsoaconcern.“AsIsraelbegantofallapart,Henrybegantofallapart,”heremembered.KissingerandSchlesingerbothunderstoodthattheUnitedStateswasinadilemma,facedwithachoicebetweenlosingIsraelorlosingAraboil.TheAmericanpositioninthe Middle East was untenable. Kissinger told Schlesinger that the Israeliofficialshehadspokentowere“soterrifiednow”ofarenewedEgyptiandriveintotheSinai.Theycouldnotholdbothfrontsformuchlonger.“That’s incredible planning on their part,” answered an exasperated

Schlesinger.“Look,theyfuckeditup,”fumedKissinger.“Hmhuh.Okay, letme try to findoutwhat thehell their statusof supplies

situationis.Wehadtheimpressiontheyhad15daysofsupply.”Thiswasthefogofwar.KissingerwasfuriouswiththeassurancestheIsraelis

hadgivenhimoverthepastyear.“Becauseyouknowwhathappened—aswellas I do,” he told Schlesinger. “These guys got thewhole thing screwed up—everytime.Theyarelivingin1967.AlldaylongyesterdaytheyweretellingmetheywereheadedforDamascusandtheyweregoingtostopontheoutskirts....Nowtheyobviouslycan’tmakeit.”Kissinger and Schlesinger agreed to move military supplies through the

Portuguese Azores. The next morning The New York Times reported that theadministrationhadagreedtoshipF-4PhantomjetfighterstoIsraeltomakeupfor its losses: “The step is being taken with unusually tight secrecy by theAdministration,whichisdeeplyconcernedabouttherepercussionsitcouldhaveon American relations with oil-producing Arab states as well as on Soviet

actionsinresupplyingEgyptandSyria.”Nixon’snationalsecurityteamreconvenedjustafternineo’clockonSunday

morning, October 14. They were joined by theWhite House energy adviser,formergovernorJohnLoveofColorado,andspecialenergyconsultantCharlesDiBonna.Their inclusionwasabelatedacknowledgmentbyKissinger that theissues of the oil supply and the Middle East conflict might now converge.Kissingeraskedhiscolleaguestocomeupwithpolicyoptionsintheevent—stillunlikelyashesawit—ofinterruptionstoAmerica’soilsupplyinresponsetotheairlift.Theyshoulddevelopcontingencies forapossibleAraboilembargo.Heasked: “What dowe do if the oil is cut off?What kinds of problemswillwehave?”IsraeliforeignministerAbbaEbanhadassuredKissingerbackinMaythatin

theeventofanAraboilembargotheShahwouldstepinandbreakitbyrampingupIran’soiloutput.ButEbanhadbeenwildlyoveroptimistic—itturnedoutthatIranhadvirtuallynosparecapacity.TherewasnowaytheIranianscouldfloodthemarketwithenoughoiltocounteranyArabboycott.“HowmuchcouldtheIraniansincrease?”askedSchlesinger.“Five-and-a-halftoeightmillion?”Love had some bad news for the White House: “Iran could perhaps get

200,000barrelsadaymorebuttheyhavealreadykickeditup.”Anyhopestheadministration had of breaking a future embargo with the Shah’s help weredashed.“If it happens it will happen next week,” said Kissinger. “We are going to

need a plan. It should consider a cutoff in theU.S. and a cutoff to Japan andEuropeaswell.”“To do so, we also have to consider consultations on the Hill, putting the

PresidentonTV,andthetimingofwhatwedonow,”addedLove.“Wehavetobeready.”“Wedon’twanttopushthebuttonnowandcausepanic,”Kissingeradvised.

“Weneedtohavetheprogramreadyforthedaywhentheydoit.”Deputy Secretary of Defense William Clements described a cutoff of oil

suppliesfromtheMiddleEastas“amegaproblem,”onethatcouldnotbefixedby conservation at home, cutting the speed limit, or increasing domestic oilproduction. Schlesinger added, “On timing we must weigh the advantage ofgettingsomethingoutontheproblem.Ifitisindicatedthiswillhappen,wewillwant to consider the deterrent impact.” Defense was making it known thatmilitarycontingencyplanningmighthavetocomeintoplay.Kissingerwas less sure: “So far no one has threatened us, butwe have no

program.”“Wecouldannouncesomethingquickly,”saidLove.

“Iwouldn’tprovokeitorthreatenthem,”Kissingerreplied.Heexplainedthathehadnotheardanymentionofacut-offinhistalkswithArabenvoys:“AllIhave received are hysterical calls from oil companies. The Saudis have beenbetter than any. We have good commercial relations. Some idiot says weshouldn’thavesaidthatbutIdon’twanttochallengetheArabstoatestoftheirmanhood.”“When we resupply to Israel, at that point we will have a problem,” said

KennethRushoftheStateDepartment.Theylookedattheimpactofanembargoonthedomesticeconomy.Thecrisis

teamwas asking questions that should have been asked and could have beenansweredmonthsearlier. “Itwill cause restrictionson thedomesticeconomy,”observedClements.Loveconcurred:“Wewouldhavetomakesomeshiftsandclosedownsome

factories.”The stunning factwas that even at this late hour in the crisis no one in the

administration could offer specifics on how much spare fuel capacity wasavailabletotapintheUnitedStatesintheeventofanemergency.“Inashort time therewouldbeshortages ineverything—perhapsamonth,”

warnedLove.Butwhensomeonesuggestedthat thegroupconsiderworst-casescenarios, Kissinger refused, saying, “Let’s not talk about consequences. Wedon’twanttomakeithappen.Weshouldbelowkey.”The following day, Saudi oil minister Zaki Yamani warned that if the

administrationundertookanaerialresupplyoperationofIsrael,hisgovernmentwouldretaliatebyslashingitsoiloutputby10percentimmediatelyandthenby5 percent each succeeding month. Saudi production was running high at 8.5million barrels per day, with 600,000 of those barrels bound for the UnitedStates. Reports were also circulating that Kuwait was considering a halt topetroleumexportstotheUnitedStates.AtthiscriticaljunctureRichardNixonrousedhimselfandlikehisheroTeddy

Roosevelt decided to charge up San Juan Hill one more time. On Tuesday,October16,thepresidentwelcomedrecipientsoftheNationalMedalofHonortotheWhiteHouse.NixontoldhisaudiencethathewaspreparedtouseforceintheMiddleEastandreferredto“thepolicywefollowedin1958whenLebanonwasinvolved”and“thepolicywefollowedin1970whenJordanwasinvolved.”In1958, theEisenhoweradministrationhad landedMarines inLebanon toputdownaninsurrection.Twelveyearslater,NixonhadcomeclosetodispatchingairbornetroopstoJordantohelpKingHusseincrushanuprisingbythePalestineLiberation Organization. Nixon’s threat to use force might have worked inanotheryear,butVietnamhaddamagedperceptionsabroadofAmericanresolve

and Watergate had shattered the public trust in Nixon’s leadership at home.Worse,theU.S.economywasnotcapableofabsorbingamajorblowlikeanoilembargo.The next day, Arab oil ministers meeting in Kuwait agreed to monthly 5

percent cuts inproductionuntil Israel evacuated the territories it had seized in1967. Separately, the six Persian Gulf oil-producing nations, including Iran,announced a double-digit percentage increase in the price of a barrel of lightArabiancrudefrom$3.01perbarrel to$3.65,an increaseofabout21percent.Thegameofleap-froggingthatKennethRushhadwarnedKissingeraboutbackinMayhadstarted.ThenextdaySaudiArabiasharplyrespondedtotheairliftofAmericanweaponsandsuppliestoIsraelbyslashingitsoiloutputby10percent.Abu Dhabi announced that it would ban shipments to the United Statesaltogether.The mood darkened considerably on October 19 when Colonel Qaddafi

imposedanoilembargoagainsttheUnitedStatesandraisedthepriceofabarrelofLibyancrude from$4.90 to$8.92,which accelerated the sequenceof priceescalations for the rest of theoil producers.Libya’s oilwas amainstayof theeconomy inNewYorkCity.The full impact of price increases and new taxesagreedtobyPersianGulfproducersnowbecameclear:thepostedpriceoflightArabiancrudehadjumpedby70percentto$5.11.“Wearemastersofourowncommodity,” declared Sheikh Yamani. “Stunned and confused” oil industryanalysts warned of impending fuel shortages along the eastern seaboard. AprivateindustrygroupinWashingtonwarnedwithconsiderableunderstatementthat “what the producing countries appear to have done is to have raised thepriceofrunningafactory,heatingahome,andpoweringacararoundtheworldbyanunprecedenteddegree.”InWashington,meanwhile,aWhiteHousespokesmanmade the remarkably

ill-advisedstatementthattheUnitedStateswouldnottaketheAraboilembargoseriouslyuntil“at leastonemillionbarrelsofoiladayofsupplyhadbeencutoff.”KingFaisalwasgladtooblige.ThenextdayheendedallshipmentsofoiltotheUnitedStates.Saturday,October20,wasahistoricdaythatbeganwithadeclarationofeconomicwarfarebySaudiArabiaagainsttheUnitedStatesandended with demands for the president’s impeachment. American televisionviewerswatched in disbelief as news anchormen broke into regular late nightbroadcasting to report that President Nixon had fired Watergate specialprosecutorArchibaldCox,abolishedtheWatergatetaskforce,andconductedapurgeofhisownJusticeDepartment.NixonacceptedtheresignationofAttorneyGeneral Elliot Richardson and sacked Richardson’s deputy, WilliamRuckelshaus, for disloyaltywhenbothmen refusedNixon’sorder to fireCox.

(ThenumberthreeJusticeofficialSolicitorGeneralRobertBorkfiredCox.)ThecallsforNixon’sresignationcameonadaywhenthecountrystilllackedavicepresident—nominee Gerald Ford had only begun the process to wincongressional confirmation—and while the secretary of state was in MoscowconferringwithSovietleaderLeonidBrezhnevonthewarintheMiddleEast.KingFaisal’sdecisiontocutofffuelsupplieswasbravelyplayeddownbya

WhiteHouse in themidst of chaos.Officially at least, the administrationwas“notsurprised”bytheSaudiaction.Unofficially,theWhiteHousewasstunned.The next day, Kuwait, Qatar, Bahrain, and Dubai announced that they werejoiningSaudiArabia,Libya,Algeria,andAbuDhabiinhaltingoilshipmentstotheUnitedStates.Theembargowascomplete.

DR.KISSINGER’S“FANTASTICRISK”

Secretary of State Henry Kissinger arrived in Tel Aviv fromMoscow onOctober22,thesamedaythataMiddleEastcease-fireapprovedbytheUnitedNationsSecurityCouncil tookeffect.FlushwithAmerican firepower from theairlift, and having trapped Egypt’s Third Army on the east bank of the SuezCanal, Israeli leaders weren’t ready to settle just yet. With Kissinger’s tacitassenttheyfoughtonpastthedeadlinetoconsolidatetheirlast-minuteterritorialgains.ItwasanextraordinarygambleandonethatcaughttheattentionofSovietleadersinMoscowalreadyconsideringanappealforhelpfromPresidentSadat.KissingerwasbackinWashingtonontheeveningofWednesday,October24,

whenLeonidBrezhnevchallengedNixontojoinhiminsendingpeacekeeperstotheMiddleEast toenforce thecease-fireaccordsandseparate thecombatants.Brezhnevmade it clear that hewas prepared to landRussian troops in Egyptregardless of Nixon’s decision.Moscowwould not tolerate the destruction ofEgypt’sThirdArmy.Tocomplicatematters,Brezhnev’sultimatumoccurredonan evening when Nixon showed every sign of collapsing under the strain ofWatergate.Duringa telephonecall toKissinger, thepresidentwas“asagitatedandemotionalasIhadeverheardhim.”Nixonrailedagainst“thosebastards”inCongress who were kicking him around: “They are doing it because of theirdesire tokill thePresident.And theymaysucceed. Imayphysicallydie.”Thepresident intimated he was prepared to quit: “I would like them to run thiscountryandseewhattheydo.”By the time Nixon’s rump national security team, the Washington Special

ActionGroup(WSAG),gatheredattheWhiteHouseat10:40P.M.,thepresidenthadpassedoutinhisbed,emotionallyspentandreportedlyinadrunkenstupor.

KissingerandWhiteHousechiefofstaffAlexanderHaigconcludedthatNixonwas incapacitatedandunable toparticipate in the crisismeeting todiscuss thechallenge from Moscow. Kissinger asked Haig if he should wake up thepresident, butHaig said no.A half hour later,Haig askedKissinger ifhe hadspoken to Nixon. “No, I haven’t,” replied Kissinger. “He would just startchargingaround....Idon’tthinkweshouldbotherthePresident.”Theyagreedthatthepresidentwas“toodistraughttoparticipateinthepreliminarydecision.”The scene that unfolded over the next several hours hovered between great

drama and high farce. Kissinger and Haig did not brief their colleagues—thedirectorofCentralIntelligence,thechairmanoftheJointChiefsofStaff,orthesecretaryofdefense—onthepresident’struecondition.Instead,theyengagedinanelaborateruse.KissingerrantheproceedingswhileHaig,“whowasshuttlingback and forth between the residence and the [Situation Room] where themeeting was taking place, reported that the president approved ourrecommendations,” recalledSchlesinger. “Haig reported that thePresidentwasaboutandfollowingevents.”TheotherswereunawarethatNixonsleptthroughoneofthemostdangerousnightsofhispresidency.The crisis team was particularly concerned about intelligence reports

suggestingthattheSovietswerepreparingtoflyeighttransportplanestoEgyptandhad“stooddowntheir forces inEastGermany, stooddown their aircraft.”That “conveyed to us the possibility that they were seriously contemplatingmoving in,” saidSchlesinger.Therehadbeena substantialbuildupofnuclear-armedSovietnavalvesselsintheMediterranean.Iran’snorthernborderwasalsoapotentialflashpoint.“WehadsomeconcernaboutthenorthernIranianborder,althoughtheIranianshadalotmoreconcernthanwedid.”ThePentagonknewthat it would not be easy for the Russians “to punch through [the ElburzMountains] with ground forces.” Of more immediate concern was theirawareness that the Soviets had recently developed a highly effective rapidmobility force. Schlesinger recalled that the group worried that Soviet “airtransporttroopswouldswoopdownintotheArabstatesincludingtheoilfields.”ThewildcardintheirdeliberationswasWatergate.TheywonderedifBrezhnev,“hearing these calls about impeachment of the President in regard to theWatergate issue,mightbeconcludingthat theUnitedStateswasparalyzedandcould not act. And so our action that evening—which may have been moreforcefulandvisiblethannecessitydictated—wasdriveninpartbyourconcernthattheSovietsmighthaveconcludedwewereparalyzedandthatwecouldnotforciblyreact.”A few minutes before midnight the seven officials in the Situation Room

agreed to recommend that thepresident raise the readiness levelof theUnited

States military. The military’s Defense Condition (DEFCON) alert systemascended numerically from DEFCON 5, the lowest level of readiness, toDEFCON1,whichwaswar.Nixon’saidesdecidedtoraisethealerttoDEFCON3, which, as explained by Kissinger, “increases readiness without thedeterminationthatwarislikely;itisinpracticethehigheststageofreadinessforessentiallypeacetimeconditions.”ThesecretaryhopedthatiftheUnitedStatesdeclaredaworldwidenuclearalertandplacedthemilitaryonstandby,BrezhnevwouldwithdrawhisthreattosendtroopstotheMiddleEast.Theymeanttocallhisbluff.Haig left the Situation Room, ostensibly to present the presidentwith their

recommendation.Whenhereturned,hetoldhiscolleaguesthatNixon(whowasstill asleep) approved their decision. Kissinger turned to Admiral ThomasMoorer, the chairman of the Joint Chiefs, and asked him to implement thepresident’s “directive.”To reinforce themessage to the Soviets,Nixon’s aidesplacedthe82ndAirborneDivisiononalert,directedthreecarriers,theFranklinDelanoRoosevelt,Independence,andJohnF.Kennedy“tomoveat fullspeed”towardtheEasternMediterranean,orderednuclearbombersreadiedfortakeoff,andhadU.S.submarines“spedtosecretpositionsofftheSovietcoast,preparedtolaunch.”Kissingerlaterrecalledthatnoteveryoneintheroomagreedwiththeurgencyofthethreat.Ashelaterrecounted,headdressedtheskepticsthisway:“Ifwe can’t dowhat is right becausewemight get killed, thenwe should dowhatisright.Wewillhavetocontendwiththechargeinthedomesticmediathatweprovokedthis.Therealchargeisthatweprovokedthisbybeingsoft.”TheWhiteHousecommunicateditsintenttoMoscow.Forabriefmomentthe

world faced the prospect of a showdown between the nuclear superpowers.Brezhnevwithdrew his threat. The nextmorning at eight when he received apersonal briefing from Kissinger and Haig, Nixon was informed that he haddeclaredaworldwidenuclearalert.Heapplaudedtheirtoughness.Baskinginthepresidentialpraise,KissingerboastedtoHaig,“YouandIweretheonlyonesforit.Theseotherguyswerewailingallover theplace.” InTehran, theShahwas“dreadfullyanxious”tohearofthealertbutwentaheadwithascheduledtriptowatch a performance ofCarmen. He was certain the Soviets would not havebackeddownwithoutthespeedyresponsefromWashington.Once the crisis had passed Henry Kissinger telephoned Israeli ambassador

Simcha Dinitz demanding to know why Israeli intelligence officials werechallengingthealertdecision.Hesaidthat“oneverytelevisionIheardyesterdaythatIsraeli intelligencewasof theviewthat therehadbeennothreatofSovietintervention.”“ThatIdidnotevenhear,”saidDinitz.

“Ihearditfrom—youknowitwasIsraeliintelligenceofficialswerenotawareofanyunusualactivity.”Dinitzdescribedthereportsas“ridiculous.”“Well, what I would like to stress to you,Mr. Ambassador, is this: If you

couldusewhateverinfluenceyouhavewiththepresshere—Idon’tgiveadamnforourselvesbecausethehistoricalrecordwillsupportus.ButwearenotoutofthewoodsyetandiftheRussianslookatthisandseethatwhenthereisacrisiswethengetflyspeckedbythepress, theymaytryagain.”Thislastpoint—thatpresscoveragecriticalof thedecisionmighttempttheSoviets toriskasecondconfrontation—stretched the limits of credulity. Kissinger had just invitedIsrael’s embassy to helphimmanipulate domesticAmericanpublic opinion tojustifyanaction thathadprovokedaworldwidepanic.“Imean, ifyou lookattheCzechoslovaksituation,theyhadanumberofscaresbeforetheymoved.”HeurgedDinitz to lobby senators, congressmen, and journalists in support of thealert.“Because we took enormous risks,” he continued, then implied the

administrationmighthave toapplypressure to Israelonapeace for landdeal.“YoumaynotlikewhatwedointheU.N....”“That’sadifferentstory...”“Butthatisaquestionoftactics—onstrategywetookafantasticrisk.”“Right,right,”saidDinitz.“Absolutely.No,Iamincompleteagreementwith

you.Andyesterday[redacted]wasdoneandwewilldomoreofittoday.”The“fantasticrisk”hadbeenabluff.Meanwhile,thesameofficialswhohad

declared a worldwide nuclear alert to prevent Soviet troops from landing inEgyptweremoving aheadwith their ownplan formilitary intervention in thePersianGulf.Withthecease-fireholdingtheycouldfinallyturntheirattentiontothecripplingconsequencesofKingFaisal’soilembargo.

THESHAHISRARINGTOGO

Prior to theembargo theSaudishadsupplied theU.S.SeventhFleet in thePacificwith 120,000 barrels of oil per day. Those shipments had now ended.Alsoaffectedby thefuelcutoffwas theU.S.SixthFleet in theMediterranean.TheSixthFleetreliedonAraboilsuppliedfromItalianrefineries.U.S.officialsfeared that once governments inWestern Europe implemented fuel rationing,therewouldnotbeenoughoiltokeepthefleetatsea.TheMediterraneanwouldthenbeexposedtoaSovietflotillaofninetyvesselsthathadjustbeenoutfittedwith a battalion of marines trained and equipped for landing operations. A

secondblowfor theU.S.strategicpositioncameonOctober20whenBahrainannounced that itwas giving theU.S.Navy one year to close down its smallnaval station, America’s last base in the Persian Gulf. Iraq meanwhile hadgranted a Soviet naval squadron docking privileges at a new port being builtwith Russian expertise at Umm Qasr. Schlesinger for one had had enough,telling Kissinger, “Well, we only have one facility and I am not sure weshouldn’t move in and . . .” Kissinger finished his train of thought: “We aregoingtomoveonthatthing.”Pressurewas buildingwithin the ranks of theUnited Statesmilitary to end

whatmanyofficersregardedasanationaldisgrace.“TheNavalWarCollegewasfilled with Marine colonels walking around saying, we’re going to put thoseGoddamned ragheadsbackon theircamels,” recalleda former seniorofficial.Therewasoutrage toobecause theAirForceandNavy, the twoservicesmostaffectedbytheSaudiembargo,wereheavilyinvolvedinbuildingthekingdom’sdefensive systems. The Air Force was about to deliver the first shipment ofNorthropF-5E jet fighters.TheSaudiswere also seeking permission from theUnited States to buy thirty Phantom F-4 aircraft. The services had beencontractedtoinstallanearlywarningradardefensesystem.Now,worriedaboutthepotentialforanAmericaninvasion,Saudiofficialshadaskedthecontractorstospeeduptheirwork.YetevenasSaudiArabiareliedonAmericangoodwilland treasure to defend it from regional predators, the kingdom’s oil minister,SheikhYamani,waggedhisfingeratAmericansandpiouslydeclared,“WearetrackingdowneverylastbarrelofoilthatreachedtheUnitedStates.”OfficialsattheDefenseDepartmentbelievedthatashowofforcewasneeded

torestoreatleasttheperceptionofAmericanpowerinthePersianGulf.Eventshad spiraled well beyond their control. Even the smallest thumbnail-sizesheikhdomsfeltfreetoactoutintheeraofVietnamandWatergate.Thisposedaproblem for U.S. policy makers. It greatly heightened the risk that a smallerstate,sayaLibyaoranIraq,mightgotoofarwithitsprovocationsandcrossanimaginary tripwire that invitedmassive retaliation from the outside. Lines ofauthorityhadtobeclearlydemarcatedtorestoreorderandreducethepossibilityofafatalerrororrecklessgamblethatmighttriggeranotherwar.Alltheplayersin the October crisis—the United States, the Soviet Union, Israel, and Arabgovernments—had mistaken each other’s intentions and motives. They hadcommittedaseriesofblundersthathadendedinanuclearshowdown.Virtuallyunarmed oil states felt free to declare economic warfare against the UnitedStates.ThentherewastheSovietUnion.WhiteHouseofficialswereconvincedthat Brezhnevwould never have dared threaten to land Russian troops in theMiddleEasthadherespectedtheU.S.militarypostureintheregion.TheUnited

StateshadtofindawaytoreassertAmericanpowerintheMiddleEastandatthe same time smash the oil embargo. The White House could not accept asituationinwhichtheUnitedStateswaschasedoutoftheMiddleEast,itsarmedforces ran out of gas, and allied economies throttled by the actions of a fewlightlyarmedoilpotentates.The White House WSAG crisis group met over breakfast on Saturday,

November 3, in the Map Room. The Saudis had sent troops to fight againstIsrael.TheyhadimposedanoilembargoagainsttheUnitedStatesthathadthepotential tocrippletheAirForceandNavy.Nowtheywerethreateningtotearupthetermsofthe25percentparticipationdealtheyhadsignedwithAramcoayear earlier. “The Saudis are getting heady over the power of oil,” saidSchlesinger.“IamnotsuretheyhaveafutureasidefromtheWest.Theycan’tsurvivespittingfireandbrimstoneattheWest.”“TheShahwouldplaythatgame,”repliedKissinger.“Heisraringtogo.The

Saudis are having trouble surviving in this kindofworld and theyhave to bemoreradicalthantheradicals.”Schlesingerbelievedhehad foundan ideal testingground to restoreat least

theillusionofAmericanpowerintheMiddleEastandcowertheSaudis.Fifteenyearsearlier,beforethediscoveryofoilinAbuDhabi,thecapitaloftheUnitedArabEmirateshadbeenafishingvillage.In1973itsnativepopulationofthirtythousand enjoyed an annual per capita income of $100,000. Abu Dhabi wasclose to themouthof thePersianGulfandmade foraconvenient springboardfromwhichtheUnitedStatescouldlaunchfuturemilitarystrikesacrossabroadswath of the region.AbuDhabi’s twenty-seven-year-old oilminister had beenthefirsttoimposeanoilembargoagainsttheUnitedStates.“IwaspreparedtoseizeAbuDhabi,”Schlesingerrecalled.HeenvisionedacleansurgicalstriketolandAmerican troops in the heart ofArab oil country. “Somethingsmall. Butnothingbig.MilitarilywecouldhaveseizedoneoftheArabstates.Andtheplandidindeedscarethemandangerthem.No,itwasn’tjustbravado.Itwasclearlyintendedasawarning.”If it was a bluff, it was one with sharp teeth. Schlesinger anticipated an

amphibious invasionusing theMarines.TheyhadspentAugust training in theMojave for just this type of eventuality. “AbuDhabi would give us whatwewant,”hetoldKissinger,CIAdirectorWilliamColby,Moorer,andScowcroft.“The Shah is cynical enough to discuss this with us,” said Kissinger, who

likedtheidea.HehadastopoverplannedinTehranonhiswaytoChinathenextweek.AdateformilitaryinterventionwassetforthelasttendaysofNovember.At

that timeseveralAmericandestroyerswouldbe inplaceat theentrance to the

Persian Gulf to take part in previously scheduled CENTO naval exercises. Itwould be convenient to have military forces from the United States, GreatBritain,Iran,andTurkeyhoveringjustoffthecoastpracticingsuchwardrillsasamphibious landings.Theaircraft carrierUSSHancockwithmore than eightyattack aircraft was steaming toward the area. “We need a public line on theHancockwhenitarrives,”saidSchlesinger.“Routine. An exercise that we have been planning a long time,” replied

Kissinger.“IwilldiscussitwiththeShah.Ifhewantsin,Iwillletyouknow.”HewasabouttoleaveinafewdaysfortheMiddleEastandChinaandfrettedthat theSoviets still hadnotgotten themessage from twoweeks earlier. “TheRussiansmaymakearunatuswhileIamaway,”hesaid.“Whatcanwedo?”“Turn Israel loose on the Third Army and tell Sadat if he lets the Soviets

loose, it will be very bad,” replied Schlesinger. They could also work withTurkey to close the Bosporus Straits, a key choke point through which theSovietshadbeenmovingnuclear-armedwarships.A few hours later, on Sunday, November 4, the Shah received formal

notification that a U.S. naval task force led by the carrier Hancock andaccompaniedbydestroyerswasmoving towardaholdingareaoff thecoastofOman.HelmsaskedtheShahifhewouldopenIranianairfieldstoAmericanP2spyplanesandshort-range flights to theHancock foraperiodof twentydays.HealsosoughtIranianassurancesoffueldeliveriestothetaskforce.TheShahwaswilling to comply so long as the fuelwas supplied indirectly through theIraniannavy.WashingtonwasnowleaningheavilyontheShah,perhapsinwaysNixonand

Kissinger had never intended. Iranian ports, airstrips, and fuel depots wereopenedtotheU.S.militaryandsuppliesmadeavailableforAmericanuseduringamajorinternationalcrisis.AtfirstglancetheNixonDoctrineappearedtohavepaidoffwithinterest.YettherewererisksinvolvedthatneitherWashingtonnorTehranhadproperlythoughtthrough.Foronething,thedealwasguaranteedtoantagonizeIran’snorthernneighbor.Underthetermsofa1962agreementsignedwith Moscow the Shah had agreed to never “allow any foreign power toestablish rocket-launching sites of any kind on Iranian territory.” The Sovietswere naturally anxious to prevent Iran from being used as a base for U.S.interventiononitssouthernborder.TheShah’ssecretdecisiontosupplytheU.S.navaltaskforceduringtheOctobercrisisdidnotviolatethetermsofthattreaty,but itdidmakehimvulnerable to theaccusation that theUnitedStatesdidnotneedtoconstructbasesofanykindinIranwhenitenjoyedfreeandunfetteredaccesstoIranianfacilities.TherewerealsorepercussionsfortheUnitedStates.Washingtonwasinthehumiliatingpositionofhavingtoaskanally’spermission

before taking themeasures it deemednecessary todefend its national interest.Therehadbeenasubtlebutprofoundpowershiftwithintherelationship.TheShahknewbetter thananyone justhowerodedAmericanpowerwas in

late 1973 and the extent to which the Nixon administration relied on hiscontinued cooperation and goodwill. The political paralysis induced byWatergateandthegrowingmoodofisolationismintheU.S.Congressmadehimquestion America’s ability to defend the interests of its allies when it couldbarely defend its own.Over the summerKingHussein of Jordan let the CIAknow that during a recent visit to Tehran the Shah had “opined that theWatergateaffairwasunfortunateforeveryonesinceitappearedtohavebroughtthe U.S. Government to a standstill. There were many problems between theU.S. and its friendswhich need attention, the Shah continued, but these daysthey did not seem to be receiving it.” His confidence in U.S. intelligencegatheringhaderodedtothepointwherehestoppedreceivingfortnightlyreportsfromtheCIAstationchiefinTehran.Kissinger arrived inRiyadh,SaudiArabia, onNovember 8 for a three-hour

discussion with King Faisal. Since the imposition of the embargo Saudi oilproductionhadfallenfromitsdailyaverageof8.3millionbarrelsto6.2millionbarrels.Thediscussion tookplace in a tense atmosphere.Bothmenknew thatjustoff thecoast lurkedenoughnaval firepower to reduceFaisal’skingdomtorubble. The Hancock was a reminder of who really wielded power in therelationship. Saudi Arabia was little more than a giant filling station whoseprimarygoalwas toservice theneedsof the industrializeddemocracies,as theUnitedStatessawit.Faisalintimatedthathewasreadytoreachadealtoendtheembargo. “You can make Israel withdraw immediately in the space of threeweeks,”FaisalimploredKissinger.Thekingpleaded,“Can’tyouhelpme?Can’tyougivemeJerusalem?”AnunbendingKissingertoldhim,“That’sthelast.Ourenemieswouldlike tohangusupona toughpoint like thatone.Giveus timeandwewilldoit.”ThechallengenowwasfortheWhiteHousetowalkFaisalbackfromtheedgewithhishonorandAmericanintegrityintact.Kissingerhadtheopeninghebelievedheneededtopursuediplomacy.On November 19, the same day the CENTO exercises kicked off in the

PersianGulf,theWhiteHousesentreassuringsignalsthattheUnitedStateshaddecided“forthetimebeingnottoretaliateagainstArabstates.”Butlestanyonedoubt American resolve, two days later Kissinger announced at a pressconference that the administration would consider “countermeasures” ifeconomic pressures continued “unreasonably and indefinitely.” Washingtonwould not tolerate a situation inwhich itwas subjected to economic pressurewhile trying tonegotiateaMiddleEastpeacedeal. Itwas thefirst timeaU.S.

official had publicly floated the idea of using force to smash the embargo.Sheikh Yamani issued a blistering response, threatening to slash Saudi oilproductionby80percent if theWesternpowerstookcountermeasurestobreakthe embargo, and warning that military action would be suicidal for thedevelopedworld“becauseyourwholeeconomywilldefinitelycollapseallofasudden.Thereare somesensitiveareas in theoil fields inSaudiArabiawhichwillbeblownup.”The threat to blow up Saudi oil installations was no bluff. Throughout the

regionArabgovernmentsweremakingcontingencyplanstodefendtheirassetsby rigging them with explosives. Anticipating a possible American invasion,Kuwaitlaidlandminesarounditsoilwellsandannounceditcouldsetthemoff“at amoment’s notice.”KingFaisal also felt theneed topublicly reiterate hishard-line demands for the withdrawal of Israeli forces to 1967 borders,recognition of Palestinian rights, and a restoration of “the Arab character ofJerusalem.” But behind the scenes the king tepidly reached out to theWhiteHouse.HewasnoQaddafiandhehadnostomachfor takingontheAmericansuperpower. The White House also knew that Faisal credited Nixon withoverthrowing the Libyan monarchy in 1969, a fact they used to theirpsychologicaladvantage.“Theythinkweknockedoff[King]Idris,”Schlesingertold Nixon’s war council. In this instance at least, Nixon’s “madman” theoryworkedasintended.At 10:15A.M. onNovember 28, 1973,Kissinger phoned Schlesinger to tell

him that he had “a very interestingmessage from SaudiArabia saying Faisalwould like toease theboycottand is looking foranearlyoccasionwhichwillprovidehimthewaywhenthepeaceconferenceisagreedto—intheformofapresidentialletter.”“Very good,” said Schlesinger. This suited his purposes because he needed

more time toassemblehisamphibious task force.“Thatbearson the subject Iwas going to discusswhich is that itwill take six or sevenweeks anyhow toaccumulate theMarines in the IndianOcean.”Theadministration’scarrot-and-stick approach meant that while Kissinger explored diplomatic options, hiscolleague over at Defense readied theMarines for action in case negotiationsfailed.TheaircraftcarrierHancockwouldbetheirvehiclefortheseizureofAbuDhabi.Theybelievedtheyhadthebreakthroughtheywerelookingfor.OnThursday

morning,November29,WSAG,thepresident’scrisisgroup,convenedfor twosessionsintheMapRoom.KissingerbriefedthemonhistalkswithKingFaisal,who,hereiterated,wasinarealbind.Theking“isafriendoftheUnitedStates,but he is pressured by radicals. So he is leapfrogging the radicals so he isn’t

embarrassed by his U.S. relationship. . . . I get the impression that they areblinking.”“Yes,theyarelookingforwaystogetusoil,”observedCIAdirectorColby.“TheyareturningupthescrewsonAramco,”notedSchlesinger.TheSaudis

hadquietly toldAramcotostartreleasingmoreoil into thesystem.Theywereprepared to make secret deliveries of fuel to the U.S. Navy as a gesture ofgoodwilltoavoidprecipitatingaclashwithAmerica.Fiveweeksafterpubliclyimposing an oil embargo against the United States the Saudis were alreadybreakingitinprivatetotheU.S.military.Theembargohadcracked.Faisalwasnowconvinced that the administrationwas firmly engaged in theMiddleEastand thatNixonwas committed to finding a negotiated settlement to theArab-Israeliconflict.Butmostofallhefearedforhislifeandhisthrone.Schlesinger’sbluffhaddonethetrick.“Theyseemtobelookingforawayout,”Kissingernoted.The crisis group agreed to relax the U.S. military posture in the

Mediterranean.TheydecidedtopullbackthenavaltaskforcebutkeepitwithineasyreachoftheGulf.TheHancockwassentonagoodwillmissiontoKenyaand the destroyers steamed to Ethiopia, where they could be recalled at amoment’snotice.ButastheysettleddowntolunchSchlesingermadeashockingadmission: “We have no fuel for the B-52s in Southeast Asia.” Eighty-ninepercent of the fuel used by U.S. forces in Southeast Asia originated in thePersianGulf.AmericanpowerprojectionwasbeingcompromisedinthePersianGulf,thePacific,theMediterranean,andnowSoutheastAsia.Itwashardlyanywonder that theSoviet bearwas probing andnudging at the periphery, on thelookoutforweaknessesinWesterndefenses.“WeneedtobuildapresenceintheMiddleEast,”heurgedhiscolleagues.The Pentagon needed a base from which it could secure the nation’s fuel

supply.PreferredlocationsfacedtheIndianOceanandwereinwhite-minority-ruledAfrican states such as the city ofDurban in SouthAfrica andLourenzoMarques(nowMaputo)inPortugueseMozambique.Ethiopiawasapossibility.InWestAsia,PrimeMinisterZulfikarAliBhuttoofPakistanwaseagertohosttheU.S.Navyandhadofferedtoprovidebasefacilities.Itwouldtakemonths,ifnotyears,tonegotiateleasingarrangementsandbuildbasefacilities.Schlesingerproposed“putting5–6,000MarinesintoBahrain,”butKissingertoldhimnottobother:“Theywillneveragree.”Kissinger’sown feelingsof frustrationboiledover during a strategymeeting onNovember 29with his colleagueswhen heexclaimed,“Can’tweoverthrowoneofthesheikhsjusttoshowthatwecandoit?”

ONEMADFINALFLING

Kissinger’s helplessness was shared by millions of Americans as the firsteffects of the oil embargowere felt. “The energy crisis is likeWatergate.Weknow something is wrong but we don’t know quite what it is,” said aMassachusetts school superintendent. Dramatic news reports spoke of the lastfullyladenoiltankersstreamingtowardtheeasternseaboard,buckingtheirway“through the wind-blown Atlantic,” headed for oil refineries along the EastCoast.PresidentNixonwentonnational television toannouncestrict limitsonweekendsalesofgasoline,ablackoutonallunnecessaryoutdoor lighting,andvoluntary compliance with a new reduced highway speed limit. Theadministrationannouncedplanstoseekemergencypowersoverthefuelsupplyand to reduce private automobile use by 30 percent. The White House wasassessingtheimpactofa9.6percentjumpinthecostoflivingforthemonthofOctober, the first direct result of recent increases in the price of oil. It nowestimated that theoil embargomeantan18percent reduction in theminimumamount of fuel required to keep America moving. Economists warned that alengthyembargomightincreasetheunemploymentratetolevelslastseenduringtheGreatDepression.WesternlightswentoutinNovember1973.HalfofthelightsontheGolden

GateBridgewere extinguished andmonuments on theWashingtonMallwereblackedout.Americansralliedaroundtheirpresident, temporarilysettingasidetheir differences over Watergate to show off their newfound conservationcredentials.Stirring storieswere toldof the lengths towhich ordinary citizenswere prepared to go to display their patriotism. There was Joe Conforte,“proprietor of a licensed house of prostitution” outside Reno known as theMustang Ranch, who “turned the reception-room thermostats down from 75degreesto68degreesandorderedhisgirlstowearpantsuitsandgownsinsteadof bikinis.” Therewas the plucky housewife in Belle Plaine,Minnesota, who“hasfoundaway to retainheat inherconcrete-blockhome;shewrapped it intransparent plastic, like a sandwich.” A nursing home resident in her ninetiesofferedsometimelessadvice toherfellowAmericans:“Tell thepeople to turnofftheirelectricblanketsandcuddle.It’salotmorefun.”The oil embargo had immediate and fearful repercussions for a global

economy still dependent on ocean-borne traffic. Around the world, freightersremained tiedup in their lastportofcallbecausecompaniesandgovernmentsbeganhoardingscarcefuelsupplies.Reportsofshortagesofessentialitemsledto housewife riots in Japan where a woman was crushed to death during a

stampede for toilet paper inOsaka, andwhere a nationwide runon sugarwassupposedly traced back to gossip exchanged between two shoppers worriedaboutpoweroutagesinthesugar-refiningindustry.FishingboatswerebeachedandfarmmachineryidledinItaly.WestGermanyannouncedahaltinthehiringofnon-EECguestworkers.SundaydrivingbanstookeffectinFrance,Holland,and Italy. Everywhere there were worries about rising inflation andunemployment as food costs soared and factorieswere shut down. The lightswere dimmed in Piccadilly Circus and the wedding of Queen Elizabeth’sdaughter, Princess Anne, to LieutenantMark Phillips took place amid scenesresembling wartime austerity. “It’s amad final fling before the winter of ourdiscontent,”shriekedaLondontabloid.TheU.S.economyrumbledwithdislocationsbothanticipatedandreal.Wall

Street suffered itsworst back-to-back losses since the crash of 1929,with thestockmarketshedding133pointsinthreeweekstoendthemonthatananemic854.AfterwholesalepricesofCadillacscollapsed25percent,sharesinDetroitautomobile manufacturers swooned and General Motors announced it wasclosing sixteen assembly plants across North America. Citrus growers inCaliforniareportedtheywererunninglowonthedieselfuelneededtosavetheircropsfromfrost.Thesteelindustryestimatedthata10percentreductioninoilconsumptionwould result in a 4-million-ton decline in production and twentythousandjoblosses.Americansknewthat if theyhadone friend theycouldcounton in timesof

troubleitwastheShahofIran.AmidthepanictheShahissuedastatesmanlikeplea toArab oil producers to end their embargo. “Oil is like bread,” he said.“Youcannotcutitoffduringtimeofpeace.Whydoyouwanttolookasifyouwanttheworldtostarve.”Arabgovernmentsweren’tlistening.“Intheirhearts,theArabs never forgave us for going it alone on the blockade,” saidArdeshirZahedi.TheyviewedIran’srefusaltoparticipateintheoilembargoasabetrayal.

ChapterFiveOILSHOCK

“IfIwasthePresidentIwouldtelltheArabstoshovetheiroil.”

—HenryKissinger,1974

“TohellwithKissinger.Payhimnoattention.”

—TheShah,1974

THEYWILLHAVETOPAYTHEPRICE

ArmyDaymarked theanniversaryof themilitarycampaign thatended theSovietUnion’soccupationofIran’snorthernrepublicofAzerbaijanin1946.ItwasthehighlightofthePahlavicalendarandareminderoftherulingdynasty’sclosetiestothearmedforces.In1973ArmyDayfellonWednesday,December12.FifteenmilesoutsideTehran, spectatorviewing standswere filledwith thecreamofPahlavisocietyandahostofbemedaledforeigndignitaries,generals,and ambassadors. The assembled guests drank tea, warmed themselves bykeroseneheaters,exchangedthegossipoftheday,andawaitedthearrivaloftheShahanshah. A tremor of anticipation rippled through the crowd when a lonefigure in a khaki uniform was spotted advancing toward them on horsebacktrailed by members of the Imperial Guard who wore “silver breastplates andhelmets,tricolorpennantsflutteringfromthetipsoftheirlances.”Itwasasightthat brought the crowd to its feet. A torrent of applause washed through thestands and a lusty cry arose from thousands of troops assembled on a plainoppositethereviewingstandsreadytomarchfortheirking.The skiesoverhead shookwith a flyoverof150Phantom jets,whileon the

frigidgroundbelowrowafterrowofBritish-madeChieftaintanksrumbledpasttheroyalbox.TheShahusuallyrelishedArmyDay,anoccasionthatcementedhis credentials as King-Emperor and Guardian of the Gulf. But today themonarch was distracted by some remarkable news. At the height of theworldwidepanicoveroilsuppliestheNationalIranianOilCompanydecidedto

gauge the mood of the market by holding two secret auctions of 80 millionbarrels of crude destined for export in the first half of 1974.The sale amounttotaled less than 4 percent of Iran’s estimated petroleum production for thecomingyear.Intwoweeks’timetheShahwassettohostanewroundofpricetalksforthesixPersianGulfstatesresponsiblefor43percentofthepetroleumconsumedbythenon-Communistindustrializedworld.Theresultsoftheauctionwouldguidehishandduring thenegotiations.Therewasneveranydoubt thattheShahwasalsosettingaspotpriceonpanic.TheauctioncamejustfivedaysafterArabstatesstartedpullingtheirmoneyfromAmericanbanksandtwodaysafter they unveiled a new plan to slash their daily output of oil by another750,000barrels starting January1.Even so, Iraniangovernmentofficialswere“dumbfounded” and industry analysts “flabbergasted” when the foreigncompaniesparticipatingintheauctionplacedbidsashighas$17.40perbarrel.Herewasconclusiveproofthattheworldoilmarkethadblownout.AtastrokeIran’soilauctiongenerated$1.5billioninnewgovernmentrevenues.“Therearea lotofpeoplegroping andgrabbing for oil,” saidoneoil expert. “Thepriceshave gone quite insane. No one knows what’s going to happen.” Explainedanother,“Thecountriesseehowhungrythecompaniesare,howdesperatesomeofthemare.”On December 21, the day before Gulf oil ministers were due to fly into

Tehran,theShahgrantedaninterviewtoaNewYorkTimescorrespondent.Iran’skingappeared“wanandweary”ashesatonasofadiscoursingabouthisfavoritetopic: how oil receipts would catapult Iran into the ranks of the FirstWorld.“What I want for Iran is very simple, very clear, very ambitious and verypossible. In20or25years Iwant it tobeaheadof thegreatestnationsof theworld.Wewillhave60millionpeoplein25years.Withthatnumberofpeople,wecanbethemostadvancedcountryanddobetterthananyothercountry.Somepeople say that we will be one of the five most developed countries in theworld.” Iran’s income fromoilwouldpay for it all.He fireda shot across thebows ofWestern oil companies and consumers. “In the past,” he said, the oilcompanies“didnotattach toomuch importance to theproblem.They tookoiland profited. They closed all the coal pits. They didn’t bother to find othersourcesofenergy.Theyfixedlowprices.Nowtheywillhavetopaytheprice.”

THESAFETYOFALLYOURLIVESMAYDEPENDONIT

ThroughouttheOctoberWartheShahbelievedhehadmorethanprovenhis

credentials as an ally to the West. But he viewed oil prices as the onenonnegotiableissueinbilateralrelationswiththeUnitedStates.BackinJuly,theShahhadwarnedNixonandKissingerthatoilpriceswouldrise“untilshaleorgasificationofcoalbecomesprofitable.”Nixonhadgivenhimablankchecktoraise oil prices three years earlier. TheAmericans did not ask him to explainwhat he meant or why the price of one commodity should be contingent onanother. The Shah’s views on oil pricingwere nevermore clearly spelled outthan inan interview thatappeared in theDecember1,1973, issueofTheNewRepublic. Italian journalist Oriana Fallaci was a provocateur who brilliantlymanipulatedtheShahduringtheirstormyexchange,whichhadactuallyoccurredbeforetheoutbreakoftheMiddleEastwar.Whensheaskedwhetherthepriceofoilwouldkeeprising, theShahexcitedlyreplied:“Ofcourse it’sgoing to rise.Certainly!Andhow!Youcanspread thebadnewsandaddthat itcomesfromsomeonewhoknowswhathe’stalkingabout.Iknoweverythingthereistoknowaboutoil,everything.I’marealspecialistandit’sasaspecialistthatImusttellyouthepriceofoilmustrise.There’snoothersolution.”TheShahpridedhimselfonbeinganoilmanofthenewera.Hewasanearly

andavidproponentofpeakoil,arguingthattheworld’smajoroilfieldswouldrun out of petroleum in the first decades of the twenty-first century. Iranwasexpectedtomaximizeitsoilproductionfrom5.8millionbarrelsperdayin1973to9millionbarrelsperdayin1976–77.Iran’soilwouldthenleveloffandenterseveral decades of decline. The Shah’s modernization drive was intended toprovide the Iranian economy with a soft landing once the wells ran dry. Heevangelizedonthetopicsofenergyconservationanddiversification.HedrewadirectlinkbetweenoilpricesandhowmuchtheWestchargedIranforitsexportsoffoodandpetrochemicals.“You’veincreasedthepriceofthewheatyousellusby300percent,andthesameforsugarandcement,”helecturedFallaci.“You’vesentpetrochemicalpricesrocketing.Youbuyourcrudeoilandsellitbacktous,refinedaspetrochemicals,atahundredtimesthepriceyou’vepaidus.Youmakeuspaymore,scandalouslymore,foreverything,andit’sonlyfairthat,fromnowon,youshouldpaymoreforoil.Let’ssay...10timesmore.”HepredictedthedaywouldcomewhenmankindwoulddigforoilbeneaththeNorthPole:

Inlessthan100years,thisoilbusinesswillbefinished.Theneedforoilincreases daily, existing fields are becoming exhausted, and you’ll soonhavetoseeksomeothersourceofenergy.Atomic,solarorwhatnot.You’llhave to resort to several solutions, one won’t be enough. For instance,you’ll have to exploit thepowerof theocean tideswith turbines.Or elseyou’llhavetodigdeeper,seekoil10,000metersbelowthesea-bedoratthe

NorthPole...Idon’tknow.AllIknowisthatthetimehasalreadyarrivedtotakemeasures,nottowasteoilaswealwayshave.It’sacrimetouseitaswedonowadays.

The Shah was so unsentimental on the subject of energy pricing that hedecided theU.S.war fleet off the coast ofOman should turn a profit for theIranian treasury. Asadollah Alam was tasked with instructing AmbassadorHelmsthatTehranwantedpaymentinfullforthefuelthatkeptthetaskforceatsea.TheShah’scrusadeforhigherpricesalsohidaninconvenient truth.InthewordsoftheShah’sownbudgetplannersIranfacedan“explosivedeficitinthebalanceofpayments.”Therewasnodoubtthatbytheendof1973spendingonarms was draining capital and skilled manpower away from the civilianeconomy.Kissinger alreadyknew that Iran’s economywasbeginning togroanunderthestrainoftheShah’smilitarybuildup.“IranianpurchasesandordersofU.S. defense equipment and services since 1965 now total more than $3.7billion,” the StateDepartment advised in an internalmemo. “Of this amount,approximately $1.8 billion in orders were signed in FY 1973 alone.” Adisconnect had developed between U.S. and Iranian threat perceptions. “TheShah’sviewofhismilitaryneedsisgreaterthanours.Heisbuildingamilitarybasebeyondtheneedsforinternalsecurityortomeetanyreasonablyacceptablethreat,apparentlyinordertomaximizehisstrengthsandenableIrantodealfromapositionofstrength.”TheShahwastryingtodotoomuch:“TheShah’sasyetinexhaustibleappetiteforthelatestsophisticatedweaponry,athigherandhigherannual costs for acquisition and maintenance, could impact on Iraniandevelopment spending. The rapid buildup is seriously straining manpowerresourcesandriskequipmentfailuresandsidelining.”IftherewasasilverliningfortheUnitedStatesitwasthis:Iranwasunlikely

tojoinanoilembargoagainsttheWestbecauseitcouldnotaffordthelosstoitsrevenuestream.TheShahwouldinfactbelikelytoexploitembargoconditionsto maximize Iran’s share of the market: “There is no likelihood that it willaccumulatevast foreignexchange reservesbeyondexpenditures, or that itwillvoluntarily restrain production below projected levels. . . . Iran is not apt tocurtailproductionbecauseoftheArab-Israeliproblems.”Major itemson theShah’s shopping list for arms included177F-4 aircraft,

141F-5E aircraft, 58C-130 aircraft, 489 attack and utility helicopters, 2U.S.surplus destroyers with Standard missiles, 302 self-propelled artillery pieces,460M-60tanks,and6battalionsofHawkmissiles.FromtheBritishheordered

800 Chieftain tanks. The Shah added 14 Hovercraft to what was already theworld’sbiggestHovercraft fleet—one thatcould land“abattalionof troopsonthe[Saudi]sideofthegulfinonlytwohours.”Twonewairandseabaseswereprojected to cost upward of $1 billion. Then there were the 8 destroyers, 4frigates, 12 high-speed gunboats, and 2 repair ships.NewKC-135 jet tankersmeantthat therangeof theShah’sfleetofF-4Phantomswasdoubledtosome1,400miles.All these itemswere orderedbefore the outbreak of the fourthArab-Israeli

warinOctober1973.ThewarconvincedtheShahoftwothings.Thefirstwasthattheoilmarketwasabouttospike.ThesecondwasthatIranneededtotakeurgent steps to prepare for a blitzkrieg invasion of the sort that had almostoverwhelmed the Israelis. Moscow’s new rapid mobility force influenced theShah’scalculations.HissolutioninDecember1973wasstraightforwardenough—he would use the oil market to pay for his new arms, a fact later grimlyconceded by U.S. officials in a classified study: “Although Iran’s economicgrowth was averaging well over 10% annually in the period 1970–73, theGovernment of Iran then believed that armaments requirements for 1974–78wouldbeabout$5billioninexcessofprojectedoilrevenuesfor thatperiod—andthusfeltthatinordertoavoidburdensomeexternalfinancing,ahikeinthepriceofoilwasinorder.”Thereport’sdevastatingconclusion:theShahintendedtooverspendonAmericanweaponsandmilitaryequipmentbyawhopping$5billion—andhemeantforAmericanoilconsumerstofootthebill.InPahlavi-eraIrangovernmentspendingtooktheformofdevelopmentplans.

The$36billionFifthPlandrawnupbythestatePlanandBudgetOrganizationwas budgeted to cover the periodMarch 1973 toMarch 1978. Its projectionswere based on maintaining an annual economic growth rate of 11.4 percent.SeniorofficialsatthePBOworriedthattheFifthPlanwassoambitiousastobe“perilously close to absorptive capacity.” Their biggest fear was that anothersubstantialinjectionofoilrevenuesintoIran’sfinancialbloodstreammightfuelinflationandoverheattheeconomy.Theonethirdofthestatebudgetdedicatedto the military functioned almost as a “black budget” because it was strictlycontrolled by the Shah and not subject to the oversight or review of hisgovernment’sciviliantechnocrats.TheFifthPlanhadbeen ineffectonlyafewmonthswhentheShahandhis

generals raised fresh demands for new arms purchases. “The pressures for anincrease in domestic spending were immense, with the Shah and his defenseestablishmentintheforefront,”recalledoneIranianofficial.TheShahalsoaskedhis planners to draft a long-range twenty-year forecast for economicdevelopmentthat“anticipatedinflowsoffinancialresourcesfromtheexportof

oil and gas.” The Shah was giving his officials advance warning that a newwindfall in oil profits was on its way. As the same official observed withtechnical correctness, the Shah’s order “signaled that there was indeed anunderstandingwithinpoliticalcirclesastotheimportanceofrecentevents[theMiddleEastwarandAraboilembargo].”BurgeoningoilrevenueshadswelledtheranksoftheIranianmiddleclass.A

growing economy absorbed their energies and channeled their ambitions intomaking money rather than demanding political reforms. But an economyexperiencing dynamic growth was accompanied by shortages of consumergoods, skilled labor, andaffordablehousing in thecities.TheShah’swife andcourtministerbroughtthesematterstohisattention.Senior court officials took their concerns to Kermit Roosevelt, the hero of

OperationAjax,whenhemadeoneofhisfrequentvisitstoTehranintheearly1970s to lobby the Shah to buy more fighter aircraft. One former Iranianambassador confided to Roosevelt “that he thought there was a growing gapbetweenthegovernmentandthepeopleofIran.HesaidthattheShah’spersonalinfluence holds the government and the people of Iran together. He foundinflationa seriousproblemandbelieved thecredibilityof thegovernmentwasbadlyeroded.”RooseveltrelayedtheconcernsoftheformerdiplomatandothersinamemorandumthatheaddressedtoKissinger’sattention.Twoeventsoccurredintheautumnof1973thatremindedtheShahofhisown

mortality. In early October a terrorist plot to either kill or kidnap the Shah,QueenFarah,andCrownPrinceRezaatanawardsceremonyinTehranhonoringthe movie industry was foiled. At around the same time—the exact date isunknown—the Shah noticed swelling around his abdomen. He made a self-diagnosis of a swollen spleen, probably the result of “some sort of blooddisorder,”butchosenottosharethenewswithhiswifeoranyoneelseatcourtapart fromAlam. InNovember theShah summonedPrimeMinisterHoveyda,thespeakerofparliament,topcourtofficials,andthecommandersofthearmedforces to Niavaran Palace.WhenAlam arrived at the secret conclave he wassurprisedtoseethequeenatherhusband’sside.Thecourtministerwasfurtherstartled tohearMohammadRezaShahdeliverhispoliticalwilland testament.Apparentlyalludingtotherecentattemptonhislife,theShahbeganhisremarkswithawarning:“Godalonedeterminesthehourofourdeaths,butweliveinanageinwhichtheinstrumentsofdeatharewieldedbyterroristsandsubversives.At anymomentmy lifemaybe snatched fromme.”Heannounced that in theevent of his premature death, “and until the Crown Prince attains legal age,authorityistoliewithHerMajestytheQueenandthemembersoftheRegencyCouncil.”Heorderedthearmedforcestoobeyhiswife’scommandsifthatday

evercame:“Theirordersmaycomefromawomanoramanoftenderyears,butthey are to be obeyed with no less respect. The safety of all your lives maydependonit.”Noonesaidaword.The room, recalledAlam, fell into“absolute silenceas

His Imperial Majesty finished; everybody too electrified to utter a sound. ImyselfwassooverwhelmedthatIcouldthinkofnothing,savethatInolongerwishtoliveasinglemomentoncetheShahhasgone.PrayGodthatIdiebeforemybelovedShahanshah.”TheShahwaspreparinghisinnercircleforacomingstorm—butwhat?Andfromwhere?

ISHALLDEFENDOURACTIONBEFORETHEENTIREWORLD

TheShahneverhidfromhisWesternallieshisintentiontoforcethroughonefinal increase in oil prices when OPEC ministers reconvened in Tehran onDecember22,1973.Iran’shabitualbigspenderneededtoraisethemoneytopayfor $5 billion in new military equipment. He decided that market conditionsmightneverbeas favorable to theproducersas theywerenow.Thecombinedeffects of thewar and the embargo had led to panic buying and squeezed allexcesscapacityfromthemarket.Priceswereabouttospike.TheShahknewthatNixon and Kissinger were anxious to appease him at a time when Iran wasrefueling thecarrierHancock, supplying Israelwithoil, and ignoring theAraboilembargo.TheShahalsoknewthatWatergatehadcrippledNixon’sabilitytobackupanydemandswiththethreatofforce.TheNixonadministration’sinepthandlingofforeigneconomicpolicyplayed

acrucialroleinthedisastroussequenceofeventsthatunfoldedthatDecember.Onthe6th,FederalReserveBankchairmanArthurBurnsattendedameetingatwhichPresidentNixonandhiseconomicsteamdiscussedthecripplingimpactoftheoilembargo.Inhisdiary,BurnsdescribedNixonatthemeetingasabrokenman.Thepresidentwas“listless;lookedsad;hismindelsewhere;shookhisheadnowand then, but hewas clearlynot interested.”NixonperkeduponlywhenBurns proposed a crash energy program that the Fed chief dubbed ProjectIndependenceandwhichheenvisionedwouldbe“onascalecomparableto[the]ManhattanProjectandtheSpaceprogram...thatwillfreeusfromdependenceonArabblackmailingsheiks.”Nixonlovedit.Hemadeclear,however,thatheandnotWilliamE.Simon, theadministratorof theFederalEnergyOfficeandtheWhiteHouseofficialinchargeofcoordinatingtheadministration’sresponseto the oil crisis, should receive credit for announcing the new initiative.

“PresidentexpressedconcernaboutSimon,”wroteBurns.“Heindicatedthathewantedtomakemajorpolicypronouncementshimself.”BurnsalsorecordedthatTreasury Secretary George Shultz, supported by others in the room, “urged asharpincreaseinoilpricesandrelianceonmarkettoequatedemand&supply”to combat the effects of the oil embargo and reliance on oil from theMiddleEast.Nixon’seconomicsteamstillunderestimatedthepotentialforanotherpricejolttoinflictwidespreaddamageontheeconomy.BurnsdidnotthinkhighlyofShultz,whomhecausticallydescribedashaving“nottheslightestunderstandingofinternationaleconomicsorfinance!Whatapitythatthisquiet,persuasive,butwoefullyignorantideologist,hassuchinfluencewiththePresident.”The incoherence of the Nixon administration sent mixed signals to oil

producers and consumers alike, which resulted in another, deadliermisunderstanding. The Shah decided to test American resolve when he toldAmbassadorHelmsthatheplannedtoincreasethepriceofoiltothepointwhereit reflected the price of other sources of energy. Helms left their meetingassuming that theShahmeant to raise thepriceof abarrelofoil by theheftysumofoneor twodollars. In fact, theShahmeant to raise thepriceby sevendollars.Howdidthismiscommunicationhappen?DespitehisfluencyinEnglish,theShahdidnotalwaysexpresshimselfclearlyonthesubjectofoilprices.Hereishisreplytoajournalistwhenhewaslateraskedtojustifythe$7abarrelpriceincrease:

Sowechargedexperts to studywhatpriceswe shouldputonoil.Doyouknowthatfromoilyouhavetoday70,000derivatives?Whenweemptyourwells,thenyouwillbedeniedwhatIcallthisnobleproduct.Itwilltakeyou $8 to extract your shale or tar sands. So I said let us start with thebottom price of $7; that is the government intake. Suddenly everybodystartedtocryfoul.

Ifthewords“thatisthegovernmentintake”areremoveditmightappearasthoughtheShahwantedoiltogoupinpricefrom$5.11to$7perbarrel.Whatheactuallymeantwas that theIraniangovernment’s“take”orprofitperbarrelwouldbe$7inadditiontothepostedpriceof$5.11.Thedistinctionbetweenthedollarprice perbarrel and theprofitmargin per barrelwas lost in translation.Ambassador Helms similarly misunderstood the Shah’s intention. TheBritishambassador later told Alam that he too had misunderstood the Shah’sexplanation of $7 income for every barrel of oil sold. This helps explain

Kissinger’s belated admissionmany years later “that he had assumed that theShahmighthikeoilpricesbyadollarortwoabarreltopayforhisweapons.”In Paris on December 19, three days before the OPEC summit, France’s

foreign minister, Michel Jobert, told Kissinger that the French government“couldnotunderstand theAmericanGovernment’sattitude toward theShahofIran.Itwasclear,hesaid,thattheShahwasgoingtopushforanothermajoroilprice increase by exploiting the current embargo, induce shortage and yet theUnitedStatesactedasifitconsideredtheShahtobeafriendlycountrywiththesame interest . . . these artificial prices would be used as a pretext to justifyhigher overall OPEC prices.” ButKissinger brushed aside Jobert’s complaint.The French believed that Kissinger “underestimated the economics andoverestimatedtheMiddleEastpoliticalprobleminthetermsoftimesensitivity.”Oil prices “were more immediately vital to the French.” President GeorgesPompidou wanted Nixon to know that he was prepared not only to join theUnited States in holding the line against further oil price increases—he alsoextended an offer “to join us in military intervention.” James Akins, theAmerican ambassador in Saudi Arabia, raised the alarm too. The SaudigovernmentappealedtoWashingtonthroughtheambassadortorestraintheShahand “use our influence formoderationwith all theOPEC nations.” Kissingerwent through the motions of issuing a general appeal for restraint to thegovernmentsofIran,SaudiArabia,andVenezuelabutotherwisemadenoeffortto exert American leadership, perhaps because he suspected that Jobert andSaudiArabia’sYamaniwere trying todriveawedgebetweenWashingtonandTehran.Whathappenednextseems tohavegenuinely takenhimandeveryoneelseintheUnitedStatesgovernmentbysurprise.The Shah opened theDecember 22Tehran oil producers’meeting from the

fortifiedMinistryofFinancebuildinginTehran.Heremindedthedelegatesthat“we are establishing the prices ourselves” without interference fromWesterngovernmentsoroilcompanies.Heurgedthemnottoraisethepriceofoiltothepointwhere it hurt the industrial nationswhose capitalwas essential for theirowndevelopment.Buthealso inveighedagainstwastingoil foruse in“powergeneration,movingshipsorheatinghomes.Oilmustbereservedforuseinmoresophisticated industries such as petrochemicals.”He recommended they adopthis ownprice formulawhichwas “a price comparable to the price of coal oilderived from shale or other sources such as coal gasification or coalliquefaction.” Itwas thesamepricing formulahehadmentioned toNixonandKissingerinJuly.TheShahendedhisremarksbyassuringthedelegatesthatifthey adopted his proposal hewas “quite prepared to bear the consequences. Ishall defend our action before the entireworld, confident thatmy nationwill

supportme.”TheShahwonover thedelegatesand turnedout tobeasgoodashisword.

ThenextdayatapressconferenceinNiavaranPalaceIran’sleadershockedtheworldwhenhe announced thatPersianGulf oil producers had agreed tomorethandouble thepriceofabarrelofoil from$5.11 to$11.65, therebyensuringthemselves a profitmargin of almost $7per barrel. “The industrialworldwillhave to realize that the era of their terrific progress and even more terrificincomeandwealthbasedoncheapoilisfinished,”hedeclared.

Theywillhavetofindnewsourcesofenergy,tightentheirbelts.Ifyouwanttoliveaswellnowyou’llhavetoworkforit.Evenallthechildrenofwell-to-do parents who have plenty to eat, have cars, and run around asterroriststhrowingbombshereandthere—theywillhavetoworktoo.Wedon’twant tohurt the industrializedworld.Wewillbeoneof themsoon.What good will it do if the present industrialized world is crushed andterminated?Whatwillreplaceit?

This last,massivehike inprices for theyearmeant that thepriceofoilhadrisen470percentinthespaceoftwelvemonthsandthattheeconomicwealthofOPECmembershadrocketedbythethenastronomicalsumof$112billion—anamount that represented the largest single transfer of wealth in history. Iranquadrupleditsoilrevenuesto$20.9billionandtotalpetroleumincomeoverthenext five years was projected to climb to $98 billion. Iran’s gross nationalproductwason target to expand an astonishing50 percent a year. In fact, theempireofIranhadjustbeenlaunchedintotheranksofthewealthiestnationsonearth.TheShahhadhis$5billion.FortherestoftheworldtheShah’soilcoupwas

a disaster. In some countries national treasuries emptied practically overnight.America’sbillforforeignoilimportssoaredfrom$3.9billionto$24billion inoneyear.“Amongotherthings,thismeansthatthewoolenmillsofLancashire,theautoplantsofBavaria,andtheelectronicassemblylinesofJapanwillhavetoproduceandsellfourtimesasmuchastheydidayearagotomeetthecostofthe oil they use,” reported The New York Times. France calculated that thecombinedeffectofthefourfoldincreaseinthepriceofoilin1973wouldleadtoariseinunemploymentfrom2to6percent,a10percentincreaseinthecostofliving,$2billioninadditionalfuelcosts,theerasureofitstradesurplus,andthedevaluation of the franc. Spain’s $500million trade surpluswas turned into a

$3.1billiondeficit.“In pushing up prices beyond what is tolerable to western economies [the

Shah] is aware of the strains he is imposing,” concluded The Economist. “Inapparentlychanginghiscolorshemaynowfeelhe is runningwith the tideofworld history and that Iran must rely on its own strength to keep off theRussians.”ThemagazinealsonotedthedomesticpressuresontheShahandhisunending quest to erase the taint of the 1953 coup. “Even after 20 years, theghost of Mossadegh, the politician who laid claim to the mantle of IraniannationalismandoutbidtheArabsinchallengingtheWest,stillhauntstheShah.”When they realized the enormity of what had happened, the NixonWhite

House was thrown into a panic. “The oil increase to us is $10 billion,” CIAdirector Colby told his colleagues on December 28. “Two can play at this,”repliedAdmiralMooreroftheJointChiefs.“MaybeweshouldraisethepriceofourstufftotheShah.”“Weare,”DefenseSecretarySchlesingerassuredhim.FromnowontheShah

would foot the bill for all research and development costs associatedwith theweapons systems he bought from the Pentagon. “We had a policy in theDepartment of Defense in which the United States paid the research anddevelopment costs of developing new equipment,” recalled Schlesinger. “Wewereengaginginsortofcharitableactivities in thesensethatwewere loadingonto theNavyDepartment or theAir ForceDepartment all of the charges forthese equipments when some of the clear beneficiaries were overseas clients.And therewas no need in thewake of the ’73 oil prices run-up to engage incharitableactivities.”Iran’salreadyhighdefenseexpenditureswereabouttogothroughtheroof.ArthurBurnsattendedasecondWhiteHousemeetingonJanuary8,1974,to

discusstheeconomicandfinancialaspectsofthecrisis.TheparticipantsrealizedtheyhadbeensnookeredbytheShah.“Kissingerhadnothingtocontributeaboutoilproblem,”Burnsobserved.“Infact,noonedid—apartfromthecontributionIleft inmymemoonAbusesofEconomicPower.Kissinger talkedwildly—weshould agree to nothing; we should not even talk to [the French?]. Not at allhelpful.”ThreeyearsearlierNixonhadsecretlygiventheShahpermissiontopushhard

onoilprices.EvenifheblastedtheShahinpublic,whatwouldbetheuse?Ifthenewsleakedthathehadapprovedtheoilpricehikesnowwreakinghavocontheworld economy, his presidency would be further imperiled. Privately, NixonappealedtotheShahtoreconsider.“Thediplomaticresponsewastotrytobringpressure to bear on theShahnot to raise theprices,” recalledHelms. “This iswhattheStateDepartmentwastryingtodo.”HelmspresentedAlamwithaletter

togivetotheShahexpressingNixon’salarm.TheShahhadlefttownforhisskivacationandHelmsandAlamtalkedabout

what had happened. “As I recall, His Imperial Majesty granted you anaudience,” Alam said, “in which he would certainly have explained that oilpricescanonlybesetinaccordancewiththepriceofalternativeenergysources.I know for a fact that His Imperial Majesty made this point to the Britishambassador.” Helms admitted that this was true. “In that case, what’s yourobjection?Ourapproach seemsperfectly rational.”According toAlam,Helmsreplied that “he had no objection and that he had sent a detailed report toWashington.”Helms then asked Alam if he could raise “a rather impertinent question.”

AmericandiplomatshadlearnedthatthemajorityoftheAraboilministerswhoattendedtheTehranconference,andinparticularSaudiArabia’sSheikhYamani,hadopposedthepricehikebuthadfeltdisinclinedtochallengetheShah.Alamsubsequently learned from the Shah that the Saudis had suggested a profitmarginperbarrelof$6.ButAbuDhabi,Kuwait,andIraqhadallpushedforaprofit margin of $9. The Iranian view was that the Shah’s pricing formularepresented themiddle ground and that itwas unfair to characterize him as apricehawk.AlamexplainedthepricingformulatoHelms,notingthat“theU.S.ambassador has begun to realize the true implications of the Arab proposals,whichhasreallyputthewinduphim.”InhislettertotheShah,Nixonurgedhisallytoreconsiderthepriceincrease

because of the possible destabilizing impact it would have “on the world’seconomy and the catastrophic problems it could pose for the internationalmonetary system.Not onlywill it result in raising the prices ofmanufacturedproducts but it will have severe repressive effect on the economies of oilconsumers which could cause a world-wide recession and which wouldeventuallybenefitnoone,includingtheoilexporters.”TheShahsimplyignoredNixon’srequest.“Iwas involved indelivering thesemessages to theShah,buthewas having none of that,” saidHelms.TheShah’s attitudewas simple anduncompromising:“I’vetriedin thepast togetoilpricerisesandtheAmericanandBritishcompanieswouldn’tgivethemtome.NowI’vegotthemandyou’regoingtohavetolivewiththem.”TheShahwasdeeplyoffendedbythecriticismleveledathimbyhisalliesintheWest.HedismissedBritain’sambassadorPeterRamsbothamas an“idiot”when the envoy begged for restraint and instructedAlamtogivehimadressingdown.NixonandhisaideslatercameunderseverecriticismforallowingtheShahto

gethiswayonoilprices.Butdidtheyhaveanychoice?Decadeslater,SecretaryofDefenseJamesSchlesingerconfirmed thatU.S.officials fearedcrossing the

Shahatatimewhen“relationsbetweentheUnitedStatesandtheSaudisinthecase of the Nixon administration were somewhat tenuous. They becameextremelytenuousbecauseofthedecisiontoprovideIsraelwithaidsometimeinOctober ’73which led to theoil embargoandwhich fed theShah’s economicambitions.Hewas theone thatwaspushing thepriceup to$12 abarrel.TheShahwasourally.”Schlesinger’snavaltaskforcereliedonIranianfuelsuppliestokeepthepressureonKingFaisaltoendtheembargo.

AndasaresultwewereambivalentabouttheShahbecausewedidn’twanttofighthimonenergyprices.Wedidn’twanttofighthimonthepointofenergyprices[tothepointwhere]wealienatedhim,right?Ontheotherhand, itwas plain that the run-up in priceswas not in the interest of theUnitedStatesortheWesternworld.Thatwastheproblem.AtthesametimewewantedhimasourallyinthepoliticalconditionsintheMiddleEastsowedidn’twanttogosofarastoalienatehimandleadhimtobehostiletotheUnitedStates.

The best explanation Henry Kissinger gave for what happened came in asecretlyrecordedtelephoneconversationwithnewspaperreporterJackAndersonin 1975. The enterprising Anderson had somehow gotten his hands on aclassifiedsummaryofKissinger’sDecember1973meetingwithFrance’sforeignministerJobert.Kissingeratfirstclaimedtohavenorecollectionoftheevent.“Ijust—you know, I just can’t remember that,” he blustered. “I would have tocheckmyrecords.”“Well, there is even a charge here that they offered to join us in military

intervention,”Andersonpersisted.“Oh,thatistotally—thatistotally—that,Iknow,istotalnonsense.”“I will read it exactly the way it said: They raised the issue of joint U.S.

military action—just raised the issue—references to thisFrenchproposalweremadeat theEmbassy levelandwerereflected in thecable traffic. Idon’thavethe cable traffic—what I have is a summary of it that comes from the StateDepartmentorfrompeopleintheStateDepartment.”Kissinger’smemory suddenly improved: “Well, look,Mr. Anderson, it is a

verycomplicatedissue,butthisconversation,evenifitwouldpossiblyturnouttobetrue,whichIcan’tconfirm—I’llhavetolooktoseewhetherIcanfindacopyofthismemooranequivalentofit,”hesaid.“Becauseyouknow,itdoessound plausible tome.”Kissinger proceeded to explain that theUnited States

had been desperate for Iranian oil to keep flowing at full capacity during theembargo,tellingAndersonthat“atatimewhenwewerefacinganembargoforustotakeontheShahwhowasouronlysupplierofoilinthatareawasnotthemost intelligent thing to do . . . the geopolitics are not irrelevant and it’s notirrelevant to have one country that won’t join an embargo and that might beavailableincaseofaMiddleEastconflictbutthatisnottheonlyconsideration.”KissingeraddedthatinDecember1973therewasahighriskofanotherwarintheMiddleEast.TheUnitedStateswasunderanoilembargo.“Youhavetolookat our strategy in light of that period. . . .Andnotwanting to add Iran to theembargoingcountriesisnottheworst—itisnotasenselessjudgment.”American impotencewas separately reinforcedwhen theShah informed the

administration thathewouldauthorize an increase in Iranianoil production toalleviatefuelshortagesintheWestonlyiftheUnitedStatessuppliedhimwithconstructionmaterials such as cement, steel I-beams, reinforcing rods, coppersheeting,andaluminum.On twofronts—oilpricingandproduction—theShahwasnowplayingaveryhardgamewiththeWhiteHouse.TheIranianleaderhadthe Nixon administration—and the economies of the Western industrializedworld—overabarrel.Theironywasthis:inJuly1973Kissingerhadbeentoldthat theShahwouldbehighlyunlikely to joinanyoil embargobecause Iran’seconomy could not afford the loss in revenue. The memo from the StateDepartment concluded that the Shah’smilitary buildupwould “enable Iran todealfromapositionofstrength,”thoughitdidnotsayagainstwhom.Kissingereither ignoredordisregarded theanalysis.SomeinWashingtonnowwonderedwhethertheShah’snewfoundpetropoweractuallyenabledhimtodealwiththeUnitedStatesfromapositionofstrength.TheShahis“definitelyusingoilasalever” a top U.S. official told TheWashington Post. He added that it was “atouchymatter”intheWhiteHouse.

YOUAREGOINGTOGIVEMEGASORIWILLKILLYOU

OnFebruary9,PresidentRichardNixonmetattheWesternWhiteHouseinSanClementewithKissinger,Shultz,andWilliamSimon,whomeveryonenowknewinshorthandastheWhiteHouse“energyczar.”Theywerecomingoutofanother hair-raising month in which the United States had experienced thegeopoliticalequivalentofapowersystemfailure.InSoutheastAsia,Europe,theMediterranean, the Persian Gulf, and throughout the Middle East theadministrationwasonthedefensive.Thepresidenthadflownout toCalifornia

onacommercialflightasacost-savingmeasure.NixontriedtolightenthemoodwhenKissinger pointed out that even a small country likeUgandahad turnedagainst them. “Look at Amin,” he complained in reference to the murderousUgandandictatorIdiAmin.“HeusedtobeoursandtheKenyansboughthim.”“TheproblemwithAminisnotsomethingheatebutsomeoneheate,”Nixon

cracked.“I’msorryfortheAfricans,butitwilltakealongtime.”Theyhadmorecritical issues to deal with than Amin or Uganda—like trying to prevent thecollapse of law and order at home and save the industrialized world frombankruptcy.Americans were experiencing oil shock. It began over the New Year’s

weekendwhenmotorists inNewYorkCity fought one anotherwith fists andknivesoutsidegasolinestationsandamaninAlbanywalkedintoagasstationwithwhat looked likeahandgrenade and leftwith all thegashe could carry.Servicestationattendantsarmedthemselvesasholdupsandassaultsproliferatedacross thecountry.“Youaregoing togivemegasor Iwillkillyou,”onewastold. Fully laden gasoline trucks were hijacked. Police reported a rash ofsuspiciousautomobilefiresascarownersfoundingeniouswaysofdisposingoftheir gas guzzlers and claiming the insurance value on their cars.Motorists inHawaii slept outside gas stations to hold their place in line. A strike byindependent truck drivers angry over fuel prices and scarcity led to foodshortages,whichinturntriggeredpanicbuyingatsupermarketsintheMidwest.Bitter clashes with strikebreakers resulted in three shooting deaths and manyinjuries, “and there have been scores of fist fights, slashed tires and smashedwindshields.” Truckers besieged the town of Streator (pop. 16,000) in Illinoisandpreventedtrucksfromenteringthecitylimits.Thetown’sbiggestemployerwasforcedtocloseitsdoorsandfrenziedresidentsmobbedstorestostockuponprovisions.ThegovernorsofeightstatescalledouttheNationalGuardtopatrolhighwayoverpassesandtruckstopsandtoescortconvoysoftrucksladenwithfood.TheFederalEnergyOfficemonitoredFBI reportsof shootingsandgrowing

socialunrestaroundthecountry.“Thekeyduringthatperiod, themost intensemotivewasthesurvivalofsectorsofthecountrythatweredesperatelyshortofoil,shuttingdownplants,shootingpricesup,doingallsortsofbizarre things,”recalled Frank Zarb, one of the officials charged with responding to theemergency.ZarbtriedandfailedtopersuadeHousespeakerCarlAlberttoshutoffthelightsonthedomeoftheU.S.Capitolasacost-savingmeasure.ByearlyFebruarygaslinesinthenation’scapitalstretchedfortwomiles.“Iwentintoalineforanhourthismorningtogetsomegasoline,”Kissinger’sdeputy,JosephSisco,complained tohisboss. “Gettinggasoline is a smallproblem ifyouare

not Secretary of State. The line was around the block twice, can you believethat?WhilesittinginthelineIwasthinkingaboutyouyesterdayandthinkingitwouldbenicetogetthisshortageover.”KissingersharedSisco’ssenseoffrustration.“IfIwasthePresident,”hejoked

with Brent Scowcroft, “I would tell the Arabs to shove their oil and tell theCongress we will have rationing rather than submit and you would get theembargo lifted in threedaysbut I amnot thePresident [under] thisgod-damnconstitutional amendment.” (Kissinger was referring to the Constitution’sproscriptionagainst foreign-borncitizensbecomingpresident.)Notall thesideeffects of the fuel shortages were bad. After the national speed limit waslowered,trafficdeathsfell25percent,pedestriandeathsby30percent,andthenumberofschoolchildrenkilledannuallyinautomobileaccidentsdroppedfromninety-eighttofifty-seven.Thepressureonthepresidentandhisadministrationtoeasetheenergycrisis

was intense.Theman taskedwith restoringorder to thenation’s fuel supplies,William Simon—universally known as Bill—was a forty-six-year-old formerWall Street bond trader, close friend ofNixon’s former attorney general, JohnMitchell, and protégé ofGeorge Shultz at Treasury. Simonwas aWall Streetmoneyman. Within nine months of starting work at the investment houseSalomon Brothers in 1963 he became one of seventeen partners and wasresponsible for managing government and municipal bond trading. With hisslicked-back hair, granite jawline, and signature square eyeglasses, Simonpublicly exuded the confidence of the well-heeled establishment man. Hissubordinatesknewhimasabully in theoffice,amanwho“terrified”hisstaffandworked them like draft horses. One time hewalked past a traineewhosedeskwasclutteredwithpapers.Simonsawthemessandbarked,“Cleanoffyourdesk.It’sa[expletive]pigsty.”ThetraineewassobusyhestillhadnotcleanedhisdeskwhenSimonreturnedfromlunch.“AndSimonleansoverand,withthebackof his arm, he just sweeps all the junkoff that desk andonto the floor,”recalled the trainee.“And thenhesays, ‘See.Seehoweasy it is tocleanoffadesk.’”HavingBillSimonasyourbossmadelife“generallymiserable.”Simonwas a die-hardNixonmanwho believed the country needed saving

from the excesses of liberalism. During the 1968 presidential campaign hecontributed$15,000ofthe$100,000donatedtoNixon’scampaignbySalomonpartners.InDecember1972hewasrewardedwiththepostasShultz’sdeputyatTreasury.A year laterNixon chose him to run the Federal EnergyOffice andcoordinate the allocations of fuel supplies across the country. Simon wasunsettled when Nixon told him that his post would be like “Albert Speer’spositionasarmamentsoverlordintheThirdReich.”Buthequicklyemergedas

thepublicfaceoftheenergycrisis,hailedbyTimemagazineinacoverstoryas“AFitzgeraldHeroinWashington,”and“oneofthefreshestandmostappealingfacesinWashington.”Herelishedtheattentionandthechallenge.Heworkedtillten o’clock each night and his long-sufferingwife, Carol, themother of theirsevenchildren,admittedtoareporterthatsheandthekidshardlyeversawhim—half an hour a day at most, including weekends. It was reported that onweekends he thought nothing of shocking his children out of their sleep byemptyingbucketsofcoldwateroverthem.BillSimonlovedhisjobandhehero-worshippedNixon, using adjectives to describe the president thatwould haveastonished Pat Nixon, such as, “fun, charming, enchanting and witty.” Theadmirationwas notmutual.Nixon andKissinger generally heldSimon in lowregard and dismissed him as an intellectual lightweight. Nixon had scrawledover Simon’s initial job application, “NO! East Coast Establishment! Otheroptions?”AfteraJanuary23,1974,cabinetmeetingNixonphonedKissingertogossip.“IthoughtthatSimonwasawipe-out,”hecomplained.“Adisaster,”repeatedKissinger.“IfeltIhadtosayafewthings,didn’tyou?”“Yousavedhim,”saidKissinger.“At the cabinet meeting—just running the Goddamn thing. They’re all so

weak.Whattheyneedisleadership.Whatwasyourfeeling?”“Exactly,”chimedKissinger.“Asyousaid,they’reweak.Youcertainlygotit

acrosstothem.”Bill Simon and Henry Kissinger were bound to cross swords handling the

domestic and foreign policy repercussions of the oil shock. Kissinger’s greatmistakewastounderestimateSimon’scapacityforruthlessnessandhisloveofagoodscrap—playedbyWallStreetrules,ofcourse,whichmeantnorulesatall.Kissinger was still having no luck in persuading King Faisal to lift the

embargo.“Hehashimselflockedinconcrete,”KissingertoldNixononFebruary5.“He’s really locked in concrete,” Nixon agreed. “Until Syria has

disengagement,there’llbenoliftingtheembargo.”“We are there on a roller-coaster,” said Kissinger. “We have their solemn

assurance in writing that they would lift the embargo. This is not ourimagination.”Another leader frustrated with the Saudis was President Sadat of Egypt.

Having emerged from thewarwith his stature enhanced throughout theArabworld,SadatwasreadytoembarkonhisquestforalastingpeacewithIsrael.Hedistrusted the Soviets and wanted to improve ties with Washington. But hecouldn’tmoveuntilFaisalendedtheembargo.ThedayafterNixon’s talkwith

Kissinger, the Egyptian foreign minister in Cairo invited the U.S. and Saudienvoys to his office and, Kissinger told Al Haig, “in the presence of ourambassador called in the Saudis and gave them hell, and now they’re pullingback.”On February 7, Nixon held a thirty-five-minute meeting with Saudi

ambassadorIbrahimal-SowayelintheWhiteHouseMapRoom.NixontoldtheambassadorthatheunderstoodKingFaisalwasinabindandunsureofhowtoproceed. Nixon knew that the king feared rousing the animosity of radicalelementsathomeandabroadifhewasseentobedishonoringtheArabcause.YetFaisalwasalsoworriedabouttheimpacttheembargoandthepriceincreaseswerehavingontheeconomiesofSaudiArabia’stradingpartners.“Iknowyourgovernmentwants tonormalize thesituation,butyou feelyoucan’tgetout infrontoftheAlgeriansandtheSyrians.”Nixoncameclosetoofferinganapologyfor notworking harder in his first term to help reduce tensions in theMiddleEast.HewantedFaisaltoknowthat“IamdeterminednowthattheMiddleEastbesettled.”Hetoldtheambassador,“IamthefirstPresidentsinceEisenhowerwhohasnocommitment to theJewishcommunity,and Iwillnotbeswayed.”Nixonwasnot exaggeratingwhenhe saidhewouldnotbow topressure fromIsrael or its supporters in theUnited Stateswhenworking to reach a regionalpeacesettlement.ThewarhadstillbeenragingwhenhehadphonedKissingerand told him that once the fighting had ended, “what ought to happen is thateven though the Israelis will squeal like stuck pigs—we ought to tell [SovietAmbassador Anatoly] Dobrynin—we ought to say that the Russians—thatBrezhnev and Nixon will settle this damn thing. That ought to be done. Youknowthat.”Nixon told Ambassador Sowayel that his efforts to reach a settlement “are

beinghamperedandwillbeseriouslyjeopardizediftheembargoistheissue....Itmakesitterriblydifficulttomoveasquicklyaswewant,withtheembargo.Iunderstand it, but with lines at the gas stations, and so on, I don’t want ourpeopletostartblamingtheArabs.”

WEAREGOINGALLOUTNOWWITHTHESAUDIS

Inanattempt to learnmoreabout theShah’s thinkingonarangeof issues,over the Christmas holiday season American newspapers republished hisinterview from a month earlier with Italian journalist Oriana Fallaci. In aninstanttheShah’scarefullycultivatedimageasafriendtotheWest,abenevolent

ruler, and a loving familymanwas shattered. His views onwomen (“You’venever produced a Michelangelo or a Bach. You’ve never produced a greatcook”),democracy(“Idon’twantanypartofit, it’sallyours,youcankeepit,don’t you see? Your wonderful democracy”), and dissent (“Those guilty ofhomicide, certainly. They are shot. But not because they’re Communists,because they’re terrorists”) caused a sensation.ManyAmericans decided theyhadnever reallyknown theShahat all, andwhat theyknewofhimnow theydidn’t much like. “The sugar-coated image of the Shah of Iran (as regularlypresented in the U.S. press) has suffered a telling blow, via the excellentinterview you published,” one woman wrote the editors of the Los AngelesTimes. “I have recently returned froman extensive tour of Iran.The so-calledWhite Revolution has been a dismal failure. Most villages have neitherelectricity nor running water; illiteracy stands at 72%. The slightest politicaldissentresults inarrestsandtorturebythedreadedsecretpolice.TheslumsofTehrancompare to thoseofCalcutta,while thewealthy live livesof incredibleluxury.” “His values are undignifying and based on sand,” declared anotherangryreader.“MayAllahprotecttheEmpressFarah.”“Icouldnotbelievehowhedisgustinglyputdownwomen,”wroteathird.Stung by the criticism, Mohammad Reza Shah went on the CBS News

program 60 Minutes to defend himself to interviewer Mike Wallace. Theprogram,which aired on Sunday evening, February 24, only compounded thedamage.TheShahappearedtenseandillatease.Angeredbyaquestionaboutcorruption in Iranhestruckback,accusingU.S.oilcompaniesofbreaking theembargoandsmugglingoil intotheUnitedStatesbyreroutingtankers“twoorthreetimes” inmid-ocean.Hespokeofoil“beingsoldforonedestinationandendingupsomewhereelse.”HedeclaredthattheUnitedStateswasinfact“notshort of oil” at all and was importing more petroleum than ever before. TheShah’s comments “created tremors in Washington,” reported The New YorkTimes, because they implied the Nixon administration was manipulating theembargofordomesticpoliticalreasons.BillSimonwassummonedtoCapitolHillthenextdaytoanswertheShah’s

chargesbeforetheHouseWaysandMeansCommittee.Hearriveddistinctlyoutofsorts.Theabruptsummonshaddisruptedhisbusyschedule.HurryingtomakeittotheHillontime,hegashedhisheadontheedgeofhiscardoor.Hisrequestto receive medical attention and stitches was turned down by the committeechairman. With his head bandaged, Simon spent the next five hours “inconsiderable pain and discomfort, bleeding profusely as various congressmenscreamedatme,”asheputit.HefacedthemdownandangrilythrewtheShah’sallegationsbackatthem.HedescribedtheShah’sviewsontheembargoasnot

only “irresponsible and just plain ridiculous” but “insane.” Later he bitterlyrecalled having to listen toCongressmanCharlesVanik ofCleveland laud theShahandimplicitlyquestionhisownexpertiseinthefield:“AreyoutellingmetheShahofIran,theworld’smostrenownedoilexpert,doesn’tknowwhathe’stalkingabout?”“That’s what I’m telling you,” Simon retorted. He fared no better before a

Senatesubcommittee.“I’llsaythisMr.Simon,”saidSenatorHenry“Scoop”Jackson.“Wewillhave

to dig a big bomb shelter for you byApril if the lines are longer.” Jackson’scomment had a bite to it. Simon’s rambling estate in northern Virginia wasalready under twenty-four-hour Secret Service protection because of deaththreatsleveledattheenergyczarbyenragedAmericans.WhentheSimonfamilyattended a college football game, agents scoured the crowd for a stalker theyknewtobesittingseveralrowsbehind.“IremembertheSecretServicebeingverypresentinourlives,”saiddaughter

KatieSimon.“IremembertheSecretServicetakingmetoMcDonald’sonedaybeforeschool.”TwodaysafterhistestimonyonCapitolHill“well-placedsources”contacted

theofficesoftheAssociatedPressinWashingtontosaythatSimonhad“madeamajormistake”bydenouncingtheShahandhadhurthischancesofsucceedingGeorge Shultz as secretary of the treasury. A second article appeared in TheWashington Post warning the administration that Simon’s comments hadprovoked“consternationandanger”inIran.TheShahhadbeenincontactwithAmbassador Zahedi “several times.” There was talk of recalling him fromWashington. President Nixon took the extraordinary step of publicly andprivately disassociating himself from Simon’s remarks. He apologized to theShahinaletternoteworthyforitscontrition.SimonnowunderstoodthattheShahhadpowerfulsupportersinthenation’s

capital,inthemedia,onCapitolHill,andintheWhiteHouse,althoughheknewnothingaboutNixon’sandKissinger’ssecrethistoryofdealingswiththeIranianleader. For him the incidentwas a lesson in how rawpower reallyworked inWashington.Itwasalsothebeginningofhisremarkable,quixoticcrusadetoridthecorridorsofpowerofPahlaviinfluenceinWashington.Simonwasanidealistwhobelieved thatmoralitymattered in foreignpolicy.TheShahappalledhim.“TheShah,inmyopinion,wasnotonlyanuninformed,misinformed,irrationalmegalomaniacgiventohallucinating,hewasalsoduplicitous,”helatersaid.TheSaudis,bycontrast,wereprovingtobemuchmorereceptivetoovertures

fromtheWhiteHouse.InearlyMarch,NixonofferedFaisaltheequivalentofagrandbargaintoendtheembargoandstartanewchapterinU.S.-Saudirelations.

Inreturnforresumingoilexports,boostingoilproduction,andholdingfirmonprices,theUnitedStateswaspreparedtofulfilltheking’slong-cherishedgoalofsealing a separate military and economic alliance with the United States. OnMarch7,KissingerexplainedtheproposedpacttoDeputySecretaryofDefenseBillClements:“WearegoingalloutnowontheSaudis.IworkeditoutwiththeKing.Wehadtopicktherightmomentandwearegoingtosendoutamilitarymissionandaneconomicmission....Itmaytakeusanotherthreeorfourweekstoget itworkedout.Wedon’twant toseemoveranxious.TheKing liked theidea andwe are now exploring it.”He added that the Saudis “have learned agoodlessonontheembargo.TheymayputitonagainbutneveragainwiththeotherArabstates.”KissingerphonedNixononMonday the11th to tellhim that“asyouknow,

Mr.President,wehadapproachedtheSaudisonbilateralismandtheirresponsehas been so enthusiastic, in fact so wildly enthusiastic that I can’t help butbelievethismustaffecttheirdecisionattheembargo.”“Yes.Well,that’sthewaywewanttodeal.”“Absolutely,”agreedKissinger.HeexplainedthatwhattheSaudiroyalfamily

“was getting out of it is a military relationship and a long-term economicrelationship . . . And the commitment of the U.S. strategically to help themagainsttheirenemiesinIraqandSouthYemenandsoforth.”“Andinternallyaswell.”“Yes,that’sright,”saidKissinger.“Thatresponsehasbeenamazing.”WhatNixonandKissingerwereofferingtheSaudi leadershipwasaspecial,

evenunique,relationship.Inreturnforresumingtheflowofoilatanaffordableprice, the United States would help the Saudi rulers crush their politicalopponentsathomeandideologicalfoesabroad.U.S.-Saudirelationswereabouttoundergoaprofoundseismicshift.No longerwould theShahbeexpected todefendGulfoilfromtheradicals.TheAmericanswouldshieldtheSaudisuntilthey could defend themselves. The United States was choosing to becomedirectly and intimately involved in Saudi Arabia’s internal governance, itsforeignpolicy,anditseconomicdevelopment.Faisalhadbeenrighttoholdoutfor a better deal. On that same day in Tehran, upon hearing reports that theSaudiswereabouttocutadealwithNixon,theShahtoldaguestnottoworry.“Washington relies on Zaki Yamani,” he declared. “But not even a hundredYamaniscouldinterrupttheflowofevents.”TheoilembargowasliftedatameetingofOPECinViennaonMarch18.The

Saudisalsoannouncedanimmediateboostintheiroilproductionbyonemillionbarrels a day. When Iran proposed raising oil prices by a further 5 percent,YamanideclaredthatSaudiArabiawouldsoonerpulloutofthecartel.Theother

delegations reacted angrily but were powerless to prevent the world’s swingproducerfromusingitsreservesasleverageagainstthem.AweeklaterSaudioilproductionwas back at its pre-embargo level of 8.3million barrels a day andYamani announced that his government had decided to expand its productioncapacity to 11.2 million barrels a day by the end of 1975, an increase of 37percentoveritscurrentrate.The impact of the embargo and themonthly 5 percent production cutbacks

became the focus of a great deal of subsequent debate. The embargo initiallytargetedtheUnitedStatesandtheNetherlandsfortheirstrongsupportofIsrael.West European states and Japanwere eventually exempted from the embargobecausetheyrushedtocutprivatedealswithMiddleEastgovernmentsorissuedpublicstatementsdesignedtomollifyArabconcernsaboutthereturnofIsraeli-occupiedterritories.Portugal,Rhodesia,andSouthAfricawerealsotargetedbythe cartel. Oil producers Iran,Nigeria, andVenezuela profited from the panicwhen they rushed to try to fill the gap in supply. Iraq’sSaddamHussein alsoincreasedhiscountry’soilproductionbyarguingthattheembargowasactuallyan American-Saudi plot to weaken Europe and Japan to increase theirdependencyontheUnitedStates.Nonetheless,asindustryanalystDanielYerginhas pointed out, the loss of even 9 percent of the 55.8 million barrels of oilconsumedeachdaybythefreeworldwas“madeevenmoreseverebecauseoftherapidrateatwhichoilconsumptionhadbeengrowing—7.5percentayear.”Withnosparecapacityinthemarket,eventhelossofafewmillionbarrelswasenough to dislocate supplies worldwide. Panic, hoarding, and clumsygovernmenteffortstoallocatefuelsuppliesalsoplayedtheirpartinthecrisis.

SOMEONEHASTOTALKTOTHESHAH

InWashingtonandelsewhere,theShah’spolicieswerecausingagreatdealofconcern.IntheearlyeveningofMarch29,1974,Kissingerhostedatop-levelmeetingofadministrationofficialsandoilexecutivestodiscussthenextmovesonMiddle East peace talks and the oil crisis. It was the latest in a series ofbriefings the secretary held with petroleum industry leaders to coordinateadministration policy with their concerns. The presidents and chairmen ofTexaco, Standard Oil of California, Exxon, Mobil, Amerada Hess, AtlanticRichfield,ContinentalOil,andGulfOilwereinattendance.AnoldWashingtonhand, John McCloy, was also there. The law firm he represented, Milbank,Tweed,Hadley&McCloy,handlednegotiationsbetweentheoilcompaniesandArab governments. Kissinger began by assuring his guests that the written

transcriptoftheirconversation“isn’tgoingtogoanywhere,exceptintomyownpersonal files. If itmakesyounervous,wewill stop. . . .Youmaynot realizewhatanachievementitisinthisbuildingtokeepnotesfrombeingmadein500copies.”Thenhemadea typicallyacerbiccrackat theexpenseofBillSimon,whowassittinginwiththem.“Youknoweverybody,don’tyou?Domeafavorandsayyoudon’trecognizeSimon.”Laughter.“That’stheonlythingthatwillinstillameasureofhumilityintheczar.”Morelaughter.AfterbriefingtheoilexecutivesonthelatestdevelopmentsintheMiddleEast

peace talks, Kissinger learned that the recent doubling in the price of oil hadbeenoneincreasetoomany:consumersintheWestandelsewherewerecuttingbacktheirimportsofforeignoilandimplementingtoughconservationmeasures.ThesemeasureswereplacingpressureonOPEC’spricingstructure—andcuttingintooilcompanyprofits.Theindustrywasalsoinagreementthatthehighpostedprice of oil was driving up the rate of inflation amid panicked efforts by oil-consumingnationstoenterintobarterdealswithoilproducers.Consumerswereanxioustorecoupthecostoftheirfuelbillsandsecurelong-termandguaranteedaccess to supplies of Middle East oil. Taiwan wanted an oil-for-refineryagreementwiththeSaudis.PolandhadagreedtosupplyLibyawithtankersandindustrialequipmentinreturnforoilshipmentsstartingin1980.Argentinawasbarteringgrains andmeat for oil fromLibya.Francewas in talkswith Iraq toconcludeatwenty-yearcontracttosupplyitwith5.6billionbarrelsofcrude,andwiththeSaudistoswapweaponsandindustrialgoodsinreturnforthreeyearsofoil.IraqhadagreedtosupplyJapanwith320,000barrelsadayinaten-yeardealthatwould seeTokyo offerBaghdad a $1 billion credit to build a natural gasprocessing plant, a refinery, a petrochemical plant, a fertilizer plant, and analuminumplant.The barter deals were affecting the world economy by holding prices up

everywhere else. Inflation had risen because of the explosion in fuel andcommodityprices. “This reflects a sharp acceleration in the last threemonths,when, particularly under the initial impact of higher oil costs, the increaseexpressedatanannualratewasoftheorderof16%,”reportedtheOrganisationforEconomicCo-operationandDevelopment.Betweenaquarterandonethirdof inflation was blamed on rising energy costs, which in turn “kicked up thepricesofcountlessoil-basedproducts, including fertilizers,petrochemicalsandsynthetictextiles.”In1974theinflationrateintheUnitedStatesclimbedashighas 12 percent. Rates of inflation doubled inWestern Europe with France andBelgiumregistering16percent,18percentinGreatBritain,25percentinItaly,32percent in Iceland,andGreeceat33.4percent. Japan reporteda24percentrateofinflation.Inflationof55percentblewuncheckedthroughArgentina.The

oilshockalsohadadevastatingtollinmanycornersoftheThirdWorld.Africa’scombined$10billionfuelbillallbuterased the$11.4billion it receivedinaidfromtheindustrializedworld.InAsia,riceharvestscollapsed40percent inSriLanka because farmers had to pay 375 percentmore for fertilizer. The socialfabric of many countries was beginning to tear. The barter deals were onlymakingmattersworse,settingafloorpricebelowwhichoilwouldnotfall.American oil company executives had another immediate concern: they

worriedtheywerebeingpushedoutofthePersianGulfoilmarket.Exxon’sKenJamiesoncomplainedtoKissinger,Simon,andtheiraidesthat“moreandmoreoilthatwasAramcooilisbeingdivertedtotheseothercountriesongovernment-to-governmentdeals.Sowearelosingeffectivelyoilthatwasunderourcontrolbefore.” The oil producers “are attempting to use this device to establish amarketprice,”agreedGulfOil’sB.R.Dorsey.Jamieson explained that “the price problem ismore critical than the supply

problem” and that “Our judgment is the onewho has really been pushing theprices theworst is the Shah.”He urged theWhiteHouse to bring pressure tobearontheIranianleader.“Heisalsothehardestonetopush,”agreedKissinger.“Heisatoughcookie.”

Headded,“SimonisourspecialistintreatingwiththeShah.”“If thepostedpricewentdown, thebarterdealswouldgodown,”explained

WilliamTavoulareas, thepresidentofMobilOil.“Sowouldthepriceatwhichtheysell.Thatwouldwork.”WhenKissingeraskedhowpricescouldbeforceddown,Tavoulareasanswered,“SomeonehastotalktotheShah.”Kissingerassured thegroup thatheplanned tosee theShah“next timeIgo

outthere.”WhathedidnottellthemwasthatneitherhenorNixonretainedanyinfluence over Iranian oil policy or had any leverage to influence the Shah’sbehavior.TheSaudis,saidJamieson,favoredapricereductionandanincreaseintheir

oilproductiontofloodthemarketandbreakOPEC’spricingstructure.“Faisal has dead aim on the Shah in this deal, Henry—I guarantee you,”

DeputySecretaryofDefenseWilliamClementswarnedKissinger.Simonwasallforit:“[TheSaudis]don’thavetoreducethepostedprice—just

raisethe[leveloftheiroil]productionandletthemarkettakecareofit.”Chairman Robert Anderson of Atlantic Richfield emphasized that the oil

marketwassofteningandthattheShahhadoverreached.Arecentpriceauctionheld by the Saudis had generated offers only as high as between $9.50 and$11.50 per barrel, significantly lower than the Shah’s $17.40 fromDecember.Kuwaithadcanceleditsauctionbecauseitreportedbidsbetweenonly$8.50and$10 per barrel. Oil liftings at Iran’s Kharg Island were averaging less than

300,000barrelsaday.Themarkethadstartedtosettledown,anindicationthatifitwereleftundisturbedpriceswouldstarttodrop.ButinsteadtheywerebeingheldupartificiallybytheShah,whohadalreadycommittedfutureoilincometopayfor$5billioninfutureU.S.weaponssystems.Jamieson and his colleagues urged the administration to enter into bilateral

trade pacts with Saudi Arabia and Iran instead of barter deals. It was in theAmericannational interest to increase theoilproducers’economicdependencyon the United States. Bilateral deals, explained Clements, “will sop up thisavailable resource that they have over there, either inmoney ormanpower ortimetohandlethearrangementsandthedeals.Theycanonlytakeonsomanyofthese things . . . ifwe started in some seriousmove, like through technology,industry,thissortofthing,justsopupwhateverwasavailableoverthereinthatregard, itwould help.” Separate bilateral deals between theUnited States andIran and Saudi Arabia would give Washington a bigger say in how bothcountries ran their economies and how much they charged for their oil. TheUnitedStatescouldalsosoakupbillionsofdollarsinpetrodollarstostabilizeitsownfinancialsituationandimproveitstradebalancewiththeGulfstates.“Ithinkthemoreinter-dependentthetwocountriesbecome,thebetterchance

you have of getting to be more reasonable on price,” agreed Mobil’sTavoulareas.DeputySecretaryofStateKennethRushmadetheperceptiveobservationthat

thebarterdealsandbilateral tradepactsworkedoutbetween the industrializedWest and oil producers in thePersianGulf “will involve a lot of [Americans]goinginthere.”Heassumed,wronglyasitturnedout,thatafloodofexpatriatesinto the region “would drawus closer to them.”No thoughtwas given to thepossibilitythattheinfluxmightinsteadarouseanti-Americansentiment.

IWANTTHEMFINISHEDINMYLIFETIME

NixonandKissingerhadencouragedtheShah’sdreamtotransformIranintoaregionalmilitarypowerhouse.AclassifiedU.S.analysisnoted:

The desire of Iran’s leadership to revive the splendors of the ancientPersianEmpireand tobecomepoliticallyandeconomicallyco-equalwithEngland and France before the end of this century is well known.Geographically, theUSSR in the north, and a growing, competitiveArabpresence to the west precludes the expansion of an Iranian sphere ofinfluence. However, Iran can increasingly be expected to try to attain a

more important position to the east in Afghanistan and Pakistan, in theIndianOcean,andininternationalforums.

WithavastsupplyofpetrodollarsandU.S.weaponspouringin,thereseemedtobenothingtostoptheempireofIrananditsShahanshahfromdominatingnotonlythePersianGulfandthelandbridgesintoCentralAsiabutevenextendingIranian influence down along Africa’s east coast, and driving deep into theIndianOcean.“Iranisnotavolcanonow,”theShahassuredavisitortothepalacewhoasked

about thecountry’spoliticalstability.“TheIranianair forceought tobestrongenoughtoprotectthewholeareafromthePersianGulftotheSeaofJapan.Indiaisgoingtocollapse.IndiaandPakistanwillbecomenaturalmarketsforIranianindustrial projects, but I shall have to protect Pakistan against Indianaggression.”TheimperialfamilyretreatedtoKishoverthePersianNewYearinMarch.On

April8,theShahbrokefromhisvacationtoflytoBandarAbbaswithAsadollahAlamandAmbassadorHelms.FromtheretheyboardedtheU.S.aircraftcarrierKittyHawk, which had joined the naval task force stationed off the coast ofOman.ThetaskforcemountednavalexercisesfortheShah’sbenefit.The Shah of Iran basked in his new stature as one of the world’s most

importantstatesmen.“Inthe33rdyearofanoftenuncertainreign,MohammadReza Pahlavi has brought Iran to a threshold of grandeur that is at leastanalogoustowhatCyrustheGreatachievedforancientPersia,”declaredTime,whichin1974dubbedIran’sleaderthe“EmperorofOil.”“ButIhavesomanyaspirations,” theShahconfided toAlam.“Tobefirst in theMiddleEast isnotenough.Wemustraiseourselvestothelevelofagreatworldpower.Suchagoalisbynomeansunattainable.”OnTuesday,April9, just sixdaysafterhearing theShahutter thosewords,

Alam drove from his residence onKish to the summer palace. Expecting theShahtobeingoodspirits,hewastroubledtobemetoutsidetheroyalquartersbyGeneralKarimAyadi,theShah’spersonalphysician,whoaskedhimtosendforProfessor JeanBernard, a leadingFrenchhematologist.The request,Ayadiinsisted,wasurgent.Dr.JeanBernard,whopracticedataleadingcancerinstitutein Paris, was treating Alam for a type of incurable blood cancer whose truedimensionshadbeenconcealedfromthepatient. Itwasnotunusual inPersianmedicalculturefordoctorstoprotecttheirpatientsfromthetraumaoflearningnews of incurable or terminal illnesses.Avoidancewas intended as amark of

respectandagestureofhumanity.Alamknewhewasillbutdidnotknowthathewas slowly dying.Alamwas shaken by the news that somethingmight bewrongwith the Shah, although themonarch displayed no trace of emotion ordistress.AstheydrovetotheairporttheShahaskedAlamabouttheprogressofhotel constructionon the island. “Theymust hurryup,”he said, “Iwant themfinishedinmylifetime.”Infact,theShah—likeAlam—hadcancer.TheShah’scuriousbehavioronthe

island of Kish—his unruffled demeanor and calm fatalism during a medicalemergency—suggests two possible scenarios. One is that he was genuinelyunconcerned about his health and had no foreboding of a fatal illness. Thesecondscenario,andtheversionlateracceptedbythequeen,wasthattheShahalready knew about his cancer and that he had already had several weeks toabsorbtheinitialshockofdiagnosisbyhisphysician.“IwastoldthatProfessor[Karl]Fellingerhad informedtheShahin1974abouthishealthproblem,”sheremembered. “I think that the Shah knew when the first French doctors firstvisitedTehrantotreathim.”Thequeen’s account is confirmedbyDr.Fellinger.Aswas their custom, in

early1974theShah,Shahbanou,andtheirchildrentraveledtoSwitzerlandforaski holiday. Itwas the Shah’s habit to break away fromhis vacation to fly toneighboringAustriaforhisannualmedicalcheckup.Dr.Fellingerwasaworld-renowned internist, the “Doctor of Kings” whose patient roster included therulers of SaudiArabia,Afghanistan, andMorocco, in addition to the Shah. Itwas in Vienna in Dr. Fellinger’s consultation rooms that the Shah was firstdiagnosedwithlymphoma,aformofbloodcancerthatwastreatablebutatthetime incurable.Dr. Fellinger later recalled how the Shah’s personal physician,General Ayadi, who accompanied the king to Vienna, emphasized to him theneedfortotalsecrecy.SomepositthatFellingerandAyadiconspiredtokeeptheShahinthedarkabouthisillness.Whilethispossibilitycannotberuledout,thelikeliest scenario is that the Shah did know and that he andAyadi decided tokeep it secret for as long as they could. The Shah’s life was thoroughlycompartmentalized and it made sense that he would treat his lymphoma as astate secret for fear of what might happen if his domestic opponents, Iran’sambitious neighbors, and the leaders of the great powers—including theAmericans—learned that he was now marking time. The Shah immediatelybegancoveringhistracks,endinghisassociationwithDr.Fellinger,andin1975switchedtoaninternistinSwitzerland.MedicalvisitstoAustriawerenowoutofthequestion.“HadhegonetoahospitalinVienna,thetestresultscouldnothavebeenkeptsecret,”recalledanaide.What prompted the Shah to seek medical attention for the swelling in his

abdomen, and why did he consult French specialists? It seems likely that byearlyApril1974GeneralAyadirealizedheneededhelp.PerhapstheswellingintheShah’sabdomenhadincreased,orperhapsthekingfeltunwell.Atleastoneforeign newspaper reporter who interviewed the Shah around this timecommentedonhiswanappearance.Ayadi’spanickeddecisiontosummonexperthelp onApril 9may also have been hastened by the death in Paris five daysearlier of President Pompidou after a lengthy and secret battle withWaldenström’s disease, a form of lymphoma. The Shah and Alam had beendeeplyimpressedwithPompidou’squietdeterminationtostayinofficedespitehis terminaldiagnosis.Pompidou’sconditionwaskept fromtheFrenchpeoplebut quietly acknowledged in diplomatic circles. Secretary of DefenseSchlesinger had alerted the National Security Council on September 5, 1973,whenhebrusquelyannounced,“Pompidouisdying.”TheNixonadministrationbegananintensivestudyoftheFrenchpresident’sillnessandhowitmightaffectAmerican-French relations. Visiting London on February 26, 1974, Kissingerconfided toBritain’s foreignsecretary,SirAlecDouglas-Home, that theWhiteHouse “had an analysismade. Our people give him eighteenmonths to threeyears.Heisdeterioratingandincreasinglysusceptibletoinfection.Heistakingmassive doses of Cortisone which bring out the personality traits ofstubbornness.”Pompidouwasdeadinsixweeks.TheShahintendedtofollowPompidou’shonorabledeparturefromtheworld

scene.TheFrench specialists summoned byAsadollahAlam flewout ofOrlyAirport in great secrecy and arrived inTehranonMay1.Dr.Bernard andhisyoungprotégé,Dr.GeorgesFlandrin,were initially told that itwasAlamwhoneeded their services. The French doctors were instructed to bring their ownmedical equipment becauseonce inTehran theywere to haveno contactwithlocal medical specialists. AtMehrabad Airport “two cars with flashing lightswerewaitingforusatthefootofthegangway,andweshookhandswithsomegentlemen we had never met but whose faces we would regularly see at ourarrivals inTehran,” recalled Flandrin. The cars took them toAlam’s house. Itwastheretheylearned“thatwewouldbetakingcareofhis‘boss’s’health—thatisthewordheusedwithhisbestsmile.”Alam’sownhealthproblemsturnedoutto be the perfect alibi. If anyone spotted the doctors entering or leaving thepalace, their questions could be directed to the court minister. Flandrin andBernardweredriventoNiavaranandusheredintotheking’sstudy.Flandrintooknote of Mohammad Reza Shah’s soft voice, his fluency in French, and hisathleticphysique.TheShahliftedhisshirttoshowthemhowheself-diagnosedhisswollenspleen.TheFrenchdoctorswentabouttheirworkknowingnothingabout the Shah’s consultation earlier in the yearwithDr. Fellinger inVienna.

Theybelievedtheyweremakingadiagnosisforthefirsttime.The doctors made an immediate diagnosis, the same as Fellinger’s from

earlier in theyear, and left theShahalonewhile they talked toGeneralAyadiandinformedhimoftheShah’slymphoma.Thenitwastheirturntobeshocked.Ayaditoldthemthat“asfarashewasconcerned,HisMajestyhadtobetoldthateverythingwasfine!”Theword“cancer”mustnotbementionedinhispresence.Anintenseconversationensued.ThedoctorsremindedAyadi thatalthoughtheShah’s overall health appeared good, the blood disease “would ultimatelybecomemalignant”—theyhadtotellhimsomething.BoundbytheirinstructionsfromAyadi,FlandrinandBernard“felttheycouldnotactotherwise.”WhentheyreturnedtoParisthedoctorsaskedAyaditomonitortheirpatient.

“As is the rule in similar medical situations, we had decided to begin withsupervisionbutnotreatment,”recalledFlandrin.TheysettledonadiagnosisthattheyhopedwouldsatisfyGeneralAyadi’sdesirenottoundulyalarmthekingyetnot compromise their own medical ethics: the Shah was told he hadWaldenström’sdisease—theexact samedisease thathad justkilledPompidou.AnyremainingdoubtsthattheShahmighthavehadaboutthestateofhishealthweresurelysettledwhenhelearnedthis.IthardlyseemsplausiblethattheShahdidnotunderstandthemessage.AccordingtoDr.Flandrin,atthisstageonlyfivepeople knew about the Shah’s health crisis: the Shah, Bernard and Flandrin,AyadiandAlam.ButifAlameverlearnedoftheShah’sdiagnosisforlymphomaheneverletoninhisdiaries.One consequence of the Shah’s diagnosis was that those who worked

alongsidehimbegannoticingsubtlechangesinhisleadershipstyle.“Wehavetoprepare the grounds for the crown prince,” he said one day to a surprisedconfidant. Officials remembered the Shah hurrying their projects along. “TheShahispushing,”theycomplained.“Wehavetheequipmentbutwedon’thavethepeople.”TheShahalsobecamelessconcernedwithhowhisactionswouldbe received inWashington.WhenKissinger let it be known hewould not becoming to Tehran in April 1974, the Shah was dismissive. “To hell withKissinger,” he toldAlam. “Payhimno attention and tellArdeshirZahedi thathe’s to avoid offering any sort of invitation or giving any hint that we’reexpectingavisit.”In the spring of 1974 Iran’s supreme leader and his closest aide had both

contracted incurable cancers. Shakespeare could not have imagined a moreexquisite tragedy of state: unbeknownst to each other, the empire’s twomostexperienced helmsmen were mortally ill. It brought to mind another empirewhose fate rested to a large extent on a secret illness—Russia’s ill-fatedRomanovdynastyandthedeadlyhemophiliasufferedbyCzarevitchAlexei,son

andheirofCzarNicholasII.

THEFIRSTEMPIREFALLS

In April 1974 an event occurred thousands of miles away from Iran inEurope,onethatatthetimeappearedtohavenoconnectionwhatsoeverwiththefate of the Shah and the House of Pahlavi. An army rebellion deposed thegovernment of PremierMarcello Caetano in Portugal and declared an end tofortyyearsofright-wingauthoritarianrule.Thecenturies-oldPortugueseempirehadfinallycomecrashingdown.Acloselookrevealsthatoilpriceshadclaimedtheir first head of state. The financial foundations of Portugal’s totteringdictatorship had suddenly been blown apart by raging inflation and asimultaneouscollapseinthecountry’soverseasoilrevenues.OilhadbeendiscoveredinPortugal’scolonialenclaveofCabindainAngola

in 1968. Cabinda oil was low in sulfur and thus especially attractive to theUnitedStatesandCanada,whichpaidpremiumpricestosatisfystrictnewcleanair regulations. Portugal resorted to buying cheaper and dirtier oil from theMiddleEastfordomesticuse.ThatarrangementabruptlyfellapartwhenLisbonagreed to Nixon’s request during the October crisis to fly military suppliesdestinedforIsraelthroughthePortugueseAzores.Arabgovernmentsretaliatedbystoppingall fuel shipments toPortugal, in turn forcingLisbon tocurtail itsown petroleum exports to North America. As a consequence the governmentrelinquishedhundredsofmillionsofdollarsinsorelyneededoilrevenues.Eventhe doubling of oil prices didn’t help stanch the financial hemorrhaging—Portugal’s$400millioninincomefrompetroleumwasmorethanwipedoutbythe $650 million annual cost of defending its rebellious colonies in Africa.InflationignitedbyhighenergycostselsewhereinEuropesappedtheeconomyanddemoralizedPortuguesesociety.“Discontentoveruncheckedinflation,about20percent lastyear,andoneof

thehighest inEurope,hasbeengeneral,”observedTheNewYorkTimes.“Fewseemedtomakeanyconnectionbetweenthespectacularriseinlivingcostsandthe war [in the rebellious Portuguese colony of Mozambique], but inflationcontributedtogeneraldissatisfactionandthefeelingthattheGovernmentshouldhavebeenworryingmoreaboutconditionsathomeand lessabout theAfricancolonies.”Therippleeffectcontinued.Portugal’snewrulingmilitary junta tookahard

turntothepoliticalleft,suddenlyraisingthespecterofaradicalsocialiststateinWestern Europe. The Portuguese Azores, the islands viewed as crucial

springboardsforAmericanaerialpowerinNorthAfricaandtheMediterranean,hadbeenlosttothePentagon.WithhopesofestablishingaU.S.navalpresenceinPortugueseMozambiquealsodashed,theShahonceagainprovedhisvaluetoWashingtonwithhis intention tobuild a$200millionmilitary base atBandarAbbasandagiant$600millionnavalbaseatChabahar,locatedatthemouthofthe Persian Gulf. American and Iranian naval officials held talks to considerways in which the United States could secure an “option” to operate out ofChabahar in the event of another regional emergency such as a coup inSaudiArabiaorasecondoilembargo.The Shah had no way of knowing that his own fate was tethered to the

outcomeofthechaoticscenesthatwouldplayoutontheIberianPeninsulaoverthenexttwoandahalfyears.

ChapterSixCRUELSUMMER

“Thefinancialmarketsareclosetopanic.”

—TreasurySecretaryWilliamSimon,1974

“IwillhavetomeetandtalkwiththeShah.”

—PresidentRichardNixon,1974

AFINEROMANCE

SaudiArabia’soilalliancewiththeUnitedStateswassealedinthefirstweekofJune1974whenPrinceFahdIbnAbdulAzizal-Saud,themostinfluentialofKingFaisal’sbrothers,ledacontingentofofficialstoWashingtontosignaseriesof economic and military accords. The official events culminated in a lavishbanquetatwhichmorethan1,400guestswanderedthroughtheSaudiembassygrounds, mingling and straining to catch a glimpse of newlyweds NancyMaginnes, a former aide toNelsonRockefeller, andherhusband,SecretaryofStateHenryKissinger, the“queenbeeat thecenterof thehive.”According toone observer, the tables groaned beneath trays piled highwith pastries, cakes,and creme-filled confections. “If you have money you can buy anything,probably.Thesestrawberries—fertilizedwithoil,Iimagine.Highcarbon.”Two joint commissions were established to handle economic and military

relations arising from the new arrangement. The Economic CooperationCommissionwaschairedbyBillSimon,sworninalmostamonthearlierasthenation’s sixty-third secretary of the treasury. The Security CooperationCommissionwaschairedbyRobertEllsworth,directorofInternationalSecurityAffairsatthePentagonandaformerU.S.ambassadortoNATO.TogetherSimonandEllsworthusedtheirformidablecloutatTreasuryandDefensetostrengthenanddeepentiestoSaudiArabia,acountryasbiginsizeastheUnitedStateseastof the Mississippi, but with only 5.7 million people living atop 132 billionbarrels of crude oil reserves. Prince Fahd emphasized that improved relations

werecontingentontheUnitedStatesmakingprogresstowardtheestablishmentofaPalestinianstate.Americanofficialsfelttheyhadlittlechoiceinthematter.“Americarunsonoil, andyoudon’t talkaboutoilvery longbeforeyoumeanSaudi Arabia,” remarked The Washington Post. The Shah was much lessenthusiasticabout the ideaof institutionalizingeconomicandmilitaryrelationswithWashington.BackchannelstotheWhiteHouse,hispreferredwayofdoingbusiness, ensured privacy and a high level of manipulation. The jointcommissionwouldcreateabureaucracyrunbyoutsidersandrequireinputfromhis ministers and the U.S. secretaries of treasury and defense. He smelledtrouble.TheShahdecidedtokeepWashingtonhappybysigningthepact.Buthemade sure itbecame littlemore thana talk shop.Distrustful as ever, theShahsuspected the joint commission was an excuse for the Americans to gaininfluenceoverIran’soil-basedeconomy.

WEREALLYHADAGRANDTIME

TheShah’sworstfearswouldhavebeenrealizedhadhebeenwitnesstotheraucousscenesplayedoutatBillandCarolSimon’ssprawlingseven-acreestateinMcLean,Virginia.OnFridayafternoon,June7, theportlyPrinceFahd“hadbeen first in the swimming pool,” followed by a tumble of male and femaledignitaries, the women frolicking in speciallymade Arab dresses. Lunch wasservedtoHisHighnessontheterraceandeveryoneatefromfullplates.Thiswasdiplomacy,Treasury-style.BillSimon telephonedHenryKissinger at theStateDepartmenttosayhowsorryhewasthesecretaryofstatecouldn’tbetherewiththem.TheSaudiswerehavingan“absolutelysuper”time,chortledSimon,“andtheyaregoingbackwithgreatenthusiasm.”Simon’sboyishenthusiasmfortheart of the deal came through in comments that left Kissinger cold: “Soeverything is justperfect.Theygotsoexcited thismorningatonepoint in themeetingthattheyaresendingtheirchiefpetroleumeconomistoverherethisnextweekandheisgoingtostayaslongaspossible.”Simon’sappointment toheadupTreasuryhadbeena typicallymessyaffair.

NixonhadalreadybeenturneddownbyDavidRockefeller,Nelson’syoungestbrother, who ran Chase Manhattan Bank. According to Arthur Burns, whomWhiteHousechiefofstaffAlexanderHaigconfidedin,NixonbelievedSimonhad“graveshortcomings—apublicityhound,notreflectiveenough,”butthatthejobhadalreadybeen“virtuallypromisedtohim.”ThepresidentintendedtokeepSimonconfined toTreasury,denyhimaWhiteHouseoffice, and striphimofanyrealresponsibility.“Whatamess!”Burnslamented.“Simoniscleverbuthe

shootsfromthehipandmaybe(Idon’treallyknow)apoliticalopportunist.”KissingerwasstrugglingtomatchSimon’senthusiasmfortheSaudis.Things

weremovingtooquicklyontheoilpricingfrontforhisliking.Hestillviewedthe geopolitical relationship with the Shah as the essential building block ofAmerica’sstrategicarchitectureintheMiddleEastandWestAsia.Whilehehaddeveloped something of a grudging respect forKing Faisal,Kissinger loathedZakiYamani,Faisal’scharmingoilministerandamanwhoalsoenjoyedahighmediaprofile.KissingersharedtheviewofIranianofficialsthattheSaudiswerecunning parvenus bent on increasing U.S. dependency on Saudi oil reserveswhile displacing the Shah as America’s senior ally in the Persian Gulf.“Dependent on theWest formilitary anddiplomatic support yet fearful of theradicalArabregimes’capacitytothreatenedSaudidomesticstability,theSaudiroyal family maneuvered with consummate prudence,” Kissinger later wrote.“Carefully modulating conservative foreign and domestic policies withoccasional radical rhetoric, it professed sympathy for America’s concern withthe price of oil. Yet whenever American importuning on the subject turnedpractical, we were shunted off, in the politest way possible, to some otheraddress, usually Tehran.” Kissinger dismissed Yamani as a showboat and alightweight, telling him to his face that “one minister of his training andcapacitieswouldgreatlybuttresstheexistingSaudiinstitutions,buttenthousandlikehimwouldprobablydestroythem.”WhenYamanicamebacktoWashingtoninlateJune,Kissingerstoodhimup,promptingBillSimon to tellhimthat theminister “was, I think, a little hurt, asArabs get.”Kissinger shrugged off theincident.Henry Kissinger was faced with the unhappy irony that one of the biggest

foreignpolicychallengesAmericansfacedonhiswatchhadimportanteconomicandfinancialcomponentsthatwereoutsidehisrealmsofexpertise.DevelopingacoordinatedresponsetotheoilshockwouldrequirehelpfromtheTreasuryandits freewheeling cadre of ex–Wall Street executives,men like Bill Simon andFrank Zarb, the new energy czar and head of the renamed Federal EnergyAdministration,whosepersonalenergy,ambition,andconfidencefrequentlyleftKissinger perplexed, frustrated—and enraged. Instead of engaging them,Kissingerresentedtheircontributionsandblockedtheirinitiativesateveryturn,usuallybehindtheirbacks.Whatfollowedwasaknock-down,drag-outfightthatsplit the Nixon and, later, Ford administrations at the highest levels withKissingerononesidedefendingtheShah,andSimonontheotherarguingthattheShahwastherealobstacletoresolvingtheenergycrisis.“[Bill Simon] and Henry had a complicated relationship,” recalled Brent

Scowcroft,Kissinger’sdeputyattheNSC.“AndIthinkatleastBillSimon,and

itprobablywentbothways,sawthemascompetingforpowerinsidetheWhiteHouse.”Kissingerworriedthatthetreasurysecretary,withnopriorexperienceindiplomacyandgeopolitics,wasbeingmanipulatedbytheSaudis.AccordingtoScowcroft,BillSimonwas“mesmerized”byYamaniandhad lost all senseofperspective.“AndwhateverYamaniwas,andhewasveryskillfulandclever,hewas not a policy maker,” said Scowcroft. “The two of them were always atloggerheads,”concurredFrankZarboftheSimon-Kissingerfeud.“Ithinkitwasmoreofacompetitionbetweenwhointerfacedwith[OPEC]governmentsonthe[oil]issue—betweenTreasuryingeneralandStateingeneral.Andthismayhavefed theSimon-Kissingerdebates.”Norwas thereanydoubt that themen fromWallStreetbroughttheirowndistinctivestyleofdiplomacytoWashingtonandin the process caused Kissinger much heartburn. It was a clash of styles andtemperamentasmuchasoneofpolicy.TherewasanuproaroveraremarkZarbmade in response to a question posed during a meeting of business leaders.When asked what he thought was the best way to deal with OPEC, Zarbansweredwithwhathethoughtwasajoke:“Withatwo-by-four!”Unfortunatelyforhimanewspaperreporterwasintheroomtorecordthecomment.At the conclusion of the Friday afternoon pool party Yamani accepted an

invitationfromSimontomoveintohishousefor theweekend.ThismayhavebeentheoccasionforYamanitomentionacuriousincidentthathadoccurredsixmonthsearlierduringtheTehranOPECmeeting.InYamani’stellingofthestorytheShahand theoilministerswereseatedarounda tablewhenheasked themwhattheythoughtofhisideaofcharging$12forabarrelofoil.Yamaniworriedthat an increase to that amount would hurt the economies of Saudi Arabia’stradingpartners.Hesaidhecouldn’tofferanopiniononthematterwithoutfirstphoningKingFaisalforinstructions.Threetimestheministerdialedthenumberto thepalace and three times the callwouldnot go through. “Itwas at a verycriticalmoment,”rememberedYamani,whosuspectedthatthephonelineshadbeensabotaged.FacedwiththechoiceofopposingtheShahandsplittingOPEC,or accepting the Shah’s proposal and then trying “to bring prices downeventually,” Yamani opted for the latter. But he returned home to find KingFaisaldeeplyunhappywithhisdecisiontofollowtheShah’slead.YamaniandSimondecidedtoplayKissingerandtheShahattheirowngame.

They opened their own separate lines of communication. “We used tocorrespond quite regularly as far as confidential messages were concerned,”Simonreminisced.“Weusedwhatwecall‘backchannel’messages.Theydidn’tgothroughtheStateDepartment.Itwasmoreprivatethatway.”

THESHAHHASUS

In the summer of 1974, with the Watergate investigation in high gear,RichardNixonannouncedagrand tourofMiddleEast capitals inwhat turnedout tobehis final attempt at self-preservation.TheEgyptians and the Israelis,theSyriansandtheSaudis,werehappytoreceivethepresident.OnlytheShahsaid no.On at least one occasion he had consideredmaking a public showofsupport for the beleaguered president. His ambassador in Washington wiselytalkedhimoutofit.Bythespringof1974NixonhadbecomealiabilitytotheShah, their association an embarrassment. The time had come to cut RichardNixonloose.“Bynomeans,”theShahtoldAlamwhenhewasaskedwhetherornothewantedNixon’sitinerarytoincludeastopoverinTehran.“Hispresenttriphasnothing todowithus, thoughofcourse I’llbehappy to receivehim ifheparticularly wishes it. All in all the Americans have been behaving withadmirable tact towards us and there really is little for us to discuss.” Alam’spersonal opinionwas that the Shah felt the need to distance himself from hisally:“HIM’sreluctance to issuean invitationstemsfromNixon’sdeterioratingpositionathome.”TheShah’ssingularactofdisloyaltybackfiredwhenNixondecidedinsteadto

spendthreefulldayswithKingFaisal.AlamassumedNixonwastryingtodivertattentionfromWatergateand thathewas intentonrollingbackoilprices.TheShah was first perplexed, then anxious at news of Nixon’s stop in the Saudicapital.Nixon’s political collapse shook the Iranian leader’s confidence in hisAmericanally.Whatwouldhappentothesecretagreementsworkedoutbetweenthem concerning oil prices and arms sales, the Kurds of Iraq, contingencyplanning in theGulf, and ferryingmilitary equipment aroundWestAsia?Thefeverish whiff of conspiracy permeated the corridors of Niavaran Palace.Mohammad Reza Shah thought he knew who and what was behind RichardNixon’s losing fight to stay inoffice. “There’smore thanmeets the eye to hispresent predicament,” he lectured Alam, who asked whether his master wasreferring to sabotageby“the Jewish lobby.”“Not the Jews,” replied theShah.“No,thewholethingisaconspiracyputtogetherbytheCIA,bigbusinessandahandful of influentialmenwhose identities remain a closelyguarded secret. ItwastheythatarrangedKennedy’sassassination.NowtheyhaveascoretosettlewithNixon, thoughIdon’tknowwhy.”Afteramoment’spausehecontinued:“Maybe I’m just imagining things. But I sincerely hope I’m right about theconspirators.Ifall thisistheresultofmerechanceitdoesn’tbodewellforthefutureofthefreeworld.”

Nixon’spresidencycrumbledastheglobaleconomiccrisistriggeredbyhighoilpricesenteredadangerousnewphase,withtheaftershocksnowthreateningto overwhelm financial systems and the banks. Officials at Treasury weregrowingmoreworriedby theday.At10:00A.M.onJuly9,TreasurySecretarySimon sat down with the president in the Oval Office to discuss his ownforthcoming visit to Middle Eastern and European capitals. Nixon seemedoverwhelmedbythescaleandimpactofthefinancialdislocationssetinmotionby the oil shock. His core constituents in small-town Middle America werehurting.“Heisgettingalotofmailaboutlittleguysbeinghurt,”AlexanderHaigconfided toArthurBurns.TwoweeksbeforeSimon’smeetingBurnshadbeenprivy to a bizarre scene inwhichNixon “began by expressing his skepticismabout economics and economists. He wanted, so he said, to explore ways ofdealingwithinflation;buthefelt,headded,thatoldwaysdonotseemtowork,and that something radical—like dictatorship—might be the answer. This, ofcourse, he added is also no answer.” It said something aboutNixon’s state ofmind that he looked to Simon for reassurance. Simon told him that TreasuryestimatedthatAraboilrevenuesfortheyearwouldtotal$60billion,twothirdsofwhichwould be spent or reinvested in theArabworld. King Faisalwouldhold$10billionorhalfoftheoutstandingsumandSimonhopedtopersuadethekingtoinvestthatmoneyinU.S.governmentnotes“thatwouldpaythesameasTreasurybills.”WashingtonwasanxioustorecycleOPECoilmoneytoimproveitsownbalancesheetandstabilizefinancialsystemsbucklingunderthestrainofthemassivefluctuationstakingplaceinthemarketsandbankingsector.NixontoldSimonthatduringhisownrecentvisittoSaudiArabiahetoohad

discussed the vexing issue of oil prices with the Saudis. Nixon agreed withSimonthattheIraniansandnottheSaudiswereresponsibleforblockingeffortstoreduceoilpricesandthatthecurrentpostedpricewassetforpoliticalreasonsand not because of demand and supply. He did not tell Simon that he hadpersonallytriggeredthecrisisfouryearsearlierwhenhegavetheShahthegreenlighttoincreaseoilpricesashesawfit.“WithFaisal,Ihaveraiseditprivately,andyoucan,thattheoilpricescan’tgoon,”hesaid.“This,ofcourse,willhavetobedoneprivately.IdoubtthatyoucandoverymuchaslongastheShahholdsupprices,butwewanttoexplorewhatevermightbepossible.”“Yamani recently spent theweekendwithme,”saidSimon.“I toldhim that

the high priceswere strengthening their potential opposition—that the currenthighpriceshelpothers,butnot theSaudis.”Simonwasreferringto theShah’smilitarybuildup,whichwascausinggreatconcerntoSaudileaders.“Sure.Itgivesusanincentiveaswelltodevelopalternatives,”addedNixon.

HighoilpriceswouldhelpweantheUnitedStatesoffitsdependencyoncheap

MiddleEastoil.Butfornowpriceshadtobereinedin.“Tellthemoureffortsforself-sufficiency do notmeanwe do not care about them. The important thingnowistogetpricesundersomecontrol.”“IsitpossibletoputpressureontheShah?”“Youarenotgoingthere,”saidNixon.“No,”saidSimon,whohadbeenallbutdeclaredpersonanongratainTehran.

Hewanted theShah to thinkhewascuttingaseparatedealwith theSaudis toreduceprices.HesawthetripasawayofexertingpsychologicalpressureontheIranian leader. “We thought we would let them sweat a bit while we werediscussinggoodieswiththeArabs.”“He is our best friend,” answered Nixon warily. “Any pressure would

probablyhavetocomefromme.”Simonwasdubious:“Iwonder.Heistheringleaderonoilprices,alongwith

Venezuela.Without them, oil priceswould be down.”WithinOPEC, Iran hadformedatacitalliancewithVenezuelatomakesureoilpricesdidnotretreattotheiroriginallevels.LiketheShah,PresidentCarlosAndrésPérezofVenezuelahad embarkedon amultibillion-dollar drive tomodernizehis country andhadalreadyspentoilrevenuesthatwereanticipatedbuthadnotyetbeengenerated.Treasurywasworriedaboutthestabilityoffinancialnetworksandthebanking

system.TheeconomiesoftheArabstatesweretoosmallandprimitivetoabsorbor recycle the billions of petrodollars pouring in from industrialized anddevelopingnations.“Withallthestateswithmoneyandnowheretospendit,thebanks and financial markets are in trouble. Oil prices have caused greatinstabilityintheinternationalfinancialmarkets.”“Howaboutthestockmarket?”askedNixon.“Thereisfearborrowinggoingon.”“Why?”“They are afraid of future inconvertibility moves and interest hikes,” said

Simon.“Thefinancialmarketsareclosetopanic.Therearemajorcorporationswhichareunabletoborrow.”Treasury’s forty-strong delegation stopped off in Nice before flying on to

Egypt,wherePresidentSadatwasanxioustosecureU.S.financialaid.WhileintheFrenchRivieraSimonagreedtobeinterviewedbyWillardRappleyeJr.,theeditor of the trade publicationAmerican Banker. Rappleye’s article, publishedafterSimon’splanetoucheddowninCairo,kickedoffafuror.SimonwasquotedasexplainingthatTehranwasnotincludedinhisitinerarybecause“TheShahisanut,”and,“maximizationof theoilprice is inhisbest interestashesees it.”TheShah“wants tobeasuperpower,”explained the treasurysecretary.“He isputting all hisoil profits intodomestic investment,mostlymilitaryhardware.”

This was harmful to the long-term interests of America’s friends in SaudiArabia:“Itiscrazyfromtheirpointofview.TheSaudishelpingkeepoilpriceshighismakingIran,theirnaturalrival,strong.”Headlinewritersbackhomehadafieldday.“SimontoSkirt‘Nut’Meeting,”headlinedtheChicagoTribune.Enroutetohisnextstop,Riyadh,SimonreceivedacablefromKissinger:“I

ambesiegedbyqueriesaboutyoucallingtheShah‘anut.’”Simonwiredbackthathis commentshadbeen“taken out of context.”“Just exactly howdo youcall the ‘King of Kings’ a ‘nut’ out of context?” asked Kissinger. Simonsubsequently explained that he “was using the vernacular in the same wayanyonewoulddescribehimselfasanutabouttennisorgolf.IwasusingaslangexpressiontoshowthattheShahhadveryfirmideasaboutoil.”Niavaran Palace wasn’t buying it. Regardless of his poor choice of words,

Simon’swillingnesstostokeSaudifearsaboutIran’smilitarybuildupgavetheShahatroublinginsightintoAmericantacticstorollbackoilprices.InTehran,aU.S. diplomat drove to the palace to hand-deliver a note from the treasurysecretaryexplainingthathiscommentshadbeentakenoutofcontext.KissingertelephonedAmbassadorArdeshirZahediat4:23P.M.onJuly15to

personallyapologizeforhiscolleague’sbehavior.WithZahedi,whohadalreadywrittenNixonaletterofprotest,Kissingerwasnotaboveresortingtogrovelingandflatterytosmoothover thetensionsarousedbySimon’simpertinence.Thefactthatatranscriptoftheirconversationrequiredredactionshowsthelevelofoutrage at the palace: “Mr. Ambassador, I call you about once every threemonths about our errant Secretary of the Treasury. Will you convey to HisImperial Majesty our affection, regard, mortification and needless to say[redacted].Hedenieshavingsaidit.”“Yes,”saidZahedi.“Fortunately,Igotitafewhoursago.”“Well,youconveytoHisImperialMajestythateverymemberofthecabinet,

with the exception of the Secretary of the Treasury, and particularly theSecretaryofStateandthePresident,holdhiminthehighestesteemandwewillputastoptothis,”hereplied.KissingerannouncedthathewaspersonallytakingoverchairmanshipofthejointU.S.-Iranbilateralcommission.Hereiteratedthat“we consider [His Imperial Majesty] one of the great leaders and we willconvinceourSecretaryof theTreasury that thissortof [redacted] isoutof thequestion.Iamnotsurehesaidit.HedeniessayingitbutwhateverhedidsayIapologizefor.”The conversation must have been particularly galling for Kissinger, who

relished every opportunity to denigrate Zahedi behind his back, even as heacceptedtheIranian’slavishhospitality.AroyalbluePersianrugwasaweddinggift from Iran. “I can remember it being rolled out one day so people

immediately around the ambassador could view it,” remembered DelphineBlachowicz,AmbassadorZamani’ssecretary.BylawU.S.governmentofficialswere required to turnover gifts from foreigngovernments; theblue rugneverappearedonthelistofitemsturnedovertotheStateDepartmentbyKissinger.“He’scertaintheyturnedeverythingin,”washowWilliamHyland,aKissingeraide, later sheepishly put it. “Mrs. Kissinger wasn’t wildly happy about [theStateDepartment]rulingrequiringthehandinginofgifts.”One man who was not on Zahedi’s gift card list after July was Secretary

Simon.Relationsbetween the twomenchilled to thepointwhereWashingtonhostessesknewnottohavetheminthesamehouse,letaloneatthesametable.TherehadbeenasceneatoneofDavidBrinkley’sfamousdinnerswhereinsultswerehurled in thepresenceofvarioussocietydoyens.Thereafter the twomenneverappearedatthesameevent,formalorotherwise.ItsaidsomethingaboutZahedi’s popularity that his stock continued to rise while Simon, perhapsuniquelyforasittingcabinetofficer,foundhimselfdroppedfromformaleventsinvolvingIraniandignitaries.The treasury secretary’s attackon theShahhadbeencalculated.Simonwas

sendingamessagetotheSaudileadershipthatheunderstoodtheirconcernsandwasreadytodobusiness.HewasinRiyadhonJuly21whenhisfriendYamaniannounced that an auctionwould be held inAugust of onemillion barrels ofgovernment-ownedoil set for delivery during the last quarter of 1974 and thefirstquarterofthenextyear.ThiswasthebreakthroughSimonhadbeenhopingfor.Yamanihoped tobreak theShah’s lockonpricingandputpressureon theworld oil market to drive prices down. It was a strategy that amounted to acountercoup in the oil market. But it didn’t quite work out that way. Thegovernments of Iran and Venezuela informed Faisal that if the Saudi auctionwent ahead they would slash their own oil production to further tighten themarket and squeeze prices even higher. Venezuela, Libya, and Kuwait hadalready reduced their production to bolster the $11.65 per barrel posted price.Theysentemissariestoinformthekingthattheywerepreparedtodrivepricesupstillhigher.Faisallosthisnerveandretreated;theauctionwascanceled.ThecollapseoftheauctionwasablowtoYamanipersonallyanditmarkeda

setback for Treasury’s efforts to stabilize global financial institutions. Yamanitold U.S. ambassador to Saudi Arabia James Akins, whom he knew to be astaunchsupporterofcloserU.S.-Saudities,thatKissingerwastoblamebecausehe“isspeakingaboutloweroilpricesbutinsecretdoingeverythingpossibletojack them up.” Akins sharedYamani’s assessment of how things stood: “TheSaudis had urged us on numerous occasions to put pressure on the shah tocooperatewithSaudiArabiaandreducetheoilprices.Yetwehadrefusedtodo

this.”Kissingerdismissedtheauctionasaruse.“MybeliefwasthattheSaudisdidnotwanttogetpricesdownbutwantedtoplacetheonusforthepriceriseontheShah,”heconfidedtoJackAndersonfiveyearslater.BillSimonnowhadwhatheconsidered irrefutableproof that theShahwas

blocking sincere efforts to reduce oil prices. Simon’s 10:30A.M.meetingwithNixononTuesday,July30,togoovertheresultsofhistripwaspushedbacktothreeo’clockbecausethepresidentwasstillasleep.Ithadbeenadramaticdayof developments in the Watergate case. The House Judiciary Committee haddrawn up articles of impeachment against the president and would shortlypresent them to the full House of Representatives for a vote. When SimonarrivedattheWhiteHousehewastoldthepresidentwasintheLincolnSittingRoom.Nixonhadsequesteredhimself, listening to tape recordingsofhisOvalOffice conversations. One of the tapes included the infamous June 23, 1972,“smoking gun” conversation in which he and Bob Haldeman had discussedhaving Richard Helms and the CIA block the FBI investigation into theWatergatebreak-in.Awarethatthetapesimplicatedhiminacriminalcover-up,Nixonnonethelesswent aheadwith hismeetingwith the treasury secretary.AtranscriptoftheirconversationbetraysnosignoftheenormouspressureNixonwasunder.Asusualwithforeignpolicy,Nixonstayedfocusedandengaged.“Itwasasifhecouldpulldownascreenandutterlyseparatehisprofessionaldutiesfromhispoliticalproblems,”Simonlaterremarked.Thetreasurysecretarybeganbytellingthepresidentthat thesituationonoil

priceswasoutofcontrol.“TheArabsareactinglikenouveauxriches,”hesaid.DuringhistriptotheWestGermancapitalofBonn,ChancellorHelmutSchmidthad expressed concern that high oil prices were destabilizing the continent’spoliticalstructures.“Theoilpricesareaproblemeverywhere.Faisalsayshehasgone as far as he can without our help. The Shah is threatening to cutproduction.”“He is our good friend, but he is playing a hard game on oil,” Nixon

conceded.“FaisalasksourhelpwiththeShah,”saidSimon.“Thereisaninternalfightin

SaudiArabia between thosewhowant price cuts and thosewhowish to keepproductionup.Faisal reallywantsourhelpwith theShah. IndiscussionswithotherMinisters I saidSaudiArabiahasprobably150yearsofproduction left,whereasIranhasonly15years.MaybeIranwillbuilditsindustryandwhentheoilrunsout,theycantakeyouandgettheoilback.”InotherwordsthetreasurysecretaryhadtoldSaudileadersthattheShahmightinvadeSaudiArabiatoseizeitsoilfields.“Wehavetoseewhatwecando,”saidNixon.“Iwillhavetomeetandtalk

with the Shah.” The president clenched his fountain pen between his teeth,yankedoff thecap,andscribbledanotetohimselfonascrapofpaper.Simonunderstood this tomean that thepresidentwould contact theShah.Nixonhadfinallycomearound.“The Shah has us,” Simon pressed on. “No one will confront him. The

producernationsarelockingintheconsumersandkeepingthemawayfromus.Schmidt said, ‘If the prices don’t move down, I have to move against thecompanies and dealwith the producersmyself.’ This issuewill require strongactionbytheUnitedStates.”Nixonperkedup:“Likewhat?Thisshouldbedeveloped.Weneeddiscussion

withyou,Ken[Rush],HenryandBrent.Keepitsmall.”“Itisaterribleproblem.Iwasnotthinkingsomuchofenergyasofbalanceof

payments.Iamworriedaboutproductioncuts...”“[Schmidt]isworriedaboutthebanks,”Nixonmused.PerhapsnotunderstandingGermansensitivityontheissue,Simonthoughtthe

chancellorwas“overboardonthat.”ButtheWestGermanleaderhadbeenbadlyshakenbytherecentcollapseofaWestGermanbank,thefirstoffourGermanbankstofailinthesummerof1974andafurtherworryingsignoftheextenttowhichEuropeanfinancialinstitutionswerebeingbatteredbytheaftershocksofthe spike in oil prices. Bank collapses, rising levels of unemployment andinflation,plungingconsumerdemand,andaslumpinthenation’sexportsectorrevivedmemoriesamongolderGermansof thefinancialdistress thatprecededthe fall of theWeimar Republic and the rise of Nazi extremism in the early1930s.LengtheningshadowswerefallingoverEurope.ThePortugueseempirehad implodedandLisbonwas in thehandsof leftist colonels.Britain,France,and Italy were in the grip of deepening recessions. Economists in Brusselspredicted inflation of 20 percent inBritain and the number of unemployed tocleartheonemillionhurdlebyyear’send.InItalytoo,inflationwasforecasttobreach 20 percent a year. Italians had been panicked by a rash ofmysteriousterroristbombingscarriedoutbyneofascistgroupswithlooseaffiliationstostateinstitutionsandthemilitary.NixonandKissingerwereconvinceditwasjustthebeginningofarepeatoftheinstabilityoftheearly1930s.“InFrancethere’llbeapopularfrontwithinfiveyears,”Kissingergrimlytoldthepresident.“ThatwilldragItalythesamewayorthere’llbearight-wingcoup.”NixonthensharedhisManichaeananxietieswithSimon,givinghimaquick

tour d’horizon of the world scene as he saw it. Simonwas an eager listener.Relations with Britain’s new Labour government were surprisingly good andBritain’s[ChancellorDenis]“Healeyisastronggoodfriend.”TheItalianswerehopeless.“Italyhasnogovernment,”Nixonsighed,addingthat“theLatinsare

unstructuredwithoutadictator.RightnowthegreatnationsoftheWestmustbeunited politically—the lack of stability in the world sets everything loose.”Nixonwas keeping an eye on Europe’s disintegrating southern tier nations ofGreece,Italy,SpainandPortugal.Hesmelledtroubleahead.Churchillwasright,he told Simon. He launched into a discourse on Gallipoli, Verdun, the 1918Spring offensive against the Germans. The only organized force in PortugaltodayweretheCommunists.SpanishdictatorFrancowasdyingandwhoknewwhatwouldsucceedhim?“IfSpaingoes,Italygoes.InYugoslavia—whenTitogoes, the Soviets will make their move. Greece and Turkey are so importantbecausetheyaretherestofthesoutherntier.”Simon sharedNixon’s concernwith Italy in particular.The Italian economy

was leaning at a dangerous tilt: “Wewill have to aid Italy before too long. Italked to [FederalReserveBankchairman]ArthurBurnsabouta [credit]swapline.Heisopposed,butI’llgetit.Evenifthenewfiscalmeasurestake,theywillhaveproblems.”As he approached the depths of his second Watergate summer Richard

Nixon’sworldwas falling apart.His presidencywas collapsing. Impeachmentwas not a question of “if” but “when.”HenryKissinger, his own secretary ofstate, now referred to Nixon behind his back as “the felon.” As networktelevision crewsmounted a deathwatch at the gates of theWhiteHouse, thepresidentwasconsumedwithparanoia.Everyonewaslyingtohim.Oldfriendshadturnedtheirbacksonhim.Hewasdrinkingeveryothernightnow.Despitehisdailyagonies,RichardNixonstayedfocusedonforeignpolicyandstrategy.Whathappenednextsuggeststhathewashavingsecondthoughtsabouthisoldfriend the Shah.Bill Simon had indeed gotten through to him.ToKissinger’sgreatconsternation,ameetingofWhiteHousesenioradviserswasscheduledforthefirstweekofAugusttothrashoutthewholeissueofoilpricing,theSaudi-Irandebate,andwhytheShahwasrefusingtocooperatewiththeSaudistoseekareductioninoilprices.Kissingerheardthenewsinalateafternoonphonecallon August 1, from Deputy Secretary of State Robert Ingersoll. “[Treasury]wouldliketohaveameetingwithyouandSimonnextweek,”Ingersolladvisedhim.“We’recheckingyourscheduletoseeifit’spossible.”“Ijustdon’ttrusthisassessmentofthesituation,”saidKissinger.Ingersoll said that Treasury officials wanted to clear up the conflicting

versionsofstoriesabouttheShah’sroleintorpedoingYamani’soilauction.“Idon’tseethattheSaudisshouldrunarisktogetoilpricesdown,”protested

Kissinger.“We’lltrytogetameetingonTuesdaywithallofthem.We’recheckingyour

schedule.”

“Just because there’s a vacancy onmy schedule doesn’tmean you can putsomethingonit,”snappedKissinger.“Youbettercheckwithmefirst.”“Okay.”

THERAMSAREFFECT

The first threedaysofAugust 1974wouldprove tobe a turningpoint forAmerican-IranianrelationsandforthefutureofthePeacockThrone.Byaquirkoffate,atthesametimeKissingerandSimonwerehavingtheirshowdownoveroilpolicytheShahwasmakingacrucialdecisiononwhattodowithIran’snewpetrodollar fortune. Should the money be spent? Should it be invested? Theprevious autumn the Shah had instructed the government’s Plan and BudgetOrganizationtoadjustitsbudgetforecastinanticipationofanewwindfallinoilprofits.SincethenIran’sincomefrompetroleumhadclimbedfrom$2.8billionfor the year 1972–73 to $4.6 billion for the year 1973–74, a total revenueincreaseof 65percent over a periodof twelvemonths.The full impact of theboomwouldbefeltin1975whenrevenuesrocketedto$17.8billion,astunningleapof287percentintwelvemonths.TheShahhaddreamedofthedaywhenhecouldbuywhathewantedwhenhewantedit.Thatdayhadfinallyarrived.“Wehavenoreallimitonmoney,”boastedhischiefeconomist.“None.”The dangerwas always from inflation. By the summer of 1974 the Iranian

governmentwascollecting$1billioninoilreceiptseachmonth.“Foratleastadozenyears, theShahhas had theplans to rebuild his country,” observedTheNew York Times. “Now, apparently, he has the money, and the problem ofpumping it into the economywithout causing disastrous inflation.” The Shahwas aware of the potential danger. If handled incorrectly the deluge ofpetrodollarscouldblowtheeconomyoutfromunderhisfeet.TheSaudisfacedasimilarproblem.Fornowtheydecidedtoparkmuchoftheiroilwealthoffshoreto reduce the riskof inflationanddislocationathome, investing in realestate,foreignindustry,andbankdepositsthatallowedforrapidwithdrawal.Iran’s inflation rate was already in double digits in marked contrast to the

previousyear.Theeconomywasheatingupevenwithouttheinfusionofmostofthenewpetro-stimulus.Eyewitnessaccountsandhardstatisticsfromthespringand early summerof 1974 indicate that a formof financial hysteria had takenhold in Iranwhereoilmoneywasbeing ingested like somuchcheapcocaine.“Inflation is running wild, anywhere from 15 to 22 percent,” reported oneobserver. “Anyone who can is moonlighting. Tehran now has an extra set oftrafficjamseachdayasworkersrushfromonejobtoanother.Althoughdutyon

imported cars runs between 200 and 500 percent, dealers have a hard timesupplying customers with enough Mercedes Benzes, Jaguars and Citroëns.Glittering boutiques and department stores along broad, tree-shaded PahlaviAvenuearejammedwithwomenanxioustohavethelatestCharlesJourdanandYvesSt.Laurentcreations.”Therewereremarkablescenesofexcess.InthecityofMashhad a blond woman drove through town in an open car handing outfistfulsofdollarbillsestimatedtobeinthethousandstopassersbysheassumedwere poor. While women in north Tehran mobbed furriers, the Shah’s ownpalaceguardsmenwereunabletofeedtheirfamiliesbecauseofabreadshortage.The Pahlavi cult of personality had reached its zenith. Every front-page of

everynewspaperpublishedinIranwasrequiredtocarryapictureofmembersofthe imperial familyaccompaniedbytheir latestappearancesandachievements.AnewportraitofHisImperialMajestyappearedinpublicbuildingsandprivatebusinessesthatshowedtheShahanshah“standingonwhatappearstobethetopoftheworld,waving,withcloudsrollingbybehindhim.”HeresembledNorthKorea’s Great Leader. Another portrait depicted the Shah and ShahbanouresemblingmoviestarsJeffChandlerandSophiaLoren.Thewholecountrywashighfromthefumesofoilprofits.TheShah’spersonalmanagementskillswereabysmal.Distrustfulofeveryone

around him, the Shah was a micromanager who refused to delegate tosubordinates,kepthisministersonatightleash,andmadesureanyonewhowastoosmartortoopopularwasremovedfromthecenterofpower.CourtMinisterAlamrecorded thebizarre sceneon the sameday in1974 that theShah’s allyEmperor Haile Selassie of Ethiopia was deposed in a left-wing coup. HisImperial Majesty was preoccupied not so much with the geopoliticalconsequences of the coup and what it meant for Iran’s security, as by theplacementofnew furnitureordered foroneofhispalaces.TheShahmanagedthearmedforcesthesameway,tothepointofapprovingtheappointmentsandpromotionsofeventhemostlowlyrankedjuniorofficers.ItwasjustthissortofrigidmanagementstylethatledHenryKissinger’sgoodfriendHushangAnsary,Iran’sministeroffinanceandeconomics,andacunningbusinessmanwhopiledup his own fortunewhile serving in the Shah’s cabinet, to tell an interviewerwithastraightfacethatIran’seconomicproblemswerenobigdealbecause,asheput it, “His ImperialMajestyhas anextraordinaryability tomake the rightjudgments.”One early and prominent American skeptic of the Shah’s handling of the

Iranian oil boom was David Rockefeller. The Rockefeller-Pahlavi connectionwas personal and financial. Mohammad Reza Shah’s social ties to theRockefellerswereprimarily throughhis relationshipwithNelson.By contrast,

theyoungerDavidaddressedtheShahas“YourImperialMajesty”andheinturnwasaddressedas“Mr.Rockefeller.”“Theprimarytopicinallourmeetingswasbusiness,” David Rockefeller recalled. The Rockefeller bank, Chase, enjoyedstrongrelationswithBankMelli,Iran’slargestcommercialbank,andChasewasthe leadbankfor theNational IranianOilCompany,whichmanagedIran’soilwealth. After oil prices rose fourfold in 1973 Iranian deposits in Chase“increased dramatically” and “our finance business boomed because wecontinuedtofinanceasignificantportionofIran’soilexports.Bythemid-1970sasmuchas$50to$60millionadaypassedthroughChase,andIraniandepositsatonepointinlate1978exceeded$1billion.”ItwasChasethattheShahturnedto when he needed to raise international financing for Iran’s big industrialprojects. Rockefeller thought it ironic that “we were never successful inattracting the Shah himself as a customer; he preferred to keep most of hismoneyinSwitzerland.”InJanuary1974DavidRockefellerflewtoSt.MoritztotalktotheShahabout

expandingChase’sbusinessopportunitiesinIran.BeforethetriptheRockefellerfamily’sstill loyal formerretainerHenryKissinger“had toldme that theShahwasanexceptionallyablemanwithastronggraspofinternationalaffairs.”Butduringhis two-houraudiencewiththeShah,Rockefellerdevelopeddoubts.Heobserved

anarrogancethatunderlayhispronouncementsonmanyoftheseissues;they lacked plausibility and betrayed an alarming isolation from politicalandeconomic reality.TheShah seemed to think thatbecausehebelievedsomething,itwasautomaticallyafact.ThetermhubrisoccurredtomeasIsat listening to him outline his startling vision of an imperial Iranreclaiming theancientdomainof theMedesand thePersians.Heseemedunconcernedaboutthehavocthehighoilpriceshadalreadycausedintheglobaleconomy,letalonewhathisextravagantproposalswouldgenerate.

When he traveled to Tehran a few days later, Rockefeller discussed hisconcernswithAmbassadorRichardHelms.HefoundthatHelmstoothoughttheShahwas overreaching, that the Iranianswere “really feeling their oats”: “OilwealthandtheirpredominantmilitarypositionintheGulf,largelytheresultofassistancefromtheUnitedStates,hadtransformedIran’sstrategicandeconomicposition.” According to Rockefeller’s notes of their meeting, Helms observedthat“theirbiggestproblemisthat[theIranians]havethemoney,thematerials,

butnot the trainedmanpowernecessary tohandle them.What isperhapsevenmoreserious,theministersarenotsophisticatedorexperiencedenoughtocopewiththeaddedgovernmentalcomplicationswhichtheirsuddenenormouswealthisbringingthem.”InretirementHelmsconcededthat“theembassywascertainlyconcerned”withtheeconomiceffectoftheincreaseinIran’soilincome.“IthinktheShahhimselfwasawareoftheimplicationsofthosedecisions,”headded.FromAugust 1 toAugust 3, theShah, the Iranian government, and leading

bureaucrats and experts retreated to the resort townofRamsaron theCaspianSeatoapproveaspendingandinvestmentplantohandleIran’snewoilwealth.Budgetplannershadlaidoutseveralscenariosinwhichtheytriedtopredicttheconsequences of a big spending stimulus on inflation, infrastructure,employment, housing, and agriculture. Ramsar became synonymous with thedelugethatfollowed.The Shah opened themeeting bymaking it clear that the only opinion that

counted was his. This was no joke. “I not only make the decisions, I do thethinking,”heboastedtooneforeignvisitorataboutthistime.Twodayslater,onthe3rd,hebrushedasidewarningsofdisasterifprofitsfromtheoilboomwerepumpedstraightbackintotheeconomy.TheShahapprovedaplantogrowtheIranianeconomyatthestunningrateof25.9percenteachyearforthenextfiveyears.Itwasanexceptionallyhighfigureevenbythestandardsofaneconomyalreadygrowing at an official annual rate of 11.4 percent.Virtually overnight,governmentexpendituresdoubled from$35billion to$69billion.Governmentministers reactedas thoughastarter’sgunhadgoneoffand raced toassemblespending projects. “My head is spinning with the whole series of incrediblestatistics,”Alamwrote inhis diary. “Twoyears ago the target outlaywas$24billion.Todayit’smoreorlesstrebledto$68billion.”The Shah had laid a trap for himself. He had not taken into account the

possibilitythattherecessionintheWestmightleadtoasharpfallindemandforIran’s oil or thatOPECmembersmight fall out among themselves and try toundercut each other in the marketplace. The government’s Plan and BudgetOrganizationhadalreadycautionedthatoilandgasincome“wassubjecttothevagariesofworld supply anddemandconditions and thereforehighly erratic.”Iran could not, “on themost optimistic assumptions, become theworld’s fifthindustrialpowerinthiscentury.”Iranwouldremainanimporteroffood.Therewasanurgentneedtoinvestintransport,ports,power,andthewatersupplytoavoidinfrastructurebottlenecksthatcouldthrottleeconomicgrowth.Iranshouldconcentrateonbuildingnuclearpowerplantstosupplementhydroelectricpoweranddevelopheavy industriessuchassteel,petrochemicals,andmachine tools.The Fifth Plan was based on estimates that wrongly assumed the oil market

wouldremaintight,oilpriceswouldkeeprising,anddemandforoilwouldstayhigh. Financial Times journalist Robert Graham concluded that the Shah’sdecisiontogoforbrokewasthenaturalresultofhisstringofunbrokenvictoriesovertheoilcompaniesandtheNixonadministration.Hishabitofoverspendingonarmsandbigdevelopmentprojects,andthenhikingoilpriceslatertopayforthem,hadbecomeadangerouscompulsion.“AttheendoftheRamsarmeeting,fewrealizedtheyhadjustagreedtoa‘hyper-boom,’”wroteGraham.“EvenastheShahpushedthroughthisdoublingofproposedexpenditure,alltheevidencepointedtodangerousoverheatingoftheeconomy.”TheShahbelieved thathehad tomovequicklybefore Iran’soil fieldswent

into decline. Two former economic planners in the Iranian government, Dr.HosseinRazaviandDr.FirouzVakil,havedescribedtheirmonarch’sinfatuationwithBigPusheconomics.AdvocatesofBigPushwereinfavorofcountrieslikeIran—economicallyundevelopedyetrichincommoditieslikeoilandcopper—plowing revenues back into their economies in the form of big developmentprojects.InsteadofinvestingtheirmoneyoverseasliketheSaudis,theIraniansshouldbuildsteelmills,petrochemicalplants,highways,andtextilefactories—anything and everything that would create the foundations for a modern,diversified industrial economy. But Iran’s Big Push could work only if itseconomywasbigenoughtoabsorbthefinancialstimulus.Thecashinfusionhadtobeingestedinstages,notswallowedatonce.Iftheseconditionswerenotmettheresultswouldbecomparabletoanoverdose.PerhapstheShahfelttheneedtomovequicklyon theeconomic frontbecauseof theuncertaintysurroundinghishealth.Hewasafatalistandsensedthattimewasnotonhisside.AsaresultIran,oneoftheworld’soldestsocieties,washurledintothefuture

like a pebble flung from a slingshot. The Shah set out on an ill-conceivedPersian-style Great Leap Forward that he hoped would bolster the monarchy,inoculateIranfromoutsidethreatsandpressures,andbuildalegacyfortheages.For the Shah, thinking big meant that nothing was off-limits. The Shah

unveileda$3billionplantobulldozeTehran’scitycenterandreplaceitwithagrandplazabiggerthanRedSquareinMoscow.The2.5mileborderaroundtheproposed Shah and Nation Square would include six hotels, forty thousandparkingspaces,55millionsquarefeetofofficespace,housingforfiftythousandresidents, and the new Pahlavi National Library. Upon completion, Iran’snationallibrarywouldcompriseoneofthegreatscholarlywondersoftheworld,boasting a staff of five thousand and more than 5 million books, a hotel forvisitingscholars,andthemostadvancedcataloguingsystemintheworld.Iran’sPersianheritagewouldalsoreceiveaboostfromaten-year,multimillion-dollarprojecttorebuild thesevenflutedcolumnsofXerxes inPersepolis.Oilmoney

wouldmeldIran’spasttoitsgloriousfuture.TheShahhadalreadyplacedordersfortwosupersonicConcordeairlinerswiththeoptiontobuyathird.Hesigneda$6 billion trade deal with France that included construction of a forty-milesubway system, the introduction of color television, construction of 200,000housing units, and an automobile plant that would initially produce 100,000Renaults.“Iwillsellyouaspirins,Iwillsellyouproteins,”declaredthekingasTehran’sbakeriesranoutofbread,“Iwon’tsellyoucrudeoil.”

WEAREHEADINGTOWARDSDISASTER

At10:00A.M.onSaturday,August3,thesamedaytheShahwrappedupthebudgetdeliberationsatRamsar,seniorNixonadministrationofficialsgatheredattheStateDepartmentfortheirlong-awaitedshowdownoverhighoilprices.ThismeetingmarkedthefirsttimeinfourandahalfyearsthatHenryKissingerhadbeenaskedtoexplain,letalonejustify,hisunconditionalsupportforIran’sShah.Itwasadiscussion thathedidnotwant tohave.Kissinger stilladhered to theviewthattheconservativemonarchiesofthePersianGulfwereentitledtoraiseoilpricestogeneratetherevenuesthatkepttheminpowerandallowedthemtobuy the American firepower that defended Western political and economicintereststhroughouttheMiddleEast.WhatKissingerhadfailedtoanticipatewasthattoohighoilpricesmightalsodamagetheU.S.economyandtheeconomiesof itsNATOallies, even to thepointof compromising the securityof the freeworld.Yet Kissinger may have anticipated something that his colleagues over at

Treasury did not—the potential catastrophe that awaited the Shah if oil pricesretreated.KissingerknewthatthemonarchiesoftheGulf,andIraninparticular,spentmoremoneythantheygeneratedinoilprofitsandthattheirfinanceswereasaresultoverextendedandthereforedangerouslyvulnerabletosuddenshiftsindemandandsupply.“Fallingpriceswouldquicklybring the revenuesof allofthe producing countries below their current levels of expenditure,” wrote onescholarwhosympathizedwithKissinger’sview.“Withthegovernmentunabletomeetexpectationsconditionedbypast experience, conservative regimeswouldprobablynotsurvive,andmoreradicalgovernmentswouldalsobethreatened.”Iran was not like Saudi Arabia, a country whose small population and vastforeignexchangereservesmeantthatitcouldsafelyabsorbabigreductionintheprice of oil and accommodate a substantial decline in its revenues. The Shahneversavedandalwaysspent.Therewasnofinancialcushiontoactasashockabsorber for the Pahlavi monarchy if oil prices suddenly dipped. A sudden

adjustmentinincomecouldleadtoafiscalcrisisfollowedbysocialunrestandpoliticalinstability.TheShah’s“oilylegs”wouldmeltaway.Kissinger’sactionsindefending theShahand trying to fendoffTreasury and theSaudismust beseeninthislight.Hewasgraduallybeginningtoappreciatethathighoilpriceswere choking economic growth and causing instability in the industrializedworld,buthewasequallyattunedtothefactthathighoilpriceswerethekeytopropping up the Peacock Throne. He faced an excruciating dilemma: how toeasetheoilshockforWesterneconomieswithoutbreakingtheShah’sregime?The small group at the table included Kissinger, Treasury Secretary Bill

Simon,chairmanoftheFederalReserveBoardArthurBurns,DeputySecretaryofStateRobertIngersoll,andAssistantDeputySecretaryofStateforEconomicandBusinessAffairsThomasEnders.Kissingerwasbynowthoroughlyalarmedat what he perceived to be Simon’s reckless meddling in foreign policy.Addressinghiscolleagueon thatAugustmorning,hegot straight to thepoint:“Youaresayingtheoilsituationisunmanageable.”“Yes,”Simondeclaredauthoritatively.“Itwillforceamassiverealignment—

youcanassesswhetherthatisgoodorbadforus.EuropeisbecomingdependentontheArabsforbothoilandmoney.”“YoumustalsoknowthereisarealchanceforanotherArab-Israeliwar,”said

Kissinger.“AretheSaudisreallypreparedtocooperateingettinglowerprices,andhowfar?”“Ifproductiondoesn’tget cut,oil priceswoulddropby30percent,”Simon

replied.“Wewouldconsiderproductioncutsanunfriendlyact,andforIran,wecouldcutmilitarysupplies.”Kissingerwanted to knowwhowould do the confronting—theU.S., or the

U.S. and Europe and Japan? “The second question is what happens after theopening round?” he asked. “I think Iran would be supported by Algeria andmany others. If theU.S. is alone this certainlywould be the case.”KissingerdescribedAlgerianpresidentBoumedièneas“psychoonoilprices”andwarnedthat if the U.S. challenged the pricing structure “Algeria would mount acampaign.TheywouldcarrytheSyrianswiththem.Ineffect,theSaudiswouldbe isolated and I don’t think they could or would stand up to it.” KissingerremindedthegroupthattheirEuropeanallieshadbuckledunderpressurefromtheArab states and couldnot be relied on to standwith them in a showdownwith the producers. If the United States cut off arms sales to Iran, “TheEuropeanscouldsupplytheIranianswithhardware.”HeturnedtothequestionoftheSaudis:“TheSaudismaybepreparinganultimatumonIsrael.Theywanttobeoursolesuppliersotheycansqueezeuswhentheywant.”Kissingerhadjust voiced hisworst fear.Hewas looking ahead to a daywhenSaudiArabia

useditsoilpowerasachokeholdoverAmericanforeignpolicyintheMiddleEast, specifically toward Israel. “Myconclusion is thatwehave tomovewithenormous care—we can take on the producers at the right moment—todisassociateIsraelfromtheoilproblem.Butitmustbeatatimewhenwecan’tbe isolated and it can’t be linked to oil. We first need to get the consumerstogether. Thenwe can do some confronting—but it will only work if we arewillingtouseforce.”Theproblem,asKissingerknewalltoowell,wasthattheUnitedStatesinthe

summer of 1974 lacked the ability to confront OPEC with the use of force.Kissinger saidhewouldonceagain tell theSaudis “thatwewill not stand foranotheroilembargo.Ifallthisiscorrect,weneedtogettheEuropeanstogetherandsharethiswiththem.Theyfirstwillbeshocked,butIseenootherwaytogo.I,though,ampreparedtotalkprivatelywiththeShah.”“I think we have to work with the Saudis—telling them hard out what we

need,”repliedSimon.AtthispointBurnsremindedthegroupofwhatwasatstake:“Weareheading

towardsdisasterintheindustrialworld.WithholdingarmsfromIranwon’thelp.Gettingtheconsumerstogetherwouldwork.IthinktheGermanswouldgowithus.WehaveafirmchancewiththeBritish.TheFrenchwoulddragtheirfeetbutmightgoalongafteralltheothersdo.TheJapanese,Idon’tknow.Conservationshouldbepushed.The taxongashasgoneupeverywherebut in thiscountry.Howabouthangingataxonexportstotheproducingcountriesbyallofus—ontheexports?”TheFedchiefwasanxiouslymonitoringthebuildupofmonetaryreservesin

countries thathadeven lessabsorptivecapacity thanIran,whichat leasthadapopulation of 33 million and a burgeoning industrial base. The World Bankestimated that if current levels persisted five countries with a combinedpopulationofonly11.5million—SaudiArabia,Libya,Kuwait,Qatar,andAbuDhabi—would accumulate total monetary reserves of $453 billion of theprojected$650billionofallreservesheldbyOPECmembercountriesin1980.The bank warned that “the world banking system cannot possibly handle therecyclingjobthatsuchavolumeofforeignexchangeholdingswouldrequire.”Oilconsumernationshadinthemeantimeplungedintotheredtopayexorbitantfuel bills, taking out loans and seeking financial assistance through theWorldBank, the International Monetary Fund, and private lenders like Wall Streetbanks to finance ballooning deficits. The lending binge left unresolved thequestion ofwhether the debtorswould ever have themeans to pay back theirloans, particularly if oil prices continued to rise, placing greater strain ongovernmentbudgets.Globalfinancialnetworksandbankingsystemshadnever

beensubjectedtosuchintensepressuresoversuchaprolongedperiodoftime.IftheUnitedStateswastoavoid“hugeforeigndebts,”wroteonescholarwho

studiedtheimpactofpetrodollarsonfinancialnetworks,oilpriceswouldhavetobe “substantially lowered by OPEC, or [unless] American oil imports aredrastically curtailed, or domestic fuel and industrial production is continuallyexpanded, the United States will have to endure the financial onus of anadditional,ever-mountingmultibilliondollaroutlayeachsuccessiveyear.Suchacourseofpolicywouldappear,politically,aswellaseconomically,ruinous.”SimonandBurnsweretryingtogetahandleonthefinancialcrisis.Knowing

nothingofNixon’sandKissinger’ssecretdealingswith theShah, theymayaswell have been performing surgery blindfolded. The American economy wasshedding jobs at the fastest rate since the Great Depression. The deficit wasclimbing.Inflationhadroaredtolife.Consumerswerecuttingbackonspending.Theexport sectorhadslumpedbecauseof fallingdemandforAmericangoodsoverseas. Factories were closing down. A noxious economic phenomenonknownas“stagflation”—highlevelsofunemploymentandinflation—hadtakenroot. If relief did not come soon, feared some economists, then a financialcatastropheonaparwiththeGreatCrashof1929couldnotberuledout.InflationwasonRichardNixon’smindthreedayslaterwhenhepresidedover

afullmeetingofthecabinet.Hispresidencyhadfinallystovedinonitself.Theexplosive“smokinggun”taperecordinghadbeenreleasedtoashockedpublic.Cabinet officers assembled in the expectation Nixon would announce hisresignation. “Iwould like to discuss themost important issue confronting thenation,andconfrontingus internationally, too,”hestarted.Steeling themselvesfor the next line, those in the room were bewildered by what he then said:“Inflation.Oureconomicsituationcouldbethemajorissueintheworldtoday.”He then talked about the economic challenges facing the nation caused byskyrocketingoilprices.IttookVicePresidentGeraldFordtosteerthemeetingtotheWatergateissue.HetoldNixonthathecouldnolongerpubliclydefendthepresident’shandlingofthescandalandhepredictedimpeachmentbytheHouse.Ford assuredNixon that comewhatmay, “I expect to continue to support theadministration’sforeignpolicyandthefightagainstinflation.”BillSimon,watchingthesurrealdramaunfold,thoughtthepresident“seemed

tohearnothingthatthevicepresidenthadsaid,savetheremarkaboutinflation.‘Ithinkyouranalysisisexactlycorrect,’saidNixon.Thenthepresidentturnedtome. He started to question me about an upcoming economic summit. I wasvirtually speechlessbut answered thebest I could.”When thecabinetmeetingwrapped up at 12:30 itwas SimonwhomNixon asked to address thewaitingthrongofreportersoutsidetheWhiteHouseandwhonowmobbedhim“asthe

restofthecabinetscootedoutabackexit.”ByfocusingonSimonandignoringthe rest of his cabinet—including his vice president—the mortally woundedpresidentwas finallyacknowledgingSimon’s loyaltyand tacitlyaccepting thattheir talks about oil, the Shah, and economics had left an impression. It wasRichard Nixon’s final gesture of defiance to a political establishment that hebelievedhaditsprioritiesinthewrongorder.Thick, wet heat clung to Washington like a dead vine on the evening of

Thursday,August8.SimonwasstillathisdeskwhenthecallcamethroughfromHaig. “It’s all over, Bill. You’d better get Carol down here right away.” Thepresidenthaddecidedtoresign.Carolwasstayingatthefamily’ssummerhomeinEastHamptononLongIsland.AsecondphonecallcameinfromKenRush,Nixon’seconomicadviser:“Bill,whatareyoudoing?”heasked.“ComeonoverandhaveaScotch.”SimonwalkedoutintothenightandheadedfortheWhiteHouse,“whereKenandIproceededtoconsumeabottleofDewars.Ahalf-hourbeforethePresident’saddress,wewalkedovertotheOvalOffice.”AsRichardNixonendedhisspeechofresignationandthetelevisioncameraspulledawayhe“walkedpastKenandme,tearsstreamingdownhischeeks,hismouthsetinaquiveringfrown,andwhenhewasa fewfeet fromusheabruptly turnedrightandheadedintotheresidence.”BillSimonwas“frozen inmy spot, overcomewith grief and disbelief.”He

rememberedKingFaisal’swordsfromjustafewweeksearlier:“TheAmericanpeople are too wise to get rid of a great president because of something asinsignificantasWatergate.”Simon’swindowofopportunitytoconfronttheShahoveroilpriceshadjustslammedshut.

SIXTEENMARINES

President Nixon’s resignation speech was broadcast around the world andheard live in Tehran at 4:30 A.M. local time on August 9. Cynthia Helms,wrapped inadressinggown,walkeddownstairsandcarrieda shortwave radiointothegardenoftheAmericanembassytogetbetterreception.WhentheVoiceof America signal proved too weak she tuned to a Swedish station to hearRichard Nixon become the first American president in history to resign fromoffice. Her husband was so convinced that Nixon would stonewall that herefusedtogetoutofbed.“Itwasawarmandstarrynight,andthelovelygardenlooked like a fairyland, brightened by the security lights,” she remembered.Iranianarmedguardswerepostedunder the trees and around theperimeter ofthe embassy grounds.Nixon’s voice carried over the lawn and back up to the

house. The ambassador, suddenly curious, pushed up a bedroomwindow andcalleddownaskingfornews.“Forus,itwasadramaticandsoberingmoment,”hiswifesaidof themomentwhenNixonquit.“Wewerefilledwithasenseofhistory,and,Imustconfess,relief.”Theembassygroundshadbeenpurchasedin1928for thethenprincelysum

of$60,000fromalocalfamilyanxioustosettleagamblingdebt.Thepropertyoccupiedatwenty-five-acrewalledcompoundatthecornerofRooseveltAvenueandTakht-e JamshidAvenue.CynthiaHelms likened the compound to a cooloasisofshrubbery,trees,andfountains,arefugefromthedustandnoiseonthestreetsoutside.Visitorswereescortedupadrivewayshadedwith tallpineandsycamore trees thatended in frontof twobigbluedoorsandpotsofoleander.The ambassador’s residence was a hybrid of contemporary American andPersianarchitecture.Theupstairslivingquartersincludedfourlargeguestroomsandaprivateapartmentwithsittingroom,bedroom,andbathroomwithalargeblackmarblebath.“Wewerechargedamonthly rent for this apartment, but itwas a haven of privacy,” Cynthia later wrote. The small family dining roomoffered“agloriousviewofthemountains.”By the fall of 1974 Embassy Tehran was one of the busiest and biggest

AmericandiplomaticpostsinAsiaandthehubofthefast-growingU.S.presencein Iran. Few embassy employees learned Farsi or developed a firm grasp ofIranian culture and customs. “In inquiring why this was so, I came to theconclusion thatmostofficers and their familieswho livedonce in Iranhadnogreat compulsion to go back,” recalled one former U.S. ambassador. “It is arather forbidding country, and its culture is not congenial to foreigners.” Themajority of the local hires were not Shi’aMuslims but Armenian Christians,Assyrians,andJews.Shi’aMuslimscitedcultural reasonsforavoidingforeignemployment.Thisunfortunatebutperhapsinevitabletendencytohireoutsiderstoworkforoutsidersonlyreinforced the isolationofAmericandiplomats.TheIranianstheydidmixwithtendedtobemembersofminoritygroupswithgripesagainstthemajorityShi’a.Embassy Tehran fulfilled a dual but vital function as a regional base of

operations for theCentral IntelligenceAgency.Other embassies in the capitalprovided a similar function but none matched the scale of the Americanenterprise.TehranduringtheyearsoftheoilboomwastotheworldofespionagewhatViennahadbeenintheearlyyearsoftheColdWar,rifewithintrigue.CIAstaffworkedalongsideAmericandiplomatsandinsomecasesuseddiplomaticcredentials as a cover for their work. ArminMeyer had been the ambassadorwhenthedecisionwasmadetobuilda“warehouse”ontheembassygroundsinthe late 1960s. Thewarehousewas actually a basement that held nothing but

electronicgearandservedasanimportantlisteningpostfortheagency.“Inthemeantime we had all kinds of other monitoring devices on the compound,”Meyer recalled. “Wehad invaluabledevices at theShah’sgamepreserve” and“extensivefacilitiesoutnorthofMeshed,monitoringeveryblastthattheSovietsever emitted, everymissile they ever shot, their intercommunications betweentheirmilitary units, and so on. Itwas fabulous, really.TheShahwasworkingwithusonthat.”ThesewerethefacilitiesmonitoringtheSovietUnionthatwereso prized by Helms and Kissinger and whose importance they argued faroutweighedconcernsabout theShah’s spendingonarms,oilprices,and Iran’srecordoftorture,extrajudicialexecutions,andhumanrightsabuses.WhenAmbassadorHelmsarrivedonposthetookacloseinterest inmaking

suretheembassycompoundwassecured.Hepersonallyinspectedthelocksondoors, vaulted areas, and emergency exits. Despite everyone’s best efforts,security at Takht-e Jamshid Avenue remained porous and problematic. Oneincident in particular stood out. Itwas an eveningwhenCynthiaHelms camedownstairsafewminutesearlytogreetguestsabouttoarriveforadinnerparty.“IwalkedintotheroomtofindmyhusbandtalkingtoawomanIdidn’tknow.”Sheleanedintoherhusbandandasked,“Whoisourguest?”Hewhisperedback,“Ithoughtshemustbeafriendofyours.Shejustwalked

inthroughthefrontdoor.”Husbandandwiferealizedtheyweredealingwithanintruder.“Withgrowing

horror I focused on her large handbag on the couch next to Dick,” saidMrs.Helms. “Where were our guards? I couldn’t see them anywhere.” Shemaneuvered thewoman,whowasbecomingvisiblydistraught, into the librarywhiletheambassadortendedtotheguests.Sheliftedtheintercomtelephonetocall forhelp fromoneof the sixteenMarineswhoguarded thecompound.Noone answered. Then she walked across the grounds to the security office tosummonassistance.Whensomeonefinallydidarrivehehadtoexcusehimselftoretrievehissidearmandradiofromdownstairs.Theintruderturnedoutnottobeasecuritythreatbutthetroubledwifeofan

Iranian judgewhohadbeenfriendlywith thepreviousambassador’swife.ButtheincidentlefttheHelmsesunnerved.Theirguardshadallowedsomeoneontothegroundswhowasnotontheirguestlist.Apolicemanhadevenescortedthejudge’swife to the frontdoor,whichwasopen for theparty.Theservantshadnot thought to challenge her.TheMarine usually on duty inside the residencewasnotathispost.TheMarineguardMrs.Helmscalledforassistancewasnotcarrying his sidearm. A potential assassin had casually walked into theambassador’s residence “and sat down besidemy husband, probably themostguardedman in Iranbesides theShah.”This incidentandothers that followed

convinced thecouple that“toomuchwasexpectedof themarineguardsat theage of eighteen or nineteen in handling the complexities of protecting ourembassyanditsoccupants.”

RAISETHEREDFLAG!

Factory closures, rampant inflation, long unemployment lines, foodshortages,carlessdays,andpopulistrevoltsbecamesignsofthetimes.Politicalstructuresbegantoshakeloose.ThePortugueseempirehaddisintegratedinthespring;overthesummerof1974itwastheturnoftheItalianstatetodrifttowardthe abyss of financial ruin and collapse. The oil shock at times resembled aseriesofseeminglydisconnectedcrisesthatthreatenedtoconvergeandformonemonstrous upheaval. At the end of the month West Germany’s chancellorSchmidt held crisis talks with Italy’s premier Mariano Rumor at Bellagio onLakeComo.ThebottomwasabouttofalloutofanItalianeconomystaggeredbyhighfuelcosts,gallopinginflationof18.7percentand800,000unemployed.TheGerman leader granted Italy a $2 billion loan. The credit was to last sixmonthsbutcouldberenewedforthreeadditionalsix-monthperiods.Italyagreedtopayinterestof8percentandputup515tonsofgoldoronefifthofthestatebank’sbullionascollateral.TheWestGermanrescuepackagesignaledanominousnewturninEurope’s

worseningfinancialcrisis.WithweakgovernmentsinBritain,France,andItaly,itwaslefttoHelmutSchmidttotaketheleadinshoringupthecontinent’sbanksandcurrencies.Overthenexttwoandahalfyearsthechancellorplayedtheroleof Europe’s fireman-in-chief, rushing from one crisis to the next to douse theflamesofeachnewflare-upwithhisbucketofdeutschemarksandeasycredit.His efforts were immensely complicated by a historic political realignmenttransforming Europe’s sclerotic southern tier. Within eighteen months,dictatorships of the right collapsed in Portugal, Spain, and Greece. Theseconvulsions created opportunities for democracy to flower from Lisbon toAthens. Yet themost immediate and obvious beneficiaries of unrest were thelocalCommunistPartychaptersthathadledtheresistancetodictatorialrule.Inthe summer of 1974 buildings in the Portuguese capital Lisbon flaunted thehammer and sickle, and Alvaro Cunhal, the Communist Party’s secretary-general, held cabinet rank in a unity government. Inflation was running atbetween 30 and 40 percent, tourism receipts were down 30 percent, and thebreakdownofbasicpublicservicescoincidedwithadeadlycholeraepidemic.Greecewasincrisistoo.InAthens,thecollapseofthemilitaryjuntaledtothe

formation of a United Left coalition of opposition parties dominated byCommunists.Deeplyangeredby thebrand-newFordadministration’shandlingoftheconflictoverCyprus,thenewGreekgovernmentwithdrewitstroopsfromNATOandanti-Americanprotests rockedGreekcities.Financialanalysts tooknote of the country’s $2.8 billion trade deficit and the “perennial deficit inGreece’s international payments account.” Greek tourism revenues had beenhardhit,firstbyawarwithTurkeyandsecondbytheworldwideslumpinthetourism industryasAmericansandEuropeanschose tosavemoneybystayingclose to home. On September 6, five days after Italy received its bailout, thegovernmentofGreecereceiveda loanof$100millionfromaconglomerateofbanks headed byChaseManhattan andGoldmanSachs.Athens alsomade anappealforasecondcashinjectionof$800millionfromWestGermanyandtheCommonMarket. ForeignMinisterGeorgeMavros, touringEuropean capitalsthatweek,madethecaseforGreekmembershipintheCommonMarket.Hegota chilly reception. “Theywant a new patron because they have always had apatron,”aEuropeandiplomatcoollyobservedofGreece’sdecisiontobreakwithWashington. “They spit on the hand that used to feed them, so now they’relooking for someoneelse.”Otheranalysts fretted thatGreecewouldbecomeafinancial albatross about the necks of the Common Market’s parsimoniousnorthern members. “Nobody really wants them,” sniffed a Common Marketofficial.“Itwouldbeanotherdebtorcountryonourhands,andifwetakethemitwouldbehardtoresistcountrieslikePortugalandSpain.”TheredtidewasalsorunninghighinFranceandinItaly,whereCommunist

Party leadersGeorgesMarchaisandEnricoBerlinguer, respectively,wereseenas attractive and unsullied leaders-in-waiting. Fueling the rise of Euro-Communismwasinflationdrivenbyhighoilprices.TheGreatInflationof1974discreditedEurope’spostwarpoliticalorderandbroughtbackmemoriesof thehyperinflation that led to the collapse of Western democracies in the 1930s.ManyEuropean andAmerican analysts frankly suspected thedurability of thecontinent’s postwar democratic institutions. Foremost among themwasHenryKissinger.ToKissinger andother pessimists the countries ofSouthernEuropewere like dominoes ready to fall.Advocates of the domino theory feared thatPortugal was on the verge of becoming the first Communist state inWesternEurope.WesternEuropecouldbesplinteredbetweenananti-CommunistnorthandSocialist andCommunist-ruled south.NATOwouldbeparalyzed.Détentewould collapse. Faced with the grim prospect of a Communist takeover ofSouthern Europe,HenryKissinger, the student of great power politics, finallygraspedthedamagehighoilpriceswereinflictingontheeconomiesandpoliticalstructures of the Western democracies. Following the overthrow of the

Portuguesegovernmentbyleftistarmyofficers,Italy’sfateweighedheavilyonhismind.In earlySeptemberKissinger expressedgrave fears about Italy’s future at a

meetingwith congressional leaderswherehedefendedongoing covert activitybytheCIAinItalianpolitics.KissingerwasjustasforcefulintalkswithIsrael’sprime minister Yitzhak Rabin. “The increasing cost of oil is prompting asignificantnumberofAmericansImetduringmyvisit toconsiderthepriceofoil as themain reason for the collapse of the democratic regimes inWesternEurope, which would make these countries ripe for Communist domination,”Rabin told the Israeli newspaper Maariv after returning from a trip toWashington.“Americanpersonalitiespointedouttomeinmanytalkstheseriousdanger of Communist domination in Italy, and perhaps in other Europeancountries.”“Youhave to lookuponhim in this case as ahistorian,”oneofKissinger’s

aides explained of his boss’s concern about Europe. “He grew up in NaziGermany and knows how economic depressions can lead to acceptance ofauthoritarian regimes, and he fears that this could happen in the West ifsomethingisnotdonetosolvetheproblem.”

PartTwoSHOWDOWN1974–1977

“Bringupalittlelioncub,andyouWillberewardedwhenhisteethshowthrough;Forgettingallthekindnesshe’sbeenshownHe’llmaulhismasterwhenhisclawshavegrown.”

—AbolqasemFerdowsi,ThePersianBookofKings

ChapterSevenSCREAMINGEAGLE

“IwilltelltheShah.Heisanadmirerofmine.”

—HenryKissinger,1974

“Pride comes before a fall, although in [Kissinger’s] case it’s moreconceitthanpride.”

—TheShah,1974

WECAN’TTACKLETHESHAHWITHOUTBREAKINGHIM

Gerald Ford’s first months in theWhite House were tumultuous. RichardNixon’sresignationwasfollowedinshortorderbyFord’scontroversialdecisionto pardon him, First Lady Betty Ford’s bout with breast cancer, Turkey’sinvasion of Cyprus, and the continuing economic fallout from the oil shock.Withinhoursofbeingswornintoofficethenewpresidentwasadvisedthathehadthreemonthstobringinflationundercontrol“orfacepossiblesocialunrest”athomeamidmountingjoblossesandsoaringinflation.Ford’sfirstaddresstoajoint session of Congress echoed the urgency of those August days—and hispredecessor’s partingwords—when he declared, “My first priority is to workwithyoutobringinflationundercontrol.InflationisourdomesticpublicenemyNo.1.”Ford reappointedHenryKissinger tohisdual roles as secretaryof state and

nationalsecurityadviser.NixonhadcautionedFordaboutKissinger’sarrogance.“Henryisagenius,butyoudon’thavetoaccepteverythingherecommends,”hetoldhis successor. “Hecanbe invaluable, andhe’ll be loyal, butyoucan’t lethimhaveatotallyfreehand.”Inprivate,Nixongotstraighttothepoint:“Fordhas justgot to realize that thereare timeswhenHenryhas tobekicked in thenuts. BecauseHenry starts to think he’s president. But at other times you petHenry and treat him like a child.” Unlike Nixon, Ford tolerated Kissinger’s

churlishbehaviorandpetulant threats toquit in the faceofcriticism.“Iwouldtakehoweverlongitrequired,whichwassometimesminutesandoftenawholehour,toreassurehimandtellhimhowimportanthewastothecountryandaskhimplease to stay,” Ford toldKissinger biographerWalter Isaacson.The newpresident lacked the confidence and sure touch in foreign policy that hedisplayedindomesticpolitics.WhereasNixonhadenjoyedalong-termworkingrelationshipwiththeShahandrelishedtheirexchangesanddealmaking,inhisfirstmonthsinofficeFordlackedtherequisiteknowledgetoaskKissingerandhis other advisers the right questions about geopolitics, strategy, and foreigneconomicpolicy.FordkeptBillSimononatTreasurybecauseheappreciatedhisfiscal conservatism. These two reappointments ensured the carryover into hisown administration of the disagreement over whether the key to America’senergysecurityandfutureoilneedsranthroughIranorSaudiArabia.PresidentFord’sfirstbriefingonoil,OPEC,andtheShahcameonSaturday

morning,August17.AtranscriptoftheirconversationshowsKissingeranxioustodeflectblamefortheoilshockawayfromtheShahandontotheSaudisandtherestoftheOPECcartel.HedidnotexplaintothenewpresidentthatheandNixonhadapprovedpreviousoilprice increases topayfor theShah’smilitarybuildup.NordidKissingerbriefFordonthespider’swebofsecretpactsreachedbetween Nixon and the Shah that were among the new president’s mosttroublesome inheritances. Kissinger wanted tomake sure that Ford, a foreignpolicynovice,sawthingshisway.“On theenergysituation,wehave to findawaytobreakthecartel,”explainedKissinger.

We can’t do it without cooperation with the other countries. It isintolerablethatcountriesof40millioncanblackmail800millionpeopleinthe industrializedworld. Simonwants a confrontationwith the Shah. HethinkstheSaudiswouldreducepricesiftheShahwouldgoalong.Idoubtthe Saudis want to get out in front. Also the Saudis belong to the mostfecklessandgutlessoftheArabs.Theyhavemaneuveredskillfully.Ithinkthey are trying to tell us—they said theywould have an auction—itwillnevercomeoff.Theywon’ttellustheycanlivewithlowerpricesbuttheywon’tfightforthem.Theywouldbejumpedonbytheradicalsiftheygotinfront.TheShahisatough,meanguy.Butheisourrealfriend.HeistheonlyonewhowouldstanduptotheSovietUnion.WeneedhimforbalanceagainstIndia.Wecan’ttacklehimwithoutbreakinghim.Wecangettohimbycuttingmilitarysupplies,andtheFrenchwouldbedelightedtoreplacethem.

KissingerdidnotmentionthatIran’sairforcewasbynowsodependentonAmerican training and spare parts that it would be grounded without them.Frenchmilitaryequipmentwasno substitute for theU.S.hardware favoredbytheShah.“Hedidn’tjointheembargo,”offeredFord.“Right,”saidKissinger.“Simonagreesnow,though.Thestrategyoftackling

the Shah won’t work. We are now thinking of other ways.” They discussedeffortstoimprovecooperationwithotherconsumernations:“Weareorganizingthe consumers. Then we are organizing bilateral commissions to tie theireconomiesascloselytooursaspossible.SowehaveleverageandtheEuropeanscan’tjustmoveininacrisis.Wewanttotieuptheircapital.WhentheShahseesusorganizingtheconsumers—hewillsee,ifwedon’tdoitinawayappearingthreateningtohim.IshouldperhapsvisithiminOctober,inconnectionwiththeSoviettrip,andtalkaboutbilateralarrangements.”“Doeshewanthigherprices?”“Yes,”saidKissinger.“Hehaslimitedsupplies.Heknowstheprofitishigher

on petrochemicals and that the Saudis get more from the companies ineverything. We won’t be in a position to confront the producers before themiddleof1975.Wehavegottogetrolling.”Kissinger had justmade five extraordinary assertions. He accepted that the

Shah was the key to lowering oil prices. He knew the Shah was planningadditionalpriceincreases.HedismissedoffersofhelpfromtheSaudisasnottobe taken seriously. He conceded that the United States had surrendered itsstrategic leverage over its ally in Tehran. Most intriguing was Kissinger’sobliqueadmissionthatthePahlaviregimewasbrittle.TacklingtheShahoveroilprices might “break him.” This last remark of Kissinger’s hinted at deeperconcernsaboutthepotentialforinstabilityinsideIran.HadU.S.officialsalreadyconcludedthat theShah’sregimewasnotasstrongasitappearedtobe?“Yes,and I think we all thought that,” conceded Brent Scowcroft in an interviewconductedthirty-sixyearslater.In1974ScowcroftwasKissinger’sdeputyattheNationalSecurityCouncil.“That[theShah]haddestroyedsomeofhisgreatestenemies—that is, thepowerof the churchand thepowerof someof thegreatlandowners—but thathehadn’tbuilta replacementsupport forhispolicies,sothat in the end he was bereft when the revolution came. So we were verycautiousinhowmuchpressureweputonhim.”Scowcroft, who admired the Shah, nonetheless “tended to be ambivalent”

about theAmerican-Iranian special relationship because “we had a number ofgoalswithrespecttoIranandsomeofthemwereconflictive.”IranwasthepillarofAmerica’sMiddleEastpolicy,protectorof theoil fieldsandshippinglanes,

andguarantorofIsrael’soilsupply.YetIranwasalsoresponsibleforproppingupthehighoilpricesthatthreatenedAmericanprosperityandthestabilityoftheWestern alliance. Further complicating matters, the Shah made it clear to theWhiteHouse thathighoilpriceswere thepriceofpoliticalstability inIran.“Ithink[theShah]wasa trueandsincereally,”saidScowcroft.“Healsohadhisdomesticinterestsand,asyoucansee,pressuresweregrowingonhimtoo.Andit’squitepossiblehethoughthehadtorelievethosepressureseconomically to[save]hisownregime.”WhatleveragedidWhiteHouseofficialsthinktheystillhad to influence theShah?As it turnedout,notmuch.“Well, the leveragewehadwasthatintheendtheShahwasdependentonus,onU.S.support,andthedifficultywaswedidn’tknowexactlyhowheviewedthatandwhetherhesawitthe same way,” conceded Scowcroft. “That explains part of the ambivalence.Somepeople likeBill Simon, for example,were very impatientwith him andthoughthewasthecauseoftheoilpricerise....HetendedtoblametheShahandwe,basicallyHenryandI,andIthink[President]Fordagreedwithus,werenotpreparedtoputthekindofpressureontheShahthatSimonwanted.”The administration was pursuing a self-paralyzing policy. Kissinger’s close

aide Winston Lord privately reminded his boss of the fix they now foundthemselves in: “To some extent, arguments over oil prices can becompartmentalized in our dealingswith Iran.Yet unless we press some of thelevers we have, thereby incurring political costs on both sides, [the Shah] isunlikelytomoveontheoilpriceissue.”

BEWARETHEEMPIREOFOIL

Iran’sambassadorArdeshirZahediwasusheredintotheOvalOfficeat12:35P.M. on Wednesday, August 21, for an introductory meeting with the newpresident. Kissinger’s behavior during the meeting was revealing. It was asthough he and not Zahedi was the Pahlavi envoy to Washington. Zahedi’smeetingwith thepresident followedbyadayFord’snominationof the Shah’sfriendNelsonRockefeller,abrotherofDavid, theShah’sbanker, to thevacantpostofvicepresident.Tehrancouldnothavebeenmoresatisfiedwiththisturnofevents.TheShahinterpretedtheappointmentasavindicationofhisprestigeand power inWashington and as a decisive blow against Bill Simon and theSaudilobby.Zahedisaidhewas“verypleasedwiththeRockefellerappointment.WehaveveryclosecontactswiththeRockefellers.DavidissettingupabranchinTehran.OurMinisterofFinanceandMinisterofEconomics—hewears twohats—iscomingheretosetupajointcommission.IamgladSecretaryKissinger

isheadingyoursideratherthanSimon.”“Theydon’tcareaboutme—justsolongasitisnotSimon,”jokedKissinger.“Ihavebeen talking toourAmbassadors inParisandLondon,andalsoHis

Majesty’sfeelingwasexcellent,”saidZahedi.“[Nelson]knowsIranand[hehasa]closerelationshipwithIran.”WhenFordsaidhelookedforwardtomeetingtheShah,Zahedieffusedthat,

“TheU.S.holdsthehighestplaceinhisheart,”andsubtlyreferencedthe1953coup. “It has always been so. The U.S. has helped when we needed it most,withoutstrings.Werememberthosedays. . . .Somanyforgetall that theU.S.hasdone.”“TheShahhasalwaysbeenourbestfriend,”Kissingereffusedandcitedthe

Shah’srefusaltoallowSovietoverflightsduringtheOctoberArab-Israeliwar.ItwasZahediwhoraisedthetouchysubjectofoil:“Theoilproblem—thereis

one.IwanttodowhatIcan.”ButheexplainedthatKenJamieson,thechairmanofExxon, had recently been toTehran andmetwith the Shah.TheShahwasnowarguingthattherenegotiatedtermsofSaudiArabia’sparticipationdealwithAramcomeantthat“SaudiArabiaandothersget$10”inprofitforeachbarrelofoilthattheyproduce,whereasIranwasonlygetting$7:“Somecountrieswanttodoawaywith thepostedprice.”Kissingeradded that IraniancomplaintsabouttheSaudiswerejustified:“Thebasicpoint is that thesepricesarecomplicated.TheShah’sviewishegets15percentlessonbuy-backoilthantheSaudis.Iranis tied to thepriceofoil,butSaudiArabiacanmaneuveraroundandvary theparticipation.”“I will work on it and we want to help and we understand the problems,”

Zahediassuredthepresident.“PleaseexpresstotheShahmydeepappreciationforthisattitude.”ItwasSaudiArabia’s turnnext.Umaral-Saqqaf,SaudiArabia’sministerof

state for foreign affairs, stopped by the Oval Office eight days later. Afterdiscussing the prospects for peace in the Middle East, Ford steered theconversation toward the oil supply and pricing: “We hope we don’t have anembargoagain.Weunderstandthecircumstanceslasttime,butwehopethereisnorepeat.Itwouldbeveryserious.Andthenaboutprices.”“Ihave said thatoil isnot a toy toplaywith,”Saqqafausterely replied.He

insistedthatanotherembargowasoutofthequestionandwasequallyforthrightonthequestionofpricing,explainingtoFordthat,“Onprice,wewerethelasttoaccept it.” Without naming the Shah, the ambassador reminded them ofYamani’s scuttled auction, but his oblique reference to Iranwas unmistakablewhen he warned: “There is an empire of oil. We must be very careful. Theauctionwasstoppedtoavoidplayingwithoil.”

“Anauctioncouldhavecounter-results,”addedKissinger.Hedidnotexplainthat theShahhad threatened to cut Iranianoil production todriveprices evenhigher if the auctionwent ahead: “If there is not a surplus, an auctionwoulddrivepricesup.”FordremindedtheambassadorthatthehealthoftheAmericaneconomywas

inextricablylinkedtoU.S.leadershipinworldaffairsandtheMiddleEast.“IknowandIseepeopletakingadvantageofit,”repliedtheSaudi.“Iknowif

ithurtsyouithurtsus.Itisnotamatterofbillions;itisamatterofbalances.”

MR.FORDGOESTOWAR

Economic imbalance lay at the heart of the challenges facing PresidentGerald Ford in the autumn of 1974. The Dow Jones Industrial Average hadslumped35percentandshed$300billion innationalwealthsincereaching itshigh-watermarkof1,051pointsonJanuary11,1973.EconomistswerealreadyraisingthespecterofasecondGreatDepression.Inthefirstthreeyearsafterthe1929stockmarketcrashsharepricescollapsedastaggering86percent.Analystsnoted that during the six-year period from 1968 to 1974 shares had fallen analmostequallyimpressive79percent.“Investorshaveseemedfrightenedofaneconomy that seemsoutofcontrol,” reportedTimemagazine in theautumnof1974.Housingstartsfell38percentinthesameperiod.PanAmericanairlines,batteredbyhighfuelcosts,appealed to thefederalgovernment fora taxpayer-fundedbailoutof$10millionamonth.Costcuttingbecameanationalpastime.MassachusettsGeneralHospitalstoppedchangingbedlineneveryday.Thefederalgovernmentestimatedthatinonlyeighteenmonthsthenumberof

Americans living below the poverty line rose by 5.6 percent, the number ofchildrenlivinginpovertyincreasedby8percentto10.2million,andrealincomedeclined4percentoveratwelve-monthperiod.TheAmericanmiddleclasswasunderrealpressure.HerewasthetruecostoftheShah’soilshock.Itcameasnosurprise that 46 percent of Americans told Gallup they “feared a depressionsimilar to the classic one of the 1930s.” In a year of constitutional crisis,financialmeltdowns,andhard-luckstories,Americansflockedtothebigscreento watch their favorite Hollywood stars be incinerated, suffocated, crushed,drowned, and maimed in celluloid disaster epics like The Towering Inferno,Earthquake, and Airport 1975. Gerald Ford’s America wallowed in itsimpotency.Thepictureoverseaswas,ifanything,evenworse.Highoilpricesexacerbated

aglobalfoodcrisis.Faminescausedbydroughtconditionsand“thesoaringcost

ofoilandfertilizer”stalkedsub-SaharanAfricaandIndia.Unabletopayitsfuelbills,Indiashutoffirrigationpumpsand“lostenoughwheattofeed50millionpeopleforayear.”HungerledtoanincreaseinchildmortalityinTanzania. InLatin America, inflation roared out of control and at one point topped 207percentannuallyinChile.FallingconsumerdemandintheWestfortextilesledtofactoryclosuresinSingapore.InWesternEurope,wherethepriceofheatingoil jumped60 to100percent, thermostatswere turneddown.FrenchpresidentVáleryGiscardd’Estaingswitchedofftheheataltogetherandworkedbesideanopenfire.ElectricallightdisplayswerebannedinBritaininthedaytimeandinFranceafter10P.M.InGreecethefloodlightsaroundtheAcropoliswere turnedoffandatnightfalldarknessenvelopeddemocracy’sbirthplacelikeamourningshroud.Fewomenshavebeensoloadedwithsignificance.SouthVietnamwasespeciallyhardhit.Doingbusiness inSaigonduring the

oil shock was likened by one American entrepreneur to “making love to acorpse,” and President Thieu’s government admitted its finances had been“overwhelmed”bysurgingfuelcosts.Oilpricesof$1.50agallonthreatenedtoachievewhat theCommunists had so far failed to do: driveSouthVietnam tocollapse.Therewas a sour irony in the fact that oilwas also seen, at least byPresidentThieuand the increasinglydesperateU.S. embassy, as apanacea forSouthVietnam’sworseningeconomicfortunes.ForyearstherehadbeenrumorsofvastoildepositsinthecoastalwatersofftheMekongDelta.Inthespringof1974aconsortiumoffourWesternoilcompaniespurchasedexplorationrightstotheareaandannouncedplanstostartdrillingbytheendoftheyear.Americanofficials crossed their fingers in the hope that oil would magically transformSouthVietnam into theKuwait of SoutheastAsia. “Please God, just let thembringinonewell,”wastheimpoliticreactionofoneAmericandiplomattothetreasurehunt.A new globalized economy was emerging, one that carried with it great

promisebutalsoenormous risk.“Whathappens in the economic realm inonepart of the globe often induces quick repercussions in other places,” wroteThomasMullaneyinTheNewYorkTimes inSeptember1974.“So ithasoftenbeenwith respect to themajorcurrentproblems—rampaging inflation, soaringinterestratesandtheexplosiveriseininternationaloilprices....Seriousastheyare, the world’s economic ills might have been addressed effectively over aperiodof timewithout toomuchdifficultyhad therenotoccurred thedramaticchangeinMiddleEastoilpolicyalmostoneyearago.”Theworld’soilbillfor1974wouldbe$100billion.TheUnitedStatesalone facedan increaseof$16billionoverthepreviousyear.“Thequadruplingof theprice of this key resource in such a short time has

createdwidespreaddistortionsandfinancialproblemsthatareintensifyingweekbyweek,”wroteMullaney.“AndtheWesternworldhasbeenalmostpowerlessto deal with a most perilous situation. The public has not fully grasped thepotential implications of the sudden change in petroleum economics, thoughcertainly political leaders have sensed it. But coping with these dire newcircumstancesisanothermatter.”Oilproducers,wroteNewYorkTimesfinancialaffairs columnistLeonardSilk,would not be so foolish as to doubtAmericanresolvetobringthemtoheel.TheUnitedStatesintheaftermathoftheoilshockwaslike“ascreamingeagle....Butthecrucialquestionisnotwheresomeofthe oil producers, such as SaudiArabia, will be frightened intomaking somemodest appeasement gesture, butwhere there is enough force behind the newUnitedStateslinetobringdownthepriceofoilsignificantly—suchasbyone-thirdormore.”OPECmembershadcrossedalinewhentheydecidedtopropupthemarketpricebyreducingtheircollectiveoutput,ratherthanallowpricestosettleasWesternconsumptionslackened.“Itlooksasthoughthebattleinwhatcouldbea longenergywar—thefirst inhistory—hasnowbeenjoined,”wroteSilk. “Its outcome, failing a quick backdown by OPEC, could be years incoming.”PresidentForddidnotfirethefirstshotinthegreatoilwar.Buthedidissue

what amounted to a formal declarationof hostilities against oil producers in alandmarkaddresstoaninternationalenergyconferenceinDetroitonSeptember23, 1974. It turned out to be themost important foreign policy speech of hispresidency. “The danger is clear,” said the president. “It is severe.” Fordexplained that sovereignnations “cannot allow their policies to bedictated, ortheir fate decided, by artificial rigging and distortion of world commoditymarkets.” Oil prices shouldmove freely with the laws of themarket and notbecause producers wanted to lock prices in at a particular level. Financialsystemsandpoliticalstructureswereunderenormousstrain.“Exorbitantpricescanonlydistorttheworldeconomy,runtheriskofworld-widedepression,andthreaten the breakdown of order and safety.” He admitted it was not easy toavoiddiscussingtheissueofoilwithoutresortingto“doomsdaylanguage. . . .Thewholestructureofoursocietyrestsupontheexpectationofabundantfuelatreasonable prices,” an expectation that “has now been challenged.” Thepresidentrefusedtoruleouttheuseofforcetostoptheescalationinoilprices.“Throughouthistory,nationshavegonetowarovernaturaladvantagessuchaswater,orfoodorconvenientpassagesonlandandsea,”hesaid,whileconcedingthat “war brings unacceptable risks for all mankind.” Ford’s speech wasdescribedbyTheWall Street Journal as “harsh and even threatening”with “athinlyveiled—andunspecific—threatofpossible retaliationagainst anynation

thatseriouslydisruptstheU.S.economybyusingoilasapoliticalweapon.”HenryKissinger and Bill Simon delivered equally hard-hitting speeches on

thesamedaytodrivehometoproducersthemessagethatthepresidentandhisinner circle were speaking with one voice. “What has gone up by politicaldecisioncanbereducedbypoliticaldecision,”KissingertoldtheUnitedNationsGeneralAssembly. “Oil prices cannot go up indefinitely. Strains on the fabricand institutions of the world economy threaten to engulf us all in a generaldepression....Theworld’sfinancialinstitutionsarestaggeringunderthemostmassive and rapidmovements of reserves in history. And profound questionshavearisenaboutmeetingman’smostfundamentalneedsforenergyandfood.”AseniorU.S.officialtoldreporters:“Yesterday’sactionswereasignal...thatanimportantbattlewillbefoughtonthisissue.Uptonowwe,andthey,thoughttheproblemwouldgoawayorthatsupplyanddemandwouldcomeintoplay.”WhileKissingerkeptacloseeyeoneventsinLisbonandRome,BillSimon

wasanxiouslymonitoringthehealthofAmerica’sbanks.Treasury’sworst-casescenario was not a Communist takeover of Southern Europe but a bankingcollapse at home.Another big increase in oil pricesmight lead to “economiccatastrophe”overthewinter.Treasurywarnedof“adrasticbusinessdeclinewithdepression-levelunemployment—thankstothetraumaticimpactontheWestofwildly rising oil prices.” Ten months earlier the Bank of England had beenforced to step in andbailout twoBritishbanksdrainedbypanicked investorsrushing to reclaim their deposits. The crisis had left the City of London,TheEconomist reported at the time, “on the brink of a terrifying collapse ofconfidencein thebankingsystem.”Morerecently, thefailureofbanksinWestGermany had startled financial analysts. In September 1974, the samemonththat Franklin National, the forty-seventh-largest U.S. bank, ran into trouble,representativesfromtenWesterngovernmentsmet toagreeonthetermsunderwhichtheywouldbailoutbiginternationalbanks“indangerofsuccumbing tofinancial pressures.”What if these were not isolated events but the first in acoming wave of bank failures? Simon, like Kissinger, worried about fallingdominoes, specifically “skyrocketing escalation of energy costs [that] willgeneratecriticalbankfailuresinWesternEurope,whichwillspreadtoAmericanbanks and American businesses bringing a flash-fire business decline withunemploymentexceeding10percent.”The Ford administration’s energy offensive provoked outrage in theMiddle

East. “America Warns the Arabs, Threatens Nuclear War over Petroleum,”blared the headline in the Lebanese newspaper Al Sharq. “Ford Threatens toSeizeArabOilbyForceofArms,”declaredasecondpaper.ButSaudiArabia’sSheikhYamanididn’tseeit thatwayatall.“Itiscallingforcooperationrather

than confrontation, and emphasized the danger of confrontation,” he toldreporters inChicago.“Iwasamazed tosee themedia interpret it inadifferentway. I think the President’s statement is a well-balanced statement because itpinpointstheproblem.Hewastalkingaboutaperiodofinter-cooperation.”Iran’semperorthoughthesmelledabluff.MohammadRezaShahwasinthe

Australiancapital,Canberra,whena reporter at theNationalPressClubaskedhimtocommentonPresidentFord’sremarksfromDetroit.TheShah’shaughtyreplywasalltooquicklyflashedaroundtheworldbythewireservices.“Noonecandictatetous,”hefamouslydeclared.“Noonecanwaveafingerbecausewewillwave a finger back.”He again demanded parity between oil prices and abasketoftwentytothirtyothercommodityitems:“Iftheworldpricesgodown,wewillgodownwithoilprices.Butiftheygoup,whyshouldwepaythebill?”He should have stopped there. He announced that Ford’s speech wasunacceptable to the Iranian people: “We will be ready to provide our energyresourcesagainst theWestinghousesandGeneralMotorsandGeneralElectricsandalltheothergeneralstheyhave.”WhenhereturnedtoTehrantheShahandCourtMinisterAlamtalkedabout

hisdecisiontopubliclyslapdownanAmericanpresident.ItwassomethingheneverwouldhavedareddowhileNixonwasinpower.TheShahhadrespectedandfearedNixon.“Fordisanutterbooby,”hedeclared.“Hedoesnothingbutrepeat whatever cretinous nonsense he’s fed by Simon.” Alam replied that“Kissingerwastherealpowerbehindthethrone,”aremarkthattheShahfoundagreeable.AsKissingerwastheShah’sgreatadmirertheyfelttheyhadnothingtoworryabout.Still,theyshouldremainontheirguard.“Pridecomesbeforeafall,”theShahcontemptuouslysaidofKissinger,“althoughinhiscaseit’smoreconceitthanpride.”JustafewyearsearliertheShahhadbitterlycomplainedtoAmbassadorDouglasMacArthurthatPresidentNixonstillhadnottakenhimuponhisoffertovisitTehran.NowhefeignedindifferencewhenhewastoldthatArdeshirZahedihadapproached theWhiteHouse to suggest thatGeraldFordstopoffinTehranonhiswaytoasummitmeetingofWesternleadersinTokyo.HewasmuchmorepreoccupiedwithplanningtheforthcomingvisitofBritain’sQueenElizabeththeQueenMother.

HEWASOURBABY,BUTNOWHEHASGROWNUP

ThePahlavitouroftheFarEastwasasmashingsuccess.AstopoverinNewDelhiwasrequired. Indiawasnowamemberof theatomiccluband theShah

waseagertopatchuprelationswithIndiraGandhiandenterintotradedeals.Hewanted to court Australia, a country he identified as a potential partner andemergingpowerintheIndianandPacificoceans.ThePersiancaravantraveledthroughSingaporeand Indonesia,andas far southeastasNewZealand,whoselambanddairyproductswereexpectedtofeedthegrowingranksoftheempire’sburgeoningmiddle class. In the cities ofAustralasia the imperial coupleweretreated like rock stars. There was a concert at the Sydney Opera House,banquets, a day at the races, and in Melbourne a horse-drawn carriage ridethrough streets lined with cheering crowds. Farah was a particular draw. HergoodworkshadearnedhertheinformaltitleofIran’s“WorkingEmpress,”andher renownedbeautyandeffortlesslystylishwardrobegarneredagreatdealofattention.Behind the glamour of the state visits was a push by the Shah to project

IranianimperialpowerfromTehrantoWellington.Hemmedintothenorthandwest,Iranshouldpivotsouthandeastinsearchofallies,influence,andmarkets,astheShahsawit.HeenvisionedanewregionalordercomprisedofIran,Israel,Ethiopia, SouthAfrica, India, Indonesia,Australia, andNewZealand.Buoyedbythecrowdsandheadlines,theShahcorrectlysensedapowervacuumintheFar East in thewake of theAmerican drawdown in SoutheastAsia. If it wasleadershipthesepeoplewanted,theheirtoCyrustheGreatwashappytostepinandgiveittothem.Hehadalreadycalledforacommonmarketbindingregionaleconomies. In Canberra he proposed a “military understanding,” a collectivesecuritypactthatwouldkeeptheIndianOceanfreefromU.S.andSovietnavalrivalry,enabling it tobe jointlypatrolledby the IranianandAustraliannavies.The Shah spent time courting Prime Minister Gough Whitlam because theAustralianhadtwocommoditiestheShahwanted:uraniumandbauxite.The Shah owed Iran’s rise to regional power status to RichardNixon,who

providedhimwiththegunsandmoneytopursuehisambitions.TheIranianalsoowedhisatomicdreamstotheAmericans,whohadhelpedsavehisthrone.Afterthe1953couptheEisenhoweradministrationprovidedIranwithasmallnuclearreactorunderthetermsofitsAtomsforPeaceprogram.“Itwasprimarilyusedfor university research,” said Dr. Akbar Etemad, the president of the AtomicEnergyOrganizationofIranfrom1974to1978andthemanwidelyregardedasthefatherofIran’snuclearprogram.“Then,intheearly1970s,theShahcametotheconclusionthatIranshoulddevelopitsnucleartechnology.Weneededmorepower plants to generate electricity: the populationwas increasing and peoplewereusingmoreelectricitythanbefore.”PresidentNixonhadrespondedtotheseconcernsin1972whenhesecretlyagreedtoselltheShahnuclearpowerplantsandfuels.WhenIran’soilincomequadrupledayearlater,theShahwasfinally

free to pursue his ambition of acquiring the atom.The next year Iran and theUnitedStatesenteredintoformaltalks“withthepreconditionthat[Washington]shouldhavecompletecontroloverournuclearfuelcycle,”recalledDr.Etemad.In1974theShahannouncedhisintentiontobuyeightnuclearpowerplantsfromtheUnitedStatesandfivefromFrance.Fromtheoutset,SecretaryofDefenseJamesSchlesinger,whomFordhadalso

kepton,forcefullyregisteredhisconcernsaboutIran’snuclearprogram.Beforetaking over at Defense, and before his even briefer stint as CIA chief,SchlesingerhadservedaschairmanoftheAtomicEnergyCommission.“IwasresistingtheeffortsofAmericanfirmstosellreactorstoThirdWorldcountries,”he recalled, noting that it “irritated some ofmy fellow commissioners on theAtomic Energy Commission who thought it was our job to go out and sell.”Schlesinger’s view was simple: “Any sales that we make should be in theAmerican interest and not in order to buttress the balance of payments.”PentagonanalystssuspectedthattheShah’smotiveswerenotentirelypeaceful.TheyquestionedwhatwouldhappentoIran’snuclearprogramifhediedorwasremoved from power. The Shah did nothing to ease their fears when in June1974hegaveaprovocativeinterviewtoaFrenchjournalist.AskedwhetherIranwould one day possess a nuclear weapon, the Shah boasted, “Certainly, andsoonerthanisbelieved.”“I always suspected that part of the Shah’s plan was to build bombs,” Dr.

Etemadlateradmitted.AflurryofcablesfromEmbassyTehransoughttoassurethe White House and the Pentagon that the Shah had been misquoted.AmbassadorHelmsevenpeddledtheShah’sdisingenuouslinethathehadbeenunfairlyquotedbecausehis remarkswere“off thecuff.” ItwasapreposterousattemptbyHelms tocoverupagaffe that revealed toomuchabout theShah’sultimatestrategicambitions.ThePentagonstiffeneditsresolvetoopposesharingnucleartechnologywith

Tehran.TheShahwantedtobuildanuclearreprocessingplantinIran.“At thattime, reprocessingdidnothave significant commercialpotential,” reported theBulletin of the Atomic Scientists, “but it did enable scientists to recoverplutoniumfromnuclearfuelonceithadbeenusedinapowerreactor,andthatplutoniumcouldbeusedtomanufacturenuclearweapons.”“If Iran were to seek a weapons capability, it is noted that the annual

plutoniumproductionfromtheplanned...Iraniannuclearpowerprogramwillbeequivalentto600–700warheads,”warnedaninternalreportpreparedfortheassistantsecretaryofdefense.“AlthoughIraniscurrentlystable,thatstabilityisheavilydependentontheShah’sremaininginpower.Inasituationofinstability,domesticdissidentsorforeignterroristsmighteasilybeabletoseizeanyspecial

nuclearmaterialsstoredinIranforuseinbombs....Anaggressivesuccessortothe Shah might consider nuclear weapons the final item needed to establishIran’scompletemilitarydominanceoftheregion.”American intelligence andmilitary officials watched with great interest the

Shah’s triumphs overseas. In the minds of some the Shah was becoming toopowerfultooquickly,whilethePersianGulfwasdescendingintoanuncheckedarms bazaar. The Defense Department had been quiet for two years on thesubjectofunrestrictedarmssalestoIran.ThatchangedonSeptember25,1974,whenSchlesingerpubliclydisassociatedhimselfandhisdepartmentfromarmssales to Iran and Saudi Arabia. “I should make it meticulously clear that theDepartmentofDefensedoesnothaveitsownpolicieswithregardtothesaleofarms,” he told reporters at a press conference. “In general,military assistancerestsunder thepurviewof theSecretaryofState.Weare theadministratorsofthe programs.”Schlesingerwas also taking a veryhard look at theShah. “Bymid-1974, the shape and scope of the Shah’s arms purchases were arousingconcernintheDepartmentofDefense,”concludedasecrethistoryofU.S.-IranrelationspreparedsixyearslaterforPresidentJimmyCarter’sNationalSecurityCouncil.“ThisconcernwasreflectedinaninternalmemorandumofOctober3,1974,which stated, ‘Thereare sufficientnegative indicators in relations to theShah’s prospects to prompt the USG [United States Government] toward asomewhatmorecautiousandguardedrelationshipwiththeShah.’”The Shah’s ambitions caused concern at the CIA. As one perplexed U.S.

intelligenceofficialremarkedataboutthistimeoftheproudfifty-five-year-oldKing of Kings, whose throne the agency had helped to restore, “Hewas ourbaby,butnowhehasgrownup.”ThespyagencyconductedananalysisofIran’seconomyinOctober1974that inhindsightreadslikeadistressflare.TheCIAhadalwaysbeenskepticaloftheShah’sfinancialacumen.Intelligenceanalystsnow concluded that the world’s fastest growing economy was having troubledigestingitsbillionsofdollarsinoilrevenues.Iran’seconomyhadtakenofflikeaboosterrocketbutnooneknewwhereitwouldlandorhowharditwouldfall.“Thelatestsurgeinoilrevenueshascontributedtoanaccelerationintherateofgrowth,”reportedtheCIA.“Theeconomygrewby33%in1973andisexpectedto grow another 40% in 1974.” Thesewere astounding figures. “Oil revenueswill continue to exceed the economy’s absorptive capacity over the next fewyears.”SomuchmoneywaspouringintothedomesticeconomythattheIraniangovernmentcouldn’tspendit fastenough:“TheShah’sambitiousdevelopmentprogramandarmsbuild-uparecreatingdomesticeconomicproblems.”Inflation,skilledlaborshortages,andurbanunemploymentwereoccurring.Inflation was eroding the earnings of Iranians who were poorer and more

religious-minded.“ThecostoflivinginIran—wheremorethan60percentofthefamilieshaveasubsistencelevelincomeunder$15aweek—isjumpingalmostdaily and is expected to rise soon to 20 percent abovewhat itwas last year,”reportedTheNewYorkTimes inOctober1974.“Prices forstaple foods, textilegoods and home appliances have been soaring, in some cases to 100 percentabove last year’s levels. A black market has developed to circumvent theGovernment’s price controls.” The government was trying to keep a lid oninflationwiththehelpofexpensivesubsidiesofbasichouseholditems.Despiteits best efforts, “inflation still dissipates the income ofmany Iranians, leavingthemlittleifanythingtospareandfarbelowtheconsumptionlevelsofWesternnationswhosemoneyispouringintothiscountryinpetroleum.”TheCIAdidnottakethelogicalnextstep,whichshouldhavebeentostudy

theimpactaninflationaryeconomywouldhaveonpoliticalstabilityinIran.CIAdirector William Colby might have paid closer attention to Iran had he anyinklings about the Shah’s health. Just before his departure for Australia, onSeptember 9, 1974, theShahhad complained toCourtMinisterAlamabout arashonhis face.His spleenwasalsoenlargedagain.TheShahhad so farnotresponded to theFrenchdoctors’diagnosisofWaldenström’sdisease from lastMay. The Shah and Shahbanou opened the second Tehran InternationalExhibitionontheeveningofSeptember17.Thenextmorningtheywereduetodepart forNewDelhien route to theFarEast.While thequeenbusiedherselfwithsomelast-minutepacking,theShah’sFrenchdoctors,FlandrinandBernard,with a third colleague in tow, Professor PaulMilliez,were smuggled into thepalace through a back entrance. “Medically, the patient was still in excellentshape,buthis spleenhadgrown larger,”notedFlandrin.Thedoctorsaspiratedsamplesfromhisbonemarrow.Alamdescribeditas“averypainfulexercisebutnecessaryifthey’retomakeaproperlaboratoryanalysis.[HisImperialMajesty]chattedwiththemwhiletheywentabouttheirbusiness,recommendingthattheytakea look roundournewhearthospital.”Alamthought thisunwise,pointingout that if theywereseenina localhospital itmightgiverise torumorsaboutthe king’s health. The doctors decided to begin treatmentwith small doses ofchlorambucil,adrugprescribedtocombattheShah’slymphoma.Theydisguisedthe medication by placing the capsules in plastic containers that usually heldvitaminpills.ThenumberofindividualswhonowknewthattheShahwasbeingtreatedfor

blood cancer had likely risen to seven: the Shah; the three French doctors,Flandrin,Bernard,andMilliez;GeneralAyadi,theShah’sphysician;presumablythehigh-powered andunnamed Iranianwhowas close to theShahandwhosehome the French doctors stayed at during their visits; and Professor Abbas

Safavian,primaryphysiciantoAsadollahAlam.IfAlamsuspectedthetruthheneverleton.

IBEX,ORCHASINGTHEGOAT

In early 1974, flush with oil revenues, the Shah decided to build a newIranian-controlledcomplexofradar installationsthatwouldallowhimtolisteninonallcivilianandmilitarycommunicationsinthePersianGulf.ItisunclearwhethertheShahproposedtheconcepthimselforifitwaspresentedtohimbyAmbassador Helms. Either way, Helms took it upon himself to personallyshepherd the $500 million project—code-named Ibex after the horned alpinegoat—throughtheplanningandconstructionstages.Accordingtooneofthefewpublishedreportsever tomention theproject, Ibexenvisioned theconstructionofeleven groundmonitoring posts connected to six airborne units andmobileground units. In the initial stages fifteen CIA employees were sent to Iranundercover to act as an advisory team to the Iranian government. Four U.S.corporations,amongthemRockwellInternational,enteredintothebiddingwartowinthefirst-phase$50millioncontracttodesigntheproject’sspecifications.InNovember 1974 the bidderswere cautioned by theCIA not to pay Iranianmiddlemen to help their chances of winning the contract. At the time it wascommon practice for well-connected Iranian businessmen to help foreigndefense contractors win business at court in return for lucrative salescommissions.Itwastheirjobtogreasethewheelsbygreasingpalms.Executivesat Rockwell ignored the directive, which had been forwarded to the CIA byGeneralHassanToufanian,theShah’shighlytrustedchiefweaponsprocurementofficer.InJanuary1975RockwellhiredUniversalAeroServicesCo.Ltd.tohelpstateitscasetotheShah.UASCO’smailaddresswasapostofficeboxregisteredin Bermuda and its agent was Abolfath Mahvi, a well-connected Iranianbusinessman.InreturnforMahvipromisingtoprovide“thenecessarymarketingservices,”Rockwell agreed topayhima fee “ranging from5 to10percentofsales.”MahvistoodtomakemillionsofdollarsifRockwellwonthecontracttobuildIbex.OnFebruary17,1975, theShahdecided toaward thecontract toRockwell.

He was acting on the recommendation of the CIA advisory team that hadscreenedthefourcontenders.TheShahwasinsistentthatIbexandtheRockwellcontractremaintopsecret.HedidnotwanttoalertIran’sneighbors,particularlytheSovietUnion,totheproject.NordidtheShahwanttheIranianpeopletobereminded of his long-standing ties to the CIA.When he visited AndrewsAir

ForceBaseinMay1975heinspectedspeciallyoutfittedplanescarryingradars,airbornewarning and control systems thatwere referred to asAWACS.Theseaircraft, the airborne component of the Ibexproject, hadbeenbuilt to pickupandsendsignalstotheground-basedreceivingstations.IbexranintotroublewhenGeneralToufanianlearnedofRockwell’sdecision

tohireMahviasitsmiddleman.Toufanian,nostrangertointrigue,insistedthatthe U.S. Defense Department placeMahvi on a blacklist, essentially banninghimfromfutureinvolvementwithdefensecontractorsoperatinginIran.Toquelltheuproar,RockwellnotifiedMahvi thathis serviceswereno longer required.Therewasjustoneproblem:RockwellhadsigneditscontractwithUASCOforfiveyears.ThatleftRockwellliableforthegrandsumof$4,526,758.Acheckinthis amount was duly sent off to the Bermuda mail drop. Documents latersurfaced confirming that payments to themail dropwere then forwarded to aChaseManhattanbankaccountinGeneva.AWashingtonPostinvestigationlatershowed that the Ibexmoney trail led all overWashington,D.C., involving theCIAandvariousU.S.companies.Quiteapartfromfinancialirregularities,theIbexcontractwasremarkablefor

severalotherreasons.First,theDepartmentofDefensewasshutoutofIbex.ThecontractwasquietlyrushedthroughtheStateDepartment’sOfficeofMunitions,an obscure office that Kissinger used to handle special projects he deemedessential andwanted to keep tabs on. Ibexwas verymuch aKissinger-Helmsproject.Second,theIbexcontractallowedforRockwelltohireawayformerandcurrent National Security Agency and Air Force Security staff. Thisunprecedented breach in security protocol sent shock waves through theAmericanintelligencecommunity.OneformerNSAemployeedeclaredhimself“amazed” that the Ford administration would allow its own intelligencespecialists to put their skills towork for a foreign government. “Wecan’t saywhotheShah’stargetswouldbe,”oneunidentifiedofficialtoldNewYorkTimesreporterSeymourHersh.“WehavetoassumethatamongthepeopleinterceptedwouldbeAmericans—thoseworkingfor theMil[militaryadvisory]Groups inIranandelsewhereinthePersianGulf.”HepointedoutthatIbexmightonedaybeusedtospyonIsrael“andevenusedbytheIraniansecretpolice,SAVAK,tohelp locate dissidents inside the country and for other internal securityfunctions.”TheShahwasdistressedwhenTheNewYorkTimespublishedalengthyfront-

page exposé of the Ibex project on June 1, 1975.The article included enoughunnamed sources, anonymous leaks, and inside information to suggest that itcould have come only from top officials in either the CIA or at the DefenseDepartment. Ibexwasnowpublicknowledgeandnotonly to the thousandsof

IranianstudentsstudyingintheUnitedStates.Almostimmediately,theofficialnewspaperof theSovietCommunistParty,Pravda, swung into action.Pravdaretaliatedwithitsownfront-pagearticleremindingtheShahof the1962treatyforbiddingconstructionofforeignrocketbasesonIraniansoil.Pravdapointedoutthatin1960theSovietUnionhadshotdownaU-2spyplanethatflewoutofanAmerican spy base located in Peshawar, Pakistan, an action that led to thecollapseofasummitbetweenPresidentEisenhowerandNikitaKhrushchevandchilled superpower relations through the Kennedy years. Ibex was nottechnicallyaforeignoramissilebasebut theRussiansweredeeplyconcernedthat“itwill be built byAmericans andwill require the long-term presence ofAmericanpersonnel.”IbexcreatedariftbetweenIrananditsnorthernneighborandprovidedextremistgroupsinIranwithonemorechargeofpuppetrytolevelagainsttheShah.

AWALKINTHEHILLSOFTHEROSES

TheAmericanpublicwasunawareof thepolicydisputesandspy intriguesthatlayattheheartofAmerican-Iranianrelations.Itsconcernwasholdingontojobsandhomesas the recessioncausedbyhighoilpricesworsened.Over thewinter of 1974–75, America’s unemployment rate climbed to 7.1 percent andthereweremoreAmericansoutofworkthanatanytimesince1940.Twofacesamongthe6.5millionunemployedwereRonandJillStuber,young

newlywedsfromBrentwood,LongIsland.Ronwasaheavy-machinetechnicianand Jill a dental assistant. The Stubers had planned to travel to Iran for theirhoneymoon. Butwhen they read that the Iranian embassy inWashingtonwasacceptingjobapplicationsfromAmericanstohelpthegovernmentfillashortageofskilledlabortheStubersdecidedtopackupandmovetoIranforgood.Theyweren’t alone. By the spring of 1975 Ardeshir Zahedi’s embassy onMassachusetts Avenue was taking more than one hundred applications eachweekfromteachers,engineers,technicians,academics,lawyers,andaccountantslookingforwork.“Wearebeingflooded,”chortledanIranianconsularofficial.The Stubers joined the growing exodus of Americans moving to Iran, a

country theybelievedoffered them their best chance to liveout theAmericanDream.AninternalsurveyconductedbytheDepartmentofDefenseinJanuary1975 revealed that seventeen thousandAmericanswere already living in Iran,triple the number from just four years earlier and predicted to increase 20percent a year for at least the rest of the decade. Sixty-eight percent of theincomingarrivalswere attached to themilitarymission.A further 5,200were

doctors, Peace Corps volunteers, teachers, lawyers, accountants, constructionworkers, contractors, and husbands and wives joining their Iranian spouses.Defense traced the upsurge toNixon’s 1972visit andhis decision “toprovideadvanced weapons systems and uniformed technical assistance personnel toIran.”Americantrainersandtechnicians—thebluesuiterspromisedtotheShah—usuallyarrived in-countrysomeeighteen to thirtymonthsafteranarmsdealwas concluded. Based on current trends, and with almost $6 billion inexpenditure forU.S. armaments already signed for 1973 and 1974, amassiveinfluxofAmericannationalseventuallynumberingfiftythousandwasexpectedtoberesidinginIranduringthepeakyearsof1979–80.Tehran was also the major hub for Pan Am flights connecting European

capitals with major destinations in the Far East. Pan Am’s vast operationextended to training Iranian pilots, and air and ground crews. Its presenceexposed Iran toWestern tourismonamassscale for the first time.Then therewas thechance tomakesomefastcash.“Ourambition is tomakeasmuchofAmericaouthereaswecan,”saidthewifeofaBellhelicopterpilot.“Weoweittoourchildren.”IfthethousandsofAmericanswhodescendedonIraninthemid-1970sknew

nothingaboutIranianhistory,culture,language,religion,orpolitics,thatwasallright too. Once they settled into the American colony in north Tehran theseAmericansentereda rarefiedworldofcocoonedprivilegeunlikeany theyhadever known. For the first time in their lives they had servants, pools, tenniscourts, and country club memberships. They worshipped at a Presbyterianchurchdatingbacktothenineteenthcentury.Theysenttheirchildrentooneofthree exclusively American elementary and secondary schools, where parentshad over the years successfully resisted the introduction of Farsi and Persianculture studies.The childrenwere transported to school in sixty school buses.TheAmericanSchoolfieldedthreefootballteams,andacheerleadinganddrillteam. Football games were played under lights on Friday night against thedramaticbackdropof theElburzMountains.Americanhousewives shopped atthe commissary attached to the embassy grounds, the largest of its kindanywhereintheworld,andwheretheonlyIraniansadmittedweremembersofthe royal family. Everything Americans ate and consumed was airlifted orshipped in from home. They preferred to buy their Coca-Cola from thecommissaryeventhoughitwassoldonthestreetsoutsideathalftheprice.Americanuniversitiessufferingtheeffectsoftherecessionjoinedthemoney

chase and rushed to enter into joint ventures with their Iranian counterparts.GeorgetownUniversitysignedan$11millioncontractwithFerdowsiUniversityin Mashhad. George Washington University trained fifty-four Iranian army

officers in computer science. Harvard accepted a $400,000 grant from theIranian government to begin preliminary planning for a campus on the southshoreof theCaspianSea.NewYork’sColumbiaUniversityaccepted$361,000to conduct a three-month study for a huge new $500 million internationalmedicalcomplexinTehran.ColumbiawasalsohelpingIranplananewschoolofsocialwelfare.“Therearetonsofdollarsthere—it’slikeagoldmine,”exultedoneEastCoastcollegeadministrator.Washington encouraged the recycling of petrodollars and established joint

venturesofitsown.Kissingerbelievedthatthebestway,perhapstheonlyway,toretainsomeformofinfluenceovertheShahandIrannowthattheTwitchellfirewall had been breached, was to integrate the Iranian and Americaneconomies to such an extent that one could not function without the other.Kissinger’s“supereconomy”wouldswappetrodollarsforweapons.Butthatwasnot how the Shah saw it. “We’re spending so much money on U.S. militarysuppliesthatnoU.S.government,letalonethearmsmanufacturers,couldaffordtodenyus,” saidAlam.Economic ties led tomisunderstandingsonboth sidesabouttheabilityofeachtoinfluencethepolicyofitspartner.Many of the government-to-government deals had obvious dual civilian-

military purposes that held little immediate benefit to the Iranian people. TheFederalHighwayAdministrationsentoutteamstosurveyIranianhighways.TheFederal Communications Commission negotiated for a study of frequencyallocation.TheFederalAviationAdministrationsentthreehundredpersonneltosupport a $270million Iranian procurement package to coordinate Iran’s civilaviationauthority,navigationaids,andcommunications. InOctober1974, Iransigneda$4.5millionagreementwithNASAtobuildasatellitereceivingstationto monitor the NASA Earth Resources Technology Satellite. U.S. defensecontractors rushed to enter into co-productionprojects andopened factories inIran.Therewasa$1.5billioncontractwithBellHelicopterfortwohundredofits215s.EmersonElectricwouldbuildonethousandTOWmissilelaunchersinIran at a cost of $60million. Contracts tomake these items andmanymore,includingrocketsandlightweightfighters,inevitablymeantthathundredsmoreAmericansandtheirfamilieswouldhavetorelocatetoIran.Co-productionfittedintoKissinger’s grand plan to turn Iran into a giant regional arms depot fromwhichhecould insertorextractmenandmachineryatwill to imposeregionalorder.Iranian defense plants and military facilities were dispersed around the

country as a precaution against invasion. That meant American defensecontractorsandtheirfamilieswerealsorequiredtomoveoutofTehran,oftentoremote parts of the country deeply imbued in conservative Shi’a Islam. “The

majordistributionalchangeisoccurringin[Isfahan]andShirazwheretwolargeAmerican civilian defense contractor communities are growing,” reported thePentagon. “Bell Helicopter and Grumman Aircraft will locate about 4,000American families there, probably by 1980. Thus, while the appearance ofAmericansoutsideTehranwasnotunusualintheearly1970s,bythelatterpartof this decade U.S. citizens will be a significant part of the Iranian ‘frontierareas.’” From the Shah’s perspective, thiswas ideal—Americanmen,women,and children based near the frontier areas were there to act as a trip wire orhuman shield to deter Soviet aggression and invite an automatic Americanresponseintheeventofinvasion.TheywerehisinsurancepolicyuntilIranwasstrong enough to stand on its own around 1980. But neither the incomingAmericansnortheirIranianhostswerereadyfortheculturaldisorientationandconfrontationsthatfollowed.“ManyAmericanfamiliesarepoorlypreparedforlifeinanalienculture,”reportedtheUnitedStatesInformationServiceevenasitnoted that Iranian universitieswere “producing a highly nationalistic and self-assertiveyoungergeneration,skepticaloftheAmericanculturalmodel.”Embassy Tehran’s economics counselor wasWilliam Lehfeldt. He liked to

takehisfamilyonroadtripsintotheIraniancountryside.OnetimetheymadeatripoutsideKashan,upintothemountains,“wheretheyharvesttherosepetalstomake attara roses.” The villages up in the hills had been converted fromZoroastrianism toShi’a IslambyRezaShah in the1930s.TheLehfeldtswerewanderingthroughoneoftherosevillageswhentheywereapproachedbysomelocal children. The children “came up to us and started talking to us andreflectedtheirteachingsfromthemullahs,whichwerethat‘youChristian,younogood;meMuslim,megood,’intheirmedievalEnglish.AmedievalmodicumofEnglish.”Itwasajarring,ifslight, incidentonanotherwisepeacefulspringday. “But the attitudes that they displayedwere symptomatic, I think, ofwhatcamelater,”hereflected.EvenhereamongchildrenlivingintheremotehillsoftherosesaboveKashantheAmericanswereunwelcome.

ITTAKESTWOHANDSTOCLAP

Intheautumnof1974SecretaryofStateHenryKissingertraveledtocapitalsin West Asia and the Middle East. Egypt, Syria, and Israel had still notconcludedadealtodisengagetheirforcesandenterintoformalpeacetalks.Theshattering events of late 1973—theOctoberWar, the oil embargo, and the oilshock—remained a constant source of open-ended conflict and grievance.DuringhistalkswiththeleadersofSaudiArabia,Pakistan,andIsrael,Kissinger

was also made aware of growing unease in the region with Iran. Nixon haddelegated to the Shah the powers of a gladiator and stabilizing presence. ButtranscriptsofKissinger’smeetingswithforeignleadersconfirmthattheShah’sneighbors were concerned with their neighbor’s sudden wealth and vaultingambitions,andincreasinglysawhimasasourceofmischiefandeveninstabilityinatinderboxregion.SaudiArabia.OnOctober13KissingerwasinRiyadh,wheretheinscrutable

KingFaisalprovedresistanttoKissinger’sflatteryandcharm.ThesecretaryofstateassuredthekingthatPresidentFord’sDetroitspeechhadnotbeendirectedat theArabpeoplebut at “alloilproducers,” anobvious reference to Iran.Heasked the king for help on oil prices and phrased his appeal in ways that hehopedwouldresonatewithFaisal’sreflexiveanti-Communism.“Thereisabigproblem which, if it continues, will contribute to the spread of Communismeverywhere in the world, and not only in the under-developed countries,”Kissinger explained. “In Europe, if Italy goesCommunist, Francewill followandthepoliticalmapoftheworldwillchange.Thiswillbetothedetrimentofthe Middle East. . . . We can solve our problems in the U.S. without acatastrophebutifWesternEurope,IndiaandJapangoCommunist,oraretakenover by other radicals, therewill be no peace for anyone.Our concern is notprofit ormoney but the entireworld structure. Thiswould bringCommunismintopowerandtheproducerswouldendupwithclientswhoareworthlessandwhosemoneyhadnovalue.”FaisalwasnotabouttoacceptblamefortheparlousstateofWesternEurope

ortheworldeconomy.“OurpoliciesareconsistentwithwhatyouhavesaidbutothercountriesincludingsomeofyourfriendssuchasIranandalsoKuwaitandAlgeria are not cooperating,” he lectured the secretary. “They canwield greatinfluence.Youshould intensifyyourcontactswith themandtry toget themtounderstandthesituationasyouandwedo.”“IwillseetheShahintwoweeksforthispurpose,”heassuredFaisal.“Your

Majestyisdoingallhecanandwerealizethatotherleadersmustsupporthimifheistobeabletolowertheprices.”FaisalinsistedthatKissingermustmaketheShahseereason.“Whileyouare

trying to convince others,we are trying our best,” he said. “I sentmy son toexplainaboutpolicytotheShah.IamalsoworkingwithAlgeria.But,Icannotdo it alone.”He thenadministered the final sting: “It takes twohands toclap.TheU.S.mustalsodoitsbest.”Pakistan.At theendof themonthKissingerwas in IslamabadwherePrime

MinisterZulifikarAliBhuttowasclingingtopower.AsBhuttosadlyexplainedto hisAmerican guests, hewas also the foreignminister and defenseminister

thesedays“sinceonehastomaintaintightcontrolinordertoavoidacoup.”TheShah’s recent rapprochement with India’s Indira Gandhi had caught the StateDepartmentbysurprise.Nixon’sdecisiontoarmtheShahin1972hadbeenatleastpartlyinfluencedbyhisconvictionthatIrancouldshieldPakistanfromitsneighbor. Now the Shah’s commitment to Pakistan’s survival seemed lessassured. Pakistan’s economy was also reeling from high fuel prices. “Ourbalance of payments is terrible and we need fertilizer which has becomeextremelyexpensive,”explainedBhutto.“Theincreasedoilpricesarehavingadisastrouseffect.”Bhutto’s complaint prompted Kissinger instead to launch into a vicious

appraisal of King Faisal and Saudi Arabia. Away fromWashington he couldspeak freely. “Faisal is trying to speed up the end of his own monarchy bybringing in foreign resourcesandexports and techniques,whichwill speedupradicalizationathome,andatthesametimeweakeningthecountriesabroadonwhomhemust depend for support,” saidKissinger. “He is alsomakingSaudiArabia more attractive for its covetous neighbors. I am saying this to you, afriendofFaisal, justas Iam.Butwhenhe tellsmeof themodernizationhe isencouraging,Ithink‘Ohyoufool.’”“I agree,” Bhutto exclaimed. “The monarchy cannot last with $29 billion

floatingaround!”Kissinger let the Shah increase oil prices because he believed oil revenues

wouldcushion thepro-Americanmonarchiesof thePersianGulf from internalrevolt and external invasion. But his cynical comment to Bhutto gave everyappearance of being a tacit admission that he knew his policy had resulted inblowbackandthatSaudiArabia’soilwealthnowmightactuallyincitedomesticrevolutionandprovokeforeignaggression—mostlikelyfromIran.Nixon’stwopillarsofstabilityintheGulfmightinfactattackeachother.Butratherthantakeresponsibility for a failed policyKissinger insteadblamed the victimwhenheassumedtheposeofafinger-waggingbystanderwhohaswatchedsomeonehepliedwithalcohol runa red light.Hewasanxious to soundoutBhuttoon theShah’s push for regional hegemony and his future prospects: “What are yourrelationswithIran?”“Verygood,” repliedBhutto.Hehad recentlyupset theShahby referring to

the Persian Gulf as the “Arabian Gulf” in deference to King Faisal, whosefinancial assistance helped keep the prime minister in power: “We have noproblemwiththenameoftheIndianOcean.ButifitcomestoacrunchwewillcallitthePersianGulf.Iranisourneighbor.SaudiArabiaisfaraway.”Kissingerpraised theShahas “amanwithbig conceptions,” thenmade the

followingjarringstatement:“TheShahmustunderstandthathissecuritywillbe

injeopardyifthehighpriceofoilkeepsup.”“Iwishwehadhismoneytobuysome.”“You have 75 million persons,” Kissinger said, trying to make Bhutto feel

better.“Youhaveaskilledpeoplesodonotdespair.Youareamartialpeople,butthereisnoevidenceofthePersiansfightinganyoneforthepast1,000years!Pakistan has great opportunities.” It was typical of Kissinger to make oneforeign chief feel better at another’s expense, though his suggestion that theIranianswerethefirsttobackawayfromafightraisedthequestionastowhyhehadapprovedtheShah’smilitarybuildupinthefirstplace.WhatdidKissingermeanwhenhetoldBhuttothattheShah’ssecuritywould

bejeopardized“ifthehighpriceofoilkeepsup”?Washereferringtoapossiblereduction in military cooperation? Perhaps the withdrawal of Nixon’s blankcheckonoilpricesandarmssales?WastheUnitedStatesplanningsomesortofcovertormilitaryactiontooverthrowtheShahifherefusedtocooperateonoilprices?While itwas the case that someofficials at thePentagon and theCIAwereraisingquestionsabout theShah’s judgmentand loyalty,noevidencehasemerged to suggest that replacing him or cutting off military aid was everconsidered.TheShahwasstillseeninWashingtonasastrongandessential—ifincreasingly uncooperative and belligerent—ally by most of the political andmilitaryestablishment.ThesecuritythreatthatKissingerenvisionedtotheShahwasnotexternalbutinternal,mostlikelyintheformofaleftistcouporuprisingignitedbyeconomichardship.KissingerwasnotconcernedaboutathreattothePahlavis from the Ayatollah Khomeini, who languished in exile in Iraq. HeagreedwiththeShahthatIran’sShi’aclergywasfinishedasadynamicforceinIranian life. What most worried Kissinger was the threat from the left, theemergenceofasecondMohammadMossadeghwhomighttakeIranoutoftheWesternorbit.Kissinger’s remarks toBhuttosuggest thathefeareda repeatoftheanti-Shahdisturbancesof1953and1963,thathenowacceptedthathighoilpricesposedasmuchathreattothestabilityofIranastheydidto,say,Italy—tooil producers as well as oil consumers—and that friendly authoritariandictatorships as well as Western democracies were in equal peril from theructionsoftheoilshock.ToBhutto,Kissingercomplainedthattheoilshockcouldhavebeenavoided

hadtheNixonadministrationacceptedtheShah’sofferin1969tobuymillionsof barrels of Iranian oil at a special discount. The deal promoted by HerbertBrownellhadbeen judged illegalunderU.S. lawbecause itviolated thequotalawsthatappliedtopetroleumimports.Kissingerknewthatthequotasnolongerexisted. “Ifwe hadmade that dealwewould not have trouble today,” he toldBhutto.Hewasreadytodealagain.

Iran:KissingerwasinTehranonNovember1topresideoverthefirstmeetingof the U.S.-Iran Joint Commission to coordinate trade and industrialdevelopment,militaryandsecurity,nuclearenergy,agriculture,andscienceandtechnology. The Iranian side was led by Hushang Ansary, Iran’s minister ofeconomicaffairsandfinanceandKissinger’sfriend.Kissinger’sreliefatbeingbackinTehran,amongpeoplewhosawtheworldthewayhedid,wasobvious.He admitted toAnsary that therewas an undercurrent of tension inU.S.-Iranrelations:

Icomeherewhenitisn’tclearfromtheAmericanpressandevensomeAmerican officialswhether I’mhere to negotiate a disengagement of ourforces[laughter]oranarmistice[laughter],orwhetherwe’redealingwithfriends.Butthepressisn’tmakingforeignpolicy.Ifwecouldcontrolthem,wecouldkeepthemfromwritingaboutme[laughter].SothepeoplewhomakeforeignpolicyconsiderIranatraditionalfriend,andourrelationshiphasasignificancefarbeyondourbilateralrelationship.Therefore,Iamnotheretodiscussthisorthattechnicalissue.

The“technicalissue”Kissingerwasreferringtowasthetouchysubjectofoil

prices. Hewasn’t about to let Bill Simon or Treasury ruin his chess game inWest Asia. To Ansary, Kissinger harked back to the golden days of theirrelationship when deals could be struck without having to go through the“experts”atTreasury,Justice,orDefense.ReferringtotheShah’s1969oildeal,the one he had earlier mentioned in his discussion with Bhutto, Kissingerannounced hewas ready to do business the oldway: “I owe it to our IranianfriendstopointoutthatIsubmittedthisproposaltoourexperts[atthetime]whosaidthiswasaslyIraniantricktocaptureabiggershareofthelimitedoilmarketand squeeze the Arabs out. This sounds ridiculous today. Our Iranian friendswere100%right,andwewere100%wrong.Soweshouldlookaheadintotherealfuture,andnotjustprojectalittlebitforwardlikebureaucrats.”“Kissinger flewin thisafternoonaccompaniedbyhiswife,”observedCourt

MinisterAlam.“HewasreceivedbyHIMbetweensixandeightthirty.AtdinnerhewasplacedtotherightofHMQwithmeonherleft.HewasfullofpraiseforHIM,sayinghowmuchhewishedPresidentFordcouldemulatehisexample.... Afterwards he and HIM resumed their private discussions, breaking off atmidnight.” Nancy Kissinger and Empress Farah watched a film while theirhusbands,joinedbyAmbassadorHelms,heldtheirdiscussions.Kissinger’s behavior at the imperial table—belittling his own president in a

foreigncapitalandinfrontofforeignheadsofstate—wasnotoutofcharacter.

MoreunfortunatewasthefalseimpressionhiscommentsmayhaveleftwiththeShahaboutFord’squalitiesasamanandasaleader.Kissinger’sremarkshadtheunfortunate effect of undercutting Ford’s authority with an autocrat who onlyresponded to and appreciated power. It also left the Shahwith the false—anderroneous—impression thatFordwasnot amanofhisword.AsAlam’sdiarymakes clear, it was about this time that the Shah, followingKissinger’s lead,begandenigratingGeraldFordasa“hopelessolddonkey”andridiculinghimas“thatidiotFord.”HeevenrepeatedLyndonJohnson’ssourone-liner“thatFordwassothickhecouldn’tchewgumandwalkstraightatoneandthesametime.”In their talks, theShahexplained to theAmericans thatafall indemandfor

PersiancrudesmeantthatIranhadmillionsofbarrelsofunsoldoilonitshands.Ashehad tried todounsuccessfully in1969, theShahoffered to secretly sellsurplus petroleum to theUnited States at a discounted price. If Iran could beassured of an intact, albeit slightly diminished streamof oil income, theShahcould keep buying military equipment and pay for existing orders. Kissingerlikedtheidea.HewantedtobreakOPECwithoutharmingIran’seconomy.TheShahandKissingeralsosawthedealasawaytoincreasetheirstrategicleverageovereachother.“AndoneofthenotionswehadwasthatwecouldbothbreakthecartelandhelptheShahbybuyingexcessoilfromhimatalowerpricethanOPEC charged but still help him with his economic policy,” recalled BrentScowcroft. The Ford administration had also decided to build an emergencystrategicpetroleumreserveasinsuranceagainstasecondoilembargo.Officialshoped the Shah’s stockpile of surplus oil could be used to build the reserve.Kissinger believed he could relieve the pressure on theAmerican and Iranianeconomies and at the same time block the effort by Simon and Yamani tostrengthenSaudiArabia’stoeholdintheAmericandomesticfuelmarket.TheShahandKissingerwereinagreement.Thedealtheystruckwasthatthe

ShahwouldsupportapricefreezeatthenextOPECministersmeetinginBaliinMay1975.Kissingerhaduntiltheendofthesummertoworkoutthedetailsoftheirplanandgetthepresidentandtheadministrationonboard.TheShahmadeitclearthatifadealwasnotforthcomingbytheendofnextAugust,hewouldhave no choice but to increase prices still further to cover his budget deficit.Iran’seconomycouldnotwait.BeforeKissingerleftTehranheheldapressconferencetoannouncethat“the

UnitedStates isnowattempting tohaltnew increases inoilprices, rather thantrying to negotiate lower prices.” Kissinger prized stability above all else.KnowingthattheShahwasimmunetopersuasionandtopressure,thebestthesecretarycoulddowas to try to extract a commitment from the Iraniannot toincrease oil prices until theworld economy had stabilized.Although no notes

remain of what was said in their meeting—most likely none was made—KissingerundoubtedlymadeitcleartotheShahthatadealonoilpriceswasintheirmutualbest interests.TheShahwouldhavebeenequally insistent thathecouldnotallowpricestoretreat.KissingeracceptedthatiftheShahwouldnotorcould not roll back oil prices he might at least agree to a price freeze onconditionthattheUnitedStatesacceptalevelbelowwhichpriceswouldnotfall.Thisbecameknownasthe“floorprice”anditdominatedpolicydiscussionsintheWhiteHouseoverthewinterof1974–75.AfloorpriceforoilwouldprotectIran’seconomyfromasuddenlossinrevenueifconsumerdemandintheWestcontinued todecline.Noteveryone in theFordadministrationwashappywiththis new policy. They regarded it as one more triumph of convenience overmoralityandyetanothervictoryfortheShah.Thepricingstructurethatkeptoilprices artificially propped up—that everyone knew resistedmarket forces andthelawsofconsumerdemandandsupply—wasnowtoallintentsandpurposesafait accompli. The Shah’s own self-satisfactory comments at the end ofKissinger’s tripwere cabled toU.S. embassies andback toWashingtonwhereoneanalystscrawled“B-S,”“F.Bull!”indoubleunderlineand“Notanymore!”inthemargins.Israel:Kissingerwasintheprimeminister’sresidenceonNovember7,1974,

for consultations with PrimeMinister Yitzhak Rabin. Rabin and hisministerswere anxious to hear more about the details of Kissinger’s meeting with theShah.“Howdowestandonoil?”askedDefenseMinisterShimonPeres.Israel’srateofinflationwasrunningwellover30percent.Kissingerexplainedthathisstrategy was to stabilize prices, then seek reductions while increasing theinsecurityoftheproducerssotheywouldnotthreatenanembargo.Kissingerwasconvinced that theadministration’s topstrategicprioritymust

be to prevent a second oil embargo during theMiddle East peace talks. TheShah, supplier of half of Israel’s oil,must be kept on theUnited States’ side.KissingerrevealeddetailsofhisjustconcludedtalkswiththeShahinTehran.HetoldRabinandPeres that theShahassuredhim that“hewould refuelus inanArab-Israeliwarifwecouldkeepitquiet.”TheShahsaid“hewouldlikeustoimproveourairliftcapabilityintheMiddleEast,notonlyforIsraelbutforhim.Becausehedoesn’tthinkwehavereliablebasesanywhere.Onwhichheisright.Iwill look into this.”Then therewas theShah’scooperationwith theKurdishinsurgencyinIraq.Duringhismeetingwiththeprimeminister,KissingerpulledoutanIsraelilistofweaponstheywantedtheShahtosendtotheKurds.RabinwasembarrassedwhenKissingerexplainedthatwhenhepulledoutasimilarlistwith$24millioninmilitaryhardware,theShahhadpulledoutthesameIsraelilistestimatedat$108million.WeretheIsraelistryingtopullafastoneoveron

theShah?“No,itwasnotgiven,”Rabinsaid.“Whywouldwedothat?”“It cost us tenminutes in that conversation comparing the lists,” Kissinger

replied.“Therewasoneitemonhis list thatwasn’tonmine,Iagree.Let’snotworryaboutit.”RabintoldKissingerthattheKurdishleadershipwasdisappointedintheFord

administration. It had expectedmoremilitary aid for its fight against SaddamHussein.Kissingerdidn’tdisagree.“EveryonearoundtheworldisdisappointedintheU.S.attitude,”headmitted.HereferredtoWatergateandtheresignationsofNixonandAgnewandtheperceptionithadcreatedofanAmericaweakenedbyitsowninternaldivisionsandunabletoprojectitswillininternationalaffairs.

I am not talking about Israel. With all these pressure groups. ThegeneralimpressionofknockingoffaPresident,thenaVicePresident,andalmostknockingofftheVicePresident–designate.IamnotblamingthisonIsraelortheJews.Thisisbecomingasecurityproblemfortheworld.. . .ThebiggestsecurityproblemintheworldisthedomesticweaknessoftheUnitedStates.IcankeepitgoingintheMiddleEastforafewmoremonthsbecauseoftheromanticcultofpersonalityandthebeliefIcansomehowdoit.

CHRISTMASEPIPHANY

FromKissinger’sperspectiveadealwithIranonoilpriceswasinseparablefrom theShah’s support for Israel and theKurds, contingencyplanning in theGulf,andpreventingIranfromjoiningafutureoilembargoagainsttheWest.Afreezeonoilpriceswas thebestdealhecouldget ifhewas tokeephisotherballs in the air. But the Shah continued to spring surprises on him. In earlyDecember the Lebanese weekly magazine Hawadess published an interviewwith theShah inwhichhehinted “at apossible shift of Iranianpolicy towardcloseralignmentwithmoderateArabgovernmentsontheArab-Israeliconflict.”AccordingtoWashingtonPostcolumnistsEvansandNovak,atranscriptoftheinterview “rushed to high officials [in Washington] via official cable fromBeirut” indicated theShahhaddelivered a threat to the Israelis: “Either Israelaccepts the implementation of the United Nations resolutions or there is noalternative to war. Of course, it will be our war. We support the Arab viewbecausetheArabsbecameavictimofforeignoccupation.”

Ourwar?TheShahhad lately become enamoredofPresidentAnwarSadatandhadagreedtopayastatevisittoEgyptinthenewyear.TheSadatsandthePahlavissubsequentlybecamegoodfriendsandtheShahbegantoentertainthenotionofanIran-EgyptaxisintheMiddleEast.TheShahmadeothercommentsin the interview that raised eyebrows back in Washington. He stressed thatAmerican military intervention in the Middle East to smash OPEC was“unthinkableas longasoil-producingcountriesmaintainedtheircohesion.”Hecriticized the Ford administration for failing to provide Egypt with more aid.Perhapsmost intriguingwas his prediction that “Iran needs only six or sevenyears to become amilitary power capable of defending the region.”By 1980,impliedtheShah,Iranwouldbeofftheleashforgoodandcouldstanduptoanygreatpoweroraggressiveneighbor.The Shah’s interview “is causing high-level consternation inside President

Ford’snationalsecurityapparatus,”reportedEvansandNovak.

UntilnowtheleaderoftheMiddleEast’smostpopulousandpowerfulcountry had dealt with Israel on special, almost intimate terms. But theShah’s latest pronouncement last weekend warned that the specialrelationshipwascomingtoanend....Whiledevoidofovertlynastyanti-Israel rhetoric, it raises serious alarmsconsidering themulti-billion-dollarAmerican arms sales toTehran andWashington’s policyof dependingonIranforwesterndefenseofoil-richPersianGulfandnorthernapproachestotheSovietUnion.

The Israeliswere puzzled and then concerned by the Shah’swooing of the

Arabworld’smostpowerfulleader,withwhomtheywerestilltechnicallyatwar.On Monday evening, December 23, Kissinger met with Israeli ambassadorSimchaDinitzandMordechaiShalev,aministerattachedtotheembassy.ItwasDinitzwhoturnedthediscussionaroundtotheShah:“ButthereisanothervisittoEgypt—theShah’s.Doyouknowanything?”“TheChristianScienceMonitorsayshewillofferarms,”promptedShalev.“It is inconceivable that he would do it without consulting us,” Kissinger

confidentlyassuredthem.Dinitzagreedbutsoughtdirectiononhowtorespond.“No,letmehandleit,”Kissingerassuredhim.“IwilltelltheShah.Heisan

admirerofmine.”TheKissinger-Dinitzconversationwastroublingforseveralreasons.Neither

theUnitedStatesnortheIsraeligovernments,bothofwhichenjoyedclosetieswith Tehran, knew the Shah’s long-term strategic objectives nor had specificintelligenceabout Iransendingguns toEgypt.Over thepastcoupleofmonths

HenryKissinger’s excuses for justifying the Shah’s oil and arms policies hadbeenunderminedby theShah’sownwords anddeeds.Bynow it shouldhavebeen abundantly clear that the Shah was pulling away from Washington topursue a foreign policy based on independent nationalism, asArdeshirZahedihadbeenadvocatingsincethelate1960s.YearsearliertheCIAhadwarnedthatas the Shah became more assertive the chances would increase that Iranianforeign policy goals would diverge from those of the United States.WhereasSaudi Arabia was making inroads in Washington, Iran was increasinglyidentifiedasasourceoftensionandinstability.Kissinger’sboast that theShahwashisadmireronlyaddedtothesurrealnatureofhisexchangewithRabin.Anxious to restoremomentumtoU.S.-Iranrelations, inDecemberKissinger

and Zahedi agreed that His Imperial Majesty should make a state visit toWashington inMay1975aspart of his tourof theAmericas.MuchwouldberidingonthesuccessofthevisitandthesecretdealonoilpricesthatKissingerand the Shah had worked out in Tehran the previous month. The Shah hadagreed to a price freeze for one year.Kissinger had not yet told the presidentwhathehadagreedtodofortheShahinreturn.

ChapterEightPOTOMACSCHEHERAZADE

“YouheardtheShahsoldouttheKurds?”

—PrimeMinisterYitzhakRabin,1975

“Tehrancontinuestobeworrisomefromthestandpointofsecurity.”

—UnderSecretaryofStateRoyAtherton,1975

LET’STRYTHELOW-COSTOPTION—WAR

ByJanuary1975adegreeofcompetition,howeverslight,wasreturning totheworldoilmarket.Thedaysof$17spotpriceswereover.ByFebruaryspotpricesof$9.50and$10hadbeenrecordedforPersiancrudes.Thesteepfalloffindemandfromrecession-hitWesternconsumersmeantthatoilproducersriskedpumping oil into a softeningmarket.MostOPECmembers accepted the newreality and reduced their output to avoid flooding the market with cheap oil.Theyreducedtheiroveralloutputfrom30millionto26millionbarrelsperday.Not everyonewent alongwith themajority view. The Saudis announced theyfavoredamodestpricereductionoverlessoutput.KingFaisalhadnointerestinproppingup theShah’smarketpriceandwouldhave letpricesdriftback ifhecould.Thenewuncertaintyinthemarket,withchangingpatternsofdemandandsupply, left Iran’s economy exposed. In August 1974 the Shah had approvedIran’s $69 billion Fifth Plan on the basis of an assured tight market thatguaranteedconsistentlyhighlevelsofpriceandproduction.Hisbiggestgambleyet,$30billioninspendingcommitmentsagainstonly$21billioningovernmentincome, meant Iran was now running a giant deficit. OPEC’s existing pricestructurewasafirewallthattheShahhadnochoicebuttodefendatallcosts—orrisktheimplosionofhisrevenuebase.In theUnitedStates, thedownwardpressure in theoilmarket inearly1975

offeredaglimmerofhopebutlittleconsolationtotheFordWhiteHouse.OverthewintertheAmericaneconomyexperienceditsmostseverecontractionsince

theGreatDepression.PresidentFordwaspreparedtoconsidertheShah’sunder-the-tableoffer tobuyIraniancrudeoilatadiscountbecausehe facedhisowndomestic financial and economic crisis. “A sense of emergency engulfsWashington, as a recessionary U.S. economy spirals down faster than almostanyonehadexpected,”reportedTheChristianScienceMonitorinthefirstweekof January.Whenbuildingconstructionground to ahalt, labor leaderswarnedthat “other segments of the economy are collapsing.” The Department ofCommercereportedthat“thenation’soutputofgoodsandservicesdeclinedbyan estimated 7½% in the last quarter of 1974, the biggest annual drop sinceWorldWarII.”NewcarsalesforDecemberplummeted26percentandDetroitautomakersshedseventy thousand jobson topof the300,000workers alreadylaidoff. “With fewexceptions, it was the bleakestNewYear’s since the coldwinters followingWorldWar II,” reportedNewsweek. “In towns fromBrest toBaltimore, long lines of the out-of-work waited patiently to sign up for theirunemploymentbenefits.”President Ford’s chairman of the Council of Economic Advisers, Alan

Greenspan, wrote a memo to Vice President Nelson Rockefeller urging theWhiteHousetoengageinsomestraighttalkwiththeAmericanpeople.Theoilshockhadaltered thenationaleconomy.Thehalcyondaysof the1960s,when“thebaseofoursocietyandthebaseofoureconomyweresecure,”andwhentheaverageAmerican family “rarely had national or international problems affecttheir daily lives,”weregone for good.Until now,Greenspan toldRockefeller,“Mostoftheworld’sproblemswereperceivedasquasi‘soapoperas’narratedbyWalterCronkite....NowtherealworldisbeginningtopressinontheaverageAmericanandcouldverywelldevastatefamilylifeandstandardsoflivingifwedonotconfrontourlonger-termproblemsandprotecttheUnitedStatesfromtheever increasing dangers to which it is becoming exposed.” America had toconfrontitsaddictiontooil.“Theimmediateproblemisoil,”Greenspanadvised,“althoughIwouldlistournationaldefensepostureandfiscalerosionasequallycritical.ItisimportantfortheAmericanpeopletounderstandhowtheoilcrisisemerged,whatitisandwhatareitspotentialconsequencesworldwideifwedonotcometogripswithit.”ThepressureontheWhiteHousetojolttheeconomybacktolifebeforethe

presidentranforelectionin1976wasintense.ALouisHarrispollshowed that86percentofAmericansdisapprovedofFord’shandlingtheeconomy.“Wearein trouble,”Ford conceded to anationwide television audienceon January13,1975.“ButwearenotonthebrinkofanotherGreatDepression.”Earlyoninhisadministration,FordhadrecalledDonaldRumsfeldfromhispostasambassadortoNATOinBrusselsandassignedhimthetaskofrestoringordertoaWestWing

splitbetweenFordloyalistsandNixon’sholdoverbaronsKissinger,Schlesinger,andSimon.Thenewforty-two-year-oldchiefofstaffhiredashisdeputyRichard“Dick”Cheney,thirty-four,anearnestconservativefromWyomingwhohadfirstworkedforhimin1969.“They’reliketwopeasinapod,”snipedonecolleague,and theirwayofdoingbusinesswas likened to aGermanpanzer “blitzkrieg.”“Mr.Rumsfeldhasbeenaccumulatingpoweratadizzyingpace,”observedTheNew York Times. “[Rumsfeld] has complete and total control over the WhiteHouse,”complainedoneFordaide.“HehascommandoverthingsbigandlittleanddecideswhoeatsintheWhiteHousemess,whogetsaWhiteHousecar,andnowhasevendecided that thecarpentershopshouldstop framingpictures forWhiteHousepeople.”Rumsfeldneverdeniedharboringpresidentialambitionsofhisownandat timesseemed tobepracticing for the role.Ononeoccasionreporters from the Chicago Tribune interviewed President Ford in the OvalOfficeandaskedhim“whohisnextCabinetchangemightbe.”ThepresidentsatmuteasasmilingRumsfeldansweredforbothofthem:“IneverdiscussCabinetchanges.”Fordquicklychangedthesubject.BillSimonwalkedintoRumsfeld’sriflesightinlateDecember1974whenthe

presidentconveneda two-daysummitofhiseconomicsandenergyadvisersatVail, Ford’s favorite getaway. The first family was spending the Christmasholidays at the luxury ski resort. Ford was under mounting pressure fromconservative Republicans, and especially from former California governorRonaldReagan,nottoaddtothenationaldeficitbyspendinghiswayoutoftherecession.SimonandArthurBurns, theFedchief,made thecaseagainstabigfiscalstimulus.Theywantedtokeepfederalspendingundercontrolandpreventthe deficit from going over $20 billion. BudgetDirector RoyAsh and Ford’spoliticaladviserstooktheopposingview.Drivenbymorepracticalconcerns—suchas thepresident’s election—theywere eager tokick-start the economy topreventevenhigher job losses.BillSimonalso fiercely resisted theKissinger-Shah proposal to establish a floor price of $8 for a barrel of oil. Kissinger’sviewpointwasrepresentedatVailbyUnderSecretaryofStateThomasEnders,aman not known for his humility, and he soon got into it with the treasurysecretary.“Thatproposal setoff theangriestdebate atVail, so intense that thepresident had to admonish officials not to interrupt each other,” with Simon“denouncing[theideaofafloorprice]asasoptooilcompaniesandpoliticallyimpossible.” Kissinger knew he couldn’t sell the idea without pitching it asbeneficialforAmericanworkersandbusinessinterests.InhispublicstatementsandlatertomembersofCongress,heavoidedallmentionofhowthefloorpricewouldhelpIran’seconomy.Instead,heinformedthemthatthemeasure

would protect American domestic production. We must protectdomesticproductionbytariffsorafloorpriceorsomeothermechanism....Iftheinternationalpricedropsbelowthedomesticpricethenourdomesticproducerswillbebadlyhurt.IfOPECuseseconomicwarfare,droppingthepricethatlow,itwouldmakeusmoredependentonthemandwipeoutourinvestment in alternative sources. Then theywould raise the prices againandwewouldbemoredependentonthemthanever.

When details of the talks at Vail appeared in the press, Rumsfeld andKissinger blamed Simon for leaking them and struck back hard. Reportscirculated that President Ford was “irritated” with his Treasury secretary.ReporterHelen Thomas predicted that Bill Simonwas “expected to leave theCabinet soon.” Columnist Joseph Kraft, who was close to Kissinger and astaunchadmireroftheShah,dismissedSimonassomeonewiththetemperamentand skills “of a Wall Street bond trader. . . . He has been the prisoner of atheologywhichseesmarketforcesastotallybenignandgovernmentasevil.Inthe interests of driving inflation from the market, he has repeatedly foughtagainstgovernmentprogramsdesignedtoeaserecession.Timeaftertimehehasgonepublicinwaysembarrassingtotheadministration.”Kraftwentsofarastopublishalistofnames“whowouldadddistinctiontotheCabinetandbringnewcompetencetotheTreasury.”WithBillSimon’sfuturehanginginthebalance,agreatclamorarosefromthe

conservative freemarketwing of theRepublican Party against the president’sdeficitspendingplanandinfavorofkeepingSimonon.RonaldReagan,Arizonasenator Barry Goldwater, and Senator James Buckley of NewYork rallied toprovideSimonand thebudgethawkswithcover.ArthurBurnsalso intervenedonhiscolleague’sbehalf.HetoldFordthatchangingtheguardatTreasuryinthemidstof theworst financialcrisis since1929wouldbe sheer“folly.”Withhisrightflankprotected,SimoncalledFord’sbluffandineffectdaredthepresidenttofirehim.“IamthechiefeconomicspokesmanforthePresident,”hedeclared.“If I am on the way out I have not been told.” Ford backed down, issuing astatementinwhichhesaidthatSimonenjoyedhisconfidenceandwouldstayathispost.ThisepisodeinoculatedSimonagainstfurtherattacksfromhiscabinetrivals.ItalsodiminishedFord’sstatureandemboldenedhisGOPcritics.High oil prices had exposed deep cleavages within the Ford administration

and ideological rifts within the conservative movement. Yet if there was onething everyone agreed on, it was the need to break OPEC. How to do that

becamethesubjectof intensedebate in theWhiteHouse.Highoilpriceswere“upsettingtheestablishedroutine,”recalledJamesSchlesinger.“AndthefailureoftheUnitedStatestocrackthewhipmeantthatthewhiphandonsuchmatterswaspassingawayfromtheUnitedStates.”TendaysbeforethemeetinginVail,fromDecember14to15,1974,thepresident’smenhadretreatedtoCampDavidtotakeasecondlookattheideaofsendingtheMarinesintothePersianGulf.Atone point the conference participants, having been informed that by 1985 oilproducerswouldhavemonetaryreservesof$1.2trillionattheirdisposal,readanote 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 thebeliefamongU.S.officialsthattimewasrunningouttoofferrelieftofinancialmarkets,thebanks,andflailingalliesinEuropewhoseeconomiesweretanking.InearlyJanuary1975KissingermadeheadlinesaroundtheworldwhenhetoldBusinessWeekthatalthoughtheuseofforcewas“averydangerouscourse,”theUnitedStateswaspreparedtouseallavailablemeans“topreventstrangulationoftheindustrializedworld.”Pressureon theWhiteHouse tomovedecisivelyon themilitary front came

firstandforemostfromtheoutridersoftheconservativemovement,theneoconswhoadvocatedbootsonthegroundintheMiddleEast tosecureAmerica’soillifelineandtheoutrightseizureofSaudioilfields.Mostneoconservativesweredisillusioned liberals turned right-wing policymavens, though not all becameRepublicans. The most prominent neoconservative on Capitol Hill wasDemocratic senatorHenry “Scoop” Jackson, a determined critic ofNixon andKissinger’spolicyofdétentewiththeSovietsandapassionatedefenderofarmssales to Israel. In January 1975 the neoconservative journal Commentarypublishedalengthyessay thatconsidered thequestionofmilitary intervention.The author proposed the outright seizure of the long strip of Persian GulfcoastlinethatextendedfromKuwaitdowntoQatarandthatheld40percentofworldoilreserves.Itsupposedlywouldbealogisticalcakewalkbecauseofthearea’s lightly populated desert terrain,which ruled out the danger of a secondVietnam.IftheSovietUniontriedtostopanAmericaninvasionoftheGulfbymakinga southward thrust from itsproxy Iraqdown intoKuwait, theauthor’ssolutionwasfortheUnitedStatestotakeKuwaitforitself.Theneoconservativeswereonarollandtheiropinionsweresharedbyothers

inWashingtonastheenergycrisisworsened.InMarch1975thecurrentaffairsjournalHarper’spublished“SeizingArabOil,”alengthyandprovocativeessayby an anonymous author with the Latin name “Miles Ignotus,” translated as“Unknown Soldier.” A long-running parlor game ensued as to who the realauthor or authors might be. In his essay, Miles Ignotus called for a ten-year

militaryoccupationofSaudiArabia’soil-richeasternprovinces.HepredictedaneasyvictoryforAmericanfirepowerinthePersianGulfwithvirtuallynochanceof a protracted guerrilla insurgency, sabotage of oil installations, or terrorism.Saudi oil fields, pipelines, port facilities, and airstrips could be seized with aforceofjustfortythousandmen.Theauthorof“SeizingArabOil”notedthattheonly country in the region capable of resisting aU.S. drive into theGulfwasIran.Hissuggestion:buytheShah’ssilencebyofferingupKuwaitonaplate:

Then there is Iran. Iran could in theory do a great deal to opposeintervention....WhynotthendiscreetlyaskwhethertheIraniansmightbewilling to “protect”Kuwait—and, incidentally, appropriate their oil. Thisoil would offset Iranians’ loss of revenue on their own output as pricesdecline.Tobesure,iftheIraniansmoveintoKuwaittheRussiansmaybetemptedtoinvadenorthernIran,butthiswouldbeahigh-riskoperationfortheRussians,sinceIranisalreadyaprotectedareaoftheothersuperpower,theU.S.

Theideathat theUnitedStatesmightbepreparedto tradeKuwait toIraninreturn for anAmerican occupation of SaudiArabia sounded farfetched.Yet itbrought tomind something James Schlesinger had said toHenryKissinger inearlySeptember1973:“TheIranianscouldtakeKuwaitbutnotcrosstheGulf.”TheHarper’sessay tookonnewmeaningwhen it turnedout tohavebeen thecollective effort of several officials in the Department of Defense officeresponsiblefordevelopingcontingencyplans.To thisday it remainsabrilliantexampleofleveragingthemainstreammediatoconductpsyops,psychologicalwarfare,againstanopponent—in thiscase the timidSaudi royal family,whichstill hesitated to challenge Iran’s oil pricing policy.The essayworked. “It hasdeeplyshockedtheupperechelonsoftheSaudiGovernmentandKingFaisal’sroyalfamily,”reportedTheChristianScienceMonitor.KingHusseinofJordancame to theWhiteHouse in thespringof1975and

relayedamessageofconcernfromtheSaudiroyalfamily.TheSaudicabinethadmet in special session to discuss the article. “Prince Fahd [of Saudi Arabia]askedmetoconveyonethoughtdirectlytoyou,”KingHusseintoldFord.“Heisstill deeply concerned about reactions in his country to any statements aboutpossibleU.S.interventionregardingtheSaudioilfields.Therewasanextensiveandseverepublicreactiontothis,andheasksifyoucandoeverythingpossibletoholdthepublicizingofthesestatementsdown.”

“I don’t think there have been any statements recently since the onemadesome time ago,” said the president, an apparent reference to Kissinger’s“strangulation” threat from January. The president had not read theHarper’sarticleorbeenbriefedonit.“PrinceFahdisverysensitiveonthisissue,”Kissingerexplained.“InMarch

there was an article inHarper’s magazine by someone labeled as a defenseanalyst from a think tank. The article was written under a pseudonym andpresentedargumentsfortakingovertheoilfields.ItcausedaseverereactioninSaudiArabia.”CriticsontheleftandrightofAmericanpoliticswerebeginningtograspthe

connection between high oil prices and arms sales to Iran. The conservativeAmericanEnterpriseInstitutethinktankpublishedamajorcritiqueofU.S.armspolicy toward Iran that concluded “excessive” arms sales were feeding theShah’s appetite for higher oil prices and hurting America’s national securityinterests.ArmssalestoIrangavetheSovietsanexcuse“torespondbyprovidingIraqwithmoremodernequipment.”Washingtoninsidersnotedthattheforewordto the report waswritten by former Secretary ofDefenseMelvin Laird, stoutdefenderoftheTwitchellDoctrineandalongtimeskepticoftheShah.TheAEIreport urged placing “well-defined limits on further sales to Iran” because “ifmoreweaponsareboughtthenoilisthemostlikelysourceofnewrevenuesforbotharmsanddomesticprojects.”ThewallofsecrecyaroundNixon’ssecretarmsandoildealswith theShah

was beginning to unravel. In December 1974, Representative Clarence Long,Democrat of Maryland, wrote to President Ford asking if it was true thatPresident Nixon had expanded arms sales to Iran “without national securitystudies of the possible consequences.” A month later The Washington Postreported that indeed it was true, that neither the Nixon nor the Fordadministration “has carried out a major National Security Council study ofwhere thePersianGulf arms racemight lead10years fromnow,as isusuallydonewith crucial issues.”OneofKissinger’s aides offered the rather startlingexcuse that the secretary of state viewed the sale of military equipment as“basically tactical, immediate foreign tools,” that he did not want to be tieddown “to a hard policy that could come out of a study.” ThePost quoted anunnamedPentagonofficialwhoconceded,“Thereisnopolicylimitonthedollaramounts of what the Shah can buy.” A second expert was askedwhat wouldhappen if the Shah used his weapons to “supersede, or erase, Americaninfluence” in the Persian Gulf and West Asia. His response was hardlyreassuring:“Thenwe’dloseourgamble.”

THESHAHNEEDSTHEMONEY

Kissinger initially designated George Shultz, Nixon’s former treasurysecretary,ashisbackchannelwiththeShahtodiscussthetermsoftheirbilateraloildeal.Shultzwasnow thepresidentanddirectorofBechtelCorporation, anengineeringfirmthatspecializedinbuildingnuclearpowerplants,dams,subwaylines, and in the case of Saudi Arabia an entire industrial city. The Bechtelconnectionmeant that private commercialmotiveswere now entangled in theadministration’s handling of sensitive policy discussions with the Shahconcerning oil prices and nuclear energy, and specifically nuclear enrichment.Kissinger viewed the Shah’s nuclear ambitions, as he did oil prices and armssales, in purely tactical terms. Shultz’s Iran trip had the dual purpose offollowing up on the oil talkswhile selling the Shah on the idea of building aU.S.-based uranium enrichment facility. “Also, at our instigation, approacheshave been made by the Bechtel Corporation to Iran to encourage the Shah’sinvestment(ontheorderof$300million)inaprivateuraniumenrichmentplantto be built in the United States,” Kissinger was reminded by an aide inDecember1974.Theadministrationcalculatedthatif theShahwentaheadandacquiredhalfhisnuclearpowerprogramfromtheUnitedStates,theequivalentofbetweensixandeightnuclearpowerplants, theUnitedStates stood toearn$6.4 billion in revenues. On top of that staggering sum, if the Shah followedthroughonhiscommitment tocover thecostsof20percentofaprivately runU.S.-basedenrichmentplant,theU.S.governmentstoodtoreapanadditional$1billioninreceipts.AnucleardealconsummatedbetweentheUnitedStatesandIranwouldbethe

crowning achievement in Kissinger’s ambitious plan to recycle Iranianpetrodollarsandintegratethetwocountries’economies.HeknewthatIran,asasignatorytotheNuclearNon-ProliferationTreaty,was“obligatedtoplaceallitsnuclearfacilitiesunderIAEA[InternationalAtomicEnergyAgency]safeguardsand to refrain from acquiring peaceful nuclear explosives.”YetKissingerwasalsoexplicitlywarnedbyhisadvisers thatpursuinganuclearaccordwith Irancarried with it a potential for conflict later on. Failure to bridge differencesbetween the two governments over the handling of nuclear fuels “could haveserious,aswellaslong-term,adverseeffectsinourrelations....ShouldwenotbeabletoresolveourdifferencestheshahislikelytoviewourunwillingnesstotreatIranaswehaveotherNPTpartiesasareflectiononIran’sstabilityandtheintegrity of its commitments as well as an indication that the U.S. cannot berelied upon because of the uncertainties of our political process.” Indeed, the

Shahmight conclude that he should look elsewhere for nuclear fuel supplierswhowere“lesscautious”thantheUnitedStates.Shultz was ushered into the Oval Office on February 7, 1975, to give

President Ford, Kissinger, Brent Scowcroft, and Charles Robinson, the undersecretaryofstateforeconomicaffairs,areportonhistalkswiththeShahatthePahlavis’skichalet inSwitzerland.“TheShahwasverycordialandanxioustodowhathecouldtobefriendly,”saidShultz.HehadcomeawayimpressedwiththePahlaviking.“ItwasabeautifulsettinginSt.Moritz.Wetalkedforanhourand a half. He is a broad-gauge, secure, and very impressive man.” ThisconversationwasFord’sfirstrealexposuretotheShahasamanandasaleader.Atranscriptrevealsheknewvirtuallynothingabouthimbutwascurioustolearnmore.“Wherewasheeducated?”thepresidentasked.“InSwitzerland,”Kissingerinterrupted.“Heisverytough-minded.”ShultzexplainedthattheShahwasofferingtoselloiltotheUnitedStatesas

part of a side deal. The twomen had not discussed the number of barrels orprice. But the Shah said Shultz wanted Ford to know that “the U.S. shouldregardIranashercountryintheMiddleEast.ItisimportanttotheUnitedStatesthatIrandevelops—Iranisawesterncountry.Heplacesgreatvalueonthe[U.S.-Iran]JointCommission.”“Iagree:heisprofoundlyafriendoftheUnitedStates,”Kissingeraffirmed.

“He is a cold-blooded realist.He needs themoney and there is a level belowwhichhewon’tcut theprice.”Kissingerexplained that theadministrationwasputting together a $10 billion program of investment with Iran that would beready for the president’s signature for when the Shah came toWashington inMay.HesecondedShultz’senthusiasmforthebilateraloildeal.PresidentFordknewverylittleabouttheShah.Heaskedhisage,andqueried

KissingeronhowtheShahhadcome to the throne.Kissinger,whowasvaguehimself,explainedthat“Hisfatherorgrandfather,wasasergeant,”andthat“[theShah] took over as a very young man and was kicked out by the leftistMossadegh.ThenMossadeghwasoverthrownwithCIAhelp,andtheShahwasputbackonthethrone.Herunsthecountryhimself.Heisatotalautocrat,butamanwith a global vision.He is convinced thatwe can’t fight anotherMiddleEastwarfromourbasicstructures.Soheisthinkingofbuyingsome747tankerstohelpus.HeisagoodfriendoftheUnitedStatesexceptonoilpressures.Hecan’taffordtocuthisoilproductionbecauseheneedstheincome.IfweshiftedsomeofourimportsfromSaudiArabiatoIran,wecouldincreasethepressureonSaudiArabia.”“Thepriceofoilislikelytoerode,”Shultzconfidentlypredicted.“Abuyers’

marketisreturning.Bilateraldealsareanindicationofweakness.”

From theoutset therewerequestionsabout the legalityof theUnitedStatesbuying oil under the table from a foreign government. “It was a tough issuebecause the U.S. government buying oil from another government andredistributingittotheprivatesectorwasanentirelydifferentarrangementtothemarketplace,” recalledFrankZarb,Simon’ssuccessoraschiefadministratorofthe Federal Energy Administration. Red tape hadn’t stopped Henry Kissingerbefore.But inWashington’sbravenewpost-Watergate era themerestwhiffofillegalitywould be enough to ignite a political andmedia firestorm. PresidentFordaskedZarbtoevaluatethemeritsofthedeal.Considereveryangle.Don’trush into anything.Above all, it had tomake sense from a financial point ofview. “My take on all of that was that [President Ford] really wanted todeterminewhetheritwasfeasible,whethertheeconomicswouldwork,whetherwewould get behind it and find away to get this oil at a discount toOPEC,therebyputtingsomepressureonOPEC,probablycreatingalittlestrainbetweenIranandtherestofOPEC,”Zarbrecalled.“Andif it lookedlikeitwasdoablefroman economics and logistical standpoint thenpursue the legal questions. IdidraiseitwiththepresidentandItoldthepresidenttherewasnolegalauthoritytodothisandIwasconcernedwithnewspaperleaks.”FordstillenjoyedclosetieswithlegislatorsonCapitolHillandsoheadvised

ZarbtoquietlytalktoSenatorHenryJacksonandRepresentativeJohnDingell,theDemocratswhooversawhis agency.Thiswould ensure “wehad air coverfrom those twoguysaswewerepursuing [thedeal],”Zarbrecalled.“The lastthing I wanted to do was to be sitting in Tehran and have this hitting thenewspapersandhaveanuproarontheHill.Sothepresidentauthorizedmetogotellthem.Andfromthatwegottheirprotection.Nottodothedealbutcertainlypursuethenumberstoseeifitwasdoable.”TheironyforKissingerwasthatoneofBillSimon’sprotégéswouldnowberesponsiblefornegotiatingthetermsofoneofhissecretdealswiththeShah—adealthatheldenormoussignificanceforbothmen.OverthenexteighteenmonthsZarbheldmeetingswithHushangAnsary,the

Shah’sministeroffinance,inavarietyofsettings,includingLondon,Paris,andTehran.AlthoughhewasnotintroducedtotheShahduringthisperiod,“Iwasinthesameroomwithhimatonepoint.”Ansary,heremembered,“wasaperfectlygoodnegotiator.Verysmart.HeclearlyhadtheearoftheShah.”ButKissingerwas unhappy with his colleague’s tough negotiating stance. Zarb neverunderstoodwhythetalksdraggedonformonthaftermonthwithnoresolutioninsight.“Therewasagreatdealofstressoverthistransaction,”heremembered.InlateFebruary1975KissingertraveledtoZurichtopursuetheoildealand

othermatterswiththeShah.Itwasameetingthatgarneredagreatdealofmedia

interest.EveryonewantedtoknowifKissingerwouldleavewithacommitmentbytheShahtoloweroilprices.Theworldeconomyhunginthebalance.Bothmenrelishedthedramaofthemoment.TheShahinterruptedhisskivacationatSt.Moritz to fly in by helicopter.Onlookers described him as looking tannedfromweeksofskiingintheAlps.Kissingerwasthirty-sevenminuteslatetothehotelwheretheyretreatedbehindawallofsecurity.“Swisspolicepatrolledtheairportandthestreetsofthecity,”reportedTheWashingtonPost.“Policewerestationedfivefeetapartalongtheroadwaytothehotel.”At the end of their talksKissinger and the Shah held a press conference at

whichtheIranianleaderconfirmedhewouldnotjoinafutureoilembargoandthatIranwouldkeepsellingoil toIsrael.“Wehaveneverboycottedanybody,”declared Iran’s king. “Once the tankers are loaded it is of no importance;wedon’tknowwhereitgoes.”KissingerregardedtheShah’spledgetokeepIsraelsuppliedwithoilasthemostimportantoutcomeoftheirtalks.HewasstilltryingtobrokeradisengagementagreementbetweenIsraelandEgyptthatwouldallowtheIsraelistopullbackfromtheirOctober1973forwardpositionsontheeasternsideoftheSuezCanal.TheIsraeliswerereluctanttowithdrawbecauseitwouldmeanhandingbacktheoilwellstheyhadcapturedatAbuRudeisintheSinaiin1967.Oilwasastrategicresourceandalsoanimportantsourceofrevenueforacountryfacedwith a balance of payments gap estimated at between$200 and$400million.TheShah’spledgemeant the Israelis couldno longer argue thatleaving Abu Rudeis would hurt them militarily. A financial aid package puttogetherbytheUnitedStateswouldmeanwhileoffsettheirbudgettroubles.Quite aside from the trade pact, the oil deal, and guaranteeing oil sales to

Israel, Kissinger and the Shah discussed another matter in Zurich whosesensitivityrequiredtheutmostdiscretion:thefutureoftheKurdishoperationinIraq. As with everything Kissinger did, the Kurds became part of a biggerpackagedeal,acarefullybalancedpieceofstrategicarchitecturethat,dependingonone’sviewpoint,resembledeitherabeautifullyconstructedAlexanderCaldersculptureoraprecarioushouseofcards.OnTuesday,March4,Kissingerbroughtgoodnews to theOvalOffice.He

saidthatheandtheShahhaddiscussedthebilateraloildealandalsoatradepactthat included American nuclear reactors to Iran worth $12.5 billion over fiveyears.“TheIranianstuff isgoingwell,”heexplained.TheShahhadagreed toselltheUnitedStates500,000–700,000barrelsofoiladayatapricebelowtheOPECprice,thoughtiedtomilitarypurchases.“Theoildealwillbringpressureonthepricestructure,becausethepurchaserswillhavetofindwhereelsetheycanmakeacutofthatsize,”saidKissinger.Kissingerwasgettingtoofaraheadofhimselfinclaimingsuccessforadeal

thathadyettobelegallysignedoffonandwhosetechnicalitieshadnotyetbeennegotiated.NegotiatorFrankZarbbegantoquestionthefinerpointsofthedeal:itwasbeginningtoresembleastraightoil-for-armsswap.

THEKURDSAREBETRAYED

Atmidday,onMarch9,1975,HenryKissingerwasridinginthebackofanofficialcarwithSyria’sforeignminister,Abal-HalimKhaddam.Kissingerwason a tour ofMiddleEast capitals.He had flown in fromSaudiArabia,whereKingFaisalhadconfidedtohimthathewas“frightenedofbeingassassinated.”The radicalArab tide exemplified by Syria’sHafez al-Asad, Libya’sQaddafi,and Iraq’s SaddamHussein was lapping at Faisal’s front door. Kissinger toldKhaddamthatheappreciatedthelavishwelcomelaidonbyhishosts,especiallytheroadsideflagsthatlinedtherouteintothecapital.“Whyarealltheflagsup?”hesaid.“Iappreciateit.Youdidn’thavetodoit.”Theforeignministersethimstraight:“It’sanationalday.”Itwas thebeginningofaveryroughafternoonfor theAmericandelegation.

KissingerhadflowntoDamascusinanefforttopersuadePresidentAsadofthemerits of joining the leaders of Egypt and Israel in signing a treaty to endhostilities. Three days earlier, at a summit meeting in Algiers, the Shah andSaddamHusseinofIraqhadmetforfourandahalfhoursandagreed tosettletheir differences. The Shah had agreed to turn off the CIA-backed Kurdishinsurgency. SaddamHussein reciprocated bymaking territorial concessions toIranontheriverboundariesatthemouthofthePersianGulf.TheIraqihadalsoagreed toallow IranianShi’apilgrims to cross theborder tovisit holy sites atKarbalaandNajaf.TheShah’sdecision to turnoff theKurdishoperationwasmotivatedby the

needtoeasetensionsonIran’snorthernborderwiththeSovietUnion,Baghdad’sally. During the Shah’s recent trip to Moscow, the Soviet leader, LeonidBrezhnev, had berated him for stoking superpower rivalries in the Gulf andmeddling in Iraq, and slammed his fist down on the table. He specificallymentioned Iranian support for the Kurds in Iraq and challenged the Shah’smilitary buildup in the Persian Gulf. The Shah was apparently affected byBrezhnev’sblunt-forcediplomacyandconcludedthattheKurdishoperationhadoutliveditsusefulness.HehadalsoconcludedthattheKurdswerelosinggroundand that Iran could not risk being drawn into open warfare with an Arabneighbor.ThecostsassociatedwiththeKurdishoperationnowoutweighedanypossible 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 anymisunderstandings over the matter.What did Kissinger say in response? “Hedidn’tsayanything,”rememberedZahedi.“Hisfacewentcompletelywhite.”OverthepastthreeyearstheroleoftheCIAinIraqhadmainlyconsistedof

providing theKurdish leadershipwith psychological support. The $16milliontheagencyspenton theoperationwasagood-faithgesture to theShahand toKurdish leaderMustafa Barzani. A postmortem conducted by the U.S. HouseSelect Committee on Intelligence concluded that the Kurdish leadership hadalwaysdistrustedtheShahandreliedheavilyonAmericanassurancesprovidedbyKissinger.TheUnitedStates“actedineffectasaguarantorthattheinsurgentgroupwouldnotbesummarilydroppedby[theShah].”U.S.participationintheKurdishoperationwasseenasyetmorerecompensefortheShah’swillingnessto host CIA bases on Iranian soil. Right at the outset the CIA and KissingerunderstoodthattheShahwouldmostlikelytradeintheKurdsiftheopportunityarose tosettle Iran’sperennialborderdisputewith Iraq.FromaCIAmemoofOctober 17, 1972: “[The Shah] has apparently used [another government’s]ForeignMinistertopasswordto[SaddamHussein]thathewouldbewillingtoallowpeacetoprevail[inthearea]if[SaddamHussein]wouldpubliclyagreetoabrogate [a previous treaty concerning their respectiveborders].”ACIAcablefromMarch 22, 1974, captured the cynicism of the whole operation when itdescribedtheKurdishnationas“auniquelyusefultoolforweakening[SaddamHussein’s] potential for international adventurism.” Mohammad Reza ShahmeanttostoketheconflictbutnottothepointwhereitmightinflameKurdishcommunitiesontheIraniansideoftheborder.“Neither[theShah]norourselveswishtoseethematterresolvedonewayoranother,”saidtheCIA.For threeyears theKurds fought.Theyendured thousandsofcasualties and

tremendoussufferingbutwereheartenedbyKissinger’spromisesofprotection.The secretary of state insisted they continue the struggle even when Saddamofferedapathtopeace.KurdishleaderMustafaBarzanifrequentlytoldtheCIAthat although he distrusted the Shah, when it came to the United States “hetrustednoothermajorpower”andassertedthatifhiscauseweresuccessfulhewas“readytobecomethe51ststate.”BarzaniwenttogreatlengthstoshowhisappreciationtoKissingerandevensenthim“agiftofthreerugsandlaterontheoccasionofDr.Kissinger’smarriage,agoldandpearlnecklace.”CongressionalinvestigatorsuncoveredamemorandumtoBrentScowcroftdatedMay20,1974,whichexplainedtheneedtokeepBarzani’sgiftstotheKissingersasecret:“Asyouareaware, therelationshipbetween theUnitedStatesGovernmentand the[Kurds] remains extremely sensitive. Knowledge of its existence has been

severely restricted; therefore, the fact that Dr. Kissinger has received this giftshouldbesimilarlyrestricted.”In Damascus, President Asad told Kissinger that the Shah’s decision to

abandon the Kurds was proof that Iran was distancing itself from Israel andmoving closer to theArabworld.Asad now saw no need to sign any sort ofdiplomatic bargain with Israel. He picked up on the theme of Americanimpotence in thewakeofVietnamandWatergate.“In the long runwebelieveAmericanswillhavetogiveuptheirsupportforIsrael,”hepredicted.“Wearenotgoingtowaitthatlong!Butit’sthenaturalthing:Americahasherinterests.BecauseforagreatpowertostandbyalittleaggressorisnotintheinterestsofAmerica. We can quote examples—countries that America has stood by butcircumstances forced America to stand aside and say goodbye to: Cambodia,Formosa, Turkey.” LikeVietnam andCambodia,which theUnitedStateswasalsoabandoning,Israelwouldonedayfinditselfcutloose.EventheShahwaslosing faith in American power and American promises. “Again, generallyspeaking,theArabsseethelongrunisfavorablefortheirinterests.Andtherearepossibilities,military and economic.For example, yesterday the eradicationoftheproblembetweenIranandIraq.RegardlessofdifferencesbetweenIraqandus,IregarditasastrategicvictoryfortheArabworld.”“Iagreewithyou,”Kissingeradmittedinwhatmusthavebeenamomentof

intensediscomfort.Kissinger’slongdaywasn’toveryetandtheworstwasyettocome.Heflew

directly to Jerusalem and the prime minister’s residence for a late workingdinnerwithPrimeMinisterYitzhakRabin,MinisterofDefenseShimonPeres,and other top Israeli officials. Kissinger told them about Asad’s confidentpredictionthat“historyisonthesideoftheArabs,”thatitwasjustamatteroftimebeforetheAmericanswalkedawayfromIsraelthewaytheyhaddiscardedTaiwan,Cambodia,Vietnam,Turkey,andPortugal.QuestionsaboutloyaltyandbetrayalwereclearlyonRabin’smindthatnight:

“YouheardtheShahsoldouttheKurds?”“I toldYigal [Allon, Israel’s deputy primeminister]; I told Simcha [Dinitz,

Israel’sambassadortoWashington]twoweeksago,”Kissingersaid.“Yes.”“I warned the Shah against it and he did it anyway,” said an embarrassed

Kissinger.ThecollapseoftheoperationshowedjusthowlittleinfluencehehadinTehran. “Thatwaspartof [Asad’s] reviewof the international situation.Hesaidthetrendswereinhisfavor....HewassortofimplyingthattherewouldbewarbetweentheArabsandtheUnitedStates.Hesaidhecouldaffordtolose50million[people]andweweren’t,sotheyhadanadvantage.Igottoughwithhim.

HementionedtheIran-IraqagreementwhichfreestheIraqistrategicreserve.Hesaid there were difficulties between him and Iraq but they could be bridgedeasilyforthesakeofanti-Israel.”TheIsraelishaduntilnowreliedontheKurdishoperationtokeepIraqiforces

pinneddownonthecountry’seasternfrontierwithIran.Withthatpressurenowrelieved Saddam was free to move his troops and tanks to the west withinstriking distance of Israel. Israeli perceptions of trust, a matter of vitalimportance to a small country surrounded by hostile states, had been rudelyviolated.“Therearethreeeventsrecentlythatarepsychologicalpoliticalfacts,”Rabin

explainedtoKissinger.“First,thefactthattheShahtooksuchadecisiontoagreewiththeIraqistosellouttheKurds.Thoughthatisnotknowntothepublic,it’sknowntous.Ithastobetakenintoaccount.”“Iagree,”saidKissinger.Underthecircumstanceshecouldsaynothingelse.“Ifhalfouroilcomesfromhim,ifsomeoneonwhomwerelytakesawhole

different outlook here . . .” The other two points were a recent Palestinianterrorist attack in Tel Aviv and the injection of Syrian troops into parts ofLebanonunderthecontrolofYasserArafat’sPLO.“Thosearethreecompletelynewpoints,”saidRabin.Ashesawit,theShah’sdecisiontoturnoffthecovertoperationwithoutfirstconsultinghimmeantthathecouldnotaccepttheShah’sguaranteestokeepIsraelsuppliedwithoilinanyfutureArab-Israeliconflict.Todo sowouldnotonlybe foolish—it couldbe suicidal.And if Israel couldnotaccept 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 goinganywhere.Thedealwasoff.Kissinger conceded that the Shah had introduced a dangerous element of

uncertainty and distrust into the peace process. “Letme be fair. Letme be ashonestasIcan,”hepleaded.“I’llgiveyoumyjudgment,butmyjudgmenthastoincludethepossibilityofSadat’schangingcourseinthefuture.WhattheShahdid,he’scapableofdoing....IwasshakentoobytheIraniandecision.Becausewehadparticipatedinittoo.Thebrutalityofit.”InthehillcountryofIraqtheslaughterwasalreadyunderway.Thedayafter

theShahsealedtheirfateinAlgiers,SaddamHusseinlaunchedasurpriseattackthatoverwhelmedtheKurdishresistance.OnMarch10MustafaBarzaniissuedafranticappeal to theCIAforhelp:“There is confusionanddismayamongourpeople and forces. Our people’s fate in unprecedented danger. Completedestructionhangingoverourhead.Noexplanation for all this.WeappealyouandUSG[UnitedStatesGovernment]interveneaccordingtoyourpromisesandnotlettingdownally,tosave[Barzani’s]lifeanddignityofourfamilies,tofind

honorablesolutiontoourproblem.”TheCIAstationchieffollowedupwithhisown plea to headquarters for something to be done. “Is headquarters in touchwithKissinger’sofficeonthis;ifUSGdoesnothandlethissituationdeftlyinawaywhichwillavoidgiving[theKurds]theimpressionthatweareabandoningthemtheyarelikelytogopublic.[TheShah’s]actionhasnotonlyshatteredtheirpoliticalhopes; itendangers thousandsof lives.”Afterasking forsomesortofinterventionthestationchiefconcluded,“Itwouldbethedecentthingtodo.”Barzani also wrote to Kissinger. The lights were going out all over Iraqi

Kurdistan.Hispeoplewerebeingbutchered.HestillhadnoideathatKissingerhad known for two weeks about the Shah’s intention to betray them yet hadgiven no warning. Barzani plaintively wrote that “our hearts bleed to see animmediate by product of their agreement is the destruction of our defenselesspeopleinanunprecedentedmanneras[Iran]closeditsborderandstoppedhelpto us completely andwhile [Iraq] began the biggest offensive they have everlaunchedwhich is now being continued.Ourmovement and people are beingdestroyedinanunbelievablewaywithsilencefromeveryone....Mr.Secretary,weareanxiouslyawaitingyourquickresponseandactionandwearecertainthatthe United States will not remain indifferent during these critical and tryingtimes.”Barzani never heard from Kissinger. “No reply has been received from

Secretary of State Henry Kissinger to the message from [Barzani],” the CIAstationchiefcabledtheStateDepartmentonMarch15.Hedescribedscenesof“acute anxiety” amongKurdish leaderswho sought an extensionof the cease-fireand“thepeacefulpassageof...refugeestoasylum....HenceiftheUSGintends to take steps to avert a massacre it must intercede with [the Shah]promptly.”TheFordadministrationmadenoefforttorescuetheKurdsorextendhumanitarianaidtothe200,000refugeeswhopouredovertheborderintoIran.Even when the Shah forcibly repatriated forty thousand Kurdish women andchildren to Iraq, where they awaited almost certain incarceration, torture, andmassmurder,“theUnitedStatesGovernmentrefusedtoadmitevenonerefugeeintotheUnitedStatesbywayofpoliticalasylumeventhoughtheyqualifiedforsuchadmittance”concludedacongressionalprobe.AskedlaterbycongressionalinvestigatorstojustifyhisinactionKissingerdeliveredacynicalanswerthatsaidmoreabouthismethodsthananymemoirevercould:“Covertactionshouldnotbeconfusedwithmissionarywork.”TheAlgiersaccordbetweenIranandIraqhadtwoothermajorconsequences.

Kuwait was left pitifully exposed to its neighbor’s predations. OnMarch 19,Kuwaiti ambassador Salem al-Sabah met privately with President Ford.Kissinger’sabsencemayhaveencouragedhimtospeakwithagreaterdegreeof

candor than usual. Iraq laid claim to Kuwaiti territory and its oil. TheambassadorfearedthatSaddamHusseinwassharpeninghiskniveswithaviewtoheadingsouth.“It’slikethewolfandthelamb,”theenvoytoldFord.“Theystillhavetheireyesonus.WiththeKurdsproblemsolved,theymayturntheireyestothesouth...Soitisalittledistressingoverthelongrun.”The Algiers accord also led to blowback for the Shah. As part of the

agreementSaddamHusseinwouldpermitShi’apilgrimsfromIrantocrossintoIraqtovisitShi’aholyplaces.IftheShahthoughtthisgesturewouldbolsterhisstandingathomeamongtheclergyhewassadlymistaken.ManyofthefaithfulsoughtoutAyatollahKhomeini,whowas living inexile inIraq.“PeopleknewaboutKhomeini,”saidAmbassadorRichardHelms.“Thiswasparticularlytrueafter the Algiers Agreement of 1975, when Iranian pilgrims were againpermitted tovisit theholyshrines inIraqatKarbalaandNajaf.SomepilgrimsbroughttapesbackfromKhomeini,andonebegantohearreportsoftheirbeingplayedinthemosquesandcirculatedclandestinely.Sothatasapoliticalfactor,peoplewereawareofhim.”

THEIDESOFMARCH

InMarch1975,fromLisbontoSaigon,Americanpowerwasinretreat.ThecollapseofKissinger’speaceshuttleintheMiddleEastraisedtheprospectsofanotherarmedconflictandoilembargo.InEurope,Portugalwenttothebrinkofcivilwarwhenopponentsoftheleft-winggovernmentmountedacoupattempt.Communist guerrilla fighters launched offensives against the U.S.-backedregimes inCambodia, SouthVietnam, andLaos.At the end of themonth theworld’s attention swung back to Saudi Arabia. On themorning ofMarch 25,KingFaisal andSheikhZakiYamaniwerewelcoming a visiting delegationofKuwaiti officials.A Saudi television crew filmedwhat happened next.As theking was greeting his guests with the traditional salutation, his American-educated nephewPrince Faisal ibnMusadAbdelAziz rushed forward, pulledouta revolver,andfired threerounds,eachbulletstriking theseventy-year-oldmonarch in thehead—one severed theking’s jugularvein.Mortallywounded,KingFaisal crumpled to the floor in a pool of bloodwhile palacebodyguardslunged at the assassin, whose eyes were now trained on Yamani. The guardswrested the revolver from the young man’s hand. King Faisal was quicklysucceededbyhisbrother,CrownPrinceKhalid,withPrinceFahdexertingrealauthority behind the scenes. The speed and ease with which the brothersassumedpowerreassuredWashingtonandTehranthatthiswasarandomactof

violenceandnotaradicalcoup.YetalthoughyoungPrinceFaisalhadatroubledpasthewasnot the “mentallyderanged” killer portrayed by Saudi authorities.While living a bohemian existence in California and Colorado he had beenarrestedforconspiracytosellLSDandbecomeinvolvedwithanassortmentofradical left-wing and anti-Zionist groups. The prince was haunted by theexecutionofhisolderbrother,Khaled,whoseembraceoffundamentalistIslamhad led him years earlier to launch a terrorist attack against a televisiontransmitterinRiyadh.WhenhereturnedtoSaudiArabiaPrinceFaisalembracedconservative Islam, shunned contact with members of the royal family, andproudly refused toaccept the royal stipendoffered toallmalemembersof theroyalhouse.Hisdecisiontoassassinatethekingwasanactofvengeanceagainstthe throne and a bid for martyrdom. He got his wish. The young prince wasbeheaded in public and his head placed on a stake in Riyadh’s town squarebeforealargecrowd.“An extraordinary conjunction of forces shook the world last week,”

commentedTime, “a historic seven days inMarch that saw the decline of oldhopesand theriseofnewdangers.”Itwasamonth that irretrievablydamagedthemystique ofHenryKissinger’s diplomacy. The romance of his personalitywouldn’t work now. He knew it too. “Our Middle East policy has beensmashed,” he bitterly lamented to Max Fisher, a prominent leader in theAmerican Jewish community and back channel to Israeli leaders. Kissingerblamed Israel andAmerican Jewish groups for sabotaging his shuttlemission,convenientlyforgettingthattheShah’sabandonmentoftheKurdshaddestroyedIsraelifaithinpromisesofoilandsecurity.“Ihavetotellyouasafriend—thefailure 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 willdevelop,”hetoldFisher.“Wehavelostcontrol.”“Americanforeignpolicyhasnotsincetheearlydaysofthecoldwarhadat

the edges so many actual or threatened losses, so many intractable andunresolved problems, and so much reason for anxiety about some of theseproblemsas today,”wrote JosephHarsch in a lucidanalysispublishedbyTheChristianScienceMonitor.“ForthePresidentandhisSecretaryofState,theIdesofthisMarcharecertainlynotpropitious.TokeepitallinperspectiveitmustberememberedthatexceptforthepoliticaldeteriorationinPortugalthesetroublesliearoundtheouterfringesofAmericaninterestsandinfluence,notthecenter.But there are plenty of them. They have piled up in the short span of threeweeks.” Harsch blamed the NixonDoctrine for what amounted to a systemiccollapseofAmericanpowerontheedgeofempire:

Essentially the Nixon Doctrine contemplated a fallback of AmericanpowerfromthemainlandofAsia,andrelianceeverywhereonairandseapower rather than land power. But this process of going over from aforwardtoadefensivenationalstrategyisextremelydifficulttoexecute.Itmeansdistressaround the fringes.The lossofoneclientmakesallothersuneasy.Onthefrontiers,noonecanbequitesurewherethecontractionisgoingtoend.IfWashingtonletsCambodiaandVietnamgo,whoelsemightbeabandoned?

It was a question that held obvious—and ominous—implications forMohammad Reza Shah Pahlavi. American foreign policy was in crisis andKissinger’srealistapproachwascomingundersustainedattackfromtherightbythe likes ofSenatorHenry Jackson, andhis brashyoung aides,RichardPerle,Elliott Abrams, and Paul Wolfowitz. The neoconservatives argued that theShah’sdecisiontoabandontheKurdsdealtablowtoIsrael’ssecurity.JacksonwrotetoKissingeronMarch22demandingthattheFordadministrationreopenits decision to sell nuclear reactors to Iran. The Shah’s foreign policy, saidJackson,showedalackof“reliabilityandcontinuity.”ForthatreasonIranhadforfeited the right to be treated as an unconditional ally worthy of Americansupport:“Suchtransactionsasthetransferofasizablenuclearpowerproductioncapability, with its plutonium byproduct, need to be assessed in light ofdisturbingevidencethat...Iraniscapableofpolicyshiftssoprecipitousastoborderonthequixotic.”The tensions spilled over to infect relations between the Iranian and Israeli

leaders.WhenSenatorJacobJavitstelephonedKissingertoaskwhetheritwouldbeall right forhim tobring the Israeli ambassador toKissinger’s forthcomingluncheon in honor of the Shah, the secretary thought not: “Well, I think not,frankly.TheIsraelishaveantagonizedhimbyaccusinghimabouttheKurds.”U.S.relationswithIranwerealsoindirectlyaffectedbyAmbassadorHelms’s

mounting legal troubles back home. Congress had launched a sweepinginvestigation into allegations that theCIA had tried to sabotage democracy inChileintheearly1970s.InvestigatorssuspectedthatHelmshadliedtosenatorsduring his February 1973 ambassadorial confirmation hearingwhen he deniedknowledgeof agencydirty tricks inChile.The ambassadorwas recalled fromTehran thirteen times over eighteen months to give one hundred hours oftestimonytoSenateandHouseinvestigators.“Inthosedays,iftheweatherandflight connections were perfect, the trip from Tehran to Washington, with a

change of aircraft in London, averaged from seventeen to eighteen cramped,chairboundhoursintheair,”Helmsrecalled.Theambassador’s legalproblemsandheavytravelschedulepreventedhimfromfocusingonhisworkinIran.InAprilhebrokedownoutsideVicePresidentRockefeller’sofficewhenhespotteda crowd ofwaiting reporters, includingDaniel Schorr, the journalistwho hadfirstreportedtheCIAplots.“Yousonofabitch!”Helmsshoutedbeforeacrowdofstartledonlookers.“Youkiller!Youcocksucker!‘KillerSchorr’—that’swhattheyoughttocallyou!”On the eve of the Pahlavi state visit toWashington inMay 1975 President

Ford received an extensivebriefingpaper fromhis secretaryof stateoutliningthe history of U.S.-Iran relations. It offered a rare window into Kissinger’sknowledgeof theShah’s intentions andwhat he knewabout conditions insideIran. The memo included a frank admission of U.S. arms policy toward Iranthoughwith caveats that had not been included in the original policy adoptedthreeyearsbefore.“AfterPresidentNixonvisitedTehran inMay1972,”wroteKissinger,“weadoptedapolicywhichprovides,ineffect,thatwewillaccedetoany of the Shah’s requests for arms purchases from us (other than somesophisticated advanced technology, armaments, and with the very importantexception,ofcourse,ofanynuclearweaponscapability...).”FordwasadvisedthatalthoughtheShahwasinfirmcontrolathome,“student/intellectualunrestandapersistentterroristmovementarecausesforconcern.”Oneoftheregime’sweak spotswas the state of the Iranian economy: “Iran does face inflationaryproblemsandshortagesofskilledmanpowerandcommunications.”Kissingerwasmuch less concerned about Iran’s internal situation thanwith

theShah’s restlessness, his foreignpolicy adventurism, andhisgrowingbeliefthatAmericanpowerwaswaningand thatWashington’sassurancesof supportfor allies like Iran were now in doubt. “He is worried about our ability tocontinue to play a strong world role, to retain a dominant position over theUSSRintheMiddleEastandIndianOcean,andtomaintainclosecooperationwithIraninthepolitical,military,andeconomicfields.”AmericahadabandoneditsgladiatorsinTaiwan,Cambodia,Vietnam,andTurkey—theShahfearedthatIran might be next, that “Congress and America may be moving towardisolationism.” Kissinger told Ford that the Shah was a difficult but importantally: “Hemay have some excessive ideas of his importance and some peopleconsider him arrogant, but there is no gainsaying the sharply rising economicandmilitarystrengthofwhichhedisposes.”WithinafewshortyearstheShah“will have the key, if not the controlling, role among the regional powers inhelpingtoassurestabilityinthePersianGulfarea.”Thebriefingpaperdescribedbilateraltensionsoveroilpolicyandarmssales

andanallywhodidnotlikebeingsecond-guessed.“Closertohome,theShahisupset by Congressional and American public criticism of Iran’s oil pricingpolicies;widespreadcriticismintheU.S.ofourmilitarysupplytoIran,nowourlargest foreign buyer of weapons; and problems in completing some majorproposed deals with private American corporations.” Kissinger advised thepresidentnottoantagonizetheShahbyraisingtheissueofhighoilprices.“IseelittlepointinyourtryingtoarguewiththeShahthatpriceswereraisedtoofastand toomuch, inasmuch as he is utterly convinced of the correctness ofwhatwas done and easily takes umbrage at suggestions to the contrary.” This wasremarkableadvicetogiveapresidentwhosepoliticalfortuneshadfallenintothetrough of an oil-induced recession. More than anything, Kissinger’s adviceconfirmedjusthowlittlehegraspedtheintensepoliticalandeconomicpressuresbearingdownonGeraldFordinthespringof1975.

WETOLDHIMWEWOULDSUPPORTAPARATROOPOPERATION

At 9:45 on Thursday morning, May 15, President Ford and SecretaryKissingerwerein theOvalOfficewaitingfor thePahlavis toarrive.Bothmenwere physically and mentally drained by the events of the previous night.America’s disastrousmilitary involvement in SoutheastAsia had ended a fewhours earlier in one final, bloody convulsion when U.S. Marines rescuedAmerican merchantmen seized by Khmer Rouge gunboats from the freighterMayaguez off the coast of Cambodia. Communist regimes had already beendeclared inCambodia,Laos,andSouthVietnam.PresidentFordhailed theair,land, and sea operation to liberate the crewof theMayaguez as a crucial firststep to restoring American prestige in the world. In reality, the operationreinforcedthelimitsofAmericanpowerandresultedinanear-fiascothatcostasmany lives as it rescued. TheMayaguez episode is remembered today as thebotched precursor to a second, riskier rescuemission—the ill-fated attempt toliberateU.S.diplomatsheldhostageinIranin1980.As they waited for the Shah, Kissinger’s remarks revealed his anxiety. He

wantedFord to impress theShah, to talk tohim thewayNixonused to. “Tellhimyouusedmoreforcethannecessary,”heurgedthepresident.“TheShahisatough,unemotional,andableguy.Hehasageopoliticalview.“Ontheoildeal,hewilldoitifwecandoitsecretly,”heremindedFord.“We

haven’t figuredout how todo that.Onewaywouldbe topay innon-interest-bearing notes, if we could do it secretly. Hewould prefer a swap of military

equipment for oil,with highprices for the equipment.Butwehaven’t figuredthatout.”Thentherewasthewholeissueofhighoilprices:“Iwouldgoovertheenergything.Hewillslapyoudown,butitwouldbegood.”KissingeralsousedthosefewminutestoinformFordaboutU.S.-IraniancontingencyplanningintheGulf. Contingency planning had not appeared in Kissinger’s briefing paperbecause itwasa secretoralagreement.NowKissinger toldhimabout it.Fordhad no time to ask questions let alone digestwhat hewas hearing. “Ask himabouttheMiddleEast,”saidKissinger.“HeisworriedaboutSaudiArabia.WetoldhimwewouldsupportaparatroopoperationinSaudiArabiainacrisis.Youcouldsayyouareawareofthiscontingencyplanning.”TheFordswelcomedthePahlavisontotheSouthLawnoftheWhiteHouse

with a twenty-one-gun salute and an honor guard. Across the street severalhundred masked demonstrators gathered in Lafayette Park to chant sloganscallingtheShahapuppetandmurderer.WhileBettyFordhadteawithEmpressFarah, the men retreated to the Oval Office for the first of two ninety-five-minuteintroductorysessions.OnceagainKissingercitedprotocolasthereasontoblockArdeshirZahedifromsittingin,andtheambassadorwasforcedtowaitintheCabinetRoomwithotherofficials.Ford,theShah,andKissingerbeganbyreviewingtheMayaguezincidentand

theMiddleEastpeaceprocess.BrentScowcroft,tooknotes.TheShahbeganbyprovidingthemwithhiscustomaryoverviewofstrategyandgeopolitics.ButthistimehisobservationsaboutMiddleEastpoliticsrevealedatroublingdisconnectfromtheregion’srealities.HeblamedIsraelforthefailureofKissinger’speaceshuttle.Heclaimed that theSyrians “don’t likeour rapprochementwith Iraq.”HewasdefensiveonthesubjectoftheKurds:“Ihadtomakeaquickagreementon theKurds. I have to say this in the face of all the press reports that I hadabandonedthem.Theyweren’tfighting—wewere.”HesaidhehadactedontheadviceoftheEgyptian,Jordanian,andAlgerianleaders,whosawtheaccordasawaytoweakenRussianinfluenceinBaghdad.Hewasevenconvincedthat theaccord actually strengthened Kuwait’s security because Saddam Hussein wasnowmorelikelytopursuearegionaltreatyforthejointdefenseoftheGulf.FollowingKingFaisal’sassassination,theShahhadflowntoSaudiArabiato

take themeasureof thenewgenerationofSaudi leaders.PresidentFordraisedtheissueofthecontingencyplan:“HenrytoldmewhathetoldyouwewoulddoiftherewereaQaddafi-likedevelopmentinSaudiArabia.Ireaffirmit.”TheShahwaspleased.HetoldhishoststhatEgyptshouldalsoparticipatein

an invasion scenario, though in a limited capacity.Hepredicted trouble in theregionifthelandingpartywasentirelynon-Arab.Now it was apparently Kissinger’s turn to be surprised. The Shah was

seriously proposing a joint Iranian-Egyptian invasion and occupation of SaudiArabia.Notonlythat—hehadapparentlyalreadygiventheideaagreatdealofthought.HewantedhisfriendAnwarSadattoshareinthespoilsofoccupation.Contingencyplanningwasrapidlyevolving intosomethingfarmoreambitiousandextensivethanNixonandKissingerhadeverintended.Oneoftheprimarymotivations behind sending blue suiters to Iran and to engage in contingencyplanninghadbeentobalanceEgyptianaspirationsintheregion.“Iwouldworryabout an Egyptian army in Saudi Arabia,” said a wary Kissinger. “Politicalsupportisgood;maybeafewtroops.”ThatnighttheFordshostedawhite-tiestatedinnerforthePahlavis.The first lady had asked Ann-Margret, the star of Bye Bye Birdie, Carnal

Knowledge,andlately,Tommy, toprovidetheafter-dinnerentertainmentwithamedley of song-and-dance numbers fromher acclaimedLasVegas show. “Wepicked her because the Shah of Iran likes pretty women,” the first lady toldreporters,apparentlymissingtheimpliedinnuendo.“Andsodoesmyhusband.”The atmosphere inside the White House was elegant and subdued, like

ScheherazadeonthePotomac.“TheAirForceStringPlayerswalkedamongthetables playing romantic melodies while dessert was served,” recalled CynthiaHelms.Thecrowdformedabobbingseaoflowbowsanddeepcurtsiesaroundthe royal couple and strained to get a glimpse of Shahbanou Farah, whomWashington wags playfully dubbed the “Shahbunny.” In attendance at thePahlavistatedinnerwerefixturesoftheWashingtonestablishment,thecaptainsandkings ofAmerican industry, ambassadors,Hollywood stars andBroadwaylegends—Kissingers, Rockefellers, Rumsfelds, the Fords of Detroit and theBloomingdalesofPalmSprings.BobandDoloresHopewerethere,sotoowereFredAstaire, PearlBailey,DionneWarwick,DouglasFairbanks Jr., andAndyWarhol,afavoriteofthequeen.Everyonewasthere,itseemed,exceptBillandCarolSimon.TheShahwasbackintheOvalOfficethenextday,Friday,at5:30P.M.,fora

secondsessionwithFordandKissinger.KissingerwaslatetotheWhiteHousemeeting.Whilehewasoutoftheroom,Fordgingerlyraisedthetaboosubjectofoil prices.Politically,hehad little choice; anAmericanpresident couldhardlyavoidraisingthesubjectofoil,withtheso-calledEmperorofOil,intheWhiteHouse. The Shah did not bite. “I know you have a great knowledge here andlookattheworldpicture,”Fordtoldhisguest.“Wehavetorecognizetherightsof the producers and theymust see our problems. Any suggestions you havewouldbeappreciated.”“This is a very important subject,Mr. President,” the Shah answered. “The

U.S.,aschampionoftheFreeWorld,almostdoesn’thavetherighttoletitselfbe

dependentontheoutside.AsamatteroffactIwilltakeupwithDr.Kissingeraswap.”“Hehastoldme,”saidFord.“Itsoundslikeafantasticarrangement.”“Yes,”saidtheShah.“ButtheUnitedStateshastobeindependent.Sotheoil

pricehastobeequaltootherformsofenergy.Inthemeantime,maybeaswapwouldwork.Itwouldnotcreatepetrodollars.”TheShahhadjusttoldPresidentFordthathewouldnotnowbeofferingmuchifanypricediscountinreturnforthe United States taking 500,000 and 700,000 barrels of oil a day off Iran’shands.TheShahwantedtoswapoilformorearms.KissingerwalkedinandthepresidentupdatedhimonwhatheandtheShahhadjustdiscussed.The Shah had spent the day at Andrews Air Force Base inspecting planes

carryingAWACS,airborneearlywarningandcontrolsystems.EachBoeing707cost$110millionandtheShahwantedtobuyatleastfourorfiveofthem.Healso decided Iran’s air force needed Fairchild A-10 attack bombers andmoreGrummanF-14fighterjets.FromtherehehelicopteredtothePentagonforatalkwithSecretaryofDefenseJamesSchlesinger.TheShahtoldFordandKissingerthathehadraisedwithofficialsatthePentagon“thematterofexorbitantpriceofspares,andleasingtheC-5s.”KissingerremindedtheShah,“Wehavetooverchargesomewaysoyoucan

sendspares[ontothirdparties]andwereplacethem.”“On the groundsmy technicians are using toomany,” the Shah concurred.

“Butyourpeoplemustkeeptheirmouthsshut.”Turkeywasrunningsolowonspares “they can’t holdmaneuvers.Weneedyour people to keepquiet on thesparepartsdeal.”Thesecondsessiondrewtoanend.Bothleadersexchangedbestwishesand

pleasantries.“Thankyouforinvitingmehere,”saidMohammadRezaShah.“Iamgratefulforestablishingthesepersonalcontacts.Weneedyouliketherestoftheworldneedsyou.Maybewecanbeofsomehelp.”PresidentFordreturnedthecomplimentand thanked theShahforgiftshehadbrought forhimselfandthe first lady. “Henry has toldme if Iwanted to talk to someonewho has anobjectiveviewoftheworld,itwasyou.Ihaveconfirmedthat.”“Ihopeyouwintheelection,”repliedtheShahandlefttheOvalOffice.TheShahheldafarewellpressconferenceattheIranianembassyonSaturday

afternoon,May17.Teaandcookieswereserved.TheWashingtonPost’sSallyQuinn thought themonarch looked very pleased with himself. “He posed forphotographs, adjusted his cufflinks, swung his slightly elevated shoes, leanedcasuallybackonthesatinpillowsofthesofasmokingoccasionalcigarettes,andbrushedofftoughquestionswithquestionsofhisown,”sherecalled.Itwasquiteaperformance.TheShahwas in the final stagesofnegotiatinga$300million

deal in which Iran would lend Pan Am $245 million in return for boardrepresentation and a controlling stake in the airline’s Intercontinental Hotelchain.PanAmheldaspecialplaceintheUnitedStatesdefenseestablishment.ItwasthelargestU.S.flagcontributortothecivilreservefleetandthebackupforthe Air Force in case of a national emergency. Then the Shah dropped abombshell. He announced that oil would have to go up in price again whenOPEC met in September. “We have lost 30 to 35 percent of our purchasingpowerbecauseofworld inflation,”he complained.TheShahdidn’tmentionapercentage amount for this new increase in price. That came twoweeks laterwhenthegovernorofIran’scentralbank,MohammadYeganeh,announcedthatthe Shah would push for a 30–35 percent oil price increase as directcompensation to Iran for its loss in purchasing power.As he surely knew, theworld economy had still not successfully absorbed the price shocks of 1973.Anotherincreaseinoilpricesofthatmagnitudewouldbenotonlyexcessivebutfranklydangerous.Itwasaremarkablesnubtothepresidentwhohadjusthostedhimsogenerously.Theofficialkowtowingwas toomuchevenfornewspapercolumnistJoseph

Kraft, who admired Kissinger and the Shah. In a column entitled “AmericaBows Low as the Shah Pays a Visit,” Kraft severely criticized Kissinger foravoidingalldiscussionofoilpricesduringtheShah’svisit.HearguedthatitwastimefortheFordadministrationtoputitsfootdown.“[TheShah]hasembarkedIranonavastprogramofeconomicandmilitaryexpansionthatdependsheavilyonAmericanproducts,AmericanexpertiseandAmericanmoney,whichhewillsoon have to be borrowing again,” wrote Kraft, who knew nothing aboutKissinger’s secret arms and oil deals. “But youwould never have heard it bywhathappenedherelastweek.TheShahwasfetedinawell-nighshamelesswaybythePresident,theVicePresidentandthesecretaryofstate.”KraftsaidhehadpersonallyaskedtheShahduringhisstaywhetherPresidentFordhadraisedthesubjectofoilprices.“Onlycasually,”theShahhadreplied.KraftthenaskedtheShahwhetherhebelievedtheFordadministrationwaspreparedtolivewiththepresent price. “Not only livewith the price, but accept further increases,” theIranian leader retorted.“Themessage that theShahreceivedfromthebowing-down of American officials is the message the whole world will get,” Kraftscolded theWhite House. The Ford administration “has no foreign economicpolicy.Positionsare takenasaresultofhagglingamongtheWhiteHouse, theStateDepartmentandtheTreasury.TheresultisanappearanceofjitterinessthatwillcontinueaslongasthePresidentdependssoheavilyonasecretaryofstatewhosebasicfeelingabouteconomicproblemsisthattheyshouldgoaway.”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 hisrealistadmirersinthepress.HeseemstohaveunderstoodatsomelevelthattheShah’sthreattohikepricesanother30–35percentunlesstheFordadministrationfound a way to help him shift Iran’s stockpile of unsold oil amounted toblackmail.

WE’REGOINGTOHAVEANOTHERBADSITUATION

Each morning a car with an Iranian driver collected the two Air ForcecolonelsfromoutsidetheirhomesinnorthernTehran.OnMay21,1975,ColonelPaulShafferbidhiswifeandtwochildrengoodbyeandclimbedintothewaitingcarwithhiscolleagueLieutenantColonelJackTurner,whosewifewasgettingtheirthreechildrenreadyforschool.Shaffer,forty-five,fromDayton,Ohio,andTucker, also forty-five, fromCarbondale, Illinois, bothworked for theUnitedStates military mission in Iran. Security for Americans living in Tehran haddeterioratedtothepointwhereseniorU.S.militaryofficersanddiplomatswereassignedchauffeursandbodyguards. Junioremployeeswere shuttledbackandforth fromwork inarmor-platedshuttlevanswhosebulletproofwindowsweresealedshut.Thedeathtollintheongoingantigovernmentinsurgencywagedbyextremist Muslim and leftist groups against the Pahlavi state was runningupward of two hundred. In the past fewweeks two government officials hadbeenassassinatedinthecapitalandnineyoungdetaineesshotinEvinprison.OnthatthirdWednesdayinMaythecapitalwasbracingfortheShah’sreturnfromWashington. The colonels’ drivermade the decision to avoid heavy traffic byturningontoasidestreet,anditwasherethatthethreemencametogrief.“Acarblocked the path of their vehicle while another rammed it from behind,” anembassystatementrecorded.“Threegunmensurgedout,shoutedat theIraniandriver of the car to lie down and opened fire at point-blank range. Then theydroveoff ina thirdcar, leavingapropaganda leafletbehindwith the twodeadofficersinthebloodstainedcar.”ThemurderswerefollowedbythebombingoftheAmericanculturalcenterinMashhad.Theattackonthecolonels’carwasinrevengefortheextrajudicialexecutions

atEvin. Itmade for quite a homecoming for theShah andwas a reminder ofrisinganti-American sentiment throughout Iran.AmbassadorHelms initiated abroadreviewofsecurityforAmericanslivinginthecapital.“Therewasconcernonmypart,”recalledAmbassadorHelms.“IfeltthattheAmericanpresencewasgettingtoolarge.Itwas10,000whenIarrived.Ithinkatonetimeitgotashigh

as 40,000 or more all through Iran. I felt this was wrong and unnecessary. Iattempted to take actions to alleviate it.” Iran was overloaded with men andmatérielpouringinfromthenowdefunctwartheaterinSoutheastAsiaandalsofromTurkey,whereaU.S.armsembargowasineffect.“Asthingswerecloseddown inTurkey therewasgreatpressure touse Iranasaphysical location forvariouskindsofequipment,”recalledHelms.“AndparticularlyduringthelattertwoyearsIwasthere,Itriedtofighttheseoff.Ithoughtitwasagreatmistaketoputmore assets,military or otherwise, into that country. Therewas toomuchtherealreadyinmyopinion.”Theambassador’seffortstoreducetheAmericanimprint in Iran never gained traction. “I did away with the Peace Corps,” heinsisted, even though the Peace Corps was one of the very few Americangovernmentalagencies tohaveearnedtherespectof theIranianpopulation.Itssmall staffof tenAmericansmanaged142volunteersworking on a variety oflanguage training, urban planning, and community development projects. TheclosureofthePeaceCorpswasapurelysymbolicactatatimewhenfiftyretiredmilitarypersonnelarrivedinIraneachmonthtotakeupemploymentasdefensecontractors.The city of Isfahan, where Grumman and Bell Helicopter employees were

stationed,wasgroundzeroforthebacklashagainstAmericansinIran.Iranianswereespeciallyshockedby incidents inwhichAmericancitizensdefiledShi’amosques.Ononeoccasionin1975threeAmericanwomenwearingtightshortsand halter tops “strolled into the ancient Friday Mosque where, laughing,gesturing, and talking in loud voices, they toured the holy place in their owngood time.” In their off-hours, Bell helicopter crews “passed the time bydrinking, fighting and even racing motorcycles into a mosque.” Americanteenagerswereseenracingmotorbikesthroughanotherhouseofworship.Itwashard to imagine similar scenes being played out in Catholic churches in SanAntonio orBaptist churches inOklahomaCity.Womenwearing chadorswereaccostedbyAmericanmeninthestreets.AmericandefensecontractorsrecentlyrelocatedfromSaigon“hadtheirownwayoflife,”recalledoneU.S.diplomat—someput theirbargirlwives intobusinessasprostitutes.AnIranian taxidriverwasshot in theheadbyanAmerican inadisputeover the fare. Iranianswerereferred to in their own country byAmericans as “sand-niggers,” “ragheads,”and “stinkies.”Muslim radicals spread rumors through the bazaars of Tehran:“Americansaredesecratingmosques,insultingIranianwomen.”“That’s where Nixon and Kissinger went wrong,” said former U.S.

ambassadorArminMeyer.MeyerwasoneoftheoldIranhandsappalledbythescenes he witnessed when he visited the country in the mid-1970s. “Theyallowed thousands and thousands of Americans to come,” recalled Meyer.

“Isfahanbecamea fleshpot.All thesehelicoptercrewsweredown there, somebringingintheirVietnameseprostitutes.Inmyjudgment,thisculturalissuewasverymuchacontributingfactortotheblowupinIran.”AtthePentagon,JamesSchlesinger was receiving alarming reports of similar outrages. Americanbehavior in Iran was, he remembered, “a disaster area. Here you had theseAmericans in these bases, sort of semi-colonies, but they were behaving likeAmericans,women running around in bikinis, you had this Iranian populationand particularly outside Tehran that was immensely conservative and theAmericanbehaviorwasjustoffensivetotheirsensibilities.”American nationals living in Iran experienced their own traumas.TheState

DepartmentsetupahotlinetohelpAmericanssufferingsocialorpsychologicalproblems or to help them deal with rampant drug use among Americanteenagers.Somefamiliescomplainedwithgoodreasonthattheyhadbeengivenjustsevendays’noticebeforebeingtransferredtoIran.Thecultureshocktheyexperienced upon arrival was in its own way as intense as that felt by theirIranian hosts.By 1976Grummanwas offering its employees classes in Farsi,and other corporations held orientation classes to help their employeesassimilate.Theysetupbuddyprogramsfornewarrivals.Butitwasacaseoftoolittle,toolate.“CompaniesstartedsendingworkerstoIrantoofast,”saidBettyChapman,whorantheIranResourceCenterinLosAngeles,whichtriedtohelpemployeesadjust to theirnewsurroundings.“Theygavethemnopreparation.”The helicopter pilots employedbyBell believed that theywerebeingunfairlycast as villains. They bitterly accused Bell of luring them to Iran with falsepromisesofqualityhousing,schoolsfortheirchildren,andhealthinsurance.Thetrouble began when the pilots threatened to form a union. SAVAK informersbegansittinginontheirmeetings.AmbassadorHelmsrefusedtomeetwiththepilotsandmadeitcleartothemthathissympathieswerewiththeIranians.OneBell executive told a pilot’s wife that the company regarded men like herhusbandas“muchthesameasmigrantworkers.”The conclusions of Embassy Tehran’s security review were presented to

SecretaryofStateKissingerandseniorStateDepartmentofficialsattheirdaily8:00A.M.staffmeetingonJuly7,1975.EarlierintheweekgunmenhadshotandkilledthedriverofaU.S.embassycarindowntownTehranaftermistakinghimforaCIAagent.“Well,inadditiontoBeirut,Tehrancontinuestobeworrisomefromthestandpointofsecurity,”saidUnderSecretaryofStateRoyAtherton.

We’vehadareportthattheembassyhasidentified65possiblemembersof themission [at risk from assassination]—mostly officers. It looks likesurveillance by people who could be connected with the guerrilla group

there. And they recently killed two medical officers, and it’s an almostimpossible situation totally to deal with because of the large Americancommunity—thefactthatthey’rescatteredallovertown—thefactthattheyhavetotravelincertainverycrowdedgroups,goingbackandforthtotheoffice.That’swhy[Defensehas]beensendingoutteams;sendingoutmoreequipment, armored vehicles. The Iranians have given help to the limit.Theycan’tputabodyguardoneveryAmerican.It’salmostinevitablethatwe’regoingtohaveanotherbadsituationthere.

Kissinger listened in silence toAtherton’s presentation,which endedwith afewwordsonIndia.Thesecretarylimitedhisfeedbacktoasingleword:“So?”

ChapterNineHENRY’SWARS

“GreenspanisterriblyworriedaboutanOPECpriceincrease.”

—PresidentGeraldFord,1975

“TheShahisseeingFrenchdoctors.”

—RichardHelms,1975

INSOMECOUNTRIESWECANEXPECTSOCIALUNREST

TheleadersoftheWesternindustrializeddemocraciescouldbeforgivenforassumingthattheworstoftheoilshockwasbehindthem.Onlywiththebenefitof hindsight was it apparent that the summer of 1975 was the eye of thehurricane.Oneyearearlier,TreasurySecretaryBillSimonhadurgedPresidentNixontoconfronttheShahoverthehighoilpricesthathebelievedmightfatallyweakenthebankingsystemandleadtoafinancialcollapse.TherecentslumpinconsumerdemandforoilhadnotchangedTreasury’sestimationof thedanger.Officialsknewthatmanycountrieswerestayingafloatfinanciallyonlywiththeaid of huge loans taken out from international lending institutions and privatebanks. At some point in the near future those loans and the interest on themwould be due for repayment. It was no longer clear that the debts wererecoverable. West Germany’s chancellor, Helmut Schmidt, understood thedangerous shoals that had to be navigated before theworld economy reachedsafe harbor. Schmidt was also deeply concerned about the opportunitieseconomicdislocationpresentedforpoliticalandsocialinstabilityinEurope.AttheendofMay1975PresidentFordmetwithSchmidt inBrussels tocomparenotes. Ford was cautiously optimistic about the prospects of an economicrecovery.HetoldSchmidtthat“alloureconomists—eventhosewhodon’tagreewithus—agreethatwehavelargelybottomedout.Therearesubstantiallymoregoodsignsthanbadsigns....Theunemploymentstatistics,neworders,andso

on,aregood.”Schmidtwasn’tbuyingit:“ButordersbeingplacedinGermanyaredropping

badly.”“Housing and autos are not doingwell,” Ford conceded. The president had

been persuaded by Simon, Arthur Burns, and Alan Greenspan to squeezeinflationfromtheeconomyandnot toprimetheeconomywithabigspendingstimulus. Ford noted that inflation had fallen from 10 percent to 6.5 percent:“ButI’mafraidifwestimulatetoomuch,we’dgetareturnofinflation.”Schmidt worried that Ford’s austerity package might dampen economic

growthandkill thegreen shootsof recoverybefore theyhadachance tobud.“Yourstatisticsarepersuasive,”hesaid,“butthisisthegreatestdepressionsince1932.Andinsomecountrieswecanexpectsocialunrest.Iamdeeplyworried.1975isverydifferentfrom1932,butthebehaviorofthegovernments—tryingtoride it out—could be similar.We can’t use themethods of recent years for asituation that none of us have lived through. The situation has led to anenormousdrop in realwages—which isunprecedented.This ishappening inamonetary system of floating rates, which compounds every problem. I reallydon’tknowwhythisishappening.JapanislookingtoNewYork.Britainisinashambles.” Schmidt offered the president the use of his country’s “enormousforeigncurrencyreservesandconsiderablegold.AllthisisattheserviceoftheUnited States.” He then conceded that his own efforts to prop up the ailingItalianeconomywerenotworking:“WediddosomethingwiththeItalians,andtheyareclosetolosingtheirgold.”Schmidt’s mention of the dread year 1932 was significant. The economic

catastrophe of the last great global slump had undermined the foundations ofGermandemocracyandpermittedAdolfHitlerandtheNazistoascendtopower.Schmidt’s Social Democratic government was grappling with the nextgenerationofextremistviolencecomingfromyoungGermanfanatics.AmonthearliermembersofthemurderousBaader–MeinhofGanghadstormedtheWestGermanembassyinStockholmandexecutedtwodiplomats.WestGermancitieswere rocked by fire bombings, violent protests, and a wave of assassinationstargeting prominent business and political figures. Like Nixon and Kissinger,Schmidtwasdeeplytroubledbywhathesawasthehistoricalparallelsbetweentheconditionsof themid–1970sand themid-1930s.Hewondered if hemightnot bewitnessing the rise of a new formof toxic populist politics feeding offeconomicmiseryandweakleadership.Schmidt and Ford met again in the German capital, Bonn, in July. The

chancellorpredictedthatthecriticalperiodfortheWestwouldbethewinterof1976–77, “because if the economic situation improves, oil demandwill rise.”

That in turn would put upward pressure on oil prices. Schmidt stressed therelationshipbetweenhighoilpricesandpoliticalinstabilitythroughoutthefreeworld. “The political effects of the recession—really a depression—threatenpolitical stability in severalcountries—in Italy,where theChristianDemocratsmayaccepttheCommunistsingovernment,”hesaid.“Francealso,wherethereis always a potential for domestic upheaval.TheBritish problem is not socialunrest,butstrikesandparalysis.Herealso,theproblemisnotupheaval,butbadelectionresults.Idon’tknowaboutJapan.”Schmidtmadeitclearthatnogreaterchallenge faced theWest than high oil prices: “The economic problems are agreater threat to theWest than theSovietUnion, theMiddleEast,orSouthernMediterraneanproblems.Giscard[d’Estaing,thepresidentofFrance]andIbothfeel that the strongest country—theU.S.—must take the lead. It is a dramaticsituation.”

ISOMETIMESWONDERIFHEISREALLY,NATURALLYATOUGHGUY

Future shock had already arrived in Iran in the form of an upsurge inreligious-based political unrest and growing signs of economic crisis. By thesummer of 1975 the world oil market was in a slump. Production was downfrom84.9millionbarrelsadayto64.9millionbarrelsaday.InthefirsthalfoftheyearIran’soilproductionslid12percent, to5.4millionbarrelsadayfrom6.2millionbarrels.ThedropoffinJunewas17.7percent.SaudiArabiareportedafall inproductionfrom8.1millionbarrelsaday to6.6millionbarrelsaday.Productionfellby27percent inKuwaitand41percent inLibya.TheproblemfortheShahwasthatIran’slargepopulation,heavyindustry,andbigspendingmade it much more vulnerable than Kuwait and Libya to even modestfluctuationsinoutputandincome.ThedireprojectionsoftheShah’seconomicadvisersabout thedangersofallowingbillionsofpetrodollars towashthroughthe economywere borne outwhen the torrent retreated, leaving in itswake afloodplainofdebt,double-digitinflation,andshortagesofconsumergoods.Thegovernment’s own economic planners later conceded that the 270 percentincrease in government oil revenues in 1974–75 propelled Iran down an“economicpathtowardthegenerationofmalcontentandeventualrevolution....By1975theeconomywasoutofcontrol,andIranwaslosingasanationontwocounts.”Those twocountswere inflationand“losingreal resources(barrelsofexportedoil)asthecostofdevelopmentprojectssoared.”TheimplicationsofdecliningoilrevenuesforIran’sbalanceofpaymentswas

alreadya sourceofconcern forU.S.diplomats inTehran. Iran’seconomywashobbled by transportation bottlenecks and shortages of skilled labor. Asanticipated,thecountry’sports,roads,railways,andairportswereoverwhelmedbythegyrationssetinmotionbytheoilboom.TankersandfreightersarrivingatIranian ports waited on average 250 days to be unloaded. Longshoremenstruggled to clear a backlog of 800,000 tons of goods. By one estimate 10percent of the machinery and other capital goods lying on the docks and inwarehouses were ruined by corrosion. Perishable goods were thrown into theharbor. The government was forced to pay $2 billion in demurrage tocompensateshippingcompaniesforthedelays.Whencontainerswereeventuallyunloaded at dockside there often weren’t enough trucks to move them. Portsresembledcontainergraveyardswithacresof rustedmachineryandabandonedproduce.Worksofartpurchasedforthequeen’scollection“eventuallyturnedupinawarehouseneartheTehranbazaarinunbelievablyfilthycondition....Twomassive bronzes by Henry Moore were found in vast packing crates said tocontainroad-workingequipment.”Thegovernmentrushedtobuyfourthousandtrucks;whenthetrucksarrivedtherewerenodrivers.“Thehighwaysare choked, cracking from increased truck traffic, and being

improvedonlyslowly,”reportedtheU.S.embassy.“Ratherthanbringinginallofthe721,000workerswhichthecountryisexpectedtobeshortofduringtheFifthPlanperiod . . . the economy to agreat extentwill improvise relyingonpoorlytrainedIranians,butthousandsofforeignworkerswillcontinuetoarrivemonthly.Thesealreadyarebadlystrainingavailablehousingandotherfacilities,andtheworstisyettocome.”“Thegovernmenthad to scour the country to find2,000carpenters,masons

andotherIranianstoworkontwonuclearreactorsWestGermansarebuildinginsouthern Iran,” said one American observer. “Where will they get people forfutureprojects?Andnopowergridsexisttocarrytheelectricitybythenuclearplants to towns and cities. These grids will involve investment equal to, orgreaterthan,thenuclearplantsthemselves.”“During the summer of 1975Dick and I realized that therewas a financial

crisis,”recalledCynthiaHelms.“Businessmenwerecomplainingthattheyweregetting only partial payment on contracts, and Iwas receiving telephone callsfromAmericanswhosaidtheywerenotbeingpaidatall.Bytheendoftheyearthe situationwasworse,withmanyprojects delayed.”The floodof foreignersand ruralmigrants into the capitalmeant that housingwas in short supply.AfemaleWorldBankemployeesoughtrefugeattheAmericanembassyaftertwonightssleepinginabroomclosetattheHilton.By now the folly of allowing unlimited arms sales to Iran was glaringly

obvious.Overthesummerof1975EmbassyTehranconductedanevaluationoftheimpactofU.S.armssalesonIran’scivilianeconomy.AlthoughtheIraniangovernmentdidnotpublishstatisticsrelatedtopurchasesofmilitaryequipment,the embassy’s economics analyst pointed out that Iran’s balance of paymentsnumbers“suggestthatnearlyone-halfor$10billionspentonimportsduringtheIranian year ending onMarch 10went formilitary imports.Our ownmilitarysalesdata suggest that abouthalfof thismoneywas spentonU.S.equipment.Accurate data are lacking because much of Iranian expenditure is buriedelsewhere in the budget, but current estimates for this year put total Iranianmilitary spending at more than $10 billion or perhaps one-third of total GOI[Government of Iran] outlay.” The report concluded that “serious damage isprobablybeingdonetothecivilianeconomy.”Onlythefactthatothersectorsofthe economy had reached their absorptive capacity prevented an immediatefinancial crisis. There had already been an “incalculable loss” to the Iranianeconomybecausetrainedpersonnelworkedinthemilitaryinsteadoftheprivatesector where their skills were desperately needed. The embassy analyst thenofferedhisown thoughtson thecausal relationshipbetweena soundeconomyandpoliticalstability:

ItisalmostimpossibletobelievethatinthelongrunevenasseeminglystrongandstablearegimeasthatinpowerinIrancangetbywithchangingthe country in only a few decades from a nearly illiterate, poor, andbasicallypeasantsocietyintoawelleducated,reasonablyaffluent,modern,anddynamicnationwithoutatsomepointgoingthroughaperiodofseriouspolitical upheaval and perhaps even radical social change. Put in anotherway, the current Iranian leadership is asking the people to acceptmodernization in almost every respect while maintaining an autocraticpoliticalsystemwhichstilldeniesthemmostofthebasichumanfreedomstaken forgranted inmostof theadvancedwestern societieswhich Iran isstrivingtoemulate.Whattheoutsideobserver,ofcourse,hopesforinIranispoliticalevolutionratherthanrevolution.

Ambassador Helms and Secretary Kissinger were reminded that “historyprovides discouragingprecedents about the declining years of autocrats. I canrecall no example of an absolute rulerwillingly loosening the reins of power.The recent establishment of a one-party state removed even the facade of theexistenceofa loyalopposition toHisMajesty’sgovernment.”Thepassivityof

the educated elite to the Shah’s control meant that the chances for peacefulchange in Iran were growing slimmer—“one cannot help but fear they areabdicating in favor of the radicals. . . .More assassinations and other acts ofterrorism seem likely.” There was little hope that the United States couldinfluence events in Iran: “Shouldwe choose to try to use anyof our apparentleveragetoinfluenceIranianpolicies,ourfirstaimprobablywouldbetotrytoforce amoremoderate Iranian position on the price of oil. But in this or anyotherareainwhichwemighttrytoswayIranianpolicieswearelimitedbyourdedicationtothefreemarketmechanism.”TheinternalstabilityofthePahlavistatecameintoquestioninthefirstweek

of June 1975 when seminary students in Qum rioted to mark the twelfthanniversaryof thearrestandexileofAyatollahKhomeini.Thestudents jeeredthatIranwas“likeaharlotrunningafter theevilwaysof theWest.”TheShahrushedsecurityforcestoQumtorestoreorder.AweekaftertheriotinginQumsubsided,AbdulMajidMajidi,Iran’sministerofstateandtheheadofthePlanandBudgetOrganization,announcedthatthegovernmentwashaltingspendingonsecondarydevelopmentprojectsandscalingback its$69billionFifthPlan.Thegovernmentfacedastaggering$10billionshortfall inincomefor theyearbecause of a 1.3million barrel per day slump in petroleum exports. Iran’s oilproduction facilities were producing at only 77 percent capacity, “not quiteenough to cover Iran’s foreign-exchange outlays in the period.” Over thesummerIranianbankswereforcedtotakeouthundredsofmillionsofdollarsinloans to cover the gaping hole in their balance sheets. “Our revenues havedwindledconsiderably,”theShahtoldhispeople.Theunrest inQuminJune1975was themostvisible signyet thatpressure

wasbeginningtobuilddeepwithinthePahlavistate.TheShah’sdecisionthreemonthsearlier todeclareaone-partystatehadclosed the lastdoor topeacefuldialoguebetweentheregimeanditscritics.Politicalpartiesactassteamventsinademocracy.TheShahhadforseveralyearscontemplatedtheideaofcreatingasingle political structure that his advisers hoped would bring the monarchycloser to the people. As early as October 1972 a U.S. diplomat reported that“therearevaguesignsthattheShahmaybetoyingwiththeideaofletting[thesmaller of Iran’s twopolitical parties]wither away and opting for a one-partysystem.”Ambassador Richard Helms took the declaration of a one-party state on

March2,1975,tomeanthattheShahwascirclingthewagons.Hedidnotthinkthis latest gambit would work. “Press reports to the contrary, the Shah’sannouncementwasreceivedbymostof theembassy’scontactswithawaveofcynicism and confusion which has not yet fully subsided,” he informed

Kissingerinacablethatsummer.

The arbitrary nature of the announcement tended to reinforce theprevailing Iranian mood of skepticism and cynicism about virtuallyeverything connected with politics. To ordinary Iranians we have talkedwith—shopkeepers, small merchants, and others—(as distinct from partyactivists whose personal interests were involved), the previous politicalpartieswere ineffectiveasameansofexpressionandso far they seem toanticipateasimilarresult fromthisparty. . . .This[decisionbytheShah]inhibits the process by which political institutions can learn to functionwithouthisguidance.

AfewdaysaftertheriotsinQum,onJune10,SenatorEdwardKennedy,whohadjustreturnedfromatriptoIran,stoppedbythesecretary’sofficeattheendof the workday. Kissinger’s conversation with Kennedy offered the firstindication that he was beginning to take a second look at the Shah. To thepresident and his cabinet colleagues, Kissinger had waxed lyrical about theShah’s toughqualities and loyalty.Nowhebetrayedhisowndoubts about theShah’s judgmentandcharacterasa strong leader.“YouknewtheShahbefore,didn’tyou,”heaskedKennedy.“Wereyouimpressedwithhim?”“Yes, I’ve known him before and I must say having now looked into his

background and how he came to power, I begin to understand some of hispreoccupationsandhisdesirestobeseenasatoughpersonagainsttheSoviets,”repliedKennedy.“I sometimeswonder if he is really, naturally a tough guy though,”mused

Kissinger inwhatforhimwasararemomentofreflectionaboutWashington’s“toughcookie”inTehran.“Well, there is something uncharacteristic about it given his background,”

Kennedyagreed.“Inhistalkswithus,heusedsomeoldfiguresonoilpricesandothereconomicfactors.TheMinisterofOil...what’shisname?”“Amuzegar,”interjectedRobertHunter,oneofKennedy’saides.“Amuzegar is a very able guy, but they’re using some figures which are

differentfromthosewehavehere,andIthinktheyshouldreallybeworkedout,”saidKennedy. “One impression I cameawaywithwithboth theShahand theSaudisistheirfeelingofisolation.TheShahiscertainlysympathetictotheWest,but he’s very thin-skinned.Hewas always talking aboutTheNewYorkTimesandTheWashingtonPost.”

“UnlikesomepeopleIknow,”Henrycracked.Everyonelaughed.KennedytoldKissingerthattheIranianofficialshespoketofelt“thatthey’re

being hard pressed by things like . . . the State/Treasury differences [on oilpricing].” The Shah felt he was getting mixed signals from the Ford WhiteHouse. The StateDepartment gave him the green light to raise oil prices, butwhenhefollowedthroughhewasattackedbyBillSimonatTreasury.TheShahwaslookingfordirection.ThisobservationmayhavesurprisedKissinger,whoassumed that the Shah resented advice as unwarranted interference in Iran’saffairs.ThentherewastheissueoftheShah’spoorgraspofeconomicsandhislack of understanding of the impact high oil prices had on the industrializedworld.“But I think theymissedseeingour seriouseconomicproblemshere inthis country,” saidKennedy. “They are sayingwe are so large and sowealthythatnothingcanbeseriouslywrong.”“Thatiscorrect,”Kissingerconceded.“IthinktheirimageoftheWestisthat

itisstrongerthanitreallyis.Theythinktheycanraisethepriceofoil$4abarrelwithoutseeingthatitmaythrowtheentireWestintoadeepdepression.”Kennedy urged Kissinger to talk to the Shah: “Agreement on figures on

inflationandontheeconomicimplicationsofsucha thingwouldbeimportantthough.”The senator, like most people, assumed that Kissinger enjoyed a close

relationshipwith theShah and that they communicated frequently.This suitedKissinger’s purposes and burnished his reputation as a statesman. But thesecretaryofstate’stelephonetranscriptsshowthatin1975hewasalreadytryingto reduce his public affiliation with the Shah, who had long since stoppedlisteningtohimortakinghisadvice.KissingerwasparticularlyanxiousnottobeseenashavinganythingtodowiththesaleofmilitaryequipmenttoIran.Thatispresumably why the man who wrote out and signed off on the Shah’s blankcheckonpurchasesofmilitaryequipmenttelephonedcolumnistJosephKrafttoassurehim(“justforyourinformation”)that,

while I’m for these sales, Iwas not the chief energizing factor. Iwasmoreabenevolent tolerance.Iwasn’tpushingitparticularly. . . .There isno“benice”strategy[towardtheShah].IamopposedtohavingapoliticalandeconomicconfrontationwithIranbecauseIdonotbelieveitwillgetoilpricesdownorbecausewhatitwouldtaketogetthemdown—theamountbywhichtheywouldgetdownthatwaywouldn’tbeworththepoliticalandeconomiccause.I’mstronglyinfavorofcreatingtheobjectiveconditionsthatwillgetthemdownandwearewellunderwayonthat.

PUTTHETANKERSRIGHTINTOGUANTÁNAMOBAY

A lotwas now riding on the bilateral oil dealKissinger had promised theShahand thatFrankZarbwasnegotiatingwithHushangAnsary.Theultimatedecisionwhether togoaheadandbuytheShah’sunsoldstockpileofoil restedwith the White House Economic Policy Board presided over by TreasurySecretarySimon.TogetherwithZarb,SimonnowheldalockoverWhiteHouseforeigneconomicpolicy.Kissingerwastooslowtograspthathewouldnothavethe final say on the deal. It was not until June that he insisted the EconomicPolicy Board broaden its membership to include State Departmentrepresentation.Kissingerhadevery reason tobeworriedaboutSimon’s tacticsand motives. Back in May the Shah’s plane had barely taken off when thetreasury secretary attacked as “false” the Shah’s call for a new price increase,describingthelogicbehinditas“confused.”HedenouncedtheIranianleaderforusingoil“forpoliticalblackmail.Hedoesn’tseethisasaneconomicquestionatall.”ThereweretobenomorefavorsorsweetheartdealswiththeShahonoilprices.“SecretarySimon isnotbashful aboutgoing after theShahand regretsthatthelordofthePersianGulfisn’tchallengedmoreoneconomicstatements,”reportedtheChicagoTribune.Thetreasurysecretary“believesinthegeniusofthefreemarket[anddoesn’t]buythesecretaryofstate’snotionthateconomicsshouldbeusedformilitary-diplomaticgoals.”Bill Simon held four immediate advantages over Kissinger and the State

Departmentindecidingthefutureofthebilateraloildeal.Thetermsofthedeal—pricing,volume,andduration—wouldbedebatedonhisturfattheEconomicPolicyBoardbyeconomists and financiers likeAlanGreenspan,WhiteHouseeconomicadviserWilliamSeidman,ArthurBurns,andFrankZarb.Itwouldbedecided on its financial as opposed to its geopolitical merits. The secondadvantage was that Ford was already under pressure from conservativeRepublicanstoreduceKissinger’sinfluenceinforeignpolicyandnottodoanymore favors for oil producers.A third factormilitating against a dealwas thepotentialdownsidefor theU.S.economyata timewhenoilpriceswereunderpressure.Iftheadministrationenteredintoalong-termdealtobuyhundredsofmillionsofbarrelsofIranianoilatafixedprice,itrantheriskoflockingitselfintotermslessfavorablethanitmightultimatelygetontheopenmarket.Fourth,Simonwasnot interested in signingoffonany deal to help theShah.He andSheikh Yamani wanted to turn the OPEC producers cartel over to Saudileadership, which meant breaking the Shah’s hold over its pricing decisions.

PresidentFordwastryingtostraddlethedividebetweenthefinancialconcernsofhiseconomicteamandhissecretaryofstate’sgeopoliticalpriorities.Itturnedouttobeabridgetoofar.IntheOvalOfficeonJune12,FordtoldKissingerthathefavoredtheoildealonlyifitpreventedafurtherpriceincrease.“GreenspanisterriblyworriedaboutanOPECpriceincrease,”hesaid.“Ifthiswillstopthat,Ithinkhewouldfavorit.”While the terms of the oil deal were being evaluated, a series of widely

syndicated, anonymously sourced articles unfavorable to the Shah beganappearing in Jack Anderson’s Washington Post column. One item remindedreadersthattheShahowedhisthronetotheCIA.AndersonalsocitedaseniorFrench official who said his government “cannot understand why the U.S.governmentcontinuestopaytributetotheShah,particularlyintheaftermathofhisrecentWashingtontripwherehe‘spitinyoureye’withhisannouncementofaSeptember(oil)pricerise.”ThearticlealsoquotedfromaconfidentialSenateanalysiscommissionedtostudyU.S.oilpolicy:“Kissinger’shandlingoftheoilproblem exhibited his tendency to treat adversaries kindly and our friendsshabbily.”OnJune23,thedayafterthecolumnappeared,KissingerhostedFrankZarb,

Alan Greenspan, and Charles Robinson for lunch in his private dining room.ZarbandGreenspannowexpresseddoubtsaboutproceedingwith theoildeal.The government had no purchasing authority to buy oil from a foreigngovernment. Worse, the White House had headed off an attempt by theDemocraticCongress togive itone.“Wedefinitelydonotwant a governmentpurchasing authority,” explained Zarb. “This notion of a government agencyhandlingthissortofmatterisinconceivableandinconsistentwithourideaofafree-enterprisesystem.Theliberalshavebeenpushingitinordertofurthertheirefforts to nationalize the oil industry. So, success in this venture we arediscussingwouldplayintoliberals’hands.”Kissinger also balked at the notion of asking Congress to pass special

legislation authorizing the purchase, though his reluctance had less to dowithethicsthanwithsecrecy.“WemightnotwantCongresstotaketooclosealookinto it,”heconfessed,aclue that therewasmore to thedeal thanmet theeye.Greenspan reminded his colleagues that Saudi Arabia was OPEC’s swingproducer.Only theSaudis had themassive oil reserves necessary to challengeandbreakthecartel’spricestructure.TheShah’sofferof700,000barrelsadaywouldnotinitselfdothejob.“Well,weallunderstandthatthecriticalpathwouldbegettingitdonewithout

goingtoCongress,”saidZarb.RobinsonremindedZarbandGreenspanthatfortheStateDepartmentthedeal

wasaboutmuchmore than economics. “You’vegot tounderstand thatwe seecertainpolitical benefits thatgo farbeyond theoil price concern,”he said. “Itgets into the whole question of American leadership.” He suggested that theadministration bypass Congress by asking the Department of Defense to “get[the oil] on the basis of military need.” This would require the secretary ofdefensetoauthorizethepurchaseonthebasisofnationalsecurity.“[The deal] must be in the next six weeks, otherwise, it’s lost,” Kissinger

remindedthem.Whathedidn’tsaywasthattheoildealhadbecomeamatteroftrust between himself and the Shah. The Shah needed to know thatKissingercould still deliver for him.Kissinger dismissedGreenspan’s idea that lawyersshouldvetthedealbeforeitwentanyfurther.“I’dratherhavetogobacktotheShahthenandtellhimthatwehavelegalproblemswithitthangotohimnowwith 5000 caveats,” he explained. “Otherwise he’ll say these guys are for thebirds. It’s the same problemwe face in general. The Shah’sworry is that theUnitedStateshashadit.I’drathertellhimafterwards.Hecansayhe’sbasicallywithusorhe’snotwithus.We’llneverget tobat if thisstoryleaks.Let’s justexplaintothePresidentthatwestillhavetolookatthetechnicalities....I’mnotsureIunderstandwhatBill[Simon]istryingtodo.WewouldmaketheShahanirreconcilableenemy,ifnotaparticipantinanotherembargo.”WhileU.S.officialsdebatedthemeritsandlogisticsofthedealtheShahwas

losing patience with Kissinger. He refused to meet with Robinson whenKissinger sent him to Tehran to propose a long-term contract guaranteeing“additionalsuppliesofoil,offsetagainstIranianpurchasesofU.S.goods.”“Thesearen’texactly themost sincerepeoplewe’redealingwith,” theShah

toldCourtMinisterAlamonJune26.“Whatassesthesepeopleare.”TheWashington Post of June 27 brought fresh bad news for the Shah and

Kissinger. Jack Anderson published portions of a leaked Treasury reportdisputingtheShah’sclaimsthathighoilpricesdidnotaffecttherateofinflationand that high prices were justified to pay for the higher prices of importedWesterngoods.“Behind the scenes,” reportedAnderson, “some administrationofficialsareeagertochallengetheshah,butthePresidenthasinstructedthemtokeeptheircommentstothemselves.Intheirprivatepapers,however,theyhavedemolishedtheshah’seconomicarguments.”Later in thedayKissinger tookaphone call from Simon in which the treasury secretary played the innocent,professing to be concerned about what Jack Anderson was up to. “JackAnderson calledme lastweek and he says, you know I’m going to be doingsomearticlesonIran,andthenhestartstotalktomeandhe’stalkingallovertheplace, most especially over in the State Department and the CIA abouteverythinghecanconjureup,”saidSimon,whosoundedlessthanconvincingin

theroleofHenry’sconfidant.“He’swrittentwoarticlesalreadyandwhoknowswhat hewill comeupwith next.”Kissinger did not rise to the bait thoughheundoubtedlytooknoteofthefactthatmembersofhisownstaff, inadditiontoofficialsatCIA,werenowpoisoningthewellagainsttheShah.Kissinger’s opinion of his colleagues on the Economic Policy Board was

about as low as the Shah’s was of him. Transcripts show that he belittledGreenspan and Zarb behind their backs. “They are small timers,” he assuredChuckRobinsonbeforedeliveringthefinalinsulttwodayslater:“Thereisn’tabrainbetweenthetwoof them.I thinkIunderstandeconomicsaswellas theydo.”Itwasinconceivabletohimthathewouldnotgethiswayontheoildeal.Hisegocouldnotentertainthepossibilityofdefeat.ThetranscriptsalsoconfirmthatKissinger’stutorinpetroleumeconomicswasnoneotherthanMohammadReza Shah.“The Shah is a tough cookie,” Kissinger had lectured Zarb andGreenspan.“Doyouknowhim?Heknowsmoreaboutoilpricesthananyone.”Thismade sense. Kissinger’s everymove on oil pricing and production since1969, intentionally or not, seemed intended to benefit the Shah and Iran’seconomyinonewayoranother,oftenattheexpenseoftheAmericaneconomy.Kissingerhadmore faith in theShah’s economicprowess thandid the Iranianleader’sownPlanandBudgetOrganization.Kissinger’sirritationwasnodoubtareflectionofwhatheknewandhiscolleaguesstilldidnot: that if thedealwasnot signedoffonby theendofAugust, theShahwouldfollowthroughonhisthreattoraiseoilpricesatthenextmeetingofOPECoilministersinSeptember.TimewasrunningoutforKissingertodeliveronhisendofthebargain.Eager to raise thestakes,anddetermined tomake theoildealageopolitical

packagewithpoliticalbenefitsforthepresident,KissingerdangledbeforeFordthe prospect of diverting some of the Shah’s surplus oil to Israel. ThiswouldspeedupthechancesofasuccessfulconclusiontothestalledMiddleEasttalksondisengagement.“They[theIsraelis]wantreimbursementforlosingthe[AbuReis]oilfieldsandaguaranteeofoilsupplyincaseofanembargo,”KissingertoldPresidentFordatCampDavidonSaturday, July5.The secretaryof stateannouncedthathehadfoundtheidealsolutiontothestandoff:“WecouldusetheIranianoil.WehaveadealwithIranifyouwantit.”Anderson’s thirdandmostprovocativecolumn,“CIAFindsShah Insecure,”

appeared on July 11. “The Central Intelligence Agency has compiled adisturbingpsychologicalprofileof the shahof Iranwhom theUnitedStates isbuilding up to be the guardian of its interests in the Persian Gulf,” wroteAnderson. The CIA’s resident psychologists had been hard at work applyingvariousFreudiantheoriestomakesenseoftheShah’spersonalityandbehavior.Theydescribed theShahas “anuncertain ally”andblamedhis insecuritieson

(1)anoverbearingfatherwhoused“tostringupenemiesbytheheelsandkickthemintheteeth,”(2)thelongyearstheShahruledinnameonly,(3)theShah’s“fearsofimpotence”andthemanyyearsittookhim“toproduceamaleheirtothePeacockThrone.”TheShahwasforgoodmeasure(4)aformerplayboywho“never got over his lack of royal lineage and the ignominy of being a puppetmonarch....Nowthisinsecureman,showeredwithoilbillionsandbolsteredbythe United States, is determined to show the world, psychologists suggest.”Anderson did not explainwhy, if the Shahwas soweak and insecure, he hadrepeatedly outmaneuvered and out-negotiatedAmerican presidents, secretariesofstate,secretariesofdefense,ambassadors,andintelligenceofficialstosecureforhimselfbillionsofdollarsinarmamentsandbillionsmoreinoilrevenues—orwhatthatsaidaboutthemenwithwhomhewasdealing.Anderson’s column did not fall on deaf ears. Ambassador Helms was so

enragedwhenhe read it thathe“wouldnot allow the column tobe circulatedamong the staff.” He had already adopted a policy of preventing his officialsfromreadingCIAanalyseshedeemedunfairlycriticaloftheShah.TherecanbefewrecordedinstancesinhistoryinwhichanAmericanambassador,letaloneaformerheadofCentral Intelligence,decapitatedhisown intelligence-gatheringfacilities,butHelmspulledoffthisfeatwithhisusualaplomb.KissingerwentanotherroundwithZarbandGreenspanonJuly14.Zarbtold

theothers that theadministrationcouldgetcongressionalauthoritytostockpiletheShah’soilonlyifdetailsofthedealweremadepublic.Kissingersaidtogoaheadanyway:“Ithinkyoushouldjustgoaheadnegotiatingwithwhatyoucanandsaythatwehavegotsomelegalproblems.”He asked whether the Defense Department could buy the oil. When Zarb

repliedthatunderthelawDefensecouldbuybutnotresellit,Kissingererupted.Hehadhadenoughofallthewildtalkaboutlegalniceties.Thiswasnowaytorun the foreign policy of a great power. Things had been done differently inNixon’sday.“Asahistorian,Isaythiscountryhashadit,”hesnapped.“Ispendtwo-thirdsofmytimeexplainingtoothercountrieswhythiscountrycannotdowhatisclearlyinitsowninterest.”ChuckRobinson brought up JackAnderson’s latest column: “The article in

thePostwasn’tveryhelpful:thepsychologicalstudyoftheShah.”“No, it wasn’t, even though it was very interesting,” said Brent Scowcroft,

whoalsoattendedthemeeting.“Buthowitgotout,Ijustdon’tunderstand.”“YouandIarerapidlygettingtothepointthat,shoulditbedecidedthatthis

can’tbedone,everystepispullingusindeeperanddeeper,”RobinsonwarnedKissinger.TheShahwasundertheimpressiontherewerenoproblemswiththeoildeal.YettheWhiteHousestilllackedthelegalauthoritytogoahead.Whygo

anyfurther?Whypushtheirluck?“If you go to the Shah and say that you have legal problems, you will be

makingagreatproblemforhim,”Kissingerexplained.“Heknowsoilandknowsitbetterthananyofushere.HecouldeasilysellhisoiltoEuropewithoutanyreductionsatall.Wemightaswellgoaheadandcompletethedeal,andseeifwecanthengetauthorization.”“ButifitisnotcompletedbyOctober1,thenitwillbealmostimpossibleto

completeitatall,”saidRobinson.TheabsurdityoftheirpredicamentbecameglaringlyobviouswhenGreenspan

announcedthathehadcomeupwiththeperfecthidingplacefortheoil.Itwasalocation that satisfied Kissinger’s obsession with maintaining secrecy andGreenspan’sconcernsaboutkeepingcostsdown:“Well,atleastwe’vecomeupwithagoodideaforeconomicalstorage:tankers.WecanfilluptankersandputthemrightintotheGuantánamoBay.”“Ifithasanythingtodowithbreakinganembargo,theCubanswillloveit,”

saidKissinger,whodismissedtheideaasludicrous.“No, it’s a serious idea,” said Greenspan. “We have a lot of potential for

floating storage.A lot of these tankers arenot used anywayand it’s relativelyinexpensive.”“Look,IwanttobealittlemorerealisticthanIusuallyam,”saidFrankZarb,

whowas trying to square the circle.Gerald Ford had told him to play by therules. “I don’t see any way we could possibly complete the deal withoutCongressionalhearings . . . thequestionthenis,canyoulivewithit?AndcantheShahlivewithit?”“Ifwecannotcompleteit,wehavegotrealproblems,”Kissingertoldthem.“I

don’tunderstandwhysomanypeoplearedemandingthatwebetoughonIran.BeingtoughonIranisnotthekeytobreakingthecartel.”ThelastofJackAnderson’sarticles,“IranMayBeSpendingBeyondMeans,”

waspublishedonJuly31.Thearticle’srealvaluelaynotsomuchinwhatitsaidabout theShahas in itsperceptive revealing that seniorWhiteHouseofficialswerekeepingacloseeyeonIran’seconomy,whichtheyknewtobeintrouble.“AmericanofficialsatthehighestlevelsareworriedthattheShahofIranmaybeliving beyond his means,” wrote Anderson. “Signs of the Shah’s financialembarrassmentareeverywhere....Forallitsoilriches,Iranisdeeplyindebt.TheShah,accordingtoAmericanofficialsfamiliarwithhisfinances,owesabout$3 billion in bilateral and multilateral loans.” Tossed in with the economicanalysiswasthisjuicymorsel:

According to the latest confidential estimates,however, theShah’soil

reserves will last, at best, for another two decades. This will leave theunpredictable, ambitious, recklessly greedy Shah with little more than adownpaymentonhisdreamofglory.Ratherthanabandonhisdream,theyfear privately, he may march his American-made army into neighboringSaudiArabiaandKuwaitandannextheiroilfields.

President Ford received Prime Minister Takeo Miki of Japan at theWhiteHouse on August 6. Japan imported 73 percent of its oil from Iran and theMiddle East. Miki stressed to Ford the importance of easing tensions in theMiddle East and the strain placed on Japan’s economy by high oil prices. “IfthereshouldbeafifthwarintheMiddleEast,Japan’sindustrywouldnolongerbe viable,” he remarked. “For that reason, a Middle East peace settlement isabsolutelyvital toJapan.AnyrenewalofhostilitiesinthatareawouldhaveanimmediateimpactonJapan’saccesstooil.”HeremindedtheWhiteHousethatJapan’sfuelbillwasfourtimeshighernowthanithadbeenayearearlier,“andweexpectouroilbillthisyeartototal23billiondollars.”Japan’seconomywas“inseverefinancialstraitsthisyear.”ThegovernmentinTokyohadbuiltasixty-eight-daystockpileofpetroleumtoguardagainstasecondembargo.Itsgoalwastohaveaninety-daystockpileinplacebytheendof1976.PresidentFordwasstillleaninginfavorofadealwiththeShahonoilsolong

asitheldclear-cuteconomicbenefitsfortheAmericaneconomy.Thedayafterhismeetingwith PrimeMinisterMiki, Ford listened toKissinger’s complaintthat“ZarbandGreenspanaredraggingtheirfeetontheIranianoil....IhadascenarioreadyandIhavetogetananswertoAnsarytoday.Ihavenodoubttheywillapproveit,buttheywanttoprovetheirmanhood.IwouldliketotellAnsaryandyoucanrescindittomorrowifyouwant.”Goahead,Fordsaid,tellAnsarythedealwason.Butstilltheycouldn’tmakeallthepartsfit.ThepresidentwasunwillingtoasserthisauthorityoverTreasury.Ford,Kissinger,Zarb,Greenspan,andScowcroftmetagainthenextday,Friday,August8,todiscusstheimpasse.BillSimon,whowasnotintheroom,wasrefusingtosignoffonthedeal.ThenKissinger’sattempttolinktheoildealtoaMiddleEastpeacesettlement

collapsedonAugust15. Israelagreed toevacuate theAbuRudeisoil fields inreturn for awritten pledge from theWhiteHouse to supply it with oil in theevent that at some future date Iran, Israel’s regular supplier, reneged on theShah’spledgemadeinZurichtokeeptheoilflowing.Brent Scowcroft later recalled that the Economic Policy Board, set up to

streamlineandformulateU.S.foreigneconomicpolicy,“wasparalyzedbecause

of the hostility” between Kissinger and Simon. “Anything Henry proposedSimonobjectedto,anythingSimonproposedHenryobjectedto,”hesaid.“Soitwas a very complicated period economically. And that spilled over into oilpolicy.”ThebickeringwithintheFordadministrationleft theShahhanging.Hewas,

not surprisingly, exasperated and irritated by the delay.CourtMinisterAlam’sdiaryincludesthecopyofaletterMohammadRezaShahsenttoKissingerdatedAugust24inwhichthekingsaidhewas“verymuchdisappointedthatourtalkson oil have not been successful and might even be inconclusive.” Alamexpressed to theShah“mydoubtsas tohowmuchwecanrelyonKissinger’sgoodwillinfixingoilprices.”TheShahagreedwithAlam:“Butstill,”hesaid,“we’vegottogothroughthediplomaticniceties.”OnAugust28,theShahreceivedaSaudidelegationinTehrantodiscussthe

forthcomingOPECsummit.HopingtopreventtheSaudisfrombreakingranks,theIranianleaderadmittedtohisgueststhatNixonandKissingerhadapprovedinadvanceeachofthepreviousoilpriceincreasessothatIrancouldbankrollitsmilitary buildup. Kissinger had also lied to the late King Faisal when hepromisedtoasktheShahnottoraiseoilpricesagain,theShahtoldtheSaudis.TheSaudidelegationwasincensed.WhenSheikhYamani returned home he confrontedU.S. ambassador James

Akins about the Shah’s allegations. Akins had just learned from reading TheNewYorkTimes thatKissingerintendedtoreplacehimasenvoyfor taking theSaudi side in thedisputeoveroil pricing.During the secretary’smeetingwithSenatorKennedybackinJune,Kissingerhadsnidelyasked,“HowwasourPro-consulthere?He’sverybright,buthe’sbecomingverylordly.”KennedyjokedthathissistershadmistakentheAmericanambassadorfor“anothersheikwhenhearrived.”AftertalkingtoYamanitheambassadorwroteamemoinwhichhedescribed

Saudiagitationandoutright furyover thedirectionofU.S.policy in theGulf.“AlthoughtheSaudisknowtheIranianpropensitytolie,theybelieveinthiscasethattheIraniansaretellingthetruth,”Akinswrote.SomeonehadleakedtotheSaudisthemilitarycontingencyplanthatcalledonIrantosendparatroopersintoSaudiArabia.YamaniangrilyaccusedtheUnitedStatesofpreparing“theShahofIranforanarmedinvasionofArabianoilfields...theconclusiontheSaudiswere reachingwas thatwe had an agreementwith Iran to let it take over theentireArabian littoral of the PersianGulf.” Iran’smilitary buildup “was quiteclearlyaimedatoccupyingtheArabstatesacross thegulf, theemirates,Qatar,Bahrain, Kuwait and even Saudi Arabia itself.” In the next Arab-Israeli war“IsraelwouldbeencouragedtooccupyTobukinnorthernSaudiArabia,andIran

would be told to occupy the Arabian littoral.” Yamani even believed that theAlgiers accord signed by the Shah and Saddam Hussein to settle borderdifferences and end theKurdish insurgencywas part of a conspiracy “so IranwouldhaveafreerhandinthelowerGulf.”YamanireportedlytoldAmbassadorAkins:“IfIranshouldsucceedinoccupyingpartoftheArabiancoast,itwouldfindonlysmokingruins,andtheWesternoilconsumerswouldfacecatastrophe.”He concluded by telling Akins that in his own view the Shah was “highlyunstablementally.”

HAVEYOUSEENTHELETTERFROMTHATIDIOT,FORD?

TheShahmovedonhisthreattoincreaseoilprices.TheSaudiswerenowintheenviablepositionofbeingcourtedsimultaneouslybytheShah,whoneededtheir support if any price increasewas to stick, and theAmericans,whoweredetermined to stopOPEC from yet another hike in price. AmbassadorHelmscabledUnderSecretaryofStateRobinsontotellhimthat“fromwhatweknowand what you have heard personally of the shah’s attitude on this question,frequentlystatedpoliticallyandthereforeallthemoredifficultforhimtoretreatfrom, he feels there is ample justification for a price increase and is pressinghardforacceptanceofhispointofview.”Helms included thiscrucialpieceofintelligence:“Further,heis insomethingofacashflowbindandthereforenotable to do all he (or we) would like him to do.” The Shah’s bad habit ofoverspending had finally caught upwith him.Helms knew it and so now didKissinger.Evenif theShahwantedtohelptheAmericanshewasunabletodoso;theresultforIranwouldbeafinancialcrisis.TheShahbackedhimselfevenfurther into a corner several days later when he declared before the Iranianparliamentthathesoughtabigincreaseinoilprices.Forhimtobackdownnowwouldbeseenathomeasanactofweakness in the faceofpressure from theAmericans.On September 2, a scene of abject humiliation was played out in King

Khalid’s compound at Taif. Kissinger had come to plead with Yamani not tosupport theShah,whowasnowtalkingabouta15–20percentpricerise.HerewasamomentforYamanitorelish.KissingertriedtoassureYamanithathewasnotanti-Saudi.“Ihavereadofsomeconversations inwhichyou indicated thatyou believed that the U.S. was embarking on a policy of getting tough withSaudiArabia,”hesaid.“Ijustwantedtotellyoupersonallythatthisisnotourpolicy. . . . Let me assure you that you have nothing to be concerned about.

Thereisabsolutelynotruthtothis.Itiscertainlynotourpolicy.”Hesaidthatapriceincrease“willbeusedbyouropponentsintheU.S.—bythoseopponentsofourpolicytowardtheArabWorld.They’llsaywearenottoughenoughwiththeArabsknowingfullwellthatifwegettoughertheArabswillretaliate.”ThiswasanapparentallusiontoSenatorJacksonandtheneoconservatives.“Sometimesweareconfused,”Yamanihaughtilyreplied,hisremarksmaking

itclearthathedidnotbelieveKissinger.“WhenHisHighnessPrinceFahdwasinTehran, theShah toldus thatyourviewwas that itwasnecessary tohaveapriceincrease.”“Itisnotconceivablethatthatcouldbeportrayedasmyview,”saidKissinger,

whopresumablynowunderstoodthattheShahhadbetrayedhisconfidence.HeexplainedtoYamanithatanincreaseinoilprices“willleadtomassivepoliticalproblems for our efforts in the Middle East. It would also have enormouseconomicconsequenceswhichyouknow.”“Weknowyour views,” saidYamani. “We are not in the forefront of those

whowantaprice increase.That isnotour traditionalposition.ButyourviewsshouldbetoldtootherOPECcountrieswhofeeldifferently.”Kissinger promised to clear up any confusion about theAmerican position.

“WhenIreturnthePresidentwillsendamessagetotheShahsohecanbeundernomisconceptionaboutourattitudeonthis,”hesaidandreturnedtohisoriginalremarks: “I can assure you there is no tough line. It is pure newspaper idlespeculation.Thereisnotruthtoit.Igiveyoumypersonalassurances.”Thenextday,September3,Yamanipressedhomehisadvantage.Hewrotea

“strictlypersonal”lettertohisfriendBillSimonurgingtheWhiteHousetoexertmaximumpressureontheShah.“Iwouldlikeyoutoknowthattherearethoseamongstuswho think that theU.S.administrationdoesnot reallyobject toanincrease in oil prices,” Yamani continued, an obvious reference to Kissinger.“Thereare thosewhothinkthatyouencourageit forobviouspoliticalreasons,and that any official position taken to the contrary ismerely to cover up thisfact.” If theUnited States did not intervenewith the Shah then Saudi Arabiawould join the rest ofOPECand support a double-digit increase inoil prices.Simon was rattled enough to write a six-page memo to the presidentsummarizinghisconversationandlayingoutthecaseforconfrontingIran.FordwrotetheShahonSeptember9.CourtMinisterAlamkeptacopyofthe

letter in his diary. The president cautioned the Shah not to raise prices againbecause doing so “could raise serious questions among the American publicregarding theclosecooperationweseekandareactivelydevelopingwithyourcountry in several fields of our bilateral relationship. . . . I am asking you toweighheavilytheadverseeffects—bothpsychologicalandreal—whichaprice

increasecouldhave.”TheShahwasincensed.“HaveyouseentheletterIreceivedfromthat idiot,

Ford?” he asked Alam. He was convinced that Bill Simon or “that devilKissinger” was behind it. Yet the Shah was nonplussed. He had stood up toNixonin1973whenpricesquadrupledandhefeltsurehewouldgetthislatestraise,whichafterallwasonly15percent.Both sides were now playing a very hard game. In his response, dated

September10,theShahdisputedtheadministration’sargumentsandsaidapricefreeze was unfair to oil producers. “I also appreciate very much and greatlyvalue the special relationship that exists between our two countrieswhich, asyoufullyrealize,Mr.President,isnotonlyinfavorofIranbutismutuallyandequally beneficial to both sides,” he wrote. “If, in defending our legitimateinterests, we might raise serious questions among the American people, wewouldbeverysorrytoascertainthattherealfactshavenotbeensetbeforeyourpublic.” This final remark was a calculated insult, a dressing-down from theKingofKingstoanunelectedpresidentinofficeonlythirteenmonths.The bitterness lingered.OnSeptember 22, President Ford narrowly escaped

assassinationwhenatroubledwomanfiredathimoutsidetheSt.FrancisHotelinSanFrancisco.Worldleadersexpressedreliefthatthepresidenthadnotbeenhurtorkilled.MohammadRezaShahalsocabledhiscongratulations.HesharedhisprivatefeelingswithAlam.“Butwhyonearthdopeoplewanttodisposeofsuchanolddonkey?”heasked,smiling.Fivedayslater,OPECoilministersmeetinginViennaannounceda10percent

increaseinpricetotakeeffectonOctober1.Thepricewouldremainfrozenforninemonthsasagesturetooil-consumingnationsstuckwithanew$10billionaddition to their fuel bills. The Iranian oil minister, Dr. Jamshid Amuzegar,declared himself “very happy” with the outcome of the discussions. SheikhYamaniwas downcast.He had hoped to prevent any new price increase fromtaking effect, and at one point demonstrated his pique by delaying theproceedingsfortwenty-onehourstoflytoLondontocontactCrownPrinceFahdusingmoresecurecommunications.Analystsnoted that“thewalkoutwasalsocalculatedtodemonstrate...thenakedpowerofSaudiArabiaastheleadingoilstate.ItwasasignaltotheUnitedStatesthatSaudiArabiawasplayinghard,thistime.”TheSaudisweregraduallylearningtoassertthemselvesagainsttheShah.ThelatestpricehikeboostedIraniangovernmentrevenuesby$2billion,thoughnot nearly enough to pay outstanding debts and cover expenditures. CourtMinisterAlamsagelynotedinhisdiarythattheoutcomeoftheOPECmeetinginVienna“canonlyberegardedbytheSaudis,andforthatmatterbytheUSA,asarelativeclimb-downbyusandoursupporters.”

THESHAHLIEDTOME

In the summer and fall of 1975 diplomats in Tehran began picking up onrumorsthattheShahwasinpoorhealth.TheSeptember23,1975,editionofTheNewYorkTimesranabriefitemundertheheadline:“AideDeniesShahofIranIs Ill.” The paper’s correspondent informed readers that a spokesman for theShah“inaninterviewyesterdaydeniedpersistentrumorsinTehran’sdiplomaticcommunitythatthereasontheShahsometimesappearsdrawn,wornandthinisthat he is suffering from a lingering and increasingly grave malady.” ThespokesmanwasundoubtedlyCourtMinisterAsadollahAlam,anexpertincover-upsandsubterfuge.“Nomanwhoisailingcouldworkundersuchpressureasheworksunderandtravelaroundtheworldthewayhedoes,”heprotested.Heputthe Shah’s weight loss down to a twelve-hour workday and “overwork andfatigue.”TheShahhimselfreadtheTimes.Itwasaroundthistime—theexactdateisuncertain—thatAmbassadorHelms

surprisedhisseniorembassystaffwitharemarkablepieceofnews.“TheShahisseeingFrenchdoctors,”hesaid.HelmsalsotoldthemthattheShahhadwrittenhis will. How was it possible that Helms knew the nationality of the Shah’sdoctors, let alone that he was receivingmedical attention? Did he also knowabouttheShah’scancerdiagnosis?AndwhoprovidedhimwiththedetailsoftheNovember 1973 conclave at which the Shah had read out his last will andtestament?During his lifetime Richard Helms remained publicly tight-lipped on the

subjectof theShah’s cancer.Theepisodeclearly troubledhim.Heunderstoodthat the failure of U.S. officials to diagnose the Shah’s illness amounted to acatastrophic intelligencefailure.Afterhe leftgovernmentserviceheruminatedwith at least one former colleague, former National Security Adviser BrentScowcroft.Andinthemid-1980sheunburdenedhimselftoahistorianduringanoralhistory interview.His remarks,publishedhere for thefirst time,shednewlight on one of the great riddles of the Iranian Revolution. They suggest theepisode remainedagreat sourceof regretandembarrassment.“Iknow thatheliedtomeaboutit,”saidHelmsoftheShah.

Ifitwasn’tadirectliesaying,“No,Idonothavecancer,Idonothaveleukemia,” or whatever it was, he certainly gave me the impression bydevicessuchas,“WellIamreadinginNewsweekthatI’msupposedtohavecancer. Have you ever seen anybody looking healthier than I look rightnow?”Thingsofthissort.SoasnearlyasI’vebeenabletoestablish...the

only person to whom he confided this information was the Empress.Nobodyelseknewaboutit.Andnobodyelsewastoldaboutit.

But in1975EmpressFarahhad stillnotbeenmadeawareofherhusband’slymphoma.TheoneconclusionwecandrawfromHelms’sadmissionisthatifheknewaboutthepresenceofFrenchdoctorsinTehranthensotoodidHenryKissinger. It is inconceivable that the ambassadorwithheld such a crucial andintriguingtidbitofinformationfromthesecretaryofstate.ShouldwethentakeitonestepfurtherandacceptHelms’sassurancethathetooktheShah’slieatfacevalue? The answer is a surprising yes. When French president GeorgesPompidou was diagnosed with Waldenström’s disease the National SecurityCouncilwasalertedandastudyundertaken toassess the impactof theFrenchpresident’sillnessandmedicationonU.S.relations.PresidentNixonandhistopofficialsmadethenecessaryadjustmentsintheirdealingswithParis.InthecaseoftheShahofIrannopolicyadjustmentsweremade,nocontingencyplansweredrawnup,nolegworkwasaskedoftheintelligencecommunity.Thetransferofhigh-techweaponrytoIrandidnotslacken.ThenegotiationstosellIrannuclearpowertechnologyremainedontrack.Nostepsweretakentoreducethenumberofexpatriatepersonnel.Inshort,theUnitedStatescontinueditsmarchtofollyinIran.RichardHelms’s failure to requestCIAsurveillanceof theShah’sFrenchdoctors—prominent cancer specialists at a leadingmedical institute in Paris—wasasmuchafailureofimaginationasintelligence.Noone,itseems,noteventhemanwho knew toomuch, seemed to realize that the ShadowofGodwasindeedmortal.

JAMESSCHLESINGERANDTHEROADNOTTAKEN

At3:30P.M.onSeptember2,thesamedaythatHenryKissingerwasmeetingSheikhYamani inTaif,SecretaryofDefenseJamesSchlesingermet inprivatewithPresidentFordtodiscussthevexingmatterofU.S.-Iranmilitarysalesanddefense relations. Earlier in the year Schlesinger had ordered a top-to-bottomreviewoftheAmericandefensepostureinIran,bilateraldefenserelations,andweapons sales. The results of that review confirmed his own instinct to scaleback the American presence in Iran and reassess the entire basis of therelationship.HewasworriedaboutIran’sinternalsituation,corruptioninvolving

American military personnel, the safety of American civilians from terroristattack,andtheShah’srefusaltoacceptU.S.conditionsregardingthehandlingofenricheduranium.TheWhiteHousewas aware that the Shah’s refusal to back down over oil

prices hurt the chances of securing congressional approval for a U.S.-Irannuclear accord. “Wecan anticipate very criticalCongressional scrutiny of anyagreement thatwemightnegotiatewith IranbasedonCongressional concernsabout nuclear exports as well as hostility towards the Shah’s oil pricingpolicies,” concluded a study undertaken by theNational Security Council. Asbothsecretaryofstateandnationalsecurityadviser,HenryKissingerenjoyedtheunique position of accepting on the NSC’s behalf proposals advanced by theStateDepartment and then forwarding their recommendations to the presidentfor his approval. Kissinger recognized that the United States was trying toachieve two “potentially conflicting goals” by trying to prevent the spread ofnuclear technologyandconcludinganuclearaccordwithIranwhen“someareconcernedover [Iran’s] possible longer-termnuclearweapon ambitions shouldothersproliferate.”Iranneededenricheduraniumtoprovidefuelforthenetworkofnuclearreactorsitproposedtobuild.Butthesamematerialcouldalsobeusedto construct nuclear bombs. The Shah had made it clear he wanted Iran toacquire its own “fuel cycle capabilities (including an enrichment capability).”Other Non-Proliferation Treaty signatories were allowed to reprocess nuclearfuels so long as they did so in accordance with international standards andsafeguards.TheShahrejectedtheproposalfirstadvancedinFebruarytoinvestinajointU.S.-IranBechtel-constructedfacilityintheUnitedStates.IfIranwassuchatrustedally,theShahwantedtoknow,whyshoulditnotreceivethesameprivilegesasotherAmericanallies?The Ford administration offered the Shah a new deal that represented a

significant concession. The United States indicated that it would look morefavorablyonIranianrequeststoreprocessandstoreplutoniumonIraniansoiliftheenrichmentprocesswascarriedoutina“multinationalplantthattheUnitedStateswouldjointlymanageandsecurewithIran.Otherfriendlycountriesintheregion, such as Pakistan and Turkey,which had expressed a desire to acquirenuclear power, would be invited to participate in the consortium. Theadministration hoped that a multinational approach under nominal Iranianleadershipwould take the stingoutofAmericanvetopowerandappeal to theShah’s personal sense of grandeur. The StateDepartment saw it as awin-winsolutionforbothgovernments.“Iranhasnodearthofremoteareasforlongtermstorageofradioactivewaste,”U.S.embassydeputychiefofmissionJackMikloscabledWashington.“Andthepublicisinsufficientlyeducatedinthedangersof

radioactivitytoriseagainsttheidea.”Iranwaspoliticallystable“aslongastheShahsurvives,”saidMiklos.TheShah,ofcourse,wasslowlydying,butMikloshadnowayofknowingthat.Mohammad Reza Shah’s hackles were raised. “The Iranians recognize and

resenttheregionalreprocessingplantconceptasadevicetoimposeinternationalcontrol on this very sensitive stage in the nuclear fuel cycle,” AmbassadorHelmscabledWashington.“Iranianbruisedhonoraside,theybelievetheideaisridiculous in theMiddleEast setting.” Iran and its neighbors did not have thesortof“closefunctionalrelationships”requiredtoovercomethe“tremendouslycomplex” problems involved in “joint management, distribution of costs, andactualphysicalarrangementsforstorage,transport,andprocessingofmaterial.”Helms offered his view that if the United States wanted to figure in Iran’snuclear future itwould have to reach an accommodationwith theShah in thematter of enrichment. If such an accommodation was not possible, theadministrationshould“cutourlossesnowratherthantoprolonganissuewhichmayfesterandpoisonourrelationsmoreinthefuture.”Secretary of Defense Schlesinger and the Joint Chiefs of Staff urged the

presidenttoholdfirmandnotofferanyfurtherconcessionstotheIranians.Theyworried thatonceagainKissingerandHelmswerepreparing togiveaway thestore. “We recognize the importance of the U.S.-Iranian relationship both forenergy and national security,” Schlesinger informed Ford. “At the same time,duetothepotentialforinstabilityanduncertainpoliticalsituationintheMiddleEast, the proposed agreement for nuclear cooperation could have seriousnationalsecurity implications.”ThePentagon’scivilianandmilitary leadershipwereunitedintheirbeliefthattheUnitedStatesshould“delaytheoperationofsuch nuclear fuel reprocessing facilities for as long as possible.” The UnitedStatesmustneversurrenderitsvetoover“whereanyfuturereprocessingactivityofU.S.fuelprovidedIrancouldoccur.”Conditionsmustbeattachedsothat ifIranevictedinternationalinspectorsfromthemultinationalplant,theAmericanpresenceonsitewouldremain.Schlesinger had never understood the logic behind the Shah’s military

buildup.Nixon’sMay1972dealtoprovidetheShahwithallweaponryshortofthenuclearbombhadneverbeenexplainedtohim.“Idon’trecallthatIhadanydirectbriefings,”hesaid.

Asonereflectsonit,therewerekindofhintsatthisandthat,buttherewasnodocumentation.Itbecamecleartomeovertheperiodahead,thattherelationshipwasverydeep.ButnowIcannotrecallanyexplanationofthedegreeofcommitment,andindeedIhavenottothisdayhaditconfirmed

fromtheparticipantsthatthosecommitmentsweremadethatyoucanhaveanything you wanted. I did not, at that time, believe that such deepcommitments had been made, although I understood that we weresupposed,ingeneral, tosupporttheShah—becauseIresistedcertainarmssales,certaincommitmentsbytheUnitedStateswhichIdidnotthinkwereinourinterest,andsometimeswerenotintheShah’sinterest,andonsomeofthemIjustgotoverruled.

He fretted about the influx of American technicians and their families. “Icould not control it,” he explained. “I could influence it to some extent andhopedtoinfluenceittomoreextent,butthatwasdrivenbytheShah.”SchlesingerhadbeeninofficeonlythreeweekswhentheShahmadehisJuly

1973statevisittoWashington.“IurgedtheShah,thefirsttimeImethim,tousehisresourcesprudentlyratherthansquanderingthemonadiversesetofmilitaryhardware,”herecalled.HewarnedthatIranwouldhavetroubleabsorbingsuchvast quantities of high-techweaponry and finding the trainedpersonnel tousethem. The Shah disregarded hiswarning, perhaps becauseNixon had secretlypromisedtosupplyIranwithasmanyastwentythousandAmericantechnicians—asmanyas theShahneeded.Schlesingernever learnedabout thisdirective.He was also concerned in 1975 by reports of rampant corruption involvingAmerican defense contractors and uniformed military personnel. His trustedpersonal liaison to theShah, retiredarmyColonelRichardHallock, filedhair-raising reports to Washington alleging that the U.S. government’s policy offoreignmilitarysalespricing“isnotcorrectorconsistentandoftennothonest...thecredibilityproblemisdeeperthantheabsolutecosts;anditisheightenedbythefactthatnearlyeverycasequestionedbythe[governmentofIran]showsthattherewereoverchargesandabuses.TheamountofmoneythatIranisspendingwiththeU.S.togetherwiththelackofleadershipanddiscipline...hasgreatlyincreased the corruption in the FMS [foreign military sales] system in theServices.”Hallockwarned of “marriages of interest between the Services andmajor contractors for conducting business in Iran which is not authorized byeither the Secretary ofDefense or [the government of Iran]—projects born ofdeceptionandliesandgreasedbyinfluenceandpayoff.”Hallockdescribedtheleadershipof theAmericanmilitarymissionas“weakandchild-like,”activelysabotagingSchlesinger’seffortstorootoutthecorruptionthatnowextendedtouniformedofficers.TheAirForcesectionwithintheU.S.mission“hasnotbeencleanedupandiswaitinglikeabombtogooff.”An example of such corruptionwas the 1972Grumman deal cooked up by

Nelson Rockefeller and Kissinger. It had finally drawn the scrutiny ofcongressional investigators and led to embarrassment for the Pentagon. Theprobeuncovered evidence thatGrummanhadagreed topay “commissions” toIranianmiddlemenintheamountof$20millionoverfiveyearsstartingin1972.“It was normal practice,” claimed Grumman’s president, John Bierwirth.Members of Congress demanded to know why Grumman was forking outmillionsinkickbacksatatimewhenthecompanywastakingtaxpayerdollarsinthe form of a loan extended by the Pentagon for it to stay in business—andwhetherthisdealwasconnectedtoasecond$200millionloanofferedbyBankMelli of Iran, the bank that enjoyed close commercial ties with DavidRockefeller’sChaseManhattanBank.SchlesingerhadbeenkeptinthedarkontheGrummandeal.For Schlesinger, the news just kept getting worse. In June 1975 an audit

preparedbyNorthropCorporation’saccountingfirmrevealedthecompanyhadshelledout$30millioninbribestomiddlementosecuredefensecontractswithMiddleEastrulers,includingtheShahofIran.Thissumwaspartofatotal$200million in kickbacks or “commissions” paid by U.S. defense contractors toforeigngovernmentsor their agents since January1973.Prominent among the“salesagents”wasamanwellknown to theShahandRichardHelms:KermitRoosevelt.Northrop’s audit confirmed thatRoosevelt, theCIA’s lead agent inthe1953coup,leveragedhisbackgroundinintelligencetosecureforNorthropdefensecontracts“runningclose to abilliondollars.” In one incident in 1965,RooseveltflewtoIrantosuccessfullypersuadetheShahandhisself-described“oldpersonalfriend,”GeneralMohammadKhatam,thecommanderofIran’sairforce, tobuyF-5fighteraircraft.“TheShahcouldnothavebeenmorecordialpersonally—he said thatnext time Ivisit I shouldbringmywife, and the twofamilies should takeavacation together,”RooseveltwroteaNorthropofficial.“My friends in theCIA are also keeping an eye on things.” In anothermemodated from1968,Northrop’spresident instructedRoosevelt to ask theShah tolobbyonGrumman’sbehalfinameetingwiththeWestGermanchancellor.Schlesingerwasunawarethatoneofthebiggestcorruptionbombswasticking

under his own feet. Richard Hallock had weakened and decided to do somedouble-dippingof his own.Hallockhad earned themoniker “theGreyGhost”forhisshadowycomingsandgoingsinTehran.Hallock’sPentagonfileshowedthathisCalifornia-basedconsultancyfirm,IntrecCorp.,waspaid$2,697,067forthe period ofHallock’s employment by theDefenseDepartment,which lastedfrom August 17, 1973, to January 6, 1976. In the spring of 1975 Hallockcasually asked Schlesinger how he would feel if Intrec accepted separatecontract work with the Iranian government. “I simply told him it was totally

unacceptable,” Schlesinger recalled. “So I assumed it had gone away.”SchlesingerdidnotknowthatevenasHallockwasconsulting for theDefenseDepartment,hewasalsoquietlyadvisingU.S.defensecontractorson theside.Worse, he hadalready signed a contract to do businesswith the Shah—someninemonthsearlier.SchlesingerwaslatertoldthatHallock’ssonhadreportedlyfallenillandthat

the boy’s father agreed to work for General Toufanian to recoup the cost ofmedical bills. That was the start of it. Intrec signed “a multi-million dollarcontract with the Iranian government in July 1974 to advise it on research,planning, and training,” wrote scholar Barry Rubin. “The programs [Hallock]advocated to the shah, however, were not necessarily those backed by theMAAG [Military Assistance Advisory Group] and the Defense Department.”Hallock’s status as Schlesinger’s personal representative thus “put him in theenviablepositionofadvisingtheshahonwhattobuy,advisingtheUnitedStatesgovernmentonwhattorecommendtohim,helpingthearmssupplycompaniesclose thedeals,andoverseeing theprogramunderwhichall these transactionswere being made.” Hallock’s game of double cross ended when GeneralToufanianpaidhimahandsomecashsettlementtoleavethecountry.Thirty-fiveyears later, Hallock’s double cross still stung Schlesinger, who found itincomprehensibleandapersonalbetrayaloftrust.Hallockwas not alone in cashing in on his connection to theShah.For the

secondtime,formerVicePresidentSpiroAgnewpassedthroughTehranlookingfor business. Nixon’s former envoy John Connally also came calling. Alamcomplained to Ambassador Helms that Connally’s presence was particularlyodious because he had been implicated in corruption scandals in the UnitedStates.HelmsassuredhimthatConnally“wasacquittedofanywrong-doingandmight even run as a Republican candidate in the next presidential election.”Alam’sresponse:“WhatabizarrecountryAmericais!”IntheOvalOfficeonSeptember2,JamesSchlesingerpresentedhisreportto

thepresidentandofferedabriefsummaryofwhatheconsideredtobeitsmajorfindings.BrentScowcroft sat in as note taker. “I have a paper on Iran and itsproblems,”Schlesingerexplained.

It is not the best literary effort, but I’ll sign it. Iran has an almostlimitlessappetiteandhassomuchonitsplatetheycan’tdigestit.Wehavetried to slow them,butwehavegiven inwhen theShah reallywanted it.OurproblemisthatwearebuildingupourAmericanpopulationinIran...which could be a problem. It could provoke anti-Americanism andterrorism. If the political situation turned sour it could leave us very

vulnerable.Ithinkweneedathoroughreviewofourshort-termandlong-termpolicytowardIran.

PresidentFord took thedocument. “Iwill lookat it,”he said. “Incidentally,Simon told me this morning that the Saudis, Kuwaitis and the Emirates allwanted to hold the lineon theoil price and askedme to appeal to theShah.”Weeks later,onOctober10,Ford toldSchlesinger thathe supportedDefense’scall for a thorough review of where U.S.-Iran relations were headed. ThefindingscontainedinSchlesinger’sreporthadapparentlymadeanimpression.Since 1972 Iran had contracted to purchase $10 billion in U.S. weapons,

equipment, support, and training through the tainted foreign military salesprogram. Eight billion of that amount had yet to be delivered to Iran, whichraised“thespecterofseveremanagementproblemsdownstream.”Iran’sarmedforcesconstructionprogramfor1973–78wasmorethan$5billionandmilitaryconstruction was underway at more than three hundred locations around thecountry. “Frankly, the U.S. itself would find it extremely difficult to handleexpansionprogramsofthissizeandspeed;theIranianscannotdoit,”concludedthe secretary’s analysis. “The military supply system is a shambles . . . theexpansionistoogreatforthemtocopewith.”Therewere toomanyAmericans living in Iran.Defense estimated that “the

numberofU.S.citizensintheeightGulfcountriesis likelytoincreaseby135percentby1980,fromabout63,000toabout150,000,including70,000inSaudiArabia and nearly 76,000 in Iran.” This number far exceeded the StateDepartment’s projected estimate of fifty thousandAmericans living in Iran by1980. Iran had an “unhealthy reliance upon U.S. skilled manpower.” ThePentagonwasworriedaboutterroriststrikesagainstAmericansinIran.Thelargenumber of skilled uniformed techniciansmoving to Iran was proving to be adrainonU.S.militaryresourcesandhurtingAmericancombatreadiness.Finally,Schlesinger’smemocautionedthepresidentthat“thereareprospects

thatU.S.-Iranianrelationswillbecomedifficultintheyearsaheadforavarietyof reasons.” These reasons included the Shah’s position on oil pricing: “Theissue of oil prices obviously is one in which U.S. interests and the Shah’sperceptions of his interests could easily collide, and soon. The question ofnuclearsafeguardsforthereactorsheseeksisalsolikelytobetroublesome.”HeurgedaNationalSecurityCouncilreviewofU.S.defenseandsecurityinterestsin Iran. A complete review was needed “concerning the supply of arms andrelated goods and services to Iran. . . . It would appear important that we

considerwhetherandtowhatextentthechangesinourrelationshipwithIranareirreversibleandwhatfuturepoliciesweshouldfollow—especiallyintheareaofmilitarysalesandsupport,whichiscentraltoourrelationship.”Historians looking for the roadnot takenby theUnitedStateson theeveof

theoutbreakofrevolutioninIranwillfindnobetterplacetolookthanhere.Thesecretary of defense was worried about rising anti-American sentiment andAmericancitizensbeingcaughtinthemiddleofintensifyingpoliticalunrest.HeviewedthefutureoftheShah’sregimeasuncertain.Hesawdisturbingparallelswith the American experience in Vietnam. He worried that the Shah’sexpendituresondefensewereoverloadingIran’seconomyandsociety.“Well, I had considerable concerns about it,” he remembered. “And I

expressedthemrepeatedly.Theywerenotconcernsthatwenttotheintelligencedata; theywereconcerns that reflectedageneralanalysisof thekindof forcesthatwereworkinginIran.”TheShah’srapidbuildupoftheIranianarmedforceswas creating internal tensions and draining the civilian economy of preciousresources.ThemilitarybuildupdeprivedIran’seconomyofitsbesttalent.

Thoseweregeneral,thatwasageneralthought.Asitturnedout,itwasmoreaccuratethaneverIthoughtatthetime.TheotherpointthatIshouldmake is that—a simple historical point made by every historian since[Alexis]deTocqueville—whichisthatthetimeoftransformationofthesesocietiesthattheybecomeunstable.Thatasyourootuppeople,movethemfromtraditionalsettingsandtraditionaloccupationsintonewoccupations—andparticularly,ifthereisagrowthofrealincomethatmightbeinterrupted—that the society is farmorevulnerable thanwhen it is functioning as atraditional society. That’s sort of a general observation: onewas worriedaboutthatinageneralway.

Schlesinger’s recommendation that the NSC launch a review offered thepresident an off-ramp from theNixon-Kissinger policy of appeasement of theShah. It also gave Ford political cover. Schlesinger enjoyed the support ofprominent conservatives and defense hawks like Ronald Reagan who weredeeplyunhappyover thedirectionofFord’sdomesticand foreignpolicy.FordcouldproceedwithareviewofU.S.-Iranrelationssecureintheknowledgethathis right flank was covered. Iran was very much on Ford’s mind. ZahediinformedtheShahthatatadinneronOctober21,thepresidenthadsoughthimoutandasked,“Pleasetellmecandidly.Whatiswrong?Isthereanytroubleor

misunderstanding between us?”What happened nextwas asmuch travesty astragedy.Almost immediately, thememo ran into two roadblocks. In his capacity as

nationalsecurityadviser,HenryKissingerdivertedthememoandsentit tothebottomof his in-box,where it languished for the next sixmonths.TheWhiteHouse lost precious months in which to consider options and draw upcontingencies. And the president’s election campaign took priority over thereview.Thesecondroadblockcameat8:30A.M.onSunday,November2,whenSchlesingerwas fired as secretary of defense, themost prominent victim of apoliticalpurgemastermindedbyWhiteHousechiefof staffDonaldRumsfeld,who wanted the job at Defense for himself. Ford had been unhappy withSchlesingerforquitesometime.Kissinger,Schlesinger’soldrival,hadpoisonedthewellbyfeedingFord’ssuspicionsthatSchlesingerwasleakingtothepresstoundermineKissinger’s arms negotiationswithMoscow. In theOvalOffice onOctober 2,Kissinger could not contain himself. “I hate to bring this up, but ImustmentionSchlesinger,”heblurtedout. “I thinkhe isdemented. . . .He isreallydevious.”“He should be here trying to get the Defense budget through, instead of

travelingaround,”grousedFord.“Your problem is executive authority,” Kissinger prodded. “He should be

supportive.”“Iwouldliketofirehim,frankly,”saidFord.“ButIthinkthatwouldgiveus

toomanyproblems.Ifwecan’tfirehim,wecanpullthethingsawayfromhimwhichhecanuseagainstus.Likecruisemissiles.”“Heissodevious.Herarelytellsyouorustherealorfulltruth.”TheeventsofNovember2,known tohistoryas the“HalloweenMassacre,”

had severe repercussions for U.S.-Iran relations. Rumsfeld’s deputy, DickCheney, became the new White House chief of staff. CIA Director WilliamColbywassackedand replacedbyGeorgeH.W.Bush.AtRumsfeld’surging,Ford also strippedKissinger of his oversight of theNational SecurityCounciland appointed his deputy, Brent Scowcroft, in his place. Rumsfeld was alsogunningforNelsonRockefeller.Rockefeller,deeplyunhappyintheroleofvicepresident, jumped before hewas pushedwhen he declared that hewas takinghimselfofftheticketasFord’srunningmatein1976.Almostimmediately,Ford’sdecisiontofireSchlesingerbackfired.Lieutenant

General Daniel Graham, chief of the Defense Intelligence Agency, whichcoordinatedmilitary intelligence, handed in his resignation in protest. RonaldReagandeclaredhimself“shocked.”ThetwowinnersinthepoliticaldramawereTreasury Secretary Bill Simon, who emerged unscathed, and Rumsfeld, who

nowbegantostalkKissinger.Atasinglestroke,theShah’stwomostpowerfulprotectors inWashington, Henry Kissinger and Nelson Rockefeller, had beenmarginalized.BillSimontelephonedKissinger tosympathize.Theybothknewwhat was coming. Having disposed of Schlesinger, Colby, and Rockefeller,RumsfeldwascomingafterKissinger.“Theguythatcutmeupinsidethisbuildingisn’tgoingtocutmeupanyless

inDefense,”Kissingersaid.“Itisgoingtobeworse,Henry,”saidSimon.“Huh?”“Itisgoingtobeworse.”“That’sright.”“AndI...”“AndIknowyouandhearegoingtoformateam.”“Thatwouldbeateam!”Simonexclaimed.“That’llbeateam!”Kissingercouldonlylaugh.Despitetheirdifferencesonoilpolicy,heenjoyed

Simon’scharm.Thesamecouldnotbesaidfor thenewteamoveratDefense.OnDecember22KissingertelephonedRobertEllsworth,Simon’scounterpartasthechairmanoftheU.S.-SaudiSecurityCooperationCommission.GeraldFordhad just appointed Ellsworth to the post of deputy secretary of defense underRumsfeld.Atyear’send,theU.S.-IranbilateraloildealhadlandedonthedeskofoneoftheShah’smostseverecriticsandastrongproponentofclosermilitaryrelationswithSaudiArabia.“Wehavebeen talkingabout this forninemonthswithIran,”saidKissinger.“Timeisrunningout.Wehavetomakeaproposalorsaywearenotgoingtodoit.Ijustwonderedwhatyourobjectionswere.SinceIamtoldyouaretheoneholdingitnow.”Ellsworth explained that he had two problems. “We do not operate in the

world crude market,” he explained. “We deal with refined products.” MaybeFrankZarbcoulddosomethingaboutit.“It has beenmy experience thatwhenDefensewants to do it, you can hire

somebodytodoit,”Kissingershotback.EllsworthtoldKissingerthathisadvisersinthePentagonwerenotlyingwhen

theytoldhimthatnothingfurthercouldbedone.Moreover,heexplainedthatthedeal offered no real economic benefit to theUnited States: “Thewhole crudemarketisfull—theyarenotreallyofferingverymuchinordertogetridofthe500,000barrelsaday.”Theonlywayitcouldbedone,hesaid,wasasastraightoil-for-armsdeal.Inthemeantime,Iran’seconomycontinuedtobleed.

ChapterTenTHESPIRITOF’76

“Igenuinelyfearthatthismaybethefirstvaguerumblingofimpendingrevolution.”

—AsadollahAlam,1976

“The dilemma we are in is that rumors are spreading that we are incollusion.”

—PrinceAbdullah,1976

IRANISONTHEVERGEOFMOVINGAWAYFROMUS

At thedawnof theAmericanBicentennialyearU.S.-Iran relationswereattheir lowest ebb since the early 1960s. The obvious tensions over oil pricingremained unresolved. Arms sales were mired in scandals involving costoverruns, price fixing, and kickbacks. The collapse of the Kurdish resistancetarnished the Shah’s standing among conservatives and liberals. There werequestions too about Iran’s commitment to the security of Israel. Kissinger’sinability todeliveron thebilateraloildealonlyadded to thegrowingsenseofmutualdistrustinbothcapitals.Thelatestflare-upwasovernuclearcooperation.TheWhiteHouselearnedthatduringarecenttriptoIndiaDr.AhmadEtemad,thechairmanofIran’sAtomicEnergyOrganization,hadtoldhishoststhatIranwascommittedtodevelopingnuclearpowerforeconomicreasonsthatincludedthe detonation of “peaceful nuclear explosions” to dig canals and movemountains.EtemadalsoinsistedthatIranwouldnotallowforeigngovernmentstodictate the termsof itshandlingofnuclear fuel.Hisstanceappeared to ruleouttheAmericanpreferenceforamultinationalenrichmentfacility.ThreemonthsearlierIranhadenteredintoasecretpactwithSouthAfricato

buy enough uranium to power up to a hundred nuclear power plants at anestimatedcostofbetween$700millionand$1billion.Under the termsof the

deal Iranwouldhelp to finance the construction inSouthAfricaof abignewuranium enrichment facility. The South Africans would supply Iran with orefromitsoccupied territoryofNamibia.TheFord administration had agreed tosell Iran eight nuclear power plants but opposed granting Iran the right toreprocess uranium in Iranian-built and managed facilities. The Shah’s SouthAfrica deal directly challenged U.S. domination of the international uraniumtrade.Thiswashiswayofevadinghisally’s restrictions.“Thisstoryhasbeendeniedpublicly,butinconfidencean[Iranian]officialhasconfirmedthatthereisasecretagreementtopurchaseuraniumfromSouthAfrica,”EmbassyTehranalertedWashington.“ItisevidentlybeingkeptunderwrapsattheinsistenceofSouth Africa.” In a separate communication, Ambassador Helms informedSecretaryofStateKissingerthatIranwas“seekingforeign—includingAmerican—expertisetohelpprospectforuraniumwithinIran,andisreportedlyenteringintojointventuresforuraniumexplorationincentralAfrica.”OnJanuary12,a tetchyHenryKissingerfacedarevoltfromhisseniorstaff

onthetwokeyissuesofnuclearcooperationandunrestrictedarmssales.DeputySecretaryofStateRobertIngersollaskedifKissingerhadhadachanceto“lookatthisnuclearpositionwithIran.”“Noonehasgivenittomeyet,”Kissingergroused.“Whatiftheygaveitto

me?Inaway,itisnotcomprehensible.”“Well,weneedtogivethemsomeguidance—”“Well,webettergetitintoourheadsthatIranisonthevergeofmovingaway

fromus.Andsincewealwaysapplyourmoralitytoourfriends—”“This isn’tmorality,” Ingersollcalmly replied.“This isasuggestion thatwe

gotoseetheShahbytop-levelStateDepartment—”“Tellhimwhathehasalreadyknown,”saidKissinger.“Hewillnotacceptit,

I’msure.Ihaven’treadit.AmIwrong?”“No.It’sreallytofindout—”“It’sa lectureonnuclearproliferationand itscontribution to it,” interrupted

Kissinger.HeridiculedIngersoll’ssuggestionthatWashingtonsendanenvoytoTehran toclarifywhetherDr.Etemad’sviewsweresharedby theShah.“Well,Helmscan find thatout,”he retorted.“That’seasily foundout.Tosenda top-levelguytoIrantoaskhimwherehestandsinrelationtohisbureaucracyisaninsult.”“Itisn’tjustthat.It’stopointouttheproblemofproliferationand—”“Oh,comeon!”snappedKissinger.“Heknowstheproblemsofproliferation.

This is one of these—we’re going towindupwith a combinationof things—pushingtheShahinadirectionwherefiveyearsfromnowwe’llbeonourkneesbegginghimtodoatenthofthethingshenowdoesvoluntarilyataheavyprice.

That’sgoingtobetheendresultofallthisbrilliant,profound,moral—”Remarkably,Ingersollandhiscolleagueskeptatit.UnderSecretaryofState

JosephSiscojoinedthefray.Theexchangewaspolite,themessageclear:itwastimeforacoursecorrectioninrelationswithIran.“There’saconcreteproposal in thepaper,”saidSisco.“I thinkyouought to

look at it.” Sisco wasn’t done. The Shah was threatening to cut back on hisdefense expendituresunless theU.S.membersof theoil consortiumagreed tobuymoreoilfromtheNationalIranianOilCompanytosellontheworldmarket.Under the terms of the 1973 accord they signedwith the Shah the companiesyieldedtheiroperationalroletotheIraniancompanyinexchangeforatwenty-yearpreferredaccesscontracttosellIraniancrudeoilontheworldmarket.Buttheyweren’t required tobuy theoilandnow,withmarketdemandinaslump,they had no incentive to do so. As usual, the Shah wanted it both ways. Hewouldnot allow theNational IranianOilCompany tocutbackany furtheronproduction.Yetherefused tohagglewith thecompaniesoverprice.TheresultwasastandoffthatlefttheShahwithstillmoremillionsofbarrelsofunsoldoilonhishands.HethreatenedanotherbigpriceincreasewhenOPECmetinBaliinMay unless the companies fell into line.Kissinger’s aides thought the timehadcometocalltheShahonhisbluff.TheyacceptedthatU.S.armssalesweregnawingatthefoundationsoftheIranianeconomyandsawintheShah’sthreattoreducedefensespendinganopportunitytoforcefiscalrestraintonTehran.“Mr. Secretary,” said Joseph Sisco, “on the related question that you

mentioned, how concerned are you on this move of his to cut back? I don’tpersonallybelievethatit’sallbad.”“I’msurethatSenatorKennedywillloveit.”“ButtheShahwasbasically,inmyjudgment,overcommittedintermsofwhat

he’stryingtodo—particularlyonthemilitaryside—overthelastyearortwo,”said Sisco. “I think he’s terribly overcommitted. And if he comes to his ownjudgmenttocutback,I’mwonderingifthat’ssobad.”“Thegreat specialty—firstof all—of thisDepartment is to tell otherpeople

howtoruntheiraffairs,nothavingsolvedourown,”KissingerrebukedSisco.“Ihaveproceededonthepremisethatweshouldletothercountriesdeterminetheirownpriorities.Secondly,whyishecuttingback?Ifhecame to theconclusionthatheshouldcutbackongeneralgrounds,wewouldcertainlynoturgehimtoover-defense himself. Thirdly, he generally feels that our role in the world isdeclining,andhehas to reassess.Thosearehisprincipal reasons,andbecausesome other deals he wanted to make with us are falling through. So for acombination of a number of reasons, he’s cutting back; and that’s not at allhelpful. It can’t be helpful to American foreign policy. Of many American

friends in the world, there’s no one who can point to something forthcomingwe’vedoneforthem.”“Well,that’sageneralproblem,”Siscoconcurred.Twodayslater,Kissingerandhisseniordeputiesreconvened.Sisco suggested to Roy Atherton that they prepare a briefing memo for

KissingerthatwouldexaminenotonlythevexingquestionofoilliftingsbutalsothearrayofproblemstakingatollonAmerican-Iranianrelations.Stilltheproblemskeptpilingup.OnJanuary19,DefenseSecretaryRumsfeld

hostedGeneralToufanian,theShah’sheadofweaponsprocurement,inaprivatedining room at the Pentagon. They quickly got into a dispute over who wasresponsible for theswirlingmilitarycontract scandals that included the saleofGrumman F-14 fighter jets. Rumsfeld took umbrage at Toufanian’s tone ofvoice.ItwastheIranians,heinsisted,whowereatfaultandnottheAmericans.ToufaniangaveRumsfeldatongue-lashing,callinghim“uninformed...nothisown man.” The general wanted to know: “How can Iran be responsible forGrummanandLittoncostoverrunsasreportedbyyourownU.S.press?”TheywerestealingfromIran.“Yeah,butthepriceofyouroilhastripled,”AirForceGeneralHowardFish

tartlyreplied.Thelunchbrokeupinrancor.Back inTehran,Toufanianwrote a scathingassessmentofRumsfeld for the

Shah. He described the forty-two-year-old secretary of defense as “political,forceful, shallow, immature, inexperienced in the defensematters of his job.”TheShahseveredrelationswithEricvonMarbod,thePentagonrepresentativeinIran,andorderednofurthercontactwithhisstaff.RelationsbetweentheDepartmentofDefenseandIrandescendedintoadeep

chill. “It’s raw, it’s awfully raw, more than anyone dares show,” said oneAmericanofficial. “From thewaywe’vebehaved, they’ve lostall trust inus.”WashingtoninsidersspeculatedthatTreasurySecretarySimonmighthaveanewally in his crusade against the Shah. “Attempting to bully Rumsfeld, one ofWashington’smostcold-bloodedinfighters,wasacolossaltacticalerror,”wroteEvans andNovak. “What remains to be seen iswhetherRumsfeldmight joinTreasurySecretaryWilliamSimoninrenewinganoldpolicydisputeinsidetheFordadministration.Simonstillwantsconfrontationagainsttheinternationaloilcartel (OPEC) ingeneraland Iran inparticular tobreakworldoilprices.Untilnow,PresidentFordhasrejectedSimon’sadviceandacceptedSecretaryofStateHenryKissinger’spolicyofaidingOPECmembers—includingheavyarmsaidforIran.”ThefurorleftAmbassadorRichardHelmsdespondent.“Nothinggoodwould

happenintheU.S.governmentuntiltheendoftheelection,”hereportedlytoldonecolleaguewhokeptanoteoftheirmeeting.“HehadneverseensuchaweakgovernmentandsomanypeopleoutofcontrolinthePentagon.”Also out of control was Iran’s economy. On Thursday, January 22, Court

Minister Alam received a briefing fromAbdulMajidMajidi, the head of thePlanandBudgetOrganization,whichlefthimshockedanddepressedatthedirestateof thegovernment’s finances. “Igenuinely fear that thismaybe the firstvague rumbling of impending revolution.” Alam had always understood thecausallinkbetweeneconomicprosperityandthesurvivalofthePahlavidynasty.The regime’s “oily legs”were trembling. “He toldme thatwe’re indeficit onthisyear’sbudgetbyasmuchas$4billionandthatthegovernmentisconnivingat themost senseless extravagance. . . . The losses we’ve incurred in buyingwheat,sugarandotherfoodstuffsarebeyondbelief.”

BREAKFASTATTHERITZ-CARLTON

TheShah suspected theWhiteHouse “wasstalling” on the secret oil dealbeing negotiated betweenHushangAnsary and FrankZarb.He knew that therefusal of Western oil companies to increase their Iranian liftings left hiseconomy doubly exposed to the vagaries of the market. “The bastards havethrowndownaseriouschallengetous,”hesaidoftheoilcompanies.“Somuchfor their protestations of goodwill.”Alamwas shocked to learn that Iran’s oilproductionhadplungedby1.7millionbarrelsperday, adeclineequal toa$6billion shortfall in government income for the coming year. Alam suspectedKissingerwasplayingadoublegamebehindtheirbacks.InearlyJanuary,KissingerandHelmsflewtoLondonforaprivatemeeting

with FinanceMinister Ansary. Iran’s fiscal crisis threatened to have profoundflow-oneffectsforAmericannationalsecurityobjectivesandthearrayofcovertmilitary actions being undertaken in the developing world with the help ofWashington’sPersiangladiator.TheShahhadrecentlydeclinedtheU.S.requestto funnel aid to anti-Communist guerrilla fighters in Angola. A flurry ofmeetingsensuedbetweenAmericanandIranianenvoysinLondon.OnSaturday,January24,Kissinger’saideJosephSiscoheldfollow-uptalkswithAnsaryandcabledasummaryback to theStateDepartment.He reported toKissinger thattheIranianhadexpressedfrustrationthat the termsof thebilateraloildealhadstill notbeenconcluded inWashington.He toldSisco thathebelievedhehadreached an “understanding” with Kissinger and Helms at their meeting inLondonearlierinthemonth“althoughonekeyelement(i.e.,discount)remained

to beworked out.” Ansary offered tomeet withKissinger again, this time inNewYorkortheBahamas,wherehewouldberecuperatingfromahospitalstay,sotheycouldcompleteadraftagreementfortheShah’sapproval.Onthesameday inTehran,AlammetwithAmbassadorHelms to talkaboutoilproductionandpricing.HelmssaidheunderstoodthedifficultiesfacingIran’seconomyand“promisedtodowhathecanonourbehalf.”Aweek later,onJanuary30,Ansary telephonedKissinger to remindhimof

the sense of urgency on the Iranian side.Kissinger recorded the conversation.“YouknowourlastmeetinginLondon—wegotoversomanyproblems,”saidAnsary.“IamsorrythingshavenotmovedasfastasanticipatedbecauseIdon’tknowwhattheproblemsareonyoursidebutIhavethestrongfeelingthatyouand I should get together.” Kissinger said they would meet again soon: “Iunderstandyouaregoingtosee[Charles]Robinsonnextweek.Afteryoutalktohim,youandIshouldgettogether.”Kissingerwascaughtinabind.Hehadahabitoftellinghisinterlocutorswhat

hethoughttheyneededtohearsothathecouldgetwhathewantedfromthem.AtonetimeKissingerwouldhavehadnotroubledeliveringonhisendoftheoildeal for theShah.But thiswas 1976, not 1972, and the political landscape inWashingtonhadchanged sinceNixon’sdeparture.Kissinger,however,hadnotchanged with the times. Nixon had given him carte blanche to manage U.S.foreignpolicy.GeraldFordwasmuchmorefocusedonteamwork,theeconomy,andmanaging thefallout fromtheoilshock.Foreigneconomicpolicywas thestrongsuitofmenlikeSimon,Zarb,andGreenspan.ByJanuary1976Kissingerknew that he could not deliver everything he had promised the Shah. Yet heworriedthatiftheShahknewthis,hemightfindotherusesforIran’soilwealthand its 436,000-strong armed forces. This was not an irrational fear onKissinger’spart.TheShahwasdeterminedtoholdAmericanfeettothefire.Hewantednomore excuses. “If you try to take anunfriendly attitude towardmycountry,wecanhurtyouasbadlyifnotmoresothanyoucanhurtus,”he toldU.S.News&WorldReportinearly1976.“Notjustthroughoil—wecancreatetroubleforyouintheregion.Ifyouforceustochangeourfriendlyattitude,therepercussionswillbe immeasurable. . . .A false senseof securitywilldestroyyou.”A turning point came on February 11whenKissinger signed a presidential

memothatreflectedtheviewsofhisaidesSiscoandAtherton.“TheShahofIranhas, during the last six to eight months, come to realize that, in spite of adramatic increase in Iran’s income fromoil since 1973, his expected revenueswill not meet the costs of his ambitious civilian and military developmentprograms,”Kissinger toldFord. In the fourthquarterof1975Iran’sexportsof

heavy crude oil had plummeted by 1.5million barrels per day. The Shah hadapproachedtheadministrationtohelphimplugthegapingholeinhisfinances.“In the last few weeks the Shah has made a series of direct and indirectapproaches tous seekingassistanceof thisGovernment inputtingpressureonAmerican oil companies to increase their purchases of Iranian oil,” read thememo. “He has suggested that, if Iran’s oil income does not rise tomeet hisdevelopmentspendingplans,hewillhavetorevisehisforeignpolicytofit thecountry’smoremodestfinancialcapabilities.”KissingerexplainedthatWesternconsumer demand for Iran’s heavy crude oil had collapsed. That made it“impossible for us to be of any substantial assistance in increasing Iran’s oilincome.”Further,Kissingermade itclear that theUnitedStatescouldoffernoreliefinthesensitivematterofcostoverrunsfortheShah’simportsofAmericanmilitaryequipment.Kissinger’s memo was his first acknowledgment of the damage to Iran’s

economy and society wrought by arms sales. “We note, incidentally, that adecision by the Shah to slow the pace of his defense development programwould have the positive aspect of permitting Iran’s strained manpower andinfrastructure to catch up with equipment procurements,” he wrote. KissingerhadineffectthrowninhislotwiththosewhoarguedthattheShah’sprofligatespendinghadgone too farand that itwasnow in theAmerican interest to seethattheShahhadfewerresources(thatis,lessincomefromoil)todevotetothemilitarypurchasesoverloadingIran’seconomy.Kissingerurgedthat“adamage-limiting effort is in order to reassure the Shah that our inability to be ofassistance has not diminished our interest in maintaining and expanding ourspecial relationshipwithIran.”Heproposed that thepresidentsend theShahaletterprovidingthenecessaryassurances.Kissinger’smemowassentfirsttothedeskofNationalSecurityAdviserBrentScowcroft.WhatKissingerdidnextdefiedthelawsoflogic.HeflewbacktoLondonfor

abreakfastmeetingwithHushangAnsaryat theRitz-Carlton.Kissingermighthave been expected to brief Ansary on the change in U.S. policy and theadministration’s belief that Iran’s economywarranted a cooling-off period andfewerweaponspurchases.Thishedidnotdo.LiketheShah’sdoctors,aides,andfamilymembers,KissingerdidnotbelievetheShahcapableofhearingthetruth,letalonedealingwithitsconsequences.Soheengagedinadeception,onethatwould have far-reaching consequences for both the United States and Iran.Kissinger’sprivatemeetingwithAnsarywaskeptlow-keytoavoidalertingthepress.Thatweknowtheirtête-à-têtehappenedatallisduetoaremarkablecablesummaryofthetalkspreparedbyCharlesRobinson,whoaccompaniedhisbosstotheRitz-Carlton.

AccordingtoRobinson’smemo,Iran’sfinanceministerexplainedtoKissingerthescaleofthefinancialcrisisunfoldinginIran.Thecountry’sincomefromoilhad flatlined.Western oil companies were buying only 3.3 million barrels ofIranianoilperday.Ansaryadmittedthatthiswas“tosomeextent”thefaultoftheShah,whostubbornlyrefusedtoreducethepriceofIran’scrudeexportstoadapt purchases of Persian crude oil to the new market reality. The Iraniangovernmenthoped to“push” theoilcompanies’ liftingsbackup to4.9millionbarrelsperday.Together,AnsaryandKissingeragreedthatthebilateraloildeal,nowdragging into itssecondyearofnegotiations,offered theShaha financiallifelineandawayoutofthetraphehadsetforhimselfandnowcouldnotgetoutof.Robinson’sdocument suggests thatKissingerwasplaying for time.Heexplained to an apparently surprisedAnsary that thedeal hadnot in fact beenapprovedbyPresidentFord.Andhe liedwhenheclaimedhehad just learnedthat thedeal required congressional authorizationbefore it couldproceed.TheIranians, he added, should lower their asking price for the oil they sought tooffload.KissingerinformedAnsary,alsoapparentlyforthefirsttime,thatthedealwas

violentlyopposedwithintheWhiteHousebySimon,Rumsfeld,Zarb,andBobEllsworth.AnsaryagreedwithKissingerthat“wewouldnotpushthisprogramfor themoment, recognizing theneed togetRumsfeld,EllsworthandZarbonboardbeforeproceedingwithanaggressiveefforttoconcludethisarrangement.”Inthemeantime,tohelptheShahmeethisdefenseneedsandpayhissuppliers,Kissinger agreed that officials from the State Department would quietlymeetwith representatives of leadingU.S. defense contractors to encourage them topursue arms-for-oil swaps with Iran. Kissinger and Ansary also decided thatconfidence-buildingmeasureswere required to getU.S.-Iran relations backontrack. Kissinger promised to set up a meeting between Ansary and PresidentFordtodiscuss“theimportanceofcontinuedU.S.supportforIran’sexpandingmilitarycapability.”Ansary’smeetingwiththepresidentwouldbefollowedupwith “a small dinner affairwithRumsfeld, Ellsworth andZarb in an effort to[increasetheir]senseofparticipationinourrelationshipswithIran.”Incredibly,KissingerthenassuredAnsarythathestillsupportedIran’scurrent

highlevelsofspendingondefense.Itwasastancetotallyatoddswithwhathehad just recommended to President Ford four days earlier in his memo ofFebruary 11. “You supportedAnsary’s view that Iranian oil exports should bemaintained at a high level to provide funds necessary for purchase of U.S.military equipment,” Robinson reminded Kissinger. Nor was that all. At theconclusion of themeeting the note takers left the twomen alone at Ansary’srequestsotheycoulddiscuss“personalmatters.”

The nature of those “personal matters” was hinted at several weeks laterduringoneofKissinger’srecordedtelephoneconversations.“Arethingsmovingsatisfactorilyonthepersonalfront?”Ansaryasked.“Ithinkso,”repliedKissinger.“Areyougettingthebusinessmentogether?”“Yes,”saidKissinger.Heleftitatthatandmovedontoothermatters.Westill

don’t know what Ansary’s private business proposition involved, why theAmerican secretary of state’s help was needed in “getting the businessmentogether,” or how suchdealingsmayhave affectedU.S. foreignpolicy towardIran.It is never an easymatter to interpret themotives of amaster tactician like

Henry Kissinger. What we do know is that over the winter of 1975–76President’s Ford’s foreign policy team had been alerted to Iran’s deterioratingfiscal situation. The Shah had quietly reached out to them for help. TheU.S.foreign policy team knew that U.S. arms sales were draining Iran’s civilianeconomyofprecious capital and skilledmanpower.Nixon’s1972blankcheckon arms sales to Iranhad created its own inevitable, destructivedynamic.Buthowtostopit?Howtobreakthecycle?TheShahmadeitclearthatanydecisionto reimpose restrictions on arms sales would be seen in Tehran as a loss ofconfidencebytheAmericansintheirally.“Nowthequestionwaswhatdid[Iran]need,whatdid itwant,and thatwas

kind of complicated to figure out,” rememberedBrent Scowcroft. “I thinkwewereconcernedbecauseweaponpricesweregoingupandthatwastakingmoremoney out of the Iranian budget which the Shah didn’t have, and that was aconcerntous.Buthowtodealwiththat?”Theproblemtheadministrationfacedonarmssaleswasthat“ifyoutelltheShahwe’renotgoingtogive[him]enougharmsthatlookstohimlikewe’redecreasingoursupportforhimtotryandputpressureonhim.”Iran’s military buildup had gone far beyond what Kissinger or Nixon ever

intended.Worse,theShahdidnotknowwhentostop.“Hewastryingtodotoomuch,toosoon,always,”saidScowcroft.Kissinger’smemotoFordproposedacourseofactionthatensuredIranwouldgenerateloweroilrevenuessothattheShahhad lessmoney to spend on arms.Yet toAnsary,Kissinger pledged hiscommitment to help the Shah generate higher oil revenues to maintain highspendingonarms.AsaresultofKissinger’sassurance,theShahapparentlyfeltnoneedtoadjustspendingpatternsorreininfiscalprofligacyathome.Hekeptplacingordersformoremilitaryequipmentbecauseheexpectedanotherbailoutintheformofafuturehikeinoilprices.WhydidKissingertellFordonethingandAnsarysomethingcompletelydifferent?“Well,these[things]aren’talways

carefullycoordinated,asyoucansee,becausewe’replayingagainstourselves,”Scowcroftruefullyobserved.

HISMAJESTYINALITIGIOUSMOOD

HenryKissingertooktohandlingthetiresomeShahinthesamewayhehadhandledNixononhisworstdays, responding toanyunpleasantnessby ladlingoutdollopsofflatterywiththeregularityandenthusiasmofMr.Bumblefeedingtheworkhouseboys.Itwasataskmadeinfinitelymoredifficultandunpleasantfor himby JackAnderson, the journalistwho continued to hound theShah ateveryturn.AmbassadorArdeshirZahediphonedKissingertowarnhimthattheShahwasthreateningtosueAndersonoverremarkshehadmadeonamorningtelevisionnewsshow.AndersonhadrepeatedhisearlierclaimthattheCIAhadproducedapsychologicalprofileof theShah thatconcluded the Iranian leaderwas“mentallyill.”KissingerclaimednottoknowanythingabouttheprofilebutpromisedtofollowthematterupwithCIAdirectorGeorgeBush.KissingerandZahediwereeventuallysuccessfulinpersuadingtheShahnottoproceedwithalawsuitthatwouldresultinpublicembarrassmentforbothgovernments.Kissingerwasconvincedheknewwhowasbehindthesabotage.“Whatwasit

Simonsaidlastyear?”heaskedZahedi.“Whatwasthewordheused?”“Idon’tdarerepeatit,”saidZahedi.“Youhave togive theShahmyaffectionategreetings.He isoneof the few

world leaders forwhom I have substantive regard. If hehad a countryof 200millionwewouldallbebetteroff.Cometothinkofit,ifhehadacountryof200millionhemightconquertheworld.”“Youdon’twantmetotellhimthat?”“Youcantellhimthat.Youdon’tthinkhewouldmind?”“No,Ithinkhewouldlikeit.”“TellhimIsaiditwithaffection.”

MR.FORDASKSAFAVOROFTHESHAH

The dangerous games continued. President Ford’s political advisers,apparentlyknowingnothingofKissinger’sassurancestoAnsary,decidedthatiftheShahwantedtheUnitedStatestotakeIran’ssurplusoiloffhishandsthenheshouldreciprocatewithafreezeonoilprices,at leastuntil theendof theyearwhen the electionwas out of theway.Oilministers fromOPECwere due tomeet in Bali at the end ofMay to consider another price increase. There had

alwaysbeentheriskthatGeraldFordwouldrepeatRichardNixon’smistakeofturningtotheShahtocutadealandhelphischancestowinelection.TheWhiteHousewanted to strengthen consumer confidence in the run-up toNovember.TherisktoFordwasobvious—iftheShahagreedtothetrade, thetwoleaderswouldthenbeindebtedtoeachother.Thisnaturallysuitedthepurposesof theShah. Cutting deals with the Shah was a temptation for American presidentsbecausetheirTehranbackchannelsallowedforspeedandflexibility.Morethananything, Gerald Ford wanted to win the presidency on his own terms. Hedetested his Republican rival, former California governor Ronald Reagan, thedarlingoftheirparty’sconservativewing,apoliticianwhosharedSimon’sfreemarket orthodoxy.OnMarch 30, Fordwas in theOvalOfficewithKissingerwhenheasked,“HowdidyoumakeoutwithAnsaryandtheoildeal?”Kissingerdescribedwherethingsstood.“I thinkweshouldask the Iranians tohold the lineonprices this summer,”

saidFord.Itwasnotsomucharequestasanordertohissecretaryofstate.FordwantedanextensionoftheOPECpricefreeze:“Thatwouldmeanmuchmoretousthanadiscounton200,000barrelsaday.”“I think we can get them to do that,” said Kissinger, who may have been

surprisedatFord’sassertionofauthority.UntilnowKissingerhadenjoyedafreehand in U.S.-Iran relations and running his back channels to Tehran. Thepresidentwanted tomake one other thing absolutely clear. He had heard thatNixon was planning a trip to Iran to see his old friend the Shah. Under nocircumstances, Ford told Kissinger, should that trip proceed. The presidentcouldn’thavebeenmoreexplicit:“IhaveheardmaybeNixonisgoingtoIran.He cannot do that.” Scowcroft recalled the incident this way: “I think it wasprobablybecausenegotiationsherewereprettytenseanddelicateandGodonlyknowswhatNixonmighthave saidordone.Becausehe felt veryclose to theShah.”NixonmaintainedtheirconnectionthroughArdeshirZahedi,whokeptuphis friendshipwith the former president. The ambassadorwould helicopter toNixon’soceansideretreatatSanClementeduringweekendgetawaystothePalmSpringshomeofWalterandLeeAnnenberg,whowerealsoclosefriendsoftheReagans.Kissingersaidhewouldtakecareoftheproblem.“LetmetalktotheIranians.

I think this is thebestwayto turn itoff.”He then telephonedAnsaryand toldhimthebilateraloildealwasbackon:“IhavetalkedtothePresidentandwearegoingtopushitnow.Wehavetofindout—wedon’twanttogetintothepositionZarbproposedtoyou,butwewantsomethingwecanlivewith.”Zarb, coincidentally,was required tocomeupwithaplanbyDecember15,

1976, to buy one billion barrels of petroleum on the world market for the

planned U.S. strategic reserve. Of that total, 150 million barrels had to beaccumulated within three years of Congress approving the president’s energyplan. “It is important that we move as quickly as possible, to accumulatestrategicreservesasabufferagainstapotentialembargo,”NSCofficialRobertHormatsremindedScowcroftonMarch12,“andasadeterrent to lesswealthyoilexporterswhomightbereluctanttoparticipateinanembargoknowingthatthe U.S. can sustain itself for a relatively long period without imports.” Thislatterpointwasanobvious reference to Iran.TheUnitedStateswaspreparingforashowdownwithOPEC.Kissinger’stranscriptsconfirmthatZarbwasnegotiatingatcross-purposesto

thesecretaryofstate.Zarb’shard-linetermswereaseven-yearagreementwithIrantosell300millionbarrelsofoiltotheUnitedStatesforitsstrategicreserve.Hestucktohisthresholdofa$3discountperbarrel.WhenAnsarycomplainedthatZarb’snegotiatingtermswereunacceptabletotheShah(“Zarb’sproposalswouldputhiminaspot”),Kissingeragreedtheywere“ridiculous”andtoldhimnottoworry—hewouldtakecareofit.ThispleasedAnsary,whorepliedthat“itwouldbeagoodthingtogetZarbtoseethelight.”

ASUDDENICYWIND

Nineteenseventy-sixmarked thefiftiethanniversaryof thefoundingof thePahlavidynastyinIran.Aroundofroyalcelebrationsandprovincialtourswasplanned at the beginning of the Iranian new year beginning in late March.Alam’sdiaryshowsthatMohammadRezaShahwasalsokeepinganeyeontheAmericanpresidentialcontest.TheShahwantedtolearnmoreabouttheleadingDemocrat, former governor of Georgia Jimmy Carter, a supporter of humanrightsandavocalcriticoftheinternationalarmstrade.HeworriedthatifCarterwere elected he would demand liberal political reforms in Iran as John F.Kennedy had done in the early 1960s.Alam forwarded to the Shah a cartoonfromanAmericanpublicationdepictingbothFordandCarterinanunflatteringlight.Alamsaid“theartisthadgraspedFord’snativestupidity.”TheShahwasamused. Nonetheless, Alamwarned him, “Cartermay turn out to be an evengreaterassthanFord.”TheterroristthreatinIranwasintensifyingbythemonth.Januarybeganona

lownotewiththeannouncementthatanIranianarmytribunalhadsentencedtodeath ten terrorists for the murders of Colonel Lewis Hawkins in 1973 andColonelsPaulShafferandJackTurnertwoyearslater.TheShahwasimpressedyetbewilderedbytheleveloffanaticismdisplayedbyhisyoungopponents.

OnSunday,March21,theimperialfamilygatheredintherainbeforethetombofRezaShahtomarktheirjubilee.Thedourpublicmoodwasasovercastasthegrayskies.Arumorhadtakenholdthatthejubileewouldbringbadlucktothecrown. “Particularly on that day I felt something had changed between thepeopleandthemonarchy;Icouldfeelitinmybones,likeasuddenicywind,”recalled Queen Farah. “There seemed to me an intangible shadow over theharmonyandconfidencebetweenus.”Sixmonthsearlierthequeenhadhostedan international symposium inPersepolis to consider the impact and future ofIran’s economic changes and social reforms. In her opening remarks sheacknowledgedthatthepeopleofIranwere“traumatizedbytheconflictingwindsof tradition and change.” Others at the assembly warned of the “alarming”buildup of pressurewithin the political system, and of a ruling elite that was“vulnerabletopopulardisaffection.”Inthesummerof1976thequeentookherconcernspublicwhenshedescribedas“dangerous”theexodusofruralmigrantsintocitieswheretheyfacedsocialisolation,unemployment,anddestitution.The Shah was surrounded by enablers and sycophants. On the eve of the

Pahlavi jubilee celebrations the royal couple hosted a dinner party.When thequeen made a gesture to stop her husband’s dog “from poking his nose intopeople’s plates,” the Shah asked what she thought she was doing. “Flattererseverywhere!” she snapped. “I refuse to follow their example.Even thisdog isfawneduponjustbecausehe’syours.Ialonerefusetostooptosuchnonsense.”The queen noticed something else—swelling on her husband’s upper lip. ShestillknewnothingabouthislymphomabutlaterrememberedthatitwasaroundthistimetheShahbeganimmersingherandtheiroldestson,CrownPrinceReza,intheartofstatecraft.Hewasinaraceagainst theclocktotrainhisheirsandlay thegroundworkforapeaceful transferofpower.Still,hedidnot think thetimerighttoconfideinhiswife.“SeveraltimesaweekRezaandIweretakentoconfer with the prime minister, then with each of the ministers involved incurrentaffairs,”sherecalled.“Wealsoreceivedthechiefsofthearmedforces,representativesofdifferentinstitutions,andparticularlythoseoftheparliament.I found itadifficultanddelicatesituation, for Ididn’t imagineforonesecondthatIwouldhavetosucceedhimoneday,andyetIobviouslyhadtotakethis‘training’seriouslyandquestionhimasifheweregoingtodie.”Tomark thePahlavi jubileePresidentFordwrote a letterof congratulations

andsentVicePresidentRockefellertoIran.TheShahwasdeflated.Henoticedhow the dynasty’s jubilee had been welcomed with greater enthusiasm byeastern bloc countries than by Iran’s allies in theWest.ThePahlavis receivedRockefellerattheirwinterpalaceontheislandofKish.CynthiaHelmswatchedtheShah’sstrickenreactionwhenthevicepresidentpubliclylaudedhimasthe

heir to Alexander the Great, seemingly unaware that Alexander was the manwhoinvadedPersiaand“destroyedPersepolisandstolePersianwealth.”Inthecar on the way to the airport, Rockefeller, still bitter from the events of lastNovember,toldAlamthatheresented“theslownessofdecision-making in theUSA,agreatcontrasttothewaythingsaredonehere.”Heseemedtothinkthelash would do the American people some good: “You should lend us HisImperial Majesty for a couple of years. He’d soon teach us how to governAmerica.”Iranian society, meanwhile, was coming unhinged. During a state visit to

Tehran,PresidentAnwarSadatofEgyptandhiswife,Jehan,weretheguestsofhonoratadinnerhostedbyanIraniangovernmentofficial.“Thesteps leadinguptotheverylargehouseweremadeofcrystal.Crystal!NeverhadIseenthatbefore—nor have I seen it since,” remembered Jehan Sadat. “Nothing wasordinary.Chocolatemoussewasofferedasoneofthedessertsinswansmadeofspun sugar and presented against a backdrop of a huge aquarium filled withtropicalfish.Fountainssplashed,theguestsstrolledbetweenthefoodtablesandthedining tentonabridgeoverasmallpond,andweateoffplacesettingsofgold.”ToSadatshewhispered:“Therewillbearevolution.Icanfeelit.Therichhere are too rich and the poor too poor without enough of a middle class toprovidestability.TheShahmustdosomethingquicklytocalmthepeople,givemore of his land away, perhaps drop the title of emperor and call himselfpresident....IamgoingtotellthistotheShah.”Herhusbandforbadehertodoanysuchthing.“Youmustnotstickyournoseintootherpeople’sbusiness,”hecautionedher.“TheShahwilllistentoyououtofpolitenessandthenhewillnotchangeanything.Sowhat’stheuse?”European jet-setters flocked to Tehran’s nightlife and kept the discotheques

andhotelsfull.YetIraniansocietywascomingtotheboil.ManyyoungIranians,traumatizedbythedisorienting,chaoticeffectsofWesternmodernization,foundsolaceinthemosquesorsimplyretreatedbehindtheveil.AlamvisitedPahlaviUniversityinShirazwhere,hetoldtheShah,hehadbeen“ratheralarmedtoseesomanyofthegirlswearingtheveil.”StudentscontinuedtoprotestagainsttheShah’s policies. Alam urged the Shah not to put too much pressure on theuniversitypresidentsbecausetheyhave“enoughtroubleasitisandareliterallybattling for survival . . . they are genuinely afraid of assassination by theterrorists.”Few events in late imperial Iranwere as revealing as the “Charles Jourdan

Incident,”ascandal thatbecameabyword for the regime’sairof findesiècleexhaustion and decadence. Parviz Sabeti was a high-ranking SAVAK official.Onedayhiswifewent shopping inTehran’s chicCharles Jourdan ladies shoe

store,only todiscoverwhenshe reached thecashier’sdesk thatherpursewasmissing from her bag.According to the version of the story that circulated atcourt,Mrs. Sabeti raised such a loud fuss that her bodyguards barred anyonefromenteringorleavingthestore.“Closethedoors,”theyannounced.“Wearegoingtosearchthepeople.”Alsoin thestore thatdaywere twomembersofafamily of high social standing, a middle-aged woman who was helping herdaughterprepareforherweddingday.“Wehavefinishedourbusiness,”saidtheaggrievedolderwoman.“Wehave

notstolenanything.Wearerespectablepeople.Wearegoingtogoout.”“No,”saidtheguard,“youcannotgoout.”Theguardphysicallyblockedher

from leaving.Thedaughter’s fiancéwaswaiting for thewomenoutside inhiscar.Hesawthecommotionthroughtheglassdoorsandranto theirassistance.Mrs.Sabeti’sbodyguardreacted to thesuddenmovementbypullingoutagunandopeningfire.Theyoungmanwasshot todeath infrontofhis fiancéeandfuture mother-in-law. The store erupted in pandemonium. The story of thewedding tragedy quickly spread around town.Even themost cynicalTehraniswereamazedthatasonofprivilegecouldbeexecutedinbroaddaylightmerelyfordefendingthehonoroffemalerelatives.The tragedy split Pahlavi society at the highest levels. When Mrs. Sabeti

offeredtoattendthefuneraloftheyoungman,hisfamilyreportedlysentherthismessage:“Comeifyouwant.Butifyoucome,youmustknowyouwillbetorntopieces.”Perceptive diplomats and intelligence analysts living in Tehran sensed that

somethingwashappeningthoughtheycouldnotasyetputtheirfingeronwhatitmightbe.Thecapitalwasseething.In1976atleasteighty-ninepeopleinTehranwere killed in shootouts between the security forces and the underground orwereexecutedbytheregimeforplottingterroristactions.OnSaturdaynight,May15,fourpolicemenandeleventerroristswerekilled

inshootoutsinthreelocationsinTehran.Sixoftheterroristsdiedwithinthecitylimits and five in Tehran’s northern outskirts. Police seized machine guns,handguns,andexplosivesforbombsandboobytraps.ThefollowingTuesdayasecond firefight left sevenmale and three female terrorist fighters dead. Fourinnocentpassersbywerekilledintheheavybarrageofcrossfirebetweensecurityforcesandtheyoungextremists.Rumorscirculatedthatthecrackdownandthekillings were the work of a team of trackers operating on themargins of theShah’s security apparatus.AmbassadorHelms raised the issue of the violenceand unrest directlywithAlam.Alam toldHelms that “the entiremovement isobviously inspired from abroad.”Helms didn’t buy it.He toldAlam that “wecannotruleoutpublicdissatisfactionhereinIran.”

The bloodshed coincided with the Saturday night departure of Air Iran’sinaugural 747 flight between New York and Tehran. In the tradition of thedecade’s great celluloid disaster epics the inaugural eleven-hour flight waspackedwith150celebritiesfromHollywoodandWashington.“StartrektoIran,with Glitter,” gushed The Washington Post of the junket billed as Iran’sBicentennialgifttotheUnitedStates.ElizabethTaylorledtheway.TheactresshadspenttheprecedingweekinWashingtonromancingArdeshirZahedi.OthersonboardincludedactressClorisLeachman(“byallaccountsthemostrefreshingandvivaciouscelebrityonthetrip”),singerConnieStevens,andoldiescroonerTonyMartin, who had entertained the Pahlavis at the NixonWhite House in1973. Upon their arrival the Americans were greeted at Niavaran Palace byQueenFarahand treated toa reception.At thecentralbank theyweregivenaguidedtourofthevaultcontainingthecrownjewels.Abellydanceperformancebrought a smile to the face of Ambassador Helms. The party hit the road,movingontoIsfahan,Shiraz,andfinallyPersepolis,whereMs.Taylor,evidentlyinneedofrest,announcedshewasgoingtospendafewdaysintheShah’stentcity.Ithadindeedbeenalongweek.“Theywerewined,dinedandentertainedinasplendorthatrivaledtheexcessesofXerxes,”crowedJackAnderson,whoasusual couldn’t resist an opportunity to rain on the Shah’s parade. “None wasinvited,ofcourse,toseeIran’sseamierside.Butbehindalltheglitter,theShahrules by torture and terror, which are the antithesis of the U.S. principles hepretendstohonor.”Over thesummerof1976allof Iranwasfixatedonamurdermystery:who

killedAyatollahAbolhassanShamsabadiinIsfahan?Thereveredcleric’sfuneraldrewcrowdsestimatedat100,000andstokedwidespreadindignationagainsttheShah.A rumor took hold that SAVAKhad disposed of the respected religiousleader in a clumsy effort to silence oneof theShah’s leading religious critics.Iranians were also deeply offended, not to say left disoriented, by the Shah’sunilateral decision to mark his jubilee by abolishing the country’s Islamiccalendar and instituting a new imperial calendar. “Few regimes have beenfoolhardy enough as to scrap their own religious calendar,” wrote IranianhistorianErvandAbrahamian.ThenewPahlavicalendar“allocated2,500yearsfor the presumed length of the Iranian monarchy and another 35 years forMohammadRezaShah.ThusIranjumpedovernightfromtheMuslimyear1355to the imperial year 2535.”Mass confusion ensued.TheShah also announcedintrusivenewmeasures designed to increase state control over Shi’a religiousinstitutions,publications,andteachings.

IDONOTBELIEVEEUROPELOOKSGOODRIGHTNOW

The final and most dangerous phase of the oil shock for Westerndemocracieswas about to begin.For the past twoyearsU.S. officials atStateand Treasury had closely watched as two separate sets of dominoes, onegeopoliticaland theother financial, trembledunder the impactof skyrocketingoilprices.ThegreatdangerwasthatgovernmentsinEurope,unabletopaytheirdebts, would falter and trigger a wave of defaults. The defaults would washthrough thecanyonsofWallStreet topplingbanks thathad takenon toomuchdebt at the height of the recession. Europe’s bleeding southern gut had beenstitched together with transfusions of emergency bank loans, intensivediplomacy,and,inthecaseofItaly,outrightbriberyintheformof$6millionincashfromtheCIAtopropupRome’srulingChristianDemocrats.Thestitchescame undone when revelations of these payments in January 1976 caused anationalscandalthatledtothefallofItaly’sthirty-seventhpostwargovernmentandthecollapseofthelira.Italians sensed that this political crisis would not be like the others.Many

middle-class andwealthy Italiansbegan spiritingmoneyoutof the country. InonemonthItaly’scaretakergovernmentspentmorethan$500million—halfitsforeign currency reserves—to defend the lira. It closed the foreign exchangemarket,appliedfora$500million loanfromtheInternationalMonetaryFund,and appealed to theUnited States FederalReserve to activate the terms of anaccord under which Washington would make emergency funds available topreventoutrightcollapse.Bythespringof1976EnricoBerlinguer’sCommunistParty governed all major cities north of Rome. There were Communist orCommunist-Socialist administrations in five of Italy’s twenty regions and inforty-twoof itsninety-fourprovinces.LocalCommunistgovernments ruled48percentof theItalianpopulation.“Ithas reached thepointwhere theChristianDemocrats cannot agree to govern with the Communists but cannot agree togovernwithoutthemeither,”adiplomattoldTheNewYorkTimes.“Ifindithardtoaccept thatallWesternEuropeancountriesarenowwatchinglikefrightenedrabbitswhile ItalygoesCommunist,doingnothing,”Kissinger confided toSirAnthonyCrosland,Britain’sforeignsecretary,intheofficersmessattheRoyalAirForceBaseatWaddingtononApril24.“Ican’tthinknothingcanbedone.”Further west, the Iberian Peninsula was in ferment. Following the death of

Spain’sFranciscoFrancoinNovember1975thedictator’ssuccessor,KingJuanCarlos,haddecided tobreakwithmore than threedecadesofFascist rule and

steerSpaintowardEuropeandliberaldemocracy.Theking’schancesofsuccesswerenothigh.Spain’seconomywasravagedbyhighfuelcostsanddouble-digitlevelsofunemploymentandinflationthatstokedpoliticalunrestintheformofstrikes,protests,andextremistviolence.“Wethinkthatthepoliticalsituationhasimprovedbutthatthereisaseriouseconomicproblemthatwillhavetobedealtwith,”ForeignMinisterJoseMariaAreilzaconfidedtoKissingerduringatriptoMadrid.Spanishdemocracywould riseor fallwith theeconomy.“Wewant toimprovetheeconomicsituationandgraduallymovetowardsEuropebutthiswecanonly dowhen the reformshave takenhold.”Theking faced the very realdangerofacoupfromthefarrightandpoliticalviolencefromthefarleft.TheloyaltyoftheSpanisharmywasinquestion.Areilzasaiditwas“aquestionoforderanddiscipline....Themostdangerousthingforanarmyistobedefeatedandbored.Wehavesome200,000conscriptsbutweonlyhaveenoughmoneytohaveanykindofmaneuveronceeachmonth.”Neighboring Portugal was preparing for its first free parliamentary and

presidential elections.Washington’s preferred candidate for the post of primeminister was Socialist Party leader Mario Soares. Soares was a respectedpragmatist quietly working behind the scenes with leaders of the CatholicChurch to block the Communists from making electoral gains. “We are nowentering a period of progressive democratic nationalization,” Soares toldKissinger. “Unless the economic situation produces an explosion withunexpected social agitation; the Communists would use that to attack us.”Kissinger told Soares that while he still opposed allowing Communists intogovernmentonprinciple,hehaderredin“analyzingyoursituationinanItalianframework.”Heagreed that thePortugueseCommunists lackedreal leadershipandhadoverreached, thoughhefelt thiswassomethingEnricoBerlinguerwasnot likely to do in Italy. “The tactical adjustments you have tomake I cannotcomment on,” he told Soares. “But I must tell you that what you have donesurprised me. I must admit this. I don’t often make mistakes of judgement.”Soares warned Kissinger that Euro-Communism was cresting across WesternEurope.Hisownviewwasthat“theoverallsituationinItalyismoredangerousthan that inFrance.”MarioSoareswenton to formPortugal’s firstdemocraticgovernmentinApril.Euro-Communismwas at high tide across the continent.The sense of crisis

deepenedinearlyJunewhenEnricoBerlinguerflewtoParistoappearbeforearoaring crowd of forty thousandwithGeorgesMarchais, leader of the FrenchCommunistParty.OntheeveoftheItalianparliamentaryelectionsonJune21,widely seen in the United States as a crucial showdown between the rulingChristianDemocrats andBerlinguer’sCommunistParty, aGalluppoll showed

that 22 percent of Americans supported military intervention in Italy ifBerlinguercametopower,49percentbelievedtheUnitedStatesshouldimposeeconomic sanctions and use political pressure, and a further 13 percentadvocatedAmericanwithdrawalfromNATO.Intheevent,theelectionendedinavirtualdeadheat.TheChristianDemocratswonavictoryinthepopularvotebuttheCommunistscapturedforty-ninenewseatsinthelowerhouseChamberofDeputies.TheCommunists alsopickedup twenty-three seats in theSenate,leaving Berlinguer’s 116 seats within striking distance of the ChristianDemocrats’135.Therewasadramatic rise in support for Italy’sneofascist farright.ButKissinger’ssolefocusasusualwasontheroletheCommunistswouldplay in the next coalition government. “The essential problem which weconfronted in the spring has not been fundamentally changed by the Italianelection,” he announced. Kissinger put the Italian political establishment onnoticenot tocutanysidedeals thatmightgiveBerlinguerpolitical legitimacy.Western leaders gathered in Puerto Rico to announce they were placing tightstrings on the availability of any new financing to bail out Italy’s listingeconomy.ItalyhadalreadydrawnitsfullquotaoffundingfromtheInternationalMonetary Fund. “Bill Simon is going to treat Italy the way he treated NewYork,”saidoneU.S.official,referringtoSimon’sunwillingnesstoprovideloanstoNewYorkCityduringafinancialcrisisthepreviousyear.Therewas a sense that events in Italywere rushing to a climax.On July1,

WestGermany’sdefenseministerGeorgLebercalledonKissingerat theStateDepartment.“Italyneedsademocraticalternativeor[Berlinguer]willwinout,”hesaid.“Weagreewithyouonthe[CommunistParty]dangerinItaly,”saidKissinger.

“Theycannotparticipateingovernment.Iftheygetin,itwillinfluenceelectionsinFrance,SpainandPortugal.”Two days later, Berlinguer won amajor psychological victory when Italy’s

otherpoliticalpartieselectedaCommunisttothepowerfulpostofpresident,orspeaker,oftheChamberofDeputies.Kissingerswungintoaction.HistelephonelogsrecordthatonJuly10hetelephonedHenryCabotLodge,PresidentFord’senvoy to the Vatican, to carry out a special assignment for theWhite House.Lodgehadgainednotoriety inSouthVietnamin1963foradvocating thecoupthatledtotheousterandassassinationofPresidentNgoDinhDiem.Lodgewaswidely regarded as an old-guard stalwart of the Washington establishment.KissingeradvisedLodgethat“weneedsomebodytogotoItalyandtalktosomeof the leaders thereaboutourviewoncommunistparticipation ingovernment,andtodoitasasortofprivateemissary.Wewerewonderingifyouwouldbewillingtodothat.”

Lodgeacceptedtheassignment.The Italians took the hint.On July 13, PresidentGiovanniLeone asked the

outgoingChristianDemocraticministerofthebudget,GiulioAndreotti,toformItaly’snewgovernment.U.S.officialsbreathedasighofrelief.

YAMANIHOLDSTHELINEINBALI

OPECministersmetinBaliattheendofMayandfailedtoagreeonanewoil price.The current posted price of $11.51per barrel remained frozenwhilemembersofthecartelagreedtotryagainattheirDecember15meetinginDoha,thecapitalofQatar.BaliwasthesceneofabitterstandoffbetweenSaudiArabiaandIran.TheIranianssupporteda15percentpricerise,something thatSheikhYamanimadeclearwasunacceptable.InWashington,PresidentFordwelcomedthe stalemate and the news that oil prices would remain frozen through thesummer.“Intoday’sinterdependentworld,astableandgrowingworldeconomyis in every country’s interest and the United States looks toward furtherimprovements in the relationships between oil producing and consumingcountries,”hesaid.FordhadaskedKissingertoasktheShahtoholdthelineonoilpricesthroughthesummer.InhisdiaryonJune8,CourtMinisterAlamwrotethat theShahhad recently sent a back channel throughHelms agreeingnot toapprove an increase in oil prices at Bali, “in order to save President Fordembarrassmentinthemidstofhisre-electioncampaign.”FordwrotealetterofreplytotheShahthankinghimforthepricefreezebutmakingnomentionofhispresidentialcampaign.

BONFIREINBEIRUT

WhileAmericanofficialsfocusedtheirattentiononSouthernEuropeanewcrisis exploded in the Eastern Mediterranean. On June 1, Syrian armoreddivisions invaded Lebanon to end the civil war that threatened to draw in itsneighbors and engulf the region in a wider conflict. The U.S. and Israeligovernments shared President Hafez Asad’s fear that a victory by PalestinianandMuslimguerrilla fightersoverLebanon’sChristiancommunitywould leadtothecreationofaradicalstatealignedwithSaddamHussein’sleftistregimeinIraq.WhileSyriantroopsmassedontheoutskirtsofBeirutwaitingfortheorderto relieveabesieged,desperatecitywherearmedgangsroamedwith impunityand whose residents were running low on supplies of water, food, and fuel,gunmenambushedacardrivingU.S.ambassadorFrancisMelloy toameeting

with Lebanon’s president. The bodies of the ambassador, his economicscounselor, and their chauffeur were later found in a seaside garbage dump.Melloyhadbeenshotintheheadandchest.PresidentFordordered theevacuationof all 1,400Americannationals from

BeirutandU.S.navalwarshipssteamedtowardtheLebanesecoast.TherewerescenesofpanicatBeirutairportwhenincomingshellsrippedthroughanairlinersitting on the tarmac ready to fly out foreign nationals, killing the pilot andinjuring crew members. Hundreds of Americans and other foreign nationalsmadeadashfortheSyrianborderinalandconvoy.SecretaryKissingerorderedthe embassy staff to get out immediately because “the PLO might be sodesperate that theywouldbedelighted tokill a fewhundredAmericans.” Intothebreach steppedKingKhalid andCrownPrinceFahdofSaudiArabia.TheSaudis used their influence among the warring factions in Lebanon to helpguaranteesecurityforAmericanswholeftBeirutbyroad.Theyweremorethanwilling to prove their goodwill to the White House. With all his nationalsaccountedfor,PresidentFordcabledKingKhalidtothankhimfor“theeffectiveassistancewhichyouandyourGovernmentrenderedusinoursuccessfuleffortstobringa substantialnumberofAmericansandothercitizensoutofBeirut tosafety.Weweregratifiedthatwiththisassistancethedifficultiesweencounteredwhenwewerepreparingourroadconvoywereultimatelyremoved.Thisisthekindofcooperationwhich,Iamsure,willcontinuetocharacterizeourrelationsasweworktogethertobringtheMideasttoajustandlastingpeace.”

THESHAH’SCLOSECALL

OnSaturday,June26,MohammadRezaShahplayedhosttothepresidentofIndia,whowasknowntohaveaheartcondition.TheShahorderedthattherouteof the processional drive through the streets of Tehran from the airport beshortened to take into account his guest’s declining health. The Shah’s ownhealthwaslessthanidealthatmonth.InJunehecomplainedofstomachpains,askinrash,andheadaches.TheShah’sdecisiontoaltertherouteatthelastmomentmayhavesavedthe

livesofbothheadsofstate.TheIranianhostswereattheairportwaitingfortheIndian delegation to deplane when Alam learned that a female terrorist hadstruck the original route back to the palace. Seeing that she had missed herchance,shetossedagrenadeattwopoliceofficerswhoopenedfire,killingher.ThenextdayAlamadvisedtheShahtoendthetraditionofdrivingstategueststhrough city streets; it was too dangerous. He suggested in the future driving

straight back to the palace and either avoiding the ceremonial procession orhelicoptering from the city outskirts.Alampointedout that but for theShah’s“changeofplan,astrokeof inspiration,” thedaycouldhaveended indisaster.“Notinspiration,merelycommonsense,”theShahreplied.“ThoughperhapstheAlmightydoeshavesomesortofdesiretoprotectme.NodoubtsoImayfulfillmymissiontothepeopleofIran.”Tehran simmered. In the early morning hours of June 29, Iranian security

forcesquietlyentered thebasementofabuildingnearMehrabadairport.Aftermonths of surveillance they discovered that inside the building was HamidAshraf,themostwantedmaninIran,aniconicfigureintheundergroundandahero tomany young Iranians.Ashrafwas the oldest survivingmember of thegroup of revolutionaries who carried out the original 1971 attack on thegendarmeriestationatSiakal.AshrafhadtauntedtheShahforyearsandcarriedoutastringofheadline-grabbingactsofsabotage.Accordingtoonescholarthesecurity forces ringed theneighborhood seven times tomake sure their quarrydidnotgetoutalive.Gunfireeruptedasthecommandosweretryingtoevacuateacoupleand their child trapped in thebuilding.WithAshrafwerenineof themost senior members of the resistance leadership. They had gathered in anemergencysessionandbeencaughtbysurprise.Intheensuingfirefightsnipersin helicopters picked them off as they clambered up onto the roof to try toescape.ThedeathofAshrafandhisninecomradeswasasignificantpropagandavictoryfortheregime.

BICENTENNIALSURPRISE

On July 2, the FordWhite House received jarring news in the form of areportonthenumberofjoblessAmericans.Amonthearlier,thechairmanofthePresident’s Council of Economic Advisers, Alan Greenspan, had gone beforeCongressandconfidentlypredicted that theUnitedStateswaswellon track toeconomicrecovery:theworstoftheoilshockwasbehindit.Heforecaststrongjob growth and a drop in unemployment below 7 percent, a fall in annualinflation to between 5 and 6 percent, and an expansion in the gross nationalproduct by about 7 percent annually in real terms. He said the Fordadministrationdidnotneedtoprovidefiscalstimulustoboosteconomicgrowth.America had cleared the hurdle of recession. Instead, Greenspan cautionedmembers of Congress that increased government spending might increaseinflation.TendayslatertheWhiteHouseconfidentlybrushedasidefiguresthatshowed the steepest fall in consumer retail spending in fourteen months.

“Variations in the pace of economic activity during an expansion aren’tunusual,”saidoneeconomistattheTreasury.“Theconsumercan’tbeexuberanteverymonth.”Yetthebadnewskeptcoming,thistimewiththeJunejobsreport.Insteadofa

decreaseinthenumberofunemployed,thejoblessrateclimbedfrom7.3to7.5percent. “Temporary pauses of this kind aren’t uncommon during periods ofcyclicalexpansion,”saidFederalReservechairmanArthurBurns,whotried toreassure Americans they were not headed back into recession. Credit wouldremain tight because he and Greenspan wanted “to reassure the businesscommunity and financial community that we intend to stick to a course ofmonetarypolicy thatwillsupport furthergrowthofoutputandunemployment,while avoiding excesses that would aggravate inflationary pressures.” ThedangerforPresidentFordwasthattheeconomywasteeteringonthebrinkofadouble-dip recession in the middle of his presidential campaign with JimmyCarter.America’sBicentennialsummerreacheditsfeverpitchwithastatebanquetat

theWhiteHousewhereQueenElizabeth IIwasserenadedbypopduosingingsensation the Captain & Tennille warbling “Muskrat Love,” a ballad aboutexactly what the title suggests. Critics deemed the song “unsuitableentertainment” for British royalty but Her Majesty “seemed to enjoy itthoroughly,”saidfirstladyBettyFord.EvennowthecountrycouldnotescapetheshadowofVietnam.InNewYork

CityonJuly4,225tallshipssaileduptheHudsonRivertotakethesalutefromPresident Ford on the carrier Forrestal. Kissinger was furious with a snafuinvolvingthediplomaticcorps.“ThePentagonisincredibleandtheSecretaryoftheNavymustbethedumbestalive,”heunloadedtohisstaff.“ForthereviewofshipsontheBicentennialhedecidedthattheNavyhadlosttoomanyhelicoptersin Vietnam so the diplomatic corps would have to use barges to get to theForrestalforthereview.”Theresultwasthattheambassadorswerestrandedonthe carrier without refreshments for hours andmost watched the Bicentennialfireworks from a bus stuck in a traffic jam: “They were infuriated at suchtreatment.” In Tehran, where the American School was the focal point ofcelebrations,theexpatriatecolonyraisedatoastasagiantAmericanflaglitupamountainsideoverlookingthemetropolis.The next morning’s New York Times reported that yet another aftershock

caused by high oil prices was headed toward American shores. The massivetransfersofpetrodollarsthathadfollowedthequadruplingofoilpricesin1973hadmostlybeenhandledbyAmericanbanks.Theflexibilitytheyhadshowntointernational lenders and debtors had so far helped avoid the worst-case

scenarios outlined by Ford,Kissinger, and Simon in their doomsday speechesfromSeptember1974.Butthishadledtoanotherpotentiallybiggerthreattotheworldeconomy.“SogreatwastheactivitythatAmericanbankshavebeenthrustinto the role of themajor suppliers ofmoney to theworld,” reported theNewYork Times. “This development is causing some mixed reactions abroad andconcernintheUnitedStates.”Spainwasabouttoreceivea$1billionloanfromasyndicateofprivate lending institutions.WallStreetwaseager to establishapresenceinacountrywhosebankingsectorhaduntilnowbeenclosedtoforeigncompetition. Peru and Argentina were cited as just two of the dozens ofcountrieslininguptotakeloansoutfromU.S.banks.Underwritingsofthissortwere “proceedingoutside the control ofmonetary authorities.”Thedanger forWallStreetwasthatAmericanbanksmightbedangerouslyoverexposedandleftat risk from a single default somewhere along the line. “Concern has beenexpressed in Congress that American banks may be exposed to risks ofwithdrawals—andpossibleblackmail—bythelargepetrodollardepositorsfromtheoil countries.Risksof insolvenciesbymajordebtors are another cause foranxiety.”Some 40 percent ofBank ofAmerica’s earnings now came from itsinternational business activities. The Morgan Guaranty Trust Companyacknowledged that half of its outstanding loans were now made throughoverseas branches. Citibank and Chase Manhattan were also now heavilyinvestedinlendingtogovernmentsstaggeredbyhighfuelbills.WallStreetbankshadalreadybeenputonnoticebyH.JohannesWitteveen,

themanaging director of the InternationalMonetary Fund. Earlier in the yearWitteveensoundedthealarmwhenhedeclaredthatbankshadtoaccept“someshare of responsibility” if mounting debt burdens became hazardous fordevelopingcountries.Heremindedthemthat“creditsweresometimesgrantedina market climate that wasn’t very conducive to the maintenance of adequate[credit-worthiness] standards.”Developing countries able to borrowmoneyonan “all-too-easy” basis, warnedWitteveen, were now struggling tomeet theirdebt repayment schedules.Witteveen asked at what point “themounting debtburden becomes hazardous.” Total international lending to governments byprivate commercial banks had reached $250 billion at the end of 1975, asubstantial increase from the $150 billion recorded in December 1973. U.S.banksandtheirforeignbranchesaccountedfor40percentofthosetotals.Otherstookupthecry.InearlyJunetheBankofInternationalSettlementsin

Switzerland announced that the debt load taken on by many countries hadreached “disturbingly high levels.” The following week Allen Lambert,president of the International Monetary Conference, drew headlines when hewarnedthatmanycountrieshitbythefourfoldincreaseinoilcostshadtakenout

unwieldy loans and “the ability of these countries” to repay them “will be adilemmawhichallofusmustface.”Peru,Indonesia,andArgentinawerealreadytrying to renegotiate their existing debt load. Panama, Zaire, Ghana, andcountries inSoutheastAsiawereexpected to join thequeue.The realproblemwouldcomewhen thesecountries, especially the leastdevelopedstates,whichhadtakenoutbetween$15billionand$17billioninprivatebankloansin1975alone,facedahikeinfuelcosts.Anotherbigincreaseinthepriceofoilmighttipone or more countries to default on their debt repayments. The president ofMorgan Guaranty Trust lectured his colleagues that “in a greedy drive forprofits, American banks in the early 1970s hadmade bad loans in real estateinvestmentsandforotherquestionablepurposes.”Only nowwasWall Street beginning to take stock of its post-1973 lending

binge.“Howcanpresumablysophisticatedbankers,whoweigheverynickelofa$20,000 homemortgage loan, get so tangled up in bad orweak-quality loansrunningintothebillions?”askedWashingtonPostcolumnistHobartRowen.Thereal issue, as he saw it, was their unwillingness to conduct effective riskassessmentofthosetheyextendedloansto.“Bankssimplymustdoabetterjobtoassuretheirsurvival,”hewrote.“Tobesure,theyareprivateinstitutions,buttheir solvency and stability have public ramifications.” The warning signs“should be taken seriously by those bankers who still regard news mediadiscussionofbankingproblemsasanassaultonthefreeenterprisesystem.”Thereweremanyweaklinksinthedebtloadchain.Inthefirstsixmonthsof

1976theIMFlentmoremoneytomembercountriesthaninanypreviousyearinthe fund’s history. By June 30, the total outstanding drawings, or loans, wascountedat$15billion.ThebiggestuserofthefundwasGreatBritain,whichhadrequestedandreceivedtwoseparatedrawings,onefor$1billion,andasecondfor$700million.TheBritisheconomy,whichforthepastseveralyearshadbeentreatedwiththefiscalequivalentofBand-Aids,wasabouttohemorrhage.Ontheevening of July 20, 1976, Chancellor of the ExchequerDenisHealey gravelyinformed backbench members of the governing Labour Party that if thegovernment did not implement drastic cost cutting to reduce the deficit, thecountryfacedthe“possiblecollapseoftheeconomy.”

THEDANCEBEGINS

The threads of the final crisis of Gerald Ford’s presidency were comingtogether and in themidst of his campaign for election.Officials in theWhiteHouse were focusing on the December 15 OPECministers meeting in Doha,

Qatar.BillSimon’smomenthadarrived:itwastimetobringtheSaudisinfromthecold.KingKhalid’ssupportforanoilpricefreezeandSaudiassistanceintheevacuation of foreign nationals from Beirut had impressed administrationofficialsasactsofstatesmanshipandproofthatthekingdomwasreadytotakeits place on the world stage. Oil prices, financial stability on Wall Street,politicalstabilityinEurope,thecivilwarinLebanon,andtheMiddleEastpeaceprocesswereallelementsofagrandbargainabouttobestruckbytheAmericanandSaudileaders.Theyhadtomovequickly.At10:30A.M.onFriday,July9,1976,Ford,Kissinger,andScowcroftreceived

Prince Abdullah bin Abd al-Aziz-Saud, Saudi Arabia’s second deputy primeministerandcommanderoftheSaudiNationalGuard;SheikhTuwayjiri,deputycommanderof theNationalGuard forFinanceandAdministrations;andSaudiambassador Ali Alireza. President Ford wasted no time in getting down tobusiness.“Wearegratefulforthestrongpositionthatyourgovernmenttookonoilpolicies,”hetoldhisguests.“Wethinkitistherightthingtodointermsofeconomic recovery and it’s in the long term interests of both producers andconsumers.AsIamsureyouknow,wearedoingourutmosttobehelpfultothepoliticalsettlementinLebanonandwewanttomoveasrapidlyaspossibletoasettlementintheMiddleEastasawhole.”“Thisisatruefact,expressedbrilliantlyyesterdaybytheSecretaryofState,”

Prince Abdullah complimented the president. “The dilemmawe are in is thatrumorsarespreading thatweare incollusion.Asyouareaware, these rumorsare spread by enemies of us both—the Communists.” Abdullah proceeded tolecture his hosts, politely but nonetheless firmly, of the risk the Saudi royalfamilywastakinginassociatingsocloselywiththeAmericans“becauseweasyour friends have been embarrassed on many occasions. For example, withPakistan,VietnamandAngola.Weweretoldbypeopletolookatthewayyouabandon your friends. The fact is we have been embarrassed by thoseaccusationsoftheArabpeople.ItisknownthattheUnitedStatesstandsbyitsfriends no matter what the situation is. But this talk is exploited by theCommunists.Thisismypoint.”Ford assured Abdullah that “after the election we will take action in

accordancewiththeaimsandprincipleswehaveinmind.”“Thatiswhatweexpected,”saidAbdullah.Theprincepartedwithacomment

about power and its uses that had preoccupied American officials sinceWatergate, theOctoberWar, and the oil embargo: “The rule of government isprestige—ifprestigedisappears,thegovernmentislost.”On July 31, the Ford administration announced that it had decided to sell

thousandsofnew-generation“smart”missilesandbombstoSaudiArabia.The

saleincluded2,500Maverickair-to-surfacemissiles,1,000 laser-guidedbombsand1,800TOWmissiles.Thissalewasinadditiontoaseparateoneinvolving2,000 Sidewinder interceptor missiles and 16 Hawk ground-to-air missilelaunchers. Over the past two years the United States had sold the Saudis $6billioninmilitaryequipment,secondonlytotheamountpurchasedbyIran.U.S.officialsstressedthat“thecontinuingbuild-upofIran’sarmedforceswasnotafactorintheSaudirequest.”

ChapterElevenROYALFLUSH

“Manycountrieshaveinfactvirtuallyreachedtheendoftheirabilitytoborrow.”

—PresidentGeraldFord,1976

“Nothingcouldprovokemorereactioninus than this threatening tonefromcertaincirclesandtheirpaternalisticattitude.”

—TheShah,1976

WEWILLHAVEARADICALREGIMEONOURHANDS

HenryKissingermade his final trip to Iran as secretary of state inAugust1976.ThreedaysbeforeKissingerflewtoTehranwithwife,Nancy,andDavid,his son by his first marriage, Senator Hubert Humphrey’s subcommittee onForeignAssistance,oftheCommitteeonForeignRelations,releasedadamningreport on U.S. arms sales to Iran. It described them as “out of control” andconcluded that the Iranian military was now so dependent on U.S. technicalsupport that Iran could not go to war “without U.S. support on a day-to-daybasis.” The report warned that tens of thousands of Americans living in IranwerepotentialhostagesifrelationsbetweenWashingtonandTehraneverbrokedown.PresidentFord’schallengerforthepresidency,JimmyCarter,attackedas“cynicalanddangerous”theFordadministration’spolicyof“almostunrestrictedarmssales” toIran.Kissinger’sangerwasdirectednotat theDemocratsbutathisfellowRepublicanswhomheknewhadinfluencedthereport’sfindings.“Itcouldn’t be aworse time,” he complained toFord. “Treasury andDefense aregoingafter theShah.Simonisgoingaroundsaying theShahisdangerousandshouldn’t have exotic weapons. And [Robert] Ellsworth and Defense areviciouslyanti-Iran.”HewantedFordtocleanhouseaftertheNovemberelection:“Youcan’tdoanythingbeforeNovember,butbetweenTreasuryand[Defense]

theyareonaviciouscampaign.”“Iwill talktoDon[Rumsfeld]becauseI thinkIranisveryimportant tous,”

Fordresponded.“Weare playingwith fire,”KissingerwarnedFord. “Wehave thrown away

TurkeyandnowIran....Anyway,itwillberoughinIran.ButifwegetridoftheShah,wewillhavearadicalregimeonourhands.”Kissingerfrettedthattheanonymous slashing attacks from within the administration ran the risk ofdemoralizingtheShahandemboldeninghisdomesticfoes.ItwasbeginningtolookasthoughtheUnitedStateswasabandoningitsally.KissingerventedagaininTehranonAugust7whenhehostedagatheringof

America’s Middle East ambassadors inside the U.S. embassy compound onTakht-e JamshidAvenue. “I am reallymad at all this criticism,” the secretarytoldhisenvoys.“Whenhas[theShah]doneanythingthatwedisapproveof?”Inthe seven and a half years he had been inWashington the Iranian leader hadneverlethimdown.“Wheneverwehaveneededhishelphehasbeenwillingtoapply positive pressure to help, to send special messages or emissaries,” saidKissinger.“LookatthetimewhenwewantedsomepressureappliedtoIraqandherespondedrightaway.”“And when we wanted those 36 aircraft for Vietnam, the Shah sent them

immediately,” Ambassador to Jordan Thomas Pickering reminded hiscolleagues.The Humphrey report, said Kissinger, “illustrates the problem we have at

home.” He blamed the Israeli government and the sympathetic coalition ofstrangebedfellowsithadassembledinWashingtonfromamongtheranksoftheneoconsandliberals.TheIsraeliswerepreparedtohurttheShahtoachievetheirbroaderobjectiveofchokingoffarmssalestoArabgovernmentsintheMiddleEast. The Israelis, explained Kissinger, were “lobbying to change the entirecourseofourpolicytocoincidewiththeirownpolicyratherthanourinterests.Lookattheparallelogramofforcesandyoucansee.EvenonIran,50percentofour trouble is the Israeli lobby.Theywant a caromshotoff of Iranonto armssalesforSaudiArabiaandKuwait.SincewearedoingsomuchforIsraelanditissostrong,itishardtokillarmssalestotheSaudiswhoaremuchweaker.SothebestapproachistoattackthroughIranandkilltheideaofallarmssalestotheGulf,thusblockingtheSaudisandKuwaitis.”ThesecretarybelievedtherealthreattotheShahcamefromtheneocons:“Thisisdespitethecloserelationshipbetween Iran and Israel. Look atCommentary magazine and you can tell mewhat is happening. There is a JoeMcCarthy–like cold war line so that if wewantedtogetIsraeltogiveuptwokilometersontheGolanitwouldbemadetoappear thatweweresellingout to theSovietsaspartofavastworldwideplot

againstIsraelandthefreeworld.”Kissinger wanted to reassure the Shah that he retained Washington’s full

backing.He urged Iranian officials to shrug off the criticism contained in theHumphreyreportanddownplayeditaselectionyearpolitics.ToCourtMinisterAlam,Kissinger lavishedpraiseon theShah,knowing thecomplimentswouldberelayedtohismaster.HisImperialMajestywas“themostdiligentstatesmanin the entire world,” and he spewed bitter invective against the Saudi royalfamily, disparaging them as “a stupid, narrow-minded bunch interested innothingbutmoney. . . .As thingsstand theyseemto live inaworldofmake-believe.”KissingershouldhavecautionedtheShahthattheIranianembassywasbeingoutgunnedbyanintensiveSaudilobbyingeffortonCapitolHillconductedwithstealthprecision.TheShahhostedtheAmericandelegationathispalaceontheCaspianSea.He

hadarrangedasightseeingtripforthemtoacaviar-processingfactoryattheportofBandarPahlavi.Henodoubtwantedtoremindhisgueststhattherewasmoreto Iranian industry and commerce than oil production. Kissinger viewed theexcursion as awaste of his time and embarrassedU.S. embassy personnel bymakinghisfeelingspubliclyknown.AtthefactoryheshamelesslymuggedfortheAmericanpresspool,makingitclearhewouldratherbeanywherebuthere.“Thesecretaryappearedboredwiththewholething,hiseyessomewhatglazedasanofficialexplainedtheprocess,”reportedtheAssociatedPress.“Attimeshehad to suppress laughterwhen he noticed reporters grinning at his reception.”Kissinger’s showmanship came to an abrupt end when a sturgeon was slicedopen in front of him and its innards exposed. The combination of 110 degreeheat andgutted intestinesproved toomuchandablanchingKissinger“lookedaway,paledandseemedextremelyuncomfortable.”During the formal talks the Shah took a hard line. He made it clear to

Kissinger that he expected the United States to continue selling him all themilitary equipment he deemed necessary to defend the PersianGulf oil fieldsand shipping lanes. For a start, he wanted to buy the next generation ofAmericanfighteraircraft,includingthreehundredF-16sandtwohundredF-18s.Irandidnothavethemoneytobuytheplanes,thetechnicianstomaintainthem,orthepilotstoflythem,butnomatter.Everyweaponspurchaseandtransactionhad become a test of Kissinger’s willingness to follow through on his andNixon’s unwritten secret commitments. The Shah repeated the threat he hadlodgedbackinMarchthattheUnitedStatesshouldnotreimposerestrictionsonarms sales to Iran.Hewouldnot tolerate a return to thedaysof theTwitchellDoctrine. “Can the United States or the non-Communist world afford to loseIran,”heaskedreportersatapressconferencewithatense-lookingKissingerat

hisside.“WhatwillhappenifonedayIranwillbeindangerofcollapsing?Doyouhaveanychoice?”Before his departure the secretary announced that the United States had

agreedtosellanother$10billioninmilitaryequipmenttoIran.AdiplomatatthescenereportedthatKissingercameupwiththetotaldollaramountpracticallyasanafterthought.ForKissinger,theimportantthingwastoprovidetheShahwiththenecessaryreassurance.ThatIranlackedthemoneytobuytheequipmentandcouldnotpossiblyuseanyof itwasirrelevant toKissinger,wholesolemotivenowwastodistracttheShahwithtanksandguns.Thetriphaddonenothingtoadvance the cause of American-Iranian relations. As Kissinger was leavingTehran he casually remarked to the newsmen traveling with him that, “onhistoricalprecedent,arateofeconomicadvancelikeIran’swasboundtoleadtorevolution.”Recalling the incident inhismemoir,Kissingerplayed it downas“idlemusing,forIaddedimmediatelythatapparentlythemomentumofaveryrapidgrowthcouldovercomethepoliticalperilsofindustrialization.”WhenhereturnedtotheWhiteHouseKissingerrenewedhiscallforPresident

Ford to sackRumsfeldandSimon. “In Iran, Idon’t thinkwe realizewhatourdomestic politics do to these people,” he bitterly complained to the president.“ThisHumphreyreportwasadisaster.WehavenobetterfriendthantheShah.Heisabsolutelysupportive.”“WhatisHumphreydoing?”“Henowfeelsbadly,” saidKissinger. “Buthehas [Bob]Ellsworth’s former

staffassistantwhodidthestudyandBobisanti-Iranian.ThentheJewswanttostoparmstotheMiddleEastandthereisananti–armssalebingeontheHill.”FrankZarbfollowedKissinger toTehraninAugust.Onceagainhecameup

short.Ansary followedKissinger’s advice and still refused to settle forZarb’srequestfora$3discountoneachofthe300millionbarrelstheShahwantedtooff-load. The Iranians had their own reasons for holding out for better terms.BackinthespringthemodestimprovementineconomicgrowthintheWesthadled tobigger factoryordersandan increase indemand forheavy fueloil.TheIranianswereconfidentthatwhenfulleconomicrecoverytookhold,demandfortheiroilwouldrise,themarketwouldtighten,andtheycouldchargeevenhigherprices for their exports of heavy crude.Thenegotiations deadlocked andZarbreturnedtoinformthepresidentthattheIranianswerestillnotpreparedtoofferenough of a discount to help the U.S. economy. Ford told his staff that thenegotiations were over. Kissinger predictably blamed Zarb for the fiasco andcalledhima“nit-pickingTalmudicscholar” fordriving toohardabargainandrefusingtoaccepttheShah’sterms.Ford’spatiencewith theIraniansand, itseems,withKissinger’scoddlingof

theShah,hadfinallyrunout.EvenFord’shard-foughtnominationvictoryoverRonaldReaganinKansasCity’sKemperArenalateintheeveningofAugust19,1976, had been clouded by reports of Iranian intrigue, this time involvingAmbassadorArdeshirZahedi.Zahedi had grown close toReagan throughMr.andMrs.WalterAnnenberg,socloseindeedthattheReaganswarmlyregardedhim as an honorary member of their famous “kitchen cabinet” of politicaladvisers.ThepreviousChristmastheFordshadextendedaninvitationtoZaheditovisittheminVail.Zahedihadturnedthemdown,citingasanexcuseapriorengagementwiththeReagans.ThetimingwasunfortunatebecauseReaganhadjustannouncedhisintentiontorunagainstFordandclaimthemantleofthe1976RepublicanPartypresidentialnominationforhimself.Zahedi flew to Kansas City in August to attend the GOP convention after

spending a weekend golfing with Annenberg. It was not unusual for foreigndiplomats to attend national political conventions as impartial observers. ThedifferencethistimewasthattheIranianambassadorstayedintheReagans’hotelandwaswith the couple and their supporters in their suiteon thenightof thedramaticdelegatecountwhenReaganlost toFordbyanarrowmargin.Zahedirecalledthathewasthereasafriendandnotasapoliticalsupporter.Yettherewas no doubt where his own sympathies lay. “Ford was a nice, wonderfulperson, but hewasweak and hewas dominated byHenry,” he said.At somepoint during the long, drawn-out night, amidst all the excitement, Zahedi’senthusiasm got the better of him. “With [Walter] Annenberg, I was trying tobring these two men together,” he said of his participation in the fraughtmediationeffortsbetweentheReaganandFordcampsoverwhatroleifanytheCalifornianwouldplay in theupcomingnationalpresidentialcampaignagainsttheDemocrats. “Iwas trying to tell theRepublicans that they shouldmakeupbetweenthemselves.IfReaganandFordcouldcomeintothepicture[together,theGOPwouldemergeunified].”Zahedi’s interventionhurthimwhen furiousWhiteHouse officials saw him in the company of the same cabal ofwealthyCalifornians who had just tried to roll a sitting president. They may haveconcluded that the Shah, through his ambassador, was trying to influence theoutcome of a Republican Party presidential contest. “This is why Ford wasmaybe a little upset,” said Zahedi when he recalled the air of tension thatsurrounded his relationswith the Ford administration during the tense end-of-yearconfrontationoveroilprices:“TheywerenothappywithmebecauseofthisFordbusiness.”ArdeshirZahedi hadunderestimated thepersonal antipathybetweenReagan

andFord,thedepthoftheideologicalchasmdividingtheRepublicanParty,andthebitternessthatlingeredlongafterGOPdelegatesleftKansasCity.Fordnever

forgaveReaganforhisprimarychallenge,whichinhisviewconstitutedanactofunforgivabletreacheryagainstafellowRepublican.ReturningtoWashingtonto receive an update on foreign policymatters from his secretary of state, thepresidentletlooseintheprivacyoftheOvalOffice.“Nowthatwehavegottenridofthatson-of-a-bitchReagan,wecanjustdowhatisright,”hebrusquelytoldKissinger.

THETHREEENGINEERS

From every side, the American-Iranian alliance so carefully constructedyears earlier by Richard Nixon and Mohammad Reza Shah Pahlavi wasunraveling.Thenextblowto therelationshipdrewheadlinesaround theworldforitsshockingbrutality.In Tehran on August 28, at the height of the morning rush hour, a red

Volkswagen veered sharply in front of a car with an Iranian driver and threeAmericanpassengers,forcingittoahalt.Aminibusthenrammedthecarfromthe rear and several men brandishing guns jumped over a wall adjoining theroadway.Oneofthegunmentoldthedrivertoliedown.Whenthedriverraisedhisheadhewassharplyremindedtogetdown.Thefirstassassinthenshot thepassengerinthefrontseat,WilliamCottrell,whofelloutontothestreet.Cottrellmoved a hand andwas finished offwith a bullet to the face.Cornered in thebackseat, Robert Krongard andDonald Smithwere shot in the head at point-blankrange.Theattackerssprayedthemenwithautomaticweaponsfireandthecar’s interiorexploded ina furyofbloodand lead.Theassassins leftbehindanote claiming responsibility for the previous killings of the three Americancolonels.Thiswasnorandomattack.Cottrellhadbeenshadowedfortwoweeksbyateamofbetweensixandeightterroristswhohadgoodreasonfortrackinghim down. Cottrell was employed by Rockwell Corporation to manageconstruction of the first phase of the top secret Ibex electronic surveillanceprogram.The twoothervictimswereRockwell technicianswhohadhitchedaridetoworkwithCottrellaftermissingtheirmorningshuttlebus.Someonehadbetrayed Cottrell’s identity to the underground. There had apparently been asecondmajor security breach. “One of the pistolswas stolen from theUnitedStates Military Assistance Advisory Group (MAAG), and another one wasbelieved, from the cartridge cases, to be a Browning,” Ambassador Helmsconfided to a colleague.The assassins, hemade clear, had insidehelp. “Therewereabout43roundsofexpendedammunitionontheground....Thejobwasprofessionalwiththesamemodusoperandiasinthepast.”

The cover-up began almost immediately. The Shah had been tipped off byIsrael’sMossad that the Islamicguerrillaundergroundwould try toexploit thefindingscontainedintheHumphreyreportandfindwaystodriveanevenbiggerwedgebetweenWashingtonandTehran.TheShahinstructedhiscourtministertopintheblame“forthisatrocity”ontheCommunistsinanobviousattempttowinback sympathy inWashington.Helmswas told thatRussianswerebehindthe attack. He knew better but accepted the Shah’s line that Moscow was toblame. This was reminiscent of how his predecessor, Ambassador DouglasMacArthurII,haddealtwiththe1970attackagainsthiscarinTehran.UntilnowthelivesofAmericanciviliansinIranhadbeensparedbytheurban

terrorists.Inthedaysthatfollowedtheattack,foreignexpatriates“stayedclosetohome and kept their children away from the public playgrounds and sportsfields that they normally frequent,” and 170 frightened Americans, mostlyrepresentativesofcompaniesdoingbusinessinTehran,packedtheU.S.embassyauditorium for a security briefing. Everyone’s nerves were on edge.Businessmenrepresentingdefensecontractorsbeganregisteringathotelsunderfalse names. The embassy’s twenty Chevrolets and limousines were outfittedwith sealed sidewindows resistant to single bullet shots, though notmachinegun fire, andmetal plateswere installed behind the backseats.CynthiaHelmsrecalledthatshe“sometimeshadnightmares.IawokeonenightwhenDickwasinWashingtontowhatIthoughtwasthesoundofashot.ConvincedthatIwasabouttobekidnapped,Ileaptoutofbed,grabbedmynightie,andrushedtothedoor.”She accompanied her husband to theFourth InternationalTradeFair inTehransurroundedbysixteenAmericanandIranianplainclothesmenandtailedbytwobackupcars.BeforetheRockwellmurderstheestimateofthenumberofAmericansliving

inIranwasassumedtobeanywherefrombetween24,000to31,000,thoughnocompletecensushadbeenundertaken.TheStateDepartmentwasoperatingonthemistakenassumption that,basedoncurrentgrowthpatterns, fifty thousandAmericanswouldmostlikelybelivinginIranby1980.AmbassadorHelmsnowaskedhisstaff to check thosenumbers.Hewasunderpressure tobackup theofficial estimates appearing in press accounts back home. Embassy staffcontacted U.S. companies based in Iran and asked them to fill out aquestionnaire asking questions about the number of employees and familymembers.Theyweretakenabackwhenthequestionnairesrevealedthatbetween45,000andfiftythousandAmericansmightalreadybelivinginIran.Intruth,noonereallyknew.Salesofmilitaryequipmentwerenot theonlyaspectofU.S.-Iranrelationsthathadspunoutofcontrol.DemocraticvicepresidentialnomineeWalterMondalecitedthedeathsofthe

Rockwell employees as the inevitable outcome of “scandalous” arms salesundertaken by two Republican administrations. “Richard Nixon gave a blankchecktoIranforthepurchaseofthemostsophisticatedarmsintheUSarsenal,”hetoldacrowdinSanFrancisco.“Unfortunately,it’sacheckthatPresidentFordhasfullyendorsed.”

IFICOULDSPEAKFORAMOMENTABOUTOILPRICES

On August 30, half a world away from the anxieties of Tehran, AlanGreenspanreportedtothepresidentandhiscabinetthattheeconomicrecoveryof the spring had slowed down. “The pattern is spurt and pause, spurt andpause,” explained Greenspan. “We are in one of those pause periods.” In hismemoir,The Age of Turbulence, Greenspan wrote that the economy’s growthrate of less than 2 percent was not unusual given the depth of the 1974–75recession.“Fromaneconomist’sstandpoint, thiswasnotacauseforconcern,”hewrote.“Becauseamoderneconomyinvolvessomanymovingparts,itrarelyacceleratesordecelerates smoothly, and in this case all themajor indicators—inflation, unemployment, and so on—looked fine.” But the major indicatorsweren’t fine.Newfiguresshowedthenation’srateofunemployment increasedfor the thirdmonth in a row, to 7.9 percent. TheWhite House was forced toretractGreenspan’searlierconfidentpredictionthatunemploymentwouldfallto6 percent by ElectionDay. Confirmation of the economic slowdown couldn’thavecomeataworsetimeforPresidentFord.Theoriginsofwhatpunditsinstantlydubbedthe“GreenspanPause”werenot

indispute.Forreasonsthatnoonecouldadequatelyexplain,billionsofdollarsset aside for federal stimulus programs remained unspent. “Economists andanalysts noted that during the first three quarters of 1976 the FederalGovernment spent $15billion less than itwas supposed to,” reportedLeonardSilkinTheNewYorkTimes.Thedollaramount“translatesintoashortfallof$20billion at an annual rate. Talk about balancing your checkbook!” Arthur M.Okun, a former chairmanof theCouncil ofEconomicAdvisers, described theoversightas“thebiggestbudgetarygaffesincethebuildupoftheVietnamwarin1966, whenmilitary spendingwas underestimated by some $10 billion—withinflationary results.” Another prominent economist lamented that the federalbudget was “in a state of chaos.” The administration’s shortfall in stimulusspending,which now threatened to tip theU.S. economy back into recession,added urgency to White House anxiety on oil prices: “If the oil-producing

countries impose another price increase, it not only will affect the Americaneconomy directly by draining purchasing power, it also will weaken otherindustrial economies, further erodingdemands forU.S. exports and, therefore,slowU.S.production.”Uncertainty in the United States quickly spread across the Atlantic to the

anemic economies of Great Britain and France. Prime Minister JamesCallaghan’sLabourgovernmentwasfacedwiththetoxiccombinationofasharpfallinthevalueofthepound,13.8percentinflation,and1.5millionpeopleoutofwork—the highest number of unemployed since the end of the war. TradeunionsvowedtofightCallaghan’spledgetocutspending.“Thingsaregoingtogetworsebeforetheygetbetter,”saidanofficialwithBritain’sConfederationofIndustry,addingthatiftheeconomydidnotpickupsoonthecountrywouldbe“effectively bust as a viable industrial nation.” Across the Channel in Paris,where inflationwas at 12 percent, PrimeMinister Raymond Barre imposed athree-monthwageandpricefreezeandaceilingof$11billiononoilimportsforthe next year. Barre blamed high energy costs for France’s worsening tradebalance.TheWhiteHousesteppedupitscampaigntowinsupportfromSaudiArabia

for an oil price freeze at Doha. The deal to sell thousands of new-generationsmartmissiles to the Saudis was part of that effort. But it ran agroundwhenliberalandconservativemembersofCongressprotestedthesaleofsophisticatedweapons systems to a country still technically at war with Israel. They werereluctant tobeseendoingfavorsfor theworld’srichestoilproducerduringanelection campaign. For good measure, lawmakers expressed support forlegislation that if signed into law would punish any American company thatcomplied with the Arab trade boycott of Israel. Gerald Ford appealed toRepublicanopponentsofthedealnottoantagonizetheSaudisandtokeeptheirsupportforIsraelinitsproperperspective.“TheSaudishavebeenveryhelpfulin keeping oil prices under control,” he reminded Senators Jacob Javits andCliffordCaseintheOvalOffice.“Idon’tthinkwecankickthemintheteethonthisinlightoftheirimportance.”OnSeptember 7,U.S.AmbassadorWilliamPorter traveled toTaif inSaudi

Arabia to deliver a letter from President Ford assuring King Khalid thatWashington remained committed to the missile deal. Crown Prince Fahdacceptedtheletterontheking’sbehalfandassuredAmbassadorPorterthatHisMajesty “will certainly not approve a price rise this year. He is against anyincreaseinthepriceofoil.IfotherOPECmemberscontinuetoapplypressurewewillagreetotalktothemnextyear,butthereisnothingplannedforthenasfar as the Saudis are concerned.” Fahd made it clear that discussions on the

matter must be kept quiet. “At that point he asked for [United Statesgovernment] assistance with Iranians and Venezuelans,” Porter cabledWashington.“Anythingwecoulddotomakethemunderstanddangersofraisingpriceswouldbehelpful all around especially forSaudiArabia. I said Iwouldsendthemessage.”On September 16, Ford had a new letter to send to King Khalid. National

Security Council officials Robert Hormats and Robert Oakley explained in amemotothepresidentthat

themainobjectiveoftheletteristoattempttolocktheSaudisintothepositiontakenbyFahd,inKhalid’sname,opposinganydecisionthisyeartoincreaseoilprices.IfwecanholdtheSaudistothis,itwillatleastmeanno price rise at the December OPECmeeting, buying us severalmonthsmoreofstatusquo.Itcouldproduceafreezeoflongerduration,butthisismore problematical. As an encouragement to Fahd andKhalid, the letterindicates that theU.S.will follow their advice andmake known to otherOPECcountries (especially IranandVenezuela)ouropposition toapriceincrease.

At 11:00 A.M. on Friday, September 17, President Ford, National Security

Adviser Scowcroft, Assistant Secretary of State Charles Robinson, andAmbassador Portermet with Saudi Arabia’s foreignminister Prince Saud binFaisal al-Saud, Ambassador Ali Abdullah Alireza, and Hassan Shawwaf, thechefdecabinet,todiscussoilpricesandarmssales.TheSaudiswereoffendedbytherecentcontroversiesoverthemissilesandthetradeboycott.Theyfelttheywere being singled out for punishment. “There aremany aspects of theU.S.-Saudirelationshipwhichwewouldhopetodiscuss,”saidPrinceSaud.“Wearenot a warlike country, but the threats in the area compel us to improve ourforces,” he explained. “The constant questioning of our efforts by the UnitedStatesleadstogravequestionsonthepartoftheSaudipeople.Wedon’tseewhytheyshouldbelookedonwithsuspicion.Oureffortsarenotjustinarms,butforschools,hospitals,barracks,etc.Whatweareaskingfor is lesseventhanyourmilitaryexpertssayisneeded.”Thepresidentsaidhewasintotalagreementwiththeprince’ssentiments.He

promised tofight forSaudi interests in theCongressandhegaveanassurancethat his administration was applying pressure to Israel to accept Syria’soccupation of Lebanon. “Let me say we agree completely that you have noaggressive designs andwe fully support your defense efforts,” he assured hisguests.

The reluctance is not on the part ofmyAdministration.Our cutbackshavebeenpragmaticallydesignedtogetCongressionalapproval.Thisisadifficulttimeforus.IwouldhopethatinJanuarywecouldmoveaheadinabetter climate here. Last year we spoke of progress in the Middle East.Tragically the Lebanese conflict has intervened.We appreciate the Saudisupportinthearea.WearedoingwhatwecantosupportLebanonandthemoderate forces and keep Israel restrained. . . . I understand and fullysupportyourneeds.

Fordwantedtomoveonthepressingissueofoilprices.“IfIcouldspeakforamomentaboutoilprices,”hebegan.

I greatly appreciate His Majesty’s comments about a price increase.Lastyearwhenyouwerehere,wewereatthebottomofarecession.Wearemovingoutnow,butitisfragile.TheOPECactionlastsummerunderyourleadershipwasveryfar-sighted,butanyincreasethisDecemberorfor’77would be extremely damaging, not only for the United States, but evenmore so for our industrial colleagues who are in a much more fragilesituation.We plan to discuss thismatterwith you but alsowith Iran andVenezuela.”Itwouldbedisastroustopushtheworldeconomybacktotherecessionoflastyear.SowehopeHisMajesty’sviewswillprevail.

“HisMajesty is just asdeterminedas last summernot tohavean increase,”saidPrinceSaud.“Butitwillbedifficult,anditwilldependheavilyonwhatyoucandowithIranandVenezuela.HisMajestyhassaidatleasthewillrefusemorethanamodestincrease,andwillcategoricallyrefuseanythingbeyond5percent.IfwecangetsupportfromIranandVenezuela,wecanholdtonoincrease,butwithout that, it will be extremely difficult.” President Perez of Venezuelacontinued to support the Shah’s hawkish stance on oil producers on behalf ofnon-Arabproducers.“Iappreciatethatandwewillworkonthemtothebestofourability.”“OurabilityinthisregarddependsstronglyontheoverallstateofU.S.-Saudi

relations, not only in military supplies but in other things,” Prince Saudreminded the president. “We need a measure of reciprocity to justify andstrengthen our ability and to keep our public opinion and the Arab publicopinionmollified.”

“NoneoftheseactsisneededandIwilldomybesttodefeatit,”thepresidentobservedoftheboycottlegislation.“Partofthisisaneducationprocess,andmyAdministrationwilldoitsbesttoexplainthesituationtotheAmericanpeople.”TheNationalSecurityCouncilconvenedtodiscussoilpricesat3:00P.M.on

September23.Thestockmarkethad justcrawledpast the1,000-pointmark toreach 1014.79—“the highest record in almost four years.” Ford’s nationalsecurity teamassumed that themajorityofOPECmembers, startingwith Iran,favoredapriceincreaseatDohaofbetween10and20percent.Thepresident’smenfacedadelicatebalancingact.Thecountrywasheadedintothefinalstretchofapresidentialelectioncampaign.Speculationaboutapossiblebankingcrisishadnotyetspilledoverintothemainstreampress.Theireffortstoapplypressuretotheoilproducershadtobekeptquiet toavoidtriggeringpublicpanicandacontagionof fear thatmight lead to thevery crisis of confidence in thebankstheywanted toavoid.TheNSCdecided to focus itseffortson threecountries:SaudiArabia,Iran,andVenezuela.OfficialsurgedPresidentFordtowritelettersto the three leaders appealing to them for price restraint. Frank Zarb wasassigned the taskof applyingpressure to theVenezuelans. Itwas important todriveawedgebetweentheShahandPerez.KissingerwasaskedtomeetagainwithPrinceSaud,whowasinNewYorkfortheopeningoftheUnitedNationsGeneral Assembly. Around the world, American diplomats were instructed tomountanintensivebutlow-keyefforttopersuadeoilproducersandconsumersalike that a price increaseposed a serious threat to theworld economyand totheirsecurity.Noonewantedtopanicthemarkets.Administration officials already knew their leverage over Iran and Saudi

Arabiawaslimited.TheShahheldapersuasivebargainingchipintheCIAbasesin northern Iran. White House hands were also tied when it came to SaudiArabia.OfficialsconsideredissuingathreattowithdrawtheU.S.ArmyCorpsofEngineers, which was building the kingdom’s military facilities and offeringtrade and investment incentives. None of the other measures considered wasdeemedpractical,desirable,orevenlegal.Theuseofforcewasnotconsidered.Inshort,theadministrationlackedleverageovertheSaudisexceptintheareaofarmssales—andthemissiledealandmilitaryequipmentwerebeingdangledasincentivestogetthemonboardanyway.ItwasforthisreasonthatAmericanoilcompaniesrushedtotopuptheirstoragetanks.BytheendofOctoberstocksofcrude oil were at their highest level since April 1939, a record 293 millionbarrels.Theoilcompaniesweren’ttakinganychances.TheyanticipatedthatthelongawaitedshowdownwascomingbetweentheUnitedStatesandOPECandtheywantedtobereadyforit.

WESHALLBRINGTHECOUNTRYTHROUGH!

BillSimonchargedintobattle.InthefirstweekofOctober1976thetreasurysecretary joined finance ministers, bankers, and more than three thousandadvisersandguests inManila for theannualmeetingof the IMFand its sisterorganization the World Bank. The big men of American banking were inattendance,amongthemthechiefexecutivesandchairmenofBankofAmerica,Chemical Bank, Citicorp, Morgan Guaranty Trust, and Morgan Stanley.Everyonewasnowfocusedonthe“debtbomb”andtheprospectofanotherbighike in oil prices. Britain’s borrowings had reached $45 billion and thegovernment was about to ask international lenders for another emergencyinfusion. Brazil,Mexico, and Italy owedmore than $20 billion each; France,Finland,andIndonesiahadforeigndebtsnear$10billioneach.“Noonereallyknowsjusthowlargethemountainofdebtis,”wroteoneanalyst.“Butwhatisimportant is not the aggregate figure, which runs into hundreds of billions ofdollars, but the ability of particular nations tomeet their payments.”Thewildcard in the risk factor was the prospect of another big hike in fuel costs. “IfOPECputs thepriceupsubstantially—sayby10percentormore—would thisaggravate the payments problem of all oil-importing countries and push someclosertothebrinkofdefault?CantheUnitedStatesandothersdissuadeOPECfromastiffincrease?”H.JohannesWitteveen,theheadoftheIMF,repeatedhiscallfromearlierin

the year for rich and poor nations to stop borrowing to cover their balance ofpaymentsdeficits.Speaking to thedelegates inManila,Witteveenwarned thatbad lending practices had begun “to affect the credit worthiness of someborrowers and to create the possibility of economic and financial problems.”Witteveen’s dour prognosis was followed on Tuesday, October 5, by an evenharsherassessmentprovidedbyTreasurySecretarySimon,whourgedacaponlendingby theWorldBankand remindeddelegates that they“areapproachingthelimitsoftheirabilitytotakeonmoredebt.”Simonissuedastarkwarningofthedangersofanotherincreaseinoilprices,anddrewalineinthesand.“Iftheoil-producing nations take, as is now rumored, the dangerous step of againraising the price of oil, it would seriously aggravate an already troublesomeeconomicandfinancialsituation.”Britainturnedouttobetheweakestlink.AmidboisterousscenesintheHouse

ofCommonsonOctober12,PrimeMinisterCallaghantriedtocalmpublicfearsandofferreassurancetonervousinvestorsaboutthestateofhiscountry’ssicklyfinances.“Weshallnotwaver!”hecried.“Weshallbringthecountrythrough!”

The IMF made it clear that it would not even consider Britain’s request forfurtheraidof$3.9billion ifDowningStreetdidnotagree inadvance to toughcutsinpublicspending.TheloanwasBritain’sfourthoverseasbailoutintwelvemonths.Callaghan’s ownbackbenchers opposed fiscal austerity and therewasnoguaranteethegovernmentwouldgetitsway.Insolvencybeckonedandwithitthe specter of national bankruptcy.Chancellor of theExchequerDenisHealeydefended the loan and warned Britons that failure to act would result in an“economicpolicysosavagethatI thinkitwouldproduceriotsinthestreets.Itwould mean an immediate and very heavy fall in living standards andunemployment,maybe3million.”HealeyalsoknewthatBritainwasobligedtosomehow meet the first payment on a separate $5.93 billion internationalstandbycreditduetofallonDecember9.Therewaswildtalkoftheoverthrowof the government. “Nobody wants to talk about it, but the possibility of abreakdown in lawandorder, or an extremist revolt inGreatBritain, gives theUnited States and other NATO governments the chills,” reported TheWashingtonPost.Thethreatofcontagionwasreal too inItaly,Portugal,andSpain,where the

economicslowdownsuddenlythreatenedtounseatthereformistgovernmentsofGiulioAndreotti,MarioSoares, andAdolfoSuárez. “Ofcourse, the economicsituation is serious,” Italian foreign minister Arnaldo Forlani confided toKissinger.“TheproblemasIseeitinItalyisthis,”repliedKissinger.“Wefavorreforms if we have to and if you have to but we don’t want you to take astringentpolicyofdeflation to thepoint that ithelps theCommunists.Wewillpushyouforreforms.Wewillpushyoubutyouwillhavetotelluswhatisnotpoliticallytolerableforyou.Don’tletourtechnicalpeoplepushyouaroundtoapointbeyondwhatispoliticallytolerableforyou.”InearlyNovemberPrimeMinisterSoaresofPortugalappealedtoWashington

toreleaseanemergency$300millionloantopreventthewipeoutofitsforeignexchangereserves.Tensof thousandsofPortuguesesettlerswerepouringbackintothemothercountryafterfleeingthefallenempire’snewlyindependentandwar-torn African colonies. Inflation was running to 30 percent and nearly 20percent of the population was unemployed. Strikes, terrorist bombings, foodlines, and the emergence of a blackmarket economy confirmed the image ofPortugalasastricken,sinkingship.PoliticalobserversagreedthatthefutureoftheSoaresgovernmentandperhapsdemocracyinPortugalwouldbedeterminedby the outcome of local and regional elections set forDecember 12when theradicalleftandrightwouldsurgeinstrength.Spain was not only broke but in the dark. Madrid experienced blackout

conditions when the government decided to trim its $4.3 billion oil bill by

turning out the lights in the capital after 8:00 P.M. and ending televisiontransmissions at 11:30. The national speed limit was reduced to 62 miles perhour.“Theenergycrisishasturnedthecountry’seconomytopsy-turvy,”reportedone visitor to the Spanish capital in October 1976. “Spain’s once glittering,throbbingcapitalwillnowhavetothrobwithouttheglitter.”Politicalobserversin Spain forecast a “hot autumn” ahead as labor unions and Franco loyalistsflexed their political muscles in the weeks leading up to a nationwidereferendumseenascrucialtotheking’splantoholdfreeparliamentaryelectionsinearly1977.ThedatesetforthereferendumwasDecember15.WallStreethadabigstakeintheoutcomeofthevote.OnethirdofSpain’soutstandingforeigndebtof$12billionwasowedtoAmericanbanks,whichhadrushedtoestablishapresenceinthecountryearlierintheyear.“Thegrowingforeigndebt is linkedheavilytoSpain’spetroleumimports,”notedTheNewYorkTimes.Anoilpricerise of 10 or 15 percent “would push the current account deficit toward $4billion,”upfromitscurrentfigureof$3.5billion.WallStreet’sdebtbombandtheturmoilspreadingthroughEuropelookedset

toconverge in thespaceofa fewhair-triggerdays inmid-December.Britain’sscheduled debt repayment fell on the 9th; Portugal’s elections on the 12th;Spain’sreferendumonthe15th;oilministersfromOPECwerealsoduetomeeton the 15th. Over the next six weeks the future of the Ford presidency,worldwide financial networks, Wall Street banks, NATO allies in Europe,millionsofjobs,andAmerica’seconomicrecoverycouldwellbedecidedbytheactionsofafewgovernmentsintheMiddleEast.WhatwouldbetheimpactoftheuncertaintysurroundingtheseeventsonthepresidentialelectioninthefirstweekofNovember?

HISMAJESTYANDIHELDARAPID-FIREDEBATE

AroundWashington, patiencewas runningoutwith theShah. “Howmuchpressure has there been from theUnited States to keep this oil rise down,” aBritishjournalistaskedtheShah.“Oh...Alot,”headmitted.ButherefusedtobackdownandrejectedevidenceofapossibleeconomicdisasterintheWestifprices went up. “I cannot accept this as a crisis,” he said in reference to aquestion aboutWestGermany’s unemployment rate. “It is a strange situation.There are threemillionguestworkers inEnglandandWestGermany.For thisveryreasonIshallhavenoneofyourtalkaboutunemployment.”HeadvisedtheGermanstocometoIran,wherehewouldputthemtowork.Westerncriticism

ofIran’soilpolicywasbasedon“purejealousy.”HesaidhewasconfidentthattheUnitedStates,WestGermany,andJapanwouldhavenotroubleabsorbinga15percentriseinoilpricesbutagreeditwouldbedifficultforItaly,France,andBritain.“Ifyou justdecided toworka littlemore, justdecided tohavea littlemorediscipline,andmodernizedyourindustry,youcouldbecomethestrongestcountryinEurope,”he lecturedaBritishvisitor to thepalace in theautumnof1976.Hefeltconfidentthathewouldgethisway.AtKissinger’s request the Shah had agreed to delay theBali price increase

untilDoha,aftertheoutcomeofthepresidentialelection.DespiteWashington’sprotestations, the Shah still fully expected a quid pro quo from theAmericanside.Besides,Kissingerhadassuredhimthat theadministrationstill supportedIran’shighlevelsofspendingondefenseandwouldseetoit thathegeneratedtheoilrevenuestopayforthem.TheShahnevertookseriouslySaudioppositiontoanend-of-yearprice rise.Over theyears theSaudishadprotested loudly infavorofpricerestraintbutneversummonedthecouragetoactuallystanduptotherestofthecartelandexerttheirswingpower.TheShah’shard lineonoilprices,at least inpublic,obscuredabehind-the-

scenes debate among his military and civilian advisers about the wisdom ofseeking a 15 percent increase. Iran’s top generals argued that a price risewasmore than justified to recoup the exorbitant cost of imported U.S. militaryequipment.GeneralHassanToufanianwasstillsmartingfromhisclashearlierintheyearwithDonaldRumsfeldoverallegationsofcorruptionandpricegougingby the U.S. Defense Department and American defense contractors. AnAmerican visitor to Toufanian’s office received a lesson in the economics ofmilitary procurement when the general pulled out from his desk drawer acardboard box “filled with small aircraft parts and produced some odds andends.”Toufanianhelduponesmallgadget,thedoorhandletoahelicopter,andsaid, “This costs us one barrel of oil.” He explained that it cost Iran theequivalent of ten thousand barrels of oil each year to pay for just one of thethousands of American blue suiters and mechanics brought in to help theIraniansmaintain theirarsenalofmilitaryhardware.Americanswhodescribedthemselvesas“logistics representatives,”butwho in realitywerestorekeepers,billed the Iranian government for annual salaries of $115,000. This kind of“importedinflation,”Toufaniancomplained,hadsofaradded$2billiontoIran’sdefense expenditures.He argued that raising the price of oil by 15 percent torecoverthesecostswasmorethanjustified.But the Shah’s civilian advisers were not so sure. Officials at the National

IranianOilCompanywereworried that another big price hikemight suppressconsumerdemandforoilatatimewhenIran’spetroleumrevenuesremainedina

slump. They recommended a price increase of nomore than 10 percent. TheShahchosetodisregardtheirwarnings,nodoubtbecausehesharedToufanian’sangeratthewaytheFordadministrationhandledarmssales.TheCIAsawintheShah’sstubbornrefusaltocooperateevidenceofadeeper

structuralprobleminU.S.-Iranrelations,perhapsevenanintelligencefailure.OnOctober 14 the agency invited colleagues from the NSC, the departments ofState,Treasury,andDefense,theDefenseIntelligenceAgency,theArmy,Navy,AirForce,andtheJointChiefsofStafftoathree-hourseminartohelpitreviewthe performance ofAmbassadorHelms and his staff in intelligence gathering.Formanyoftheofficialsitwasthefirsttimetheyhadhadachancetocomparenotes.Concernsquicklypoured forthand from themostunlikely sources.Therepresentative from the National Security Council complained that privatedefensecontractorsweredoingendrunsaroundtheWhiteHousebysettinguptheirownlinesofcommunicationtothepalace.APentagonofficialappealedtothe CIA to help the Defense Department learn more about Iran’s militarypreparedness.One ofKissinger’s own staffers asked if anyone knew anythingabout the royal succession. Those in the room realized they could not answereventhemostbasicquestionsabouttheShah,conditionsinsideIran,ortheU.S.-Iran relationship. “Washington does not have a clear perception of the Shah’slong-range objectives,” concluded David Blee, the CIA’s national intelligenceofficerfor theMiddleEastand theofficialwhosummarized thediscussionforhissuperiors.

For example, why is he acquiring such a vast array of sophisticatedmilitary hardware? The Shah states that adequate defenses againstCommunist-equipped Iraq are precautionary, yet the placement of newbases suggests other interests. In 1985 when oil revenues from Iranianproductionhavepeaked,andhisoilrichneighborsarejustacrosstheGulf,whatdoes theShahintend todowithhisaccumulatedweaponry?Willhestillclaimanddemonstrateconcernforthestabilityofthearea?Orwillhehavedestabilizingobjectives?

Henry Kissinger had personalized relations with the Shah, hoardedinformation,andsidelinedtheShah’scriticsintheWhiteHouse.HedominatedpolicymakingtosuchanextentthatvirtuallynooneelseintheU.S.government—includinghis own senior staff—had thevital information theyneeded todotheirjobs.SomeoftheparticipantsintheCIAforumexpressedconcernthatthe

ShahwastooremovedfromtherealitiesofordinarylifeinIran.“Inthisregard,itisparticularlyimportanttoknowwhatsubjectsarewithheldfromtheShahandthedegreetowhichreportstohimaredoctoredbyhissubordinates,”wroteBlee.“Towhatextentdosuchpracticeswarphisperspective,isolatehim,andimperilhisregime?”Untilnow,AmbassadorHelmshadinsistedthathisdiplomatsavoidantagonizing the Shah by shunning contacts with Iranian opposition leaders.SeminarparticipantsunanimouslyagreedthatthetimehadcomeforHelmsandhisstafftoenterintoadialoguewiththeShah’sdomesticcritics:“Whileitisapolitically difficult and sensitive matter for Embassy officials to meet withidentified opponents of theShah, theMission should have thewidest possiblerangeofcontacts.”FivedayslaterGeneralGeorgeS.Brown,thechairmanoftheJointChiefsof

Staff, publicly raised doubts about the Shah’s ambitions and his loyalty as anAmerican ally. “Gosh, the programs the Shah has coming, it just makes youwonderaboutwhetherhedoesn’tsomedayhavevisionsofthePersianEmpire,”hetoldanIsraeliinterviewerinremarksthatmadeheadlines.“Theydon’tcallitthe Persian Gulf for nothing.” Secretary of Defense Donald Rumsfeld playeddownthegeneral’s“obviously inelegantphraseology”andpointedlyrefused toreprimand him. Several days later the Shah told Tehran’s English-languagenewspaperKayhanInternational thatBrown’scommentswere“trulyhilarious”andthatBrownhadpassedonanapologyandregrets.The Defense Department was digesting the results of its own intelligence

assessmentonU.S.-Iranrelations,thisoneintheformofasurveyofarmssalesundertakenbyDavidRonfeldt, an analyst at theRANDCorporation.Ronfeldtset himself the task of answering two very basic questions—questions that nooneatCIAorStatehadsofarthoughttoask:Howdidwegethere?Wheredowego fromhere?TheUnitedStates,Ronfeldt concluded,had stumbled intoastrategic trapof itsownmakingbysurrendering its leverageover its ally.Thesuperpowerhadcreateda“superclient”andtothepointwhereIran’sShah,notAmerica’s president,managed the terms of the relationship.U.S. officials hadnaively underestimated the Shah’s policy of “aggressive nationalism” and hisdesire simultaneously to lure theUnitedStates intodeeperengagement in IranwhilemovingIran“stillfurtherawayfromanimageofexcessivedependenceontheUnitedStates.”TheUnitedStates,havinglostsightofitspolicyobjectives,andhavinglostcontrolofitsprograms,nowfounditselftrappedinIran.RonfeldtdeliveredablisteringcritiqueoftheNixonDoctrine,whichhadset

up theShah and otherThirdWorld dictators as regional gladiators: “In recentyearstheU.S.Governmentisfrequentlyaccusedoffavoring,ifnotofimposing,dictatorial rule in client states.The presumption is that dictators are somehow

more subservient toU.S. interests.However, in the case of Iran and probablyother countries this view seems inaccurate.” America’s multibillion-dollarinvestment in Iranmade theUnited States “a potential hostage” to the Shah’sambitionswith the added risk thatAmerica could be drawn into a futurewarfoughtbytheShahonhisterms.The report severely criticized the approach taken by Kissinger’s State

Department, which encouraged and signed off on unrestricted arms sales toTehran as a way of recycling Iranian petrodollars. Given what the DefenseDepartmentwasnowdealingwith,“there is littleevidencethatState’spolicieshave indeedprotected,much lessenhanced,U.S. influenceand leverage.” IranwastotallyunpreparedforlifeaftertheShahandasuccessorregimecouldturnouttobevirulentlyanti-American.TheShahhadsofarresistedAmericaneffortsto broaden his political legitimacy.Norwould he do so until such time as heexperienced“amajorfailureofleadership....TheShahhasnotyetexperiencedsuchafailure—yettheexcessiveambitionofhisrecentgoalsinacquisitionsforthedevelopmentofIranmaywellresultinnotabledisorganizationanddisarray.”The United States was deeply, incontrovertibly enmeshed in Iran in ways

reminiscentofitsearlyanddisastrousinvolvementinVietnam.Decisionstakenyearsearlierby theNixonadministrationmeant thatPresidentFord lacked theability toexertpressureon theShah tocompromiseon theoilprices thatnowthreatened to ignite a debt bomb, bring down the banks, and topple alliedgovernmentsinEurope.Norwasthatall.Therehadalwaysbeentheriskthatoilprices,armssales,andtheCIAbaseswouldbecomeentangled.Thathappenednow,with just twoweeks togobeforeElectionDay,when in lateOctober theinfluentialtelevisionnewsshow60MinutesbroadcastaninterviewinwhichtheShah frankly admitted that SAVAK conducted surveillance operations onAmerican soil against Iranian dissidents. The disclosures caused suchwidespread revulsion andalarm thatKissingerhadnochoicebut to launch aninvestigation.JackAndersonreportedthathehadsuddenlycomeintopossessionofacacheoffilesrevealingthattheCIAhadtrainedtheIraniansecretpoliceinthefineartsofforgery,wiretapping,illegalentry,andbreak-ins.AndersonalsopubliclyannouncedthenameofSAVAK’sseniorhandler,adiplomatassignedtotheIranianmissiontotheUnitedNations.RichardHelms’sdecisiontostepdownasU.S.ambassadortoIranattheend

of1976wasmadeintheknowledgethattheCIAreviewwasabouttoexposehisrecord of failure as envoy to Tehran. His tenure had been an unmitigateddisaster,notonlyfortheU.S.nationalinterest,butalsofortheShah,whoneverlearnedtheextentofthegrowingoppositiontohispoliciesinWashington.Thescandal involving SAVAK was symptomatic of a relationship that had

increasinglycometobeone-way.Helmswasawarethathefacedalmostcertainprosecutiononachargeofperjuryrelatedtoaliehehadtoldsenatorsduringhisconfirmation hearing in February 1973.Watergate was about to claim its lastvictim.Withhiscareerandreputationinruins,theambassadorcalledonCourtMinisterAlamonOctober24toinformhimofhisdecision.Helmsbrokewithprotocol when he urged Alam to talk to the Shah. He said the Iraniangovernmenthadtorespondmoreforcefullytoattacksfromhumanrightsgroups.And hewarned against raising oil prices again, saying itwouldworsen Iran’sstandingintheUnitedStates.PresidentFord’sformalrequesttotheShahtoopposeanincreaseinoilprices

inDecembercouldnothavecomeataworsetime.OnOctober30,AmbassadorHelms received an “eyes only for the ambassador” cable with the followinginstructionsfromHenryKissinger:“Attheearliestappropriatetime,andinanyevent,nolaterthan[closeofbusiness]Monday,November1,pleasedeliverthefollowing personal message from President Ford to His Imperial Majesty,Mohammad Reza Pahlavi.” Embedded in the cable was President Ford’spersonal appeal to the Shah not to increase oil prices. Election Day wasNovember2. In the lastweekof thecampaign thepresidentwasbarnstormingthe country furiously, trying to erase JimmyCarter’s slender lead in thepolls.The American people knew nothing of the behind-the-scenes dramapreoccupyinghisforeignpolicyteam.Thepresident’s letter to theShahwas firmanddirect.Fordpointedout that

improvements in theworldeconomyover thesummerhad led toamodestbutdiscernible increase indemandforIran’soil. Iran’soilproductionhadclimbedbackabove6millionbarrelsaday.Fordwasmaking thepoint that theWhiteHouseno longeraccepted theShah’sargument that Iran’seconomyneededanend-of-yearbailout in theformofanotherbig increase inoilprices. Instead, itwas the United States that needed a bailout if it was to prevent a financialmeltdown.“Manycountrieshaveinfactvirtuallyreachedtheendoftheirabilityto borrow,” wrote the president. “Several important industrialized countrieswhich are experiencing economic difficulties and the attendant danger ofpolitical instability would encounter still more severe economic problems iffacednext yearwith anewoil price increase. . . .Thiswould addmajornewstrains to the international financial system and intense pressure on bothindustrializedandoil-producingnationstoprovidebalanceofpaymentssupport.Thus, the fragile and uneven nature of the global economic recovery requiresthatresponsiblenationsavoidactionwhichwouldendangerit.”PresidentFordmadeitclearthatfromnowonprogressonarmssaleswouldbecontingentoncooperationwithoilprices.HeurgedtheShahnottoplayintothehandsofhis

critics: “I am sure you have been fully informed of the Administration’ssuccessfulresistancetoCongressionalattemptstoblockthesaleofF-16aircraftand other military equipment to Iran. The struggle with certain segments ofAmerican opinion on this subject has not beenwon, however, and I fear thattherewillbefurtherandperhapsgreaterpressuresnextyear.”Helms took the letter toNiavaran Palace on Sunday,October 31,where he

wasreceivedbytheShahinhisstudyat10:00A.M.localtime.Itwasapoignantencounter for both men. They had known each other and collaborated since1957.HelmshadbeeninvolvedintheplanningforOperationAjax,whichhadrestored thePahlavis topower.Hehadbeen theShah’sbackchannel, enabler,interlocutor, and apologist for two decades. Now they faced each other asadversaries.Thecable thatHelms sentback toKissingermade it clear thathehadstoodhisgroundwiththeShahtothepointofbreachingimperialdecorumandcourtprotocol:

After His Majesty has opportunity to study message, reply will beforthcoming. His Majesty and I held a rapid-fire debate for about 10minutesonvariousfacetsofcrudeoilpriceincreaseissue.PleaseassurethePresident that whatever the outcome of the December OPEC meeting, Itook pains to insure that His Majesty is fully aware of the Americanposition, American views, and American reasons for not wanting to seeanotherpriceincreaseinthenearfuture.

Foreignambassadorsdonotengagein“rapid-fire”debateswithforeignchiefsofstate, leastofallwithonewhosetitlesincludedKingofKings,LightoftheAryans,andShadowofGod.HelmsgavetheShahwhatindiplomatictermswastheequivalentofadressing-down.ThelettertheShahwroteinreplyanddatedNovember1reflecteddeepangeratthehumiliationhereceivedatthehandsofamere ambassador. Ambassador Zahedi held the letter in reserve until theoutcomeof thepresidentialelectionwasknowninTehran.TheShahstoodhisgroundat least inpartbecausehebelieved—erroneouslyas it turnedout—thattheoilmarkethad turned inhis favor. In fact,muchof the recentdemand forIran’s oil could be attributed to short-term panic buying by oil consumersstockpilinginadvanceoftheOPECmeeting.On Tuesday, November 2, Jimmy Carter defeated Gerald Ford to win the

WhiteHouse.RichardHelms’sresignationasambassadortoIranwasannouncedthesameday.KissingerhadlongsincegivenuponFord.Thepresident’sclumsy

responses to foreign policy questions during the televised debateswithCarterhadexasperatedhissecretaryofstate.“Look,Idon’tgiveagoodgoddamn—Ithink this campaign is lost,” hegroused toBrentScowcroft twoweeksbeforeElectionDay.Before the votes had even been cast,Kissinger placed a call toSenator Ted Kennedy to assure him of his support should the senator fromMassachusettsmakearunforthepresidencyin1980.“You were right about the pause,” Kissinger tartly remarked to Alan

Greenspan. “It’s just too bad it happened to coincide with the presidentialelection.”

THESHAH’SLESSONINLEVERAGE

The last thing Kissinger needed on the eve of the OPEC meeting was ashowdownwiththeShahover thenefariousactivitiesofIran’ssecretpolice.Itwas better that that particular stone was left unturned. On November 4,Kissinger, Harold Saunders, and RoyAthertonmet to discuss the progress oftheir investigation into whether SAVAK had violated U.S. laws. Saundersreported that the FBI and CIAwere of no help because they had “no formalliaisonwithSAVAKagentsonAmericansoil.”Kissingerwantedthematterputquickly and firmly to rest. “I told Zahedi I hoped that none of this was truebecause we could never accept it,” he said. Kissinger said he wanted anassurance from the Iranianambassador that“there isnoevidence that theyaredoing it [spying and perhaps committing sabotage] and that we would nevertolerateit.”ArdeshirZahedideliveredtheShah’sletterofreplytoPresidentFord’sappeal

onoilpricesonNovember5.Hehadbeencareful toawait theoutcomeof theelectionresult.AnydoubtsaboutthedeepoffensetheShahhadtakentorecenteventswereconfirmedbythetoneofhisletter.TheShahbeganbypointingoutthat Iranhadheld the lineonoilprices atBali although it hadnotbeen in itseconomicinteresttodoso.Hestressedtheimportanceofenergydiversification,price indexing,andconservation.Even thoughGreatBritain,France,and Italyfaced a critical situation with their balance of payments, the Shah told thepresident that“thiscertainlydoesnot justifyourcommittingsuicidebypayingfortheirfailureorinabilitytoputtheirhouseinorderbysucceedinginmakingthe necessary adjustments in their economy through domesticmeasures.” TheShah declared President Ford’s effort to reduce America’s dependence onforeignoil a failureandblamedprice increases forAmericancommodities forIran’sownfinancialtroubles.ThentheleaderofIranissuedathreat:

Youarenodoubtaware,Mr.President,ofmydeepconcernfortheneedtomaintain close cooperationbetweenour countries.However, if there isanyopposition in theCongressand inothercircles toseeIranprosperousandmilitarilystrong,thereareothersourcesofsupplytowhichwecanturnforourlifeisnotintheirhands.Ifthesecirclesareirresponsiblethenitishopeless, but should they be responsible, they will certainly regret theirattitudetomycountry.Nothingcouldprovokemorereactioninusthanthisthreateningtonefromcertaincirclesandtheirpaternalisticattitude.

WhattheShahleftunsaid—presumablyhefelthedidnotneedtospellitoutinblackandwhite—wasthathehadagreedtoforgoapriceincreaseatBaliinMay1976aspartofabroaderdealwiththeWhiteHousenottoraisethepriceofoiluntilthepresidentialelectionwasoutoftheway.Fordhadlosttheelectionanyway.AstheShahsawit,hehadkepthisendofthebargain.Now,morethanever, theShahneeded to raisegovernment revenue tomeet Iran’s internal andexternal financial commitments. The Shah believed that he had stuck to thetermsofadealthattheAmericanpresidentwasabouttorenegeon.Heremainedconvinced that he had been a loyal friend to the United States and a firmdefenderofAmerica’sinterestsinthePersianGulf.TheShahnowturnedhisattentiontotheSAVAKaffair.TheIranianForeign

Ministryissuedacarefullywordedstatementthatwarnedofretaliatoryactionifthe Ford administration tried to punish or expel Iranian intelligence personnelbased in the United States. Helms sent Kissinger a cable on November 7 toemphasize that the Shah was deadly serious about his threat of reprisal. TheIranianleaderwantedtheWhiteHousetostoptheinvestigation.“Thestatementserves notice,” Helms wired Kissinger, “that any restraints imposed upon, oractions taken toward, Iranian representatives in the United States would bereciprocatedhere.”ThiswasanunmistakablereferencetotheactivitiesofCIAemployees working out of Embassy Tehran and in the secret listening postsstrungalongthenorthernborderwiththeSovietUnion.TheShahwasnowusingthe bases for leverage with the Americans. He would not tolerate anotherhumiliation or accept any more terms imposed by his so-called allies. ThegladiatorwasfightingbackandwouldtakenomoreordersfromCaesar.At 9:55 on the morning of November 8, Henry Kissinger telephoned Roy

Atherton,whodidnotknowaboutHelms’scable.AthertonsaidhehadalreadyspokenwithZahedionceabout thematterand theenvoyhadassuredhimthattheIranianshaddonenothingwrongandthateverythingcouldbesettledquietly.

“Withthelineweweretaking[Zahedi]saidhehadnoproblem,”saidAtherton.“I don’t want to know his problem,” snapped Kissinger. “I want his

assurances.”“Weagreedtogettogetherearlythisweek.Iwanttogooverwithhim...”“IwantanassurancefromtheIraniansthatitwasnotbeingdone.”“Hetoldmetheywouldnotdoanythingimproperorillegal,”saidAtherton.

“Iwantedtogooverwithhimwhatisproperandlegalwithinourlaws.”“Youwilldoittoday.”KissingerwasnotgoingtoputupwithZahedi’sword

games.HeandAthertonbothknewwhatthestakeswere.Theircommentsalsosuggest that theyknew the truthof thematter, thatSAVAKagentshad indeedengaged in espionage and quite possibly committed acts of sabotage onAmerican soil. The potential existed for an explosive political scandal. Theinvestigationhadtobeshutdown.“Theproblemisthattherearealotofthingsunderourlawthathemaynotbe

aware of,” Atherton offered by way of an explanation: “He may give us anassuranceofthingsthathedoesnotknowthatareillegal.”“Bytheendofthedayyouwillhavedoneit,G-D,Roy.Iwantitbytheendof

theday.”“Iwilldoit.”“Justcutoutthosestaffmeetingsandspeeches.”“Alright,Iwillgethimintoday.”ZahediandAthertonmetthenextday.OneoftheAmericansat themeeting

recalled that the Iranianenvoydelivereda typically “virtuosoperformance” inwhichhe smoothlyblamed Iranianexiles living inLosAngeles for stirringuptrouble. They were the ones, he insisted, who engaged in “intimidation andharassment.” Itwasobvious thatbothsideswanted the issue togoaway—andfast.“AmbassadorZahediwasquicktoassureusthatSAVAKhadviolatednolaws

—evenbeforeweexplainedwhatlawswereatissue,”saidtheStateDepartmentofficial.“WecannotsaythatwegavehimathoroughbriefingonrelevantU.S.law,althoughwecansaythathehadbeenwarned.”On November 10 the State Department issued a public announcement. Its

“inquiry” had failed to turn up evidence confirming “any illegal or improperactivity” by Iranian diplomats in the United States. As far as Kissinger wasconcernedthematterwasclosed.Overthenextforty-eighthours twoimportantdevelopmentstouchingonthe

Middle East helped convince Saudi leaders that the Ford administration wasseriousinitscommitmenttobrokeringaregionalpeacesettlement.TheUnitedStatesacceptedtheSyrianpresenceinBeirutandthecitysuccumbedtoforeign

occupation.OnNovember11,theUnitedNationsSecurityCouncilunanimouslyvotedtocondemnIsrael’sconstructionofsettlementsonoccupiedArabland.ItwasthefirsttimetheUnitedStateshadsidedwithIsrael’scriticsintheSecurityCouncilandcastavotecensuringitspolicies.

THEWHOLESYSTEMMAYCRACK

AlanGreenspan, the chairman of the Council of EconomicAdvisers, wasanxiously “pacing the floor” of his suite at the Thunderbird Country Club inPalm Springs on November 12. Greenspan conceded to a visitor that theAmericaneconomywas“trackingunderourprojections”andthat thesummer-long “pause” had lasted longer than he expected.He said the problemwas “alackofconfidencebyinvestorsinlong-rangeprospectsfortheeconomy.”Therewerefearsofanotherroundofhighinflation“basedinpartonthehugeexternaldebtbeingcarriedbyanumberofindustrializedcountriesasaresultofpastoil-price increases.” Wall Street was nervous. Banking legend Felix Rohatyndeclared that the growing debt situation “could lead to disaster because thepoliticalstructuresaren’ttheretocopewithit.”“AfterabriefIndianSummerinwhich recovery trends seemed discernible, the outlook for the industrializednationsoftheworldnowhasturnedtodecline—andtheworstpessimismsincethe1930s,”reportedtheLosAngelesTimes.“Ontopofallthis,theindustrializedworld is holding its breath to seewhether its oil bill is going to be hiked byanother10%or15%when theOrganizationofPetroleumExportingCountriesmeetstofixitsnewpricescalesinQatarinthePersianGulfinmid-December.”In November 1976 San Francisco–based Bank of America was the world’s

largestbank.Toreassureinvestorsthatthebankwasnotatriskfiveseniorbankofficials traveled toNewYorkCity to announce the adoption of a “VoluntaryDisclosureCode.”Ithadtakenofficialstenmonthstoproduceatwenty-six-pagepublicrelationsbrochure.Aspartofitsnewcommitmenttofulldisclosure,Bankof America announced that it would bring greater transparency to the shakyhomemortgage sector by sharingwith borrowers “the bank’s appraisal of thevalue of property they offered as collateral.” It would also make public itsforeigncurrencytrades.Curiously,thecodehadlittleornothingtosayabouttheissuethatforceditsadoptioninthefirstplace—riskylendingpracticestoforeigngovernments.Onlygroupsandindividualsdeemedbybankofficialstohave“alegitimateneed”toknowwouldbeeligibletoreceivethatsortofinformation.Thesituation inWesternEuropedeteriorated further. In theaftermathof the

oilshockRichardNixonandHenryKissingerhaddrawnthehistoricalanalogy

ofthe1930s.TheyhadnofaithinthefutureofdemocracyinSouthernEuropeandwereconvincedthatweakgovernmentsinRome,Lisbon,andMadridwereripeforsubversion.Twoyearslatertheirviewshadgainedwidespreadcurrency.“IhaveneverseenEuropesoconfused,souncertain,andsopessimistic,”saidanAmerican analyst. “Everybody sees things turning down again and this timenobodyhasanyideaofhowtogetoutofit.”AneconomistwiththeOECD,theOrganisationforEconomicCo-operationandDevelopment,concurred:“Therealworrynowisthatanotherroundofrecessioncouldprovokearealpoliticalandsocial crisis for some of our democracies.” Nixon’s fear of a leftist PopularFront–stylegovernmenttakingofficeinFranceseemedonthevergeofcomingto pass when Prime Minister Raymond Barre’s austerity budget faltered.UnemploymentinFrancehadrocketedby300,000injusttwomonthsandnowsurpassed the one million mark. A poll conducted by the French magazineL’Expansion showed that three out of four businessmen regarded a Socialist-Communist victory in the 1978 general election to be a foregone conclusion.Capital began leaving France for safe havens. “Some observers believe thesituationisbeginningtoresemblewhathappenedinItalytwoyearsago,leadingtothedramaticfallinthelira’svalue,”reportedTheWashingtonPost.“Thereisa feelingquite suddenlywhichwehavenever experiencedbefore, at least notsincethewar,thateconomiceventsareoutofourhands,beyondourcontrol—that whatever policies governments adopt they can no longer really cope orcontroltheeconomicinfluenceswhichareworkingagainstus”saidoneFrenchgovernment official. “France scares thehell out ofme,” a Ford administrationofficialadmittedtoTheWallStreetJournal.InRome, the government approved an austerity budget that called for deep

spending cuts; its passage required the cooperation of Enrico Berlinguer’sCommunist Party. Italy’s external debt had ballooned from $7 billion to $17billion in just threeyearsandfor the lasteightmonthsof1976 thecostof thecountry’sfuelimportshadsoaredby45percentabovethecorrespondingperiodlast year. “What will it take to convince the Western world that the OPECproblem is not, in fact, manageable?” asked an Italian economist. “A massmoratoriumondebtpaymentsbythepoorcountries?Somethinghastobedonetomeettheproblem.Somuchofittracesrightbacktooil.”Another10percentprice hike would throw the carefully crafted Italian austerity program off-balance by $700 million. A 15 percent price increase would mean a revisedbalance-of-paymentsdeficitof$1billion.Prime Minister Mario Soares held on in Lisbon as rumors swirled that

extremistswithin thePortuguesemilitarywereplottinga right-wingcoup.TheSpanishgovernmentalsoheld itsground in thefaceofseverechallengesfrom

theleftandrightofSpanishpolitics.AnationwidestrikeledbytradeunionswasfollowedseveraldayslaterbyahugerallyindowntownMadridtomarktheone-yearanniversaryofthedeathofdictatorFranciscoFranco.The alarm spread to North America on November 15 when voters in the

French-speakingCanadian province ofQuebec awarded amajority of seats inthenational assembly to the separatistPartiQuébécois ledbyRenéLévesque.Here too the lingering effects of the oil shock had come into play.Unemployment inQuebecwas8.5percent,well above thenational averageof7.1percent,andwasforecasttohit9.1percentin1977.Lévesquehadmadetheprovince’s high unemployment and low economic growth a centerpiece of hiscampaign.Canada’sweakeconomywasblamedforfuelingprovincialpopulismandfortakingthecountrytothebrinkofdissolution.“DiscontentoverinflationandunemploymentisshakinggovernmentsinBritainandItaly,fomentingrisingleft-wing sentiment in France, and rekindling separatist dreams in Canada,”reportedTime.Itnotedthat“thequietoptimism”ofthespringhadgivenwayto“galloping global jitters. . . . The shock that could turn sluggishness intorecessioncouldcomefromanotherbighikeinoilpricesbytheOrganizationofPetroleumExportingCountries,which has scheduled a pricemeeting inQatarforDecember15.”

WESHOULDNOTOVERTHROWTHISGOVERNMENT

TheWhiteHousemovedintohighgear.Bynowthereshouldhavebeennodoubtinanyone’smindthattheFordadministrationhaddecidedtobreakOPECinwhicheverway it could.Kissinger’s argument thatMiddleEastpetrodollarscouldberecycledtobenefitthedomesticU.S.economyhadbeenexposedasafallacy.HigheroilpriceshadnotmovedtheAmericaneconomyawayfromitsdependenceonforeignoil.HigherpriceshadnotincreasedWesternsecurityinthe Persian Gulf, strengthened the region’s conservative pro-Americanmonarchies,orenhancedAmerica’sstrategicobjectives.Instead,highoilpriceshadbrought theeconomiesof theWestern industrializedworld to thebrinkofdisasterandoverheatedtheeconomyofIran.“Itseemstohavetakenthedefeatof the Ford administration, the near-bankruptcy of Italy and England, theseeminglyunsolvabledislocationsofinternationaltradeandpayments—withnoendinsight—tojoltUSpolicymakersfromtheirtheorythatOPEC’spriceriseswouldsomehowpayofffortheUnitedStates,”observedtheLosAngelesTimes.OneofPresidentFord’seconomicadvisersputitthisway:“Howcanyouruna

rational international systemwhen equilibriummeans a $40 billion deficit forthe whole world against three oil producers with a population less than NewYork’s?”OnNovember 18, three days after the disastrous electoral result inQuebec,

Kissinger informed Ford that he had spoken to the Iranian and Saudiambassadors about the grave danger of imposing higher fuel bills onWesterndemocracies.“I called in the Saudi and IranianAmbassadors,” saidKissinger.“TheSaudiwassympatheticbuttheIranianwasbelligerent.WehaveweighedinwithourEuropeanallies.”Hethought theyhaddoneenough.“I thinkapublicmissionwouldbecounterproductive,”hesaid.“SodothetwoAmbassadorsandourownAmbassadors.[Germany’sHelmut]Schmidthasalreadysaidhecouldabsorb15percent.TheSaudissaidtheymighthavetoaccept5percent.”Ambassador Zahedi had a very different recollection of his meeting with

Kissinger. He said Kissinger gave every appearance of being embarrassed athaving toraiseoilpricesfordiscussion.“Hewasshy,”saidZahedi.“Heknewwewouldnotbudge.Maybeinhishearthe thoughtwewereright.Hedidnoteventalkseriously.Itwasinhisoffice.Wewalkedintohisoffice.”Kissingerdidnotmakeanoutrightrequest totheambassadorabouttheDohaconferencebutdangled instead thepromiseofameetingwithPresident-electCarter ifZahedicould persuade the Shah to reverse course and support a price freeze. ThenZahediunderstoodKissingertosaysomethingthatgavetheambassadorpause.Kissinger,Zahedirecalled,indicatedthathewouldnotbehandingovercertainofhisIranfilestoCarter’sWhiteHousetransitionteam.Instead,Kissingersaidhe was having them sent to Nelson Rockefeller’s estate at Pocantico Hills inNewYorkforsafekeeping.“HewasnotwillingtogivetherecordstotheCarteradministration,” said Zahedi. He was now in the uncomfortable position ofbelievingthatinformationpossiblyvitaltothefutureofU.S.-Iranrelationswasbeingdeliberatelywithheldfromofficialswithwhomhewouldnowbeworking.Zahedi did not know what the files Kissinger was referring to contained—orwhy the American secretary of state wanted to hold them back from theincoming administration. The first the public knew of Kissinger’s decision tostorehispapersontheRockefellerestatecameovertheChristmasholidaybreakwhen the StateDepartment admitted that the secretary’s telephone transcripts,whichhadbeen trucked toPocantico,wouldnowbegranted alongwithotherofficialdocumentstotheLibraryofCongress,theretoremainunderhiscontrolforatleasttwenty-fiveyears.Kissingeractedtoheadoffathreatenedlawsuitbya group of reporters who had learned of the stash. However, Zahedi’srecollection of his conversationwithKissinger raises the possibility that otherpapers,inadditiontothetelcons,werealsosenttoPocantico.Ifthepapersarein

existence, their location remains amystery.Dr.Kissinger did not reply to theauthor’srequestforaninterview.Kissingerdidnotleadtheefforttoresolvetheworseningfinancialcrisisnor

was he at the president’s side during the final confrontations with Saudi andIranian envoys. Was Kissinger disassociating himself from a strategy that hebelievedwould end in disaster?Washing his hands of a potential debacle?OrhadFord shuthimoutof theprocess?Kissinger certainlyunderstood thatBillSimonandSheikhYamaninowheldallthecards.PresidentFord,desperateforaway out of this crisis and faced with the Shah’s refusal to cooperate, had nochoiceatthislatestagebuttothrowinhislotwiththeSaudis.TheNixon-KissingerpolicyofdelegatingpowerandarmstoIrantopatrolthe

PersianGulf,defendWestAsia,andsafeguardtheoilfieldsofSaudiArabiahadbeen torn apart by its own irreconcilable contradictions.KingKhalidofSaudiArabiawason thevergeof replacing theShahasmasterofOPECandIranasAmerica’s indispensablepartner intheregion.Kissingerknewwhat thatmeantbut even now failed to grasp the full dimensions of the financial hurricanemovinginfromoffshore.ThedayaftertheelectionKissingerhadmetwithEdYeo,UnderSecretaryforMonetaryAffairsatTreasury.YeohadjustflownbackfromWestGermanyaftermeetingwithGermanofficialstotrytoputtogetherarescuepackageforGreatBritain.AtranscriptoftheirconversationconfirmsthatKissingerhadnotdevotedmuchifanyattentiontoBritain’sworseningfinancialsituation.YeorelayedGermanchancellorSchmidt’sviewthatitwasimperativethey keep Prime Minister Callaghan in power. “He has a terrible view ofMargaretThatcher,”reportedYeo.“Hesaysthatsheisabitch,sheistough,shelacksscopeandcannotlead.”Callaghan’sowncabinet“isalltryingtohanghim.He is terribly concerned about the instability of sterling. . . . There is terrificintrigueinthecabinet.Theyarechoppingeachothertopieces.”Kissingerwaspuzzledbythescaleofthecrisis.“YouknowIdidn’t realizebeforehowstaggeringlyhigh theBritish interest

rates are,”heconfessed. “Whycan’t theBritishhaveour system?”WhenYeobegan to explain, Kissinger asked him to slow down. “Remember, I am justusing you asmy economic tutor,” he interjected. “Giveme the idiot lecture.”Later,thesecretaryofstateplaintivelyasked,“WhathappenedtobringBritaintothisplace?”Ford and Kissinger reconvened on November 23. The president appeared

agitated.“AfteryouleftthemeetingonFriday,wediscussedoilprices,”hesaid.“ThenonSaturdayArthurBurnstoldmehewasveryworriedabouttheimpactofapriceincrease.Hethoughtadelegationshouldgothere[toDoha],headedbymeortheVicePresident.ItoldhimIwouldtalktotheVicePresident.TheVice

PresidentmentionedtheoildealwiththeShah.”“Wecan’tgetitnow,”saidHenry.HewasreferringtoFrankZarb’sill-fated

negotiationswithHushangAnsarytobuyoilfromIranunderthetable.Cuttingadealwas no longer in the Shah’s best interests. “There is no shortage [of oil]now.Wecouldhavegottenitlastsummer.Itwouldbehumiliatingforyoutogo.You would have come back with no price increase if you were not to behumiliated.IfeelthesamewaythoughlesssoabouttheVicePresident’sgoing.If you really feel strongly, he could go. If you feel you need it—but theEuropeansaren’tdoingmuch,andyouhavenoclout.Ijustdon’tthinkitisthethingtodo.YoucouldcallintheAmbassadors.”“Let’s set that up for early next week,” said the president. He was now

focusedonthis,hislastandgreatestcrisisasAmericanpresident.“Iwanttobewell-prepared,withthefactsontheeconomics,politicalsupport,etc.”Kissinger had some bad news for Ford. When it came to oil prices, the

administrationhadnoleverageleftwithTehran.“Ontheeconomics,youhaveatoughagreementwith theShah,”heexplained.“Hewillshowhowyoujackedmilitarypricesup80percent over thepast fewyears.Thebest is thepoliticalargument—that you will have to blast them for an increase and that theyshouldn’tput themselves inabadlightwhentheyneedourhelp in theMiddleEast.Burnsisirresponsiblemakingasuggestionlikethat.”“Heisconcernedabouttheworldfinancialimpact,”saidBrentScowcroftina

rare moment of public disagreement with his mentor. Tensions in the WhiteHousewere runninghigh.Howhad they let thingsget sooutofhand—to thepointwheretheUnitedStateswasfacedwithachoicebetweenItalyandIran?Here was the true cost of eight years of secret deals and blank checks: thepossiblecollapseoftheU.S.bankingsystem,thepeacefulCommunisttakeoverofNATOallies,andadevastatingrecessionintheindustrializednations.“Iagreewiththat,justnothisprescriptionfordealingwithit,”saidKissinger.

“Maybewe could get it postponed. Iwould call in the Saudi first. Zahedi, ofcourse,issuchafool.Whathewillreportwillbearnorelationtowhatyoutellhim.”Later in thedayPresidentFordplaceda telephonecall to theWestGerman

chancellor, Helmut Schmidt, who had narrowly won his own reelectioncampaign. The two leaders worked well together and Schmidt was genuinelysorrytoseeFordleavingoffice.FordtoldSchmidtthathehadbeenonthephonetoPrimeMinisterCallaghan,whowarnedthatiftheIMFimposedtoostringentconditions on its loan, the resulting spending cuts “could touch off massivestrikesandbringdownthepoundaswellashisgovernment.”SchmidtwantedtheBritish primeminister tomake tough cuts in spendingwithout placing his

ownpoliticalfutureatrisk.“Itisintheeconomicinterestthatweimposestrongconditions on the British,” he told Ford. “We should not go so far as tooverthrowthisgovernment.Thereisnooneelsetotakethereinsandtheremaybeaperiodofdisorderwhichcouldaffectusalldeeply.”Ford told Schmidt he was “very worried” about oil prices. The chancellor

concurred and pledged his support toWhite House efforts to restrain the bigproducers.

IHAVEFOUGHTHARDFORSAUDIARABIA

AmbassadorAliAlirezawas ushered into theOvalOffice at 9:58A.M. onMonday,November 29, 1976.TheWhiteHousewasmonitoring events in theSouthPacific,whereafewhoursearlierAustraliahaddevalueditscurrencyandNewZealand’s government suspended foreign exchange trading.Officials stillweren’tsureiftheywerewatchingthefirstsignsofaglobalfinancialpanic.Thepresident met the ambassador alone. TheWhite House did not want to drawattentiontothemeetingorencouragemediaenquiries.“Iamgravelyconcernedabouttheworldeconomicsituationandthepossible

impactofan increase inoilprices,”saidPresidentFord.“Iamdeeplyworriedabout the economic situation both in themore industrial states and in the lessdeveloped countries, which are very vulnerable. In Portugal we have beenworkinghardtogetamoderategovernmentoperatingandeliminateCommunistinfluence.Adeterioration in thiseconomicsituationcouldreverse theprogresswe havemade. In Italy also there are grave economic problems,which if thepresentgovernmentcan’tsolve, itwillundoubtedlybringCommunists into thegovernment.GreatBritainisnowtryingtonegotiateanIMFloantostabilizeitscurrency.” He mentioned the situation Down Under. “I have fought hard forSaudiArabiaandsupportedtheclosestofrelationsbetweenus,”PresidentFordremindedhisguest.“Ihave[fought]againstirresponsibleactionsontheboycottof thepartof theCongress. Iwillcontinue todosobecauseouraimsandourobjectivesareidentical.IwillcontinuetodosoevenafterIleaveoffice.ButitisdifficultwhentheAmericanpeopleseeapriceincreasewhichdoessuchdamagearound the world. I want to help, but when my economists tell me of thejeopardy a price increase could put theworld economy recovery in, Iwant toworkwithyoutodealwiththisproblem.”AmbassadorAlirezadidnotneedtomentiontheShahwhenherespondedthat

when it came tooil prices “theproblem ispolitical not economic.Wewill doeverythingwecanwithoutbreakingOPEC.But ifyoucouldbringpressure to

bearonothermembersitwouldbehelpful.Ifthroughyourgoodofficeyoucanpersuadeotherproducers.”Ford expressed his appreciation for Saudi Arabia’s willingness to extend

financialassistance to ItalyandGreatBritain.Hewasappreciative,hesaid,ofSaudiArabia’s“responsibleleadershipinLebanon.”Ambassador Alireza picked up on this point. “I hope you can restrain the

neighbortothesouth,”hesaidinanallusiontoIsrael.“WithoutSyriantroopsinthe area, the guerrillas will have a free hand.” The Saudi was apparentlyresponding to a statement issued the day before by PrimeMinister Rabin ofIsraelwhenhedeclaredthatthepossibilityofaSyrianmilitarypresenceonhiscountry’sborderwithsouthernLebanonwas“intolerable.”The president said the White House was aware of the situation: “We are

working with the Israelis on that point and I am hopeful that the Lebanesesituationcanberesolved.”

ITHINKTHESHAHHASTHEMESSAGE

Kissingerwasbackin theOvalOfficeonFriday,December3.Hehad justreturnedfromMexicoCity,wherehehadescortedRosalynnCarter,thewifeofthe president-elect, to the inauguration of President José López Portillo. “Shewasactuallyquitenice,”Kissinger toldFord.“Igot theimpressionthathehasbeentellingherhowtostand,whattosay,whichsidetopresenttothecamera,untilsheisstiffasaboard.Butbelieveme,sheknowsnothing.HerwholeworldisruralGeorgia.Youcan’tbelievethethingssheaskedme.”GeraldFord,whoknewbetterthanmostthefullweightoftheawesomeresponsibilitynowthruston theCarters,expressedsympathy for them:“Actually, in that regard I feelalittlesorryforthem.”TheWhite House was still absorbing the latest bad news on the economic

front. The number of jobless Americans had climbed back up to 8.1 percent.Alan Greenspan admitted that the U.S. economy had weakened beyond hisearlier optimistic predictions. He reported “a higher degree of caution” fromboth consumers and the business sector. Then the country’s two biggest steelcompanies announced plans to hike their prices by 6 percent for 1977. Oilproducerswerebigcustomersof theU.S.steel industry.Theyarguedthat theywerenowjustifiedintheirdecisiontoraisetheirownpricestooffsetthislatestnewimportexpensefromtheWest.PresidentFordandhisadviserscalledonthesteel companies to reverse theirdecision, arguing that it jeopardized the entireeconomy.ItwashardtoaskMiddleEasternoilproducersnottoraisetheprices

oftheircommoditieswhenU.S.industrywasdoingjustthat.Kissingertoldthepresident hehad spoken againwith theSaudi ambassador: “He said youwereveryimpressivebutthesteelpriceincreasewaskillingthem.”“I raised hell with my people about that,” replied Ford. “It is outrageous.

ShouldIgetZahediin?”“I think so, just sowekeep the record straight,” saidKissinger.He told the

president he had some good news: “I think the Shah has the message. He istalking 10 percent now, so Iwould guess it will be 7–8 percent.”Kissinger’senthusiasmwasmisplaced.Thepresidentandhiseconomicadvisershadmadeitveryclearthattheywantednopriceincreasefor1977.AndonceagainKissingerhadmisinterpretedtheShah’sintentions.TheShahhadbeenclearthathewouldnot,indeedcouldnot,settleforanythinglessthana15percentpriceincrease.“Okay,let’sgethimin,”saidthepresident,“butitgripesmewhenourpeople

pulltherugoutfromunderme.”

ChapterTwelveOILWAR

“Bankruptcyisworsethandefeat.”

—TheShah,1977

“OurgreatdiplomacywiththeSaudisiswhatdidit.”

—HenryKissinger,1977

IWANTTOHAVENOCONFRONTATION

TheloomingshowdownoveroilpriceswasaharshreminderthatdespitethebesteffortsoftheNixonandFordadministrationstopromotefuelefficiencyandencourageenergyconservation,theAmericaneconomywasmoreexposedthanevertothewhimsofMiddleEasternoilproducers.FortypercentofAmerica’soilneedswasnowbeingmetbyforeignsuppliers,whichrepresenteda4percentincrease in crude imports over the past three years.Nixon’s cherished ProjectIndependence had long since been abandoned. “The brave conservationmeasuresof late1973andearly1974havebeenreplacedbyaso-whatspirit,”reported Time. “Chicago’s Commonwealth Edison Co. has no qualms abouturgingviewersofitsTVcommercialstoleavehouselightsonwhentheyareona tripbecause ‘a darkenedhouse is an invitation toburglars.’The small, fuel-savingcarsthatmotoristssnappedupin1974arenowtheverymodelsgatheringdust indealer showrooms.”WhiteHouseofficialshadanotherbigproblemontheirhands.SecretaryofStateKissinger’soriginalobjectivehadbeentobreakOPECwithouthurtingIran’seconomy,whichwashighlyvulnerable tosuddenfluctuations in the petroleum market. The collapse of the Zarb-Ansary talksmeant therewas still nomechanism in place to shield Iran’s primary revenuestreamfromsuddenmarketturbulence.PresidentFordwelcomedAmbassadorArdeshirZahediofIranintotheOval

Office at 10:00A.M. onDecember 7, 1976. Zahedi had been summoned fromNew York, where he had spent the previous day with Nelson and David

Rockefeller.Byunhappycoincidenceforboththepresidentandtheambassadorit was also Pearl Harbor Day. The president was joined by National SecurityAdviser Brent Scowcroft and chief economic adviser Alan Greenspan.Greenspan’s presence was an indication of the severity of the deepeningfinancialcrisis inEuropeandonWallStreet.Fordbeganbyofferinghiswarmregards to theShahand assuring the ambassadorofhis “great personal regardandaffectionforhim.Ihopethatinthefutureyearsthecloserelationswehavebetweenourtwocountrieswillcontinue.”Fordwastednotimeingettingtotheheartof thematter:“But Iwant to talkaboutan issuewhich troublesme—theDohameetingandapossibleoilpriceincrease.IhavereadtheShah’sletterverycarefully.Ibothagreeanddisagreewithit.Iagreewithhimwholeheartedlywithhispointsonconservation.. . .Idodisagreewithhimontheissueofoilpriceand its relation to industrial prices. These are honest differences betweenfriends.”Ford talked about “the impact that an increase will have” and told the

ambassadorthattherewasnoroomforcompromisebecause“thereisunanimityamongmyadvisersthattheworldeconomichealthisnotgood.Anyincreaseinthepriceofoilwouldhaveaseriousimpactontheworldfinancialstructure....I am a strong supporter of the Shah. I think he has done great things for hiscountryand isa strong force formoderationandstability in theMiddleEast.”Thiswastrue.InhissecondteleviseddebatewithGovernorCarterthepresidenthaddefendedtheShahwhentheDemocratstatedhisoppositiontothesaleofF-14fighterjetsandwarshipstoIran“beforetheirdeliverywascompletedtotheUnitedStates’armedforces.”FordhadrepliedbypraisingIranas“agoodally.”NowFordremindedZahedithatbilateralrelationsextendedtoareasotherthandefense.“ButwehavetolookatitinabroaderperspectivenowandIthinkanincreasewouldhaveaseriousimpactontheworldeconomicstructure,”hesaid.Zahedisaiditwastoolate.“Idon’twanttotakeyourtime,buttwoyearsago

whenpricesweregoingupItalkedtoSecretaryKissingerandSecretarySimonandwould have gone to the area right then andwould have helped,” he toldFord,whowaspresumablystartledatthisdisclosure.“Butthepastisthepast.”HeremindedFordoftheShah’sfutileofferstoselltotheUnitedStatessurplusquantitiesofIranianoilatagenerousdiscount.Thepresident’slettertotheShahontheeveofthepresidentialelectionhadbeenamistake.Zahediupbraidedthepresident: “Had I known of your letter toHis ImperialMajesty, Iwould haveurged that itbeheldearlierornotatall.The timingwasnotgood.”TheShahwantedthepresidenttoknowthat“wedounderstandtheproblem,andwehavebeenthinkingofonlya10percentincrease....Therewillbeanincrease.Whatwouldbemoderate?”

“Theonlywaywecanreassuretheworldeconomyistohavenoincrease.”“Thatisnotpossible.”“I am telling you the facts,” the president insisted. “Any increase would

jeopardize theeconomyandno increasewouldbea shot in thearm.Thenextbestwouldbeadelay.Isthatpossible?”“Now, it is impossible,” repliedZahedi.He knew, as theAmericans should

alsohaveknown,thatIran’seconomywasintroubleagain.InOctobertheShahhad grudgingly conceded for the first time that government expendituresexceeded receipts. “Instead of carte blanche expenditure, the governmentwastoldtoeconomizeinallareas,finish theprojectsnowunderway,andleavetherest of the Fifth Plan objectives for the Sixth Plan,”wrote top officials of thePlanandBudgetOrganization.PrimeMinisterAmirHoveydadutifullylaunchedahigh-profileanticorruptioncampaignandstudiedwaystoeliminatewaste.Butoilmoneywasthefoundationoftheeconomy.Oilmoneybondedthethronetoitsstakeholders,themilitary,middleclass,bigindustry,farmers,andmerchants.Even as the government called for economization the popular press kept up adrumbeat of new big spending initiatives that promised better days. Theheadlines in Tehran’s English-language Kayhan International newspaper inDecember 1976 told the story: “New Loans for House PurchasingWorkers”;“NewPlanWillDoubleThirdPartyCoverage”;“NothingShouldBeKeptfromPeople—Empress”; “Government Loan Payment to Be Studied”; “Jobs forReturnees”; “Iran Is ‘ShoppingAround forArms’”; “MasterPlansUnderWayfor90Towns.”FortheShahtobedeniedhisoilmoneynowwouldbetoexposehimasanemperorwithnoclothes.AmbassadorZahedidisclosedKissinger’srequestfromearlierintheyearnot

toraiseoilpricesuntiltheelectionwasover:“Ifitweredoneearlyinthefall—when Secretary Kissinger and I were joking about it—if you had asked forMarch,itwouldhavebeeneasy.ButSecretaryKissingersaidwaituntilaftertheelection. Iknowhowyou spokeup for Iranand theShah isdeeplygrateful. Idon’tbelieveanyoftheOPECcountrieswouldagreetoadelaybecauseitwouldlookliketheywereforcedto.”“That’swhy I asked you to come in quietly,” said the president. “Iwant to

havenoconfrontation,andthatiswhythismeetingisprivate.”Greenspan interjected. Zahedi didn’t seem to be getting the point or the

president’ssenseofurgency.TheWhiteHousewasfacingapossiblecollapseofthebankingsystem.GreenspantookthediscussionbacktoDecember1973andtheShah’sdoublingofoilpricesinTehran.“Ithinkitisafactthattheworldhasnotyetadjusted to theearlier increase,”saidGreenspan.Heexplained that thelending flexibility of three years earlier “has vanished,” and “the international

financial structure is now stretched thin.” The economies of the industrializedcountries were paused because the “huge increase in debts” had shaken theconfidenceofthemarkets,government,andbusiness.President Ford then moved on to the critical situation facing allied

governments and economies throughout Southern Europe. “The situation inseveralcountries isveryserious.TakeItaly.Theyarehavingseriouseconomicproblemsbutatthebottomitispolitical.Ifthegovernmentcan’tcopetherewillbeCommunistsinthegovernment.InFrance,thesituationispotentiallyserious,with strong Communist forces.” Governments in Portugal and Spain werehangingonbyathread.“Anyincreaseaddstothedangerofafinancialcrisis,tofailureinsomegovernments,eventothedangerofmilitarycrisis.”Ardeshir Zahedi was unmoved by their appeals. “I think there is no doubt

therewillbeanincrease,especiallyafterthesteelpriceincreaseinthiscountry,”he said. “Many newspapers are now speculating therewill be a 7–15 percentincrease.Wewouldnotacceptabigincrease.Therewillbeanincrease,butweareconcernedaboutthesecuritysituationinEurope.WeknowmorethanmosthowimportantEuropeisandthedangersofbeingisolated.ThatiswhywearegivingbilateralhelptotheEuropeans.”Zahedi’snextcommentmayhavegivenFord andGreenspan reason forpause: “Unlesspeopleget a shock, theywon’trealizewehave to switch fromoil.”Whatdid theambassadormean?Was theShah planning a repeat of the catastrophic price increase three years earlier?ZahedipredictedtheShahwouldsettlefora10percentpriceincrease.Ormaybe15percent.Althoughhedidnotknowwhatthefinaloutcomewouldbe,Zahediassured thepresident, “wewould fightanythingover15percent.Less than10percent, I honestly don’t know, but I honestly don’t think so.TheShah said Icouldpromiseyouhewouldbemoderateandverymoderate.”OnDecember9, theStateDepartmentdeclaredthatnooilpriceincreasefor

1977 was justified “and any oil price increase could have damagingconsequences on the world’s economy.” Also on December 9, Italy repaid a$486millionloantoBritainsothattheBritishgovernmentcouldrepaythefirstinstallmentonits$5.9billionstandingcredit.TheBritishmettheirdeadlinebutItalywasleftwithlessthan$2billioninforeignexchangereserves.Thefinancesof theWestern industrializedworldwere beginning to resemble a giant Ponzischeme.

SHEIKHYAMANI’SCHRISTMASBOX

DuringhistriptoMexicoCitytoattendtheinaugurationofPresidentLópez

Portillo, Henry Kissinger had quietly received an envoy sent by King JuanCarlos of Spain. Manuel del Prado, chairman of the board of Iberia, Spain’snationalairline,warnedKissingerthatthekingwasworriedaboutthepossibilityof right-wing revolt by disaffected army officers. Pro-Franco elements in thearmy had not reconciled themselves to the new Spain. “Our problem is theArmy,” confided del Prado. “It would probably revolt if we legalized theCommunist Party.” The king wanted to pave the way for the eventuallegalizationoftheCommunistPartywhileatthesametimerulingoutimmediateCommunist participation in a coalition government. In the past few daysCommunistPartyleaderSantiagoCarrilloSolares,banishedfromhishomelandsince thecivilwar,had illegallyslipped intoSpain toholdapressconference.Francoloyalistshadreactedangrilytowhattheysawasadangerousprovocationbytheleft.SpainincheditswaythroughDecember.Thegreatcrisisforthegovernment

andfordemocracycameontheeleventhdaywhenmaskedgunmenkidnappedAntonioMaríadeOriolyUrquijo,presidentoftheCouncilofState,thefourthmostpowerfulmaninthekingdom.Basqueterroristsclaimedresponsibilityforthe brazen daylight raid in downtown Madrid that struck at the heart of theSpanish state. Agitators on the right used this episode to argue that thegovernment had lost control. Prime Minister Adolfo Suárez was now lessconfidentofwinninganoverwhelmingyesvoteintheDecember15referendum.Several days later, riot police battled hundreds of leftist demonstrators in thecenterofMadrid.TheleadersofSpain’soppositionpartiesreceiveddeaththreatsfromunidentified fanatics andwereplacedunder armedguard.Spanishpolicemeanwhile mounted a desperate search for the kidnapped Council of Statepresident.WhileSpainseethed,Portugal’sfeverbrokeonDecember13.Votersgavethe

country’sminoritySocialistPartygovernment“aqualifiedvoteofconfidence”andavertedacrisis.DemocracyinPortugalwassafefornow.Thenextday,December14,OPECoilministersarrivedinDoha.SheikhZaki

YamanitoldreportersthatSaudiArabiafavoredasix-monthpricefreeze.Evena5 percent price increase would be a mistake because the economic recoveryamongWestern consumernations “isnot as strong aswe hoped itwould be.”Simultaneously inWashington, Ambassador Alireza had a 4:51 meeting withPresident Ford and National Security Adviser Scowcroft. The ambassadorhanded Ford a letter from King Khalid pledging “to reach a reasonable andacceptableminimumincrease”inthepriceofcrudeoil.KhalidwrotethathehadtakennoteofPresident-electCarter’spledgetooppose“anylegislationagainsttheboycottof Israel,and thathewilluse leverageonIsrael toprevent it from

committing any act of aggression against the Arabs in Southern Lebanon.Undoubtedly, thiswasagoodinitiativeonhispart,andwewould like towishhim every success during his presidency for the good of his country and theworldatlarge.”The president expressed his thanks to Ambassador Alireza: “I deeply

appreciate the position your country is taking to moderate and hold downprices.”“SinceourlastmeetingIreceivedacallfromJiddathatwehopetokeepita

maximum of 10 percent, and are hoping for 6 to 7 percent,” the ambassadorexplained. “Butwith the attitude of the oil companies, a 5 percent increase isbuilt in.” When Ford asked if it was possible to postpone the increase untilMarch1977,Alirezarepliedthattheideahadnosupportwithinthecartel.The attention of the world’s media was focused on the conference hall in

Doha’sGulfHotel.With theexceptionof theUnitedArabEmirates,Yamani’scallforapricefreezewasnottakenseriouslybyhiselevencolleagues.“Weareusedtosuchstatements,”sneered theLibyandelegate.“This isagame thathealwaysplays,” the Iraqiministerassured reporters. Itwasnothingmore thana“maneuver” because “allwant to raise the price, evenYamani.” Still,Yamaniformally presented his proposal for a six-month prize freeze. When he wasrebuffed,heledtheSaudidelegationinawalkout.Yamanidrovetotheairportand flew back to Riyadh to consultwithCrown Prince Fahd about their nextmove. While he was away the rest of the cartel, with the exception of theministerfromUAE,votedinfavorofraisingthepriceofoilintwostages.Thefirststage,totakeeffectJanuary1,wouldseepricesgoup10percentto$12.70a barrel. The second stage, to take effect July 1, would raise the price of oilanother5percent,takingitto$13.30abarrel.Ifenforced,OPEC’sfirstphase10percentincreasewouldadd$3.5billiontotheU.S.fuelbillfor1977and2centsagallontothepriceofgasoline.Dozens of journalists awaited Yamani’s return from Saudi Arabia with his

instructions. “Any sign of white-robed movement at the far end of the GulfHotel’shugelobbyhadagaggleofreportersandanefflorescenceofcameramenon their feet in an instant,” reported one eyewitness. Word that Yamani hadreachedanelevatorsetoffastampedeofreporters,and“somanytriedtocraminto the lift that it jammed between floors. Muffled banging reached thedesperatecrowdofwordsmithswaitingbelow.AnItalianreportershriekedattheguards, ‘Help them, they are dying of suffocation!’” The correspondent forNewsweekwasmobbedbyreporterswhomistookhimfortheoilministerfromEcuador. Hotelmanagement tried to restore order by expelling the journalistsfromthebuilding for theafternoon.Duringasecuritycheck theydiscovereda

groupofAmericanreportershidingoutinthebowlingalley.“Latenightdramas,rumors,camaraderie,thechancetomakeupalmostanythingandcallitinformedspeculation. . . thisshowhadeverything,”gushedonereporter.“Itevenhadagoodstory.”Back in London, the British government unveiled tough new austerity

measurestocutpublicspendingaheadofameetingoftheIMFboardtoconsiderPrimeMinister Callaghan’s urgent request for an emergency bailout. Cuts of$1.69billion in 1977 and$2.51billion for the followingyear provoked angryscenes in the House of Commons. From the right, the Conservatives led byMargaret Thatcherwent on the offensive over the government’s “incompetentmanagementoftheeconomyduringthreewastedyearsatTreasury.”TherulingLabour government’s own left wing denounced fiscal austerity as “essentiallyTorypolicieswhichoriginatedwiththebankers.Thisisabankers’strategy.”Forhis part, U.S. treasury secretary Simon declared himself satisfied with the“excellent” efforts of the Callaghan government to stabilize Great Britain’sfinancesandimposefiscaldiscipline.YamanireturnedtoDohaafteranabsenceofeighthours.Heissuednoformal

statement and retired to his suite. The tension continued to build. The nextmorning theoilministeremerged tomake theannouncement theWhiteHousehadbeenwaitingfor:SaudiArabiawouldnotabidebythemajoritydecisiontoraise the price of crude exports by 15 percent in 1977. Saudi Arabia wouldinsteadunleash itspetropowerandattempt themost radical intervention in themarketeverbyanoilproducer.Saudiexportsofcrudeoilwouldriseinpriceby5percenton January1 insteadof the10percentofferedby Iranand thepricehawks.SaudiArabiawouldalsotrytofloodthemarketbyliftingtheceilingonits domestic oil production from 8.5million barrels a day to 11.8 million. InDecember 1976, Saudi Arabia and its ally United Arab Emirates wereresponsible for producing approximately 10million barrels a day of OPEC’scombined 30million barrels.Their act of rebellion threatened to dislocate notonly the market but also the economies of OPEC member states that wereheavilydependentonensuringthatpricesstayedhigh.Yamani’sannouncementatDohaofferedpricerelieftoconsumersevenasitthreatenedtorunthehawksfromthemarketanddrivetheireconomiestothewall.Thegreatoilwarof1977wasunderway.Yamaniwasmakingitclear—tothe

Shah,toOPEC,andtotheworld—thattheSaudis,theworld’sbiggestproducerand exporter of petroleum, were finally taking charge of their destiny andbecomingmastersoftheirownhouse.“IsitfairforallOPECtogettogethertodecidethepriceofSaudicrude?”theoilministeraskedreporters.“Isitfairforotherstodecideagainstourwill?”AndwiththatYamanistalkedoutoftheGulf

Hotel,notevenbotheringtoattendtheclosingsession.Iran had the most to lose from a two-tier, flooded oil market. The giant

petrostate stood to losebillionsofdollars in revenue fromoilexports. “Heavycrudes are the focus of the Opec struggle, because Saudi Arabia’s extraproductionislargelyofheaviercrude,whichalsomakesupabigshareofIran’stotalamount,”reportedTheEconomist.ThrottlingIran’s revenuestreammeantfewer funds available to lavish on schools, housing, health, forestry, publicworks, food subsidies, andmilitary equipment. In his usual indomitable style,theShahhadalreadyearmarkedorspentbillionsofdollars thathewouldnownever see. The Americans and the Saudis had finally called his bluff. Fordiplomatic reasons the Iranian leaderdarednotpubliclyattackKingKhalidorother members of the Saudi royal family. But Zaki Yamani made for aconvenientfoilandtheIranianstatemediaswungintoaction.“ThethirdworldandallprogressivenationseverywhereareangryanddetestYamaniforhavingsoldtherealinterestsofhiscountryandofOPECtoimperialism,”declaredtheeditors of Rastakhiz, the newspaper representing Iran’s single political party.Television stations and radio networks derided Yamani as a “puppet,” the“saboteurwhoknifedOPECfrombehind.”“If onehas to create amuseumoftraitors,ZakiYamaniwillgainaspecialrankamongthosetraitorstotheirowncountry, nation, king and fellow OPEC members,” declared Ayandegannewspaper.ThewidelyreadKayhantolditsreadersthatYamanihad“triggeredan oil war between Saudi Arabia and OPEC” and it accused American oilcompaniesofprofiteeringfromatwo-tiermarkettothetuneof$4billion.TheEconomist cleverly described the outcome atDoha as SheikhYamani’s

“Christmas box” to the outgoing Ford administration, the incoming Carteradministration, banks on Wall Street, and cash-strapped Great Britain andSouthernEurope.Herewas the price relief so desperately sought byTreasurySecretary Simon since the summer of 1974. While it was the case that theworld’s fuel bill would still rise by another $10 billion in 1977, it helpedenormously that the powerhouse economies of the United States and Japanwould be spared the worst of the financial burden. The United States stillproduced60percentof itsdomestic fuelneedsand reliedonSaudiArabia formuchoftheremainder,whiletheSaudissuppliedJapanwith37.4percentofitspetroleumimports.MemberstatesoftheEuropeanCommunitywerenotquitesofortunate—their collective fuel billwas set to rise by an estimated $4 billion.However, theEuropeanswould alsobenefit from something consumershadn’tseen in quite some time: a buyer’s market. In Great Britain, the governmentestimatedthattheconsumerpriceindexwouldgoupbyonlyhalfapercent.SaudiArabia’sradicalinterventioninthemarketprovokedintensespeculation

about what Saudi leaders wanted or hoped to achieve. Yamani offered threejustifications.HeexplainedtoWestGermany’sDerSpiegelthattheSaudisactedtopreventaCommunisttakeoverofWesternEurope.“WeareextremelyworriedabouttheeconomicsituationoftheWest,worriedaboutthepossibilityofanewrecession,worriedaboutthesituationinBritain,Italy,eveninFranceandsomeothernations,”hesaid.“AndwedonotwantanotherregimecomingtopowerinFranceorItaly.”WhenYamaniwasaskedifhewasreferringtoCommunists,heanswered, “Yes. The situation in Spain is not so healthy either and the sameappliestoPortugal.Iftheeconomicrecoverydoesnottakeplaceitwillnotonlyhave political significance for Saudi Arabia, it will hit Saudi Arabiaeconomically.”Yamani made it clear that future Saudi cooperation on oil pricing and

productionwouldbelinkedtothefutureoftheMiddleEastpeaceprocess.“Weexpect theWest, especially theUnitedStates, to appreciatewhatwe did.”Oilprices and issues of war and peace in the Middle East were now directlyconnected, a troubling prospect that “has raised all sorts of possibilities forfutureAmericandiplomacy,” reportedTheNewYorkTimes, even as it “carrieswithitthepossibilityoftragicmisunderstandingsiftheanticipatedmovesbytheCarteradministrationnextyearfailtoproduceresults.”Onemonthlater,Yamanireiteratedthat“thereisastronglinkbetweenoilandpoliticswhichexistedwaybackinthepastandwillexistwayoutintothefuture.”TherewasnodoubtthattheSaudisalsoactedwithruthlessdispatchbecause

theyfearedIranandthepredatoryintentionsoftheShah.Afloodedoilmarketwoulddisrupt the supplyofpetrodollars theShah reliedon toacquiremilitaryequipment and nuclear technology from the West. Oil industry analystsdescribed theSaudimaneuvering as part of “awell-conceived framework thatwilldirecttheoilaspreciselyaspossibleformaximumimpact,”bywhichtheymeantitwouldretardIran’sabilitytospendmoneyfreely.ColumnistsEvansandNovakreportedwithgreatconfidencethatCrownPrinceFahdhadactedbecausehe saw theurgentneed“to slowdownneighboring Iran’s rapid economic andmilitarydevelopment.”Henry Kissinger had feared the day when Saudi Arabia would use its oil

powerasleveragetoinfluenceU.S.foreignpolicytowardIsraelandIran.SaudiArabiaprovidedtheUnitedStateswith25percentofitsimportedpetroleumandhad$40billion invested in thedomesticAmericaneconomy.Thiswas instarkcontrasttoIran,whichbyDecember1976providedtheUnitedStateswithonly5 percent of its imported oil. The Saudis enjoyed enough clout “to affectUSinterest ratesand thestrengthof thedollaronforeignexchangemarkets in theunlikelyeventtheyshouldchoosetodoso.”

“Wearereachingthepointwherewearemoredependentuponthemthantheyareonus,”concededaU.S.diplomatintheaftermathofYamani’soilcoup.“Nomatterwhatgoodfriendstheyare,thatisanunhealthypositionforus.”Yethiswas theminorityviewata timewhenU.S.officialswereconfident theycouldmanage Saudi petropower to the American strategic advantage. Someadministration officials and diplomatsmade no effort to hide their pleasure atseeingtheShahreceivehiscomeuppance.“Yamaniwent intotheOPECmeetingintendingtostickit toIran,”chortled

anAmericanobserverinDoha.“We’llshowtheShahwhoisbossofOPEC,iswhathewas thinking.”TheallianceforgedbetweenTreasurySecretarySimonandSheikhYamaniatSimon’sVirginiaestate twoandahalfyearsbeforehadbornefruit.SaudiArabianowreplacedIraninU.S.affectionsasitsclosestallyin thePersianGulf.Articlesbeganappearing inAmericannewspapers laudingthe courage of the Saudi royal family in words previously reserved for thePahlavisofIran.Yamaniwashailedasthe“TalleyrandoftheOilWorld.”“SaudiArabia Comes ofAge” declared theLos Angeles Times. “Saudis’ Influence IsGrowing”announcedTheNewYorkTimes.AnAmericanwith“deep roots” inSaudiArabiawasquotedsayingthatSaudiArabiawas“thebestgoddamnbasewehaveeverhad.”WallStreetwelcomedthenewsthattheeconomyhadescapedadouble-digit

increaseinthepriceofoil.TheShahofIranhadtakenabulletforthem—nexttime banks and lendersmight not be so lucky. Paul Volcker, president of theFederal Reserve Bank of New York, warned the financial community of thedangers of complacency. Risky lending practices had taken the Americanbankingsystemandinternationalfinancialnetworkstothecliff’sedge.Volckercalled for a more cautious approach to banking practices and foreign lendingwhenheurged“closermonitoringoftheiroperationsbytheFederalReserveandother regulatory bodies.” He proposed establishing a “financial safety net” tohelp countries staggered by high fuel costs avoid defaulting on their debtrepayments.“Unsustainabletensionsarebuildingup,”hesaid.NoonewantedtoseeanotherglobalfinancialcrisistriggeredbyWallStreet.President Ford expressed his gratitude and relief in a letter toKingKhalid.

“While I continue to fear thatevenamodest increasemay lead tounfortunatesetbacks among developed and developing economies, your own example ofrestraint was most commendable and, I am sure, very difficult under thecircumstances,” wrote the president. “I regret that most of the other OPECnationswerenotmotivatedbythesamesharedsenseofconcernforthehealthoftheworldeconomyuponwhichwealldepend....PresidentFord’snationalsecurityteamcheeredtwovictoriesonthesameday.

KingKhalid’sdecisiontobreakOPECandstanduptotheShahcoincidedwithatriumphant poll result in Spain. King Juan Carlos’s national referendum toapprove free elections and introduce political reforms passed by theoverwhelming margin of 94.2 percent in favor. The worst case scenariosenvisioned byWhiteHouse officials had not eventuated. Theworld economyremainedfragile,butthebanksheld,andtheprospectofacatastrophicwaveofdefaults triggered by another round of high fuel costs receded. Great Britain,Italy, andPortugal earned a precious fewmonths to stabilize their economies.Savoringthesetriumphs,GeraldFordpubliclyattackedthemajorityvotewithinOPECfora15percentpriceincreaseas“irresponsibleandshortsighted”actionsby leaders who ignored “the destructive consequences of their action.” HiscommentswerechieflydirectedattheShah,whohadledthechargeforahigherprice.TreasurySecretarySimon insisted thatOPEC’s 15 percent increasewasunenforceablebecausetheSaudiswouldsimplystealtheirmarketshare.Therewas further good news on January 3when the IMF approved a $3.9

billion loan to Great Britain on condition that the Callaghan governmentimplement the strict austerity measures announced a month earlier. The“performanceclauses”intheIMFcontractmarkedthefinalhumiliationfortheonce proud island nation that only thirty years before had ruled an empirestretching from Singapore to Aden. Several days later a consortium of tenindustrialized nations stepped in for a second time to defend the value of thepoundsterlingbyputtingtogethera$3billionstandbycredit.HenryKissingerthoughtheknewwhodeservedaccoladesforsavingtheWest

inthefinalhoursoftheFordpresidency.OnthemorningofTuesday,January4,1977, the secretary of state and President Fordwere in theOvalOffice. “Weshould also get credit for what happened to the OPEC prices,” declaredKissinger. “I have said all along theSaudiswere the key.Only they can raiseproductiontomakeitstick.OurgreatdiplomacywiththeSaudisiswhatdidit.”President Ford kept his own counsel and said nothing. Kissinger’s remarksuggested thathedidnotunderstandwhathewas takingcredit for.TheWhiteHouse had calculated the potential damage to Western economies from a 15percent price increase. Did U.S. officials undertake a similar risk analysis tomeasure the impact on the Iranian economy if oil did not rise in price by 15percent?Thesurprisinganswerisyes.TheNationalSecurityCouncildidtrytoassess the possible damage to Iran’s economy. But officials erred when theyunderestimatedtheseverityof theeconomicproblems in Iranand thefinancialpressuresontheShah.Workingincrisisconditionsandapparentlyinthegreatestof secrecy, analysts assumed that Iran’s economy had rebounded from therecessionary conditions of 1975.They did not understand that if the Saudi oil

coup was successful then as The Economist noted, “[oil] producers that liefarthest from theirmarkets, and thosewith thehighestproportionof relativelyundesirableheavycrude,willbetheworstsufferers.Iran—nowbadlyinneedofcash—fitsboththesecategories.”AmbassadorRichardHelmshadonelastpieceofbusinesstoattendtobefore

he flewhome to faceprosecutionand trial.TheSAVAKscandal refused togoaway.OnSunday,December26,CourtMinisterAlamattendedtheambassador’sfarewellluncheonandwassurprised toseehimweep.Helms’s tearsmayhavehadsomething todowith themesshewas leavingbehindand the fact thathewas flying home, his reputation shredded, to face indictment and possibleimprisonment.Thefollowingday,inoneofhislastofficialactsasU.S.envoy,the ambassador forwarded Kissinger a message from the Shah reassuring theWhiteHousethat“SAVAKisnotauthorizedtoconductactivitiescountertoU.S.law.” Helms made it clear that he wanted the matter dropped. He warnedKissingeragainstgetting into“an inflammatory,publicbrouhahaoverpossiblyill-advised intelligence activity” by the Iranians on American soil. “As youknow,” he remindedKissinger, “we are very beholden here in the intelligencearea and therefore correspondingly vulnerable.” He flew out later that day,apparentlypessimisticabouttheShah’sfutureforstayinginpower.“BythetimeIleftTehranitwasbecomingclearthatIranwasheadedforserioustrouble,”hewroteinhismemoir.In early January, EmbassyTehran sentKissinger amessage using a special

double-encryptedcodeonits“RogerChannel,”whichwasindecipherableevento the CIA. The Shah wanted the White House to know that if the JusticeDepartment took action against SAVAK personnel in the United States he“would not be able to overlook the presence of 70 of your people who arecarryingout activities contrary to Iranian law,”orof “otherswhomwedonotknowaboutofficially.”Ontheeveof thehandoverofpowertoPresident-electJimmy Carter America’s “special relationship” with Iran had devolved intoblackmail,intimidation,andthreatsagainstU.S.governmentpersonnelandCIAoperatives.ThescandaloverRichardHallockalsoresurfacedtocausenewcomplications.

OnJanuary2,1977,TheWashingtonPostpublishedafront-pageexposébyBobWoodwardrevealingintimatedetailsabouttheIbexspyprogram.SomeonehadleakedtothePostportionsoftranscriptsoftheShah’sprivateconversationswithHallock,who as Secretary ofDefense Schlesinger’s personal liaison had beenentitled to one-on-one meetings with the king at the palace. According toHallock’snotes,in1976theShahhadaccusedPentagonofficialsofinvolvementin “malfeasance” and “crude deceptions” in the sale of expensive radar

technologytoIran.TheShahhadrailedthat“thechicaneryofPentagonofficialsand their military civilian representatives here was intolerable. Patience wasunavoidable until the election, but not necessarily longer than that. . . . [HisMajesty’s]disenchantmentwithAmericanofficials,Rumsfeldinparticular,wasvirtuallycomplete.”Six days afterWoodward’s article appeared,General Toufanian fired off an

anguished two-page letter to Rumsfeld denying the Shah had made thecomments attributed to him and at the same time requesting that “yourgovernmentdetermine if thedocumentsmentionedexist,and ifso, theiroriginandpresent location.”Heexpressedalarm that “sensitive security information,safeguardedbyourtwogovernments,”hadbeenleaked.HeremindedRumsfeldthat “itwas theU.S.Department ofDefense that first introducedMr.RichardHallock to the Government of Iran and strongly endorsed his activities andfunctions in writing to His Imperial Majesty.” Iran had since terminatedHallock’s contract and “we can assume no responsibility for any activity heengagedinwhichwasnotspecificallyauthorizedbythisgovernmentduringhisperiodofemployment.”Rumsfeld’scrispletterofresponsetothegeneralwasalloffivesentences.He

did not deny that the transcripts existed, nor did he offer to help recover orsecurethem.Infact,Rumsfelddidnotmentionthematall,nordidhementionHallock.ThesecretaryofdefensemerelyexpressedsatisfactionwiththestateofU.S.-Iran defense relations and deliveredwhatmay have been intended as hisfinal insult: “This relationship has been nurtured by the frank and candidexchangeofviews.”DuringthepresidentialcampaignCarterhadattackedSimon’shandlingofthe

economy.Democrats argued that Simon’s harsh deflationary policies impededeconomicrecoveryandimposedunnecessaryhardshipsonworkingfamilies.“Idon’tknowanybodyintheFordadministrationthatJimmydetestsasmuchashedoes Simon,” confided an insider. Eliot Janeway, a prominent economist andsyndicatedcolumnist,andavociferouscriticoftheShah,reachedouttoCarter’stransition team to set up ameetingbetween the twomen.Hewanted tomakesure that the new president-elect was personally briefed on the outgoingadministration’s problemswith the Shah andOPEC. Janeway later wrote thatalthoughhedidnotattendSimon’sbriefingwithCarter, theoutgoingTreasurysecretaryassuredhim“PresidentCarteraskedmealltherightquestions.”

WE’REBROKE

OnJanuary1,1977,MohammadRezaShahheldalongaudiencewithCourtMinister Alam and accused the Saudis of betrayal. “We must give them thethrashing they deserve.”The next daywasworse.Alamwas greetedwith theshatteringnewsthatIranfacedfinancialruin.“We’rebroke,”admittedtheShah.“Everythingseemsdoomedtogrindtoastandstill,andmeanwhilemanyoftheprogramswehadplannedmustbepostponed.”Heexpectedoilexportstofallbyasmuch as30percent.WhenAlam tried tooffer reassurance, theShah railedagainstYamaniand theSaudis.“It’sgoing tobe tough,” theShahadmitted.Afewdaysearlier,duringaninterviewwiththenewspaperKayhan,theShahhadfoolishly lashedoutathisownpeople,blaming themfor Iran’s financialcrisisandimplyingtheyneededtotightentheirbelts.Iranhadbecome“aparadiseofindolenceandsloth.”Itwastimeforeveryonetorolluptheirsleeves.“Ifwedonot revise [our policies] we shall not survive,” he said. The King of Kingsdeclared that hewould “lead this nation into the great civilization, by force ifnecessary.”Anyonewhodisagreedwithhimshouldpacktheirbags:“Weshalltakethembythetailandthrowthemout—likemice.”IranwaitedfortheSaudideluge.“ThequestionnowiswhetherYamaniwill

flood the market with oil,” the Shah grimly conceded in an interview withBusinessWeek.“Ifhedoesthis,foralittlewhileitmayforceustodecreaseourproduction.And if thishappens itwill affectour economicplans,ourmilitaryplans, ourmilitary buildup, and especially our foreign aid program. . . . I amworriedsomewhataboutinternaldevelopments.Ifwedonothavetheamountsofmoneywethoughtwewouldhave,itwillslowdownabit.Buttheeconomyis overheated, and thiswill cool a bit.”WhenYamani boasted that theSaudiswerepreparedtoboostSaudioilproductionby50percent,takingitashighas14millionbarrelsaday,theShahwentonFrenchtelevisiontodenounce“anactofaggression.”HetoldWilliamSchmidtofNewsweekmagazinethatYamaniwas“[Washington’s] colonial appointee to pump all the oil of Saudi Arabia” andbitterly compared the Saudi oil minister to Judas Iscariot. “We shall suffer agreatdealifitcontinuesthisway,”hesaid.“Butwearenotgoingtogivewayorgiveup....Andifwearedrivenoutofthemarket...thiswillaffectourwholepolicy.”Schmidt asked the Shah what he thought of Yamani’s argument that a 15

percentriseinthepriceofoil“mightweakensomeWestEuropeancountriesandmakeaCommunisttakeovermorelikely.What’syouranswertothat?”“Iamjustlaughing,”theShahsnorted.“Youdon’ttakeseriously,thepotentialofCommunisttake-overs?”“That is very possible, but not because of the 5 percent increase of Sheikh

Yamaniinsteadof10.”

“But isn’t there a level atwhich oil price increaseswould play havocwithWesterneconomies?”askedSchmidt.“Thisisnottherealpoint,”repliedtheShah.“Itisthatyoursocietiesarenot

well run. You have no government and no leadership. I am not talking aboutAmericabecauseitisaworldofitsown.IamtalkingabouttheEuropeans.”Iran’s income from petroleum made up 85 percent of foreign exchange

receipts. In the run-up to Doha oil companies had rushed to stockpile crudesupplies, fearing another big price increase after New Year’s. They werereluctant to takesides in theoilwarandwereespeciallywaryofantagonizingIran because the Shah made it clear he would never again do business withcustomers who canceled their existing purchase orders. For now, the oilcompanies preferred to deplete their existing inventories and hold back onplacingneworders.CompaniesnotalreadylockedintodealswithIranrushedtosignupwiththeSaudis.Theresultoftheconfusioninthemarketwasthatinthefirst nine days of 1977 Iranian oil production plunged 38 percent over thepreviousmonth,theequivalentof2millionbarrelsaday,asnewordersdriedup.InjustfivedaystheNationalIranianOilCompanyreportedthattwenty-fivenewcustomershadreducedtheirIranianoilpurchasesfrom1.2millionbarrelsadayto693,000barrelsaday.IncomefromoilforthemonthofJanuarydropped to$460millionfromthepreviousyear’s$672million.Byoneestimatethecountrywas losing$20millionaday.ThepricegapbetweenSaudiand Iranianheavycrudes was now 7 percent, more than enough enticement for Iran’s waveringcustomers to take theirbusinesselsewhere.Bigdrops in Iranianoilproductionhad happened before. The difference this timewas that production in January1977waslowerthanevenayearearlierwhenIran’soutputhadallbutcollapsedinthefaceoffallingconsumerdemandintheWest.OtheroilproducerssuchasKuwait also experienced a sharp decline in orders and production. But littleKuwaithadnotbankeditsentirefortuneonacrashindustrializationprogramofthesortthatleftIranpermanentlyslakedforfreshinfusionsofpetrodollars.Starvedoftheoilrevenuesithadlongfeastedon,Iran’seconomyteeteredon

aprecipice.“Iranneedsaquickagreement toendOpec’s two-tieroilpricing,”reported The Times of London. “Many Opec members have suffered asubstantiallossofoilexportssinceoilpricesroseonJanuary1.Noneisfeelingthefinancialeffectsasacutelyas Iran.” Iran’scentralbankestimated that totalincome fromoil for theyearwould fall to$19.5billion from$22billion.TheFifthPlan, ending inMarch1978,wouldbe short bybetween$10billionand$12 billion. On January 11, Iran’s government abruptly tore up its financialestimates,imposedaspendingfreeze,andcanceledaloanintendedtohelpbailout Britain’s shattered economy. Tehran was forced instead to accept a $500

million loan of its own, one hastily cobbled together by a consortium ofAmerican and European banks led by David Rockefeller’s Chase Manhattan.Eventhearmedforceswerenotsparedretrenchment.ThestartofconstructionatthemassivenavalbaseatChabaharonthePersianGulfwaspostponed.GeneralDynamics,themanufactureroftheF-16,wasaskedifitwouldacceptpaymentinoilforthe$3.8billionworthofaircraftalreadyunderorder.TheShah’sinnercirclewasinapanic.ArrivinginLondononFriday,January

7,FinanceMinisterHushangAnsaryconfidedtoAmbassadortotheCourtofSt.JamesParvizRadji that“hehadforewarnedeveryoneabouttheuntenabilityofourstanceatDoha,andpredictsthenextsixmonthswillbeparticularlydifficulteconomically in Iran.” Parviz Mina, a director with the National Iranian OilCompany,alsoflewintoLondon.“Normallyaquiet,reservedandsoft-spokenman,InowseehiminastateofagitationovertheoutcomeoftherecentOPECmeetinginDoha,”theambassadorwroteinhisjournal.MinaexplainedtoRadjithatIranwouldbearthebruntofthepricecollapse.“SoallthereductionwillbeIran’s,”hesaid.“AndyetthesituationisbeingpresentedtotheIranianpublicasagreatvictory.Goodnessknowswhatwillhappenwhenthebillsstartrollinginforpayment.”CourtMinisterAlamtooktohisbedfortwoweekswithahightemperature.

Thecancer thatwouldsoonkillhimwassappinghisstrength.AsheponderedhisfateandthefutureofthePahlavidynasty,Alamsummonedthenervetowritea letter to theShahwarninghim thatdangerousdays lay ahead formonarchy.“WehavesquanderedeverycentwehadonlytofindourselvescheckmatedbyasinglemovefromSaudiArabia,”hewrote.“YourMajesty,wearenowindirefinancial peril andmust tighten our belts if we are to survive.” He urged theShahtorestorepublicconfidenceinthegovernmentandjailcorruptofficials.In late January, at the Shah’s insistence, Alam departed Tehran to receive

medicaltreatmentinParis.Hehadalreadybeenbedriddenforthreeweeks.“WehavebeenthwartedoveroilpricesandtheprospectforourfuturerelationswiththeUSAisbleakindeed,”hewrotefromhissickbed.PrimeMinisterHoveydavisitedhim inParis andconfided that therewas“anatmosphereofunease” inIranbuthecouldnotputhisfingeronthecause.FebruarybroughtarespiteandhopethatIran’seconomymightbeabletoride

out the storm. The Shah let it be known through General Toufanian that hewouldfighttheSaudis.“Bankruptcyisworsethandefeat,”hesaid,andorderedthemilitarytoreduceexpenditures.However,bitterlycoldwinterweatherintheUnited States andWesternEurope led to a surge in demand for Iran’s heavy-gradefueloil.IntheUnitedStates,demandonsomedaysexceeded20millionbarrels.Iran’spositionwasalsohelpedbyhighwindsthatbuffetedthePersian

Gulf and prevented tankers from taking on oil at Saudi Arabia’s Ras Tanuraterminal.RasTanurawas amarvel of the oil industry and a potent symbol ofSaudipetropower.OnasingledayinearlyFebruary1977,“18shipsaretakingonoil,andsevenmore,anchored furtheroffshore,arewaiting forclearance tomovetoberths...atankerisinandoutwithitsloadin45hours.”IfRasTanurahadavulnerabilityitwaslackofstoragecapacity.Itcouldmaintainonlyafour-day stockpile. That meant even minor interruptions to supply led to loadingdelays. Thanks to the stormy weather conditions that held down the flow ofSaudioilintothesystem,Iran’soilproductionrebounded30percentinFebruaryover thepreviousmonth to reach5.5millionbarrelsofoiladay.WhenNorthAmericanandEuropeaneconomies revived in the spring, as theywerewidelyexpected to,demandforMiddleEastoilwould rise in linewith factoryordersandindustrialactivity.“Ifthey[thecountriesthatoptedfora10%increase]cansurvivetheinitialdropinoutput,thereshouldbeastrongincreaseindemandinthesecondhalfthatmayevenabsorbanyfutureincreasesinSaudiproduction,”reportedoneWesternoilcompanyofficial.Theroller-coasterridecontinuedwhenMarchandAprilbroughttheShahand

Iran’soilindustrybackdowntoearth.SaudiArabia’sdrivetoopenthespigotsandrampupoilproductionfinallytookhold,evenaswarmerspringweatherintheUnitedStatesandEuropeledtoasharpfallinoilconsumption.Saudicrudeexports soared to 9.3million barrels a day inMarch, an increase of 540,000barrelsoverFebruary,withthecountry’stotaloilproductiontoppingoutat9.7millionbarrelsaday.Iran,rapidlylosingitsmarketshare,facedafiscalblowout.TheShah’sFifthPlan,thesymbolofIran’s“BigPush”andtheempire’senginefor growth, was finally rendered “inoperable” and its financial estimates setasidealtogether. InApril, Iran’soilproductionfell16percent, a sharpdropof864,000barrelsaday.“Sinceoilhadbeenexpectedtounderwrite78percentofthe revised Plan, the impact of such fluctuations in international demandwasdramatic,” wrote Robert Graham, the correspondent for the Financial Times.“Iranhadreturnedtotheunstableconditionsofthe1950swhenthesizeofitsoilrevenuehadneverbeencertain.”ThestrugglebetweenSaudiArabiaandtherestofthecartelexposedthedepth

of hostility in the Arab world toward the Saudi royal family and revealedalarming fissures at the heart of the Saudi state. King Khalid was bitterlydenouncedfromBeirutbyYasserArafat’sPalestineLiberationOrganizationforsellingoutOPECandtheArabworld’soilpowertotheUnitedStatesandIsrael.SaudiArabia’soilindustrywascenteredinitsEasternProvince,aregionwithalarge and restless Shi’a population that harbored long-standing grievancesagainst the ruling Saud dynasty. In the spring of 1977 there were reports of

unrest among Aramco oil workers unhappy at implementing the directive toflood themarket.Saudioil fields and facilitieswere also struckbya seriesofmysteriousblazesthatknockedoutpipelinesandprocessingplants.These troubling incidents did not pass unremarked inTehran.OnThursday,

May12,CourtMinisterAlamwasinanaudiencewiththeShahwhenthephonerang. “Clearly it was to report an enormous fire at an oil field somewhere,”wroteAlam.“Iwasalarmedand,contrarytomyusualdiscretion,askedHIMfordetails.‘Oh,it’snothingdisastrous,’hereplied.‘It’sinSaudiArabia.Whyelsedo you suppose I sit here so relaxed.’” The fire at the Abqaiq pipeline andpumping station complex run by Aramco knocked out more than half thekingdom’stotaloilproduction.“TheskywasblackovertheAbqaiqoilfield,40milessouthof theAramcoheadquartershere,as theremainingoil in thepipesand overflow dikes was allowed to burn itself off,” reported The WashingtonPost.Onemanwaskilledandthirteeninjuredinaninfernothattookfourdaystobring under control and cost Saudi Arabia $100 million in lost revenue. TheincidentalsomarkedaseriousiftemporarysetbackinSaudieffortstofloodthemarketandholddownoilprices.TheWesternmediaacceptedassurancesfromAramcoandtheSaudigovernmentthatthefiresweretheresultofmechanicalorhuman failure.Local reports suggested otherwise, hinting that Shi’a saboteurshadblownupoil facilities in an attempt to panic the royal family anddisruptSaudi oil production. A few weeks later, Saudi authorities broke up a coupattemptbythirteenSaudiairforcepilotswithplanstobombtheroyalpalaces,seizepower,anddeclarean“Arabianrepublic.”InIraninthespringof1977therewereclassicsignsofstructuralbreakdown

anddislocationwith shortagesof electricity, telephone service,water,gas, andbasicfoodstuffs.GuestscheckingintotheIntercontinentalHotelinTehranweresupplied with flashlights as a precaution against rolling power blackouts thatlasteduptohalfaday.“Tehran’sstreetsaresopackedwithautomobilesthatthetraffic jamsentailaseriouswasteof time,” remarkedavisitor to thecapital inApril.“A fewmonths ago, thecountry ranoutofeggs,” reportedLos AngelesTimes correspondent JoeAlexMorris. “Anemergencycallwentout, andeggswere flown in fromEasternEurope.Then therewere toomany eggs.”Morrisrecountedwhathappenednext:“Desperate,thegovernmentaskedtheAmericanembassyhowquicklyapowderedegg factorycouldbe setup.Discouragedatthe response, it shipped theeggsback toEurope,byairofcourse, tobemadeintopowderedeggsand shippedback.Anexpensiveway to satisfyagrowingpublicdemandforeggs.”The Iranian government was making progress on at least one front in the

battle to restore order to the national economy. Cargo was moving again at

Khorramshahr,theporthobbledbyshortagesoflaborandequipment,andwhichwas nowopen twenty-four hours a day, sevendays aweek.Temporary jettieswererushedintoconstructionatacostof$32milliontospeeduptheunloadingandloadingofcargoandoil.Butwasitalltoolate?“Iraninthepastthreeyearshasmade itself a kind of test case for an extreme hypothesis of developmenteconomics—the strategyof the ‘big push,’whichwas fashionable in the earlydaysofdevelopmentstudies,”TheTimesofLondonreportedinearly1977oftheShah’s belated effort to bring the Iranian economy back under control. “Theeconomycareenedtowardstotalchaos,andthereweredangeroussymptomsofsocial unrest. . . . Economic growth is certainly desirable, but it should beaccompaniedbyprogresstowardamorehumaneandtolerantsociety.Otherwisethetensionsthatitgeneratesmustsoonerorlatereruptinviolentformandcarryawaytheregimethatpresidedoverit.”TheIraniangovernmentreviseditsbudgetforecastfor1977downfrom$22

billionto$19.5billion.Itanticipatedcrudeexportswoulddropfrom5.4millionbarrelsadayto4.6millionbarrelsofoiladay.“Andeventhoughthisyear’soilrevenuesactuallymayexceedlastyear’s,”reportedTheWallStreetJournal,“thetotal for the five-year development plan ending onMarch 30, 1978, probablywill fall short by $10 billion to $12 billion from the originally forecast $102billion.” The shortfallwould only getworse if demand for oil dropped in thesecondhalfof1977.“Thecurrentfive-yearestimateforpetroleumrevenues...thus underscores one of the flaws of the original development plan: It lackedflexibility to adjust to a lag inmoney inflows.Moreover, the rapid economicgrowth has been accompanied by rapid inflation, recently calculated at a 15.5percent annual rate.” This was no surprise to the Shah’s Plan and BudgetOrganization,whichthreeyearsearlierhadexplicitlywarnedthepalaceagainstlocking Iran into a fixed-term spending plan based on oil prices staying high.“Thedropinoilexports indicates that theGovernment isnowconfrontedwithfluctuating income from this course,” was how the government ministerresponsibleforthePBO,AbdulMajidMajidi,delicatelyputit.ThatspringQueenFarahvisitedParis.ForsometimeDrs.Flandrin,Bernard,

andMilliezhadwantedtobriefthequeenonherhusband’scondition.Theywerealarmedby a recent incident inwhich theShah’svalet hadnoticed theShah’sdeliberately mislabeled chlorambucil container was empty and replaced themedicationwith the harmless drugwhose namewaswritten on the label. Themix-uphadcausedseverehealthcomplications,enlargingtheShah’sspleenandaffecting his blood count. The French doctors viewed Farah’s cooperation asessentialtoavoidfuturemedicalmishaps.TheShahdisagreedandrefusedtheirrequesttomeetwithhiswife.Aftermonthsofdebatingtheethicsoftheissue,

BernardandFlandrindecidedtogoaheadanyway.WithoutinformingtheShahthey arranged through an intermediary tomeet the queen in privatewhile shewasinParis.Themeetingtookplaceinthegreatestofsecrecy.“Fearingaforeseeabledeteriorationofthedisease,wewantedhiswifetobe

informed, so that she could bemorally and psychologically prepared forwhatwouldinevitablyhappenoneday,”recalledProfessorGeorgesFlandrin.“Andsowehadaverydifficultmessagetogiveher,andwhatismore,ithadtobedonewithabsolutesecrecyand,ifImaybesobold,behindthebacksofthepatient,hissecretservice,ourfamilies,andourfriends,nottomentionourenemiesandanyone elsewhowould be naturally curious.” Togetherwith ProfessorAbbasSafavian,Alam’sdoctor, theybroke thecrushingnews to theShah’swife thattheyhadbeensecretlytreatingherhusbandforcancerforthreeyears.The Pahlavi court’s excruciating kabuki ritual continued. Queen Farah

achievedthetrickytaskofpersuadingherhusbandtoallowhertosit inonhisnextmedicalcheckupwith thedoctors, thoughhestillknewnothingabouthersecretbriefinginParis.Relationsbetweenhusbandandwifeweresuchthatevennow the illnesswasnot discussedopenlybetween them.Thedoctors used theword “cancer” when they spoke to her but referred to “lymphoma” or“Waldenström’sdisease”whentheytalkedtotheShah.Thequeendidnotfeelitwasherplace to raise thesubjectwithhimeither.Sheasked thedoctors tobefrankwithhimbut theyheldback.She later concluded thatherhusbandmostlikelyunderstoodhisfate.SherecalledacommenthemadetoFrenchpresidentVáleryGiscardd’EstaingwhenGiscardcalledontheroyalfamilyatSt.Moritzin 1975. “When the French president expressed his surprise at the speed ofgrowth in Iran, my husband confided to him without any explanation, ‘MyproblemisthatIhaven’tenoughtime.Iwon’tberemaininginpowerforlong.Iintend leaving in seven or eight years. I will be over sixty. I would prefer toleave earlier, butmy son is still tooyoung. Iwillwait until he is ready, but Iwanttheessentialstobeinplacebeforehetakesover.Hewillhavedifficultiesin thebeginning. It’sup tome tobringabout the transformationof Iran. I amdetermined to do it.’” The Shah’s doctors also gradually accepted that theirpatientunderstoodthathewaslivingunderadeathsentence.“Iamonlyaskingyou tohelpmemaintainmyhealth for twoyears, enough time for theCrownPrincetohavefinishedhisyearintheUSandspendanotherinTehran,”hetoldtheminthesummerof1977.

THATMOMENTIWASSHAKING

OnMay12, thesamedayafireshutdownSaudiArabia’sAbqaiqpipelineandpumpingstationcomplex,SecretaryofStateCyrusVancearrivedinTehrantoattendaministerialmeetingofCENTOmemberstates.CyrusVancewasthefirsthigh-rankingmemberofthenewadministrationto

meet with the Shah. He had a general awareness of the strained relationsbetween the Ford White House and the Iranians but knew no specifics. Hewantedtoknowwherethingsstood.OnJanuary17,1977,justthreedaysbeforeJimmyCarter’sinauguration,VancehadtakenahelicopterdowntoCharleston,WestVirginia,toattendtheswearing-inofJayRockefeller,Nelson’sandDavid’snephew,asgovernorofWestVirginia.Also inattendance thatdaywasIranianambassador Ardeshir Zahedi. When Vance learned of Zahedi’s presence heaskedhimtojoinhimfortheflightbacktoWashington.Thepilottookadetoursothetwomencouldhavemoretimetogether.Vancearrangedforafollow-upmeeting at the State Department between the ambassador and an aide.“Everything theyasked, Ianswered,”hesaid.WhenVanceaskedZahediwhathethoughtwasthebiggestimpedimenttobetterrelationshesaidhegaveaone-wordanswer:“Oil.Itwasoil.”Yetinordertoasktherightquestions,Carter’sforeignpolicyadvisersneeded

tohavedetailedinformationattheirfingertips.Zahedisaidhedidnotvolunteerinformationon topicssuchas Iran’s internalpolitical situationbecause“Itwasthedutyof thehostcountrytoshowtheirrecords[toCarter’s transitionteam],notformetoshowourrecordstothem.”HehadinmindthefileshebelievedHenryKissingerhadmovedtoNelsonRockefeller’sestateatPocanticoHills.PresidentCarter’sambassador-designate,WilliamSullivan,wasnotinTehran

whenSecretaryVancearrivedthereinMay.HewasinWashingtonpreparingtotestify before Congress at his confirmation hearing. During the six-month lagbetween the departure of Helms and the arrival of Sullivan, Iran’s internalsituation had taken a turn for the worse. Not since the early 1950s had thePahlavi thronebeen so isolated abroad andvulnerable at home.TheShahhaddynamited his long-standing ties to Washington’s conservative Republicanpolitical establishment butwithout building bridges to theDemocrats.He hadmanagedtoalienateorantagonizetheIsraelisovertheKurds,GreatBritainandtheEuropeanCommunityoverhighoilprices,and theSovietUnionandArabstates over the Ibex electronic eavesdropping project and Iran’s rapidmilitarybuildup.TheShahfearedareturntothedaysofKennedyandJohnsonwhenarmssales

were linked to progress on political and economic reforms. He decided topreemptthenewadministrationinWashingtonbyannouncingaraftofmeasuresdesigned to improve thePahlavi regime’s image inWesterncapitals.TheShah

knewthatCyrusVancehadservedasPresidentKennedy’ssecretaryofthearmyandthatSullivanwasacareerdiplomatwhohadjustspentfouryearsmanaginganother ofNixon’s troublesome gladiators, President FerdinandMarcos of thePhilippines. The Shah gave permission to the International Committee of theRed Cross to visit Iranian jails and meet with detainees to investigate theirconditionsand treatment.Anestimated threehundred to fourhundredpoliticalprisonerswerereleasedbackintosociety.IranianswereencouragedtobringanycomplaintsandgrievancestheyhadtotheattentionofthegoverningResurgenceParty,whichinturnwouldforwardthemtotheattentionofthegovernment.ThiswashowIran’sone-partystatewassupposedtoworkintheory—asaconduittomanage the flow of public expression. It did not work that way. EmbitteredIranians overflowed town hall meetings to denounce official corruption and“demandmoreschools,roadsandsocialbenefitsandtocriticizetheGovernmentfor not providing them fast enough.” Students, intellectuals, and oppositionpoliticianssawtheShah’sstagedopeningasaconvenientcoverforthemtocallfor anend todictatorshipanda return to constitutional rule andparliamentarydemocracy. The Shah’s government had achieved the stupendous feat ofmobilizingitsseverestcritics.TheShahwasperplexedbythehighpriorityJimmyCarterplacedonmorality

and human rights in foreign policy and national security policy. The newpresident announced a sweeping review of the way the United States soldmilitaryequipmentandnuclear technology to itsallies.Alamassuredhim thatWashington “will never abandon us,” and opined that Carter’s talk on humanrightswasapublicrelationsgimmick.TheShah’sskittishnessaboutAmericanintentions—andhisbitternesstoward

theSaudis—revealed itself in an interviewwithNewsweek when he indirectlyaccusedCarterofmoralhypocrisyandshowingfavoritismtowardthecompliantSaudis.“If youAmericans are going to be somoral, youmust apply a singlestandardtothewholeworld,”hecomplained.

HowaboutSaudiArabiawhich, fromthe lackofAmericancomment,wouldappear tobeaparadiseofhuman rights? If Ihavea few thousandCommunistpeople inprison so thatothers can live in a free society, it ismagnified and talked about endlessly. But do you ever talk about thehundreds of thousands who were murdered in Cambodia? . . . I cannotbelievethattheU.S.wouldbesoshortsightedastocutoffarmssalestomycountry.Thatwouldcreateawideningbreachbetweenyouandtheprimaryforceforstabilityinthisarea....IfAmericarefusestosellusarms,ifyousay thatonlyyouand theRussiansareentitled tohavemajorarmaments,

youwillbetreatinguslikeslaves.PresidentCarterandhistopofficialswereawareoftheShah’sinsecuritiesand

wenttogreatlengthstoofferhimreassurance.YetCarterandhisforeignpolicyadvisersappearedtohavebeenworkinginsomethingofaninformationvacuum.There is no indication that Kissinger briefed his successors on the byzantinedeals he had negotiated. Therewas no paper trail to document the swaps andtradesworked out between officials in theWhiteHouse andNiavaran Palace.Carterandhisstaffwereonlynowbeginning tocomprehend thescaleof theirPersian inheritance. On the question of arms sales, one official used an aptcomparisontohintat thescaleof thecommitmentsalreadyin thepipelineandthatcouldnotberenegedonwithoutprovokingareactionfromtheShah:“Theproblem we’re faced with is how do you turn a 500,000-ton supertankeraround?”“ItwasquiteapparentinWashingtonthattheshahwasapprehensiveaboutthe

new Carter administration,” recalled Gary Sick, the Iran desk officer on theNational Security Council. “It was also evident that theUnited States had novisiblestrategicalternativetoacloserelationshipwithIran.Policybridgeshadbeen burned years before. Consequently, the Carter administration devotedconsiderable effortsduring its first year to reassure the shah that therewasnointenttoalterthebasicnatureoftherelationship.”William Sullivan, a man who did not suffer fools gladly, expressed

ambivalenceabouttakingupthepostofAmericanambassador.Whenheaskedthe secretaryof statewhyhewasbeing sent toTehran,Vance replied that thepresident wanted a professional in the role of ambassador. The Shah wouldbenefit from having someone who could speak frankly with him. Sullivan’sbackgroundwasidealbecausehehad“considerableexperience indealingwithauthoritarian governments and with leaders who were forceful personalities.”Sullivan was not convinced. By his own estimation he was “innocent of anydetailedknowledgeofIran....IhadneverlivedintheIslamicworldandknewlittleaboutitscultureorethos.”HehadbeenholdingoutforMexicoCity.Vancetold him that an understanding of Iranian politics, history, and culture was“considered secondary qualifications for this post.” Sullivan needn’t have feltbad.Hewas inheritingadiplomaticmissionwhosepoliticalcounselor,GeorgeLambrakis,“didn’twant to be there,” an economics counselorwho had neverservedintheMiddleEast,andanewCIAstationchiefwhospokenoFarsibuthadpresumablypickedupagreatdealofJapaneseduringathirteen-yearpostingtoTokyo.“TheEmbassy’sdisarray,”recalledaformerU.S.diplomat,“madeitveryeasyfortheIranianstoplaythemoffagainstoneanother.”

In advance of his trip to Iran,Vance received a briefing paper onU.S.-Iranrelationsfromhisdeputy,RoyAtherton,whohadservedKissingerinthesamecapacity.Atherton’smemorevealedthescaleoftheAmericaninvestmentinIransince Nixon’s visit in May 1972. U.S. exports of civilian goods to Iran nowaveraged$3billionayear,with$1.5billioninAmericancapitalinvestmenttiedup in Iran. Fifty American universities had established links with Iraniancounterparts or with the Iranian government. Approximately thirty thousandIranianstudentswereenrolledatAmericancollegesintheUnitedStates,whiletensofthousandsofAmericannationalsresidedinIran.Theirony,asAthertonsawit,wasthattheverysuccessoftheNixonDoctrineinstrengtheningIranhadled to a backlash in the United States against Washington’s Persian project.“There is wide concern in this country, reflected in the media, public andCongress,thatIranisneedlesslyoverarmedandthatthe30,000Americanstherewillproducedangerousfrictionsinourrelationshiporwouldbehostagesintheeventofaconflict,”AthertoncautionedVance.“TheShahisbroadlyviewedasarrogant, imperial and dictatorial, which he is, but this is a caricature whichoverlookshisextraordinaryintelligence,energyandsinglemindeddedicationtohis country’s rebirth and modernization. Regardless of their distortions theseperceptions now somewhat limit our flexibility in dealing with Iran.” Iran’ssingle-mindedpursuitofhighoilpriceswas“theprincipalnettle” inU.S.-Iranrelations.Atherton advised the secretaryof statenot tobadger theShahabouthumanrightsbecauseitcouldleadto“seriousfriction.”ItwastheviewoftheexpertsattheStateDepartmentthatalthoughtheShah

wasnotlovedorperhapsevenparticularlylikedbyhissubjects,“thevastbulkof the Iranian people support his policies, at least passively, and there are noseriouscontendersforpower.”Iranianterroristgroupswere“small,wellarmedanddisciplined”andreceivedsupportfromLibyaandalsofromPalestinianandEuropean terrorist groups. But the terrorists did not enjoy the support of theIranian people and “except for the remote possibility of a successfulassassination,arenotanimmediatethreattotheShah.”TheShah’scampaignofself-criticism through the Resurgence Party was a step in the right directionbecause it encouraged “popular political participation, particularly at the locallevels,”thusdrawingthelightningawayfromtheShah.Athertonidentifiedtwopotential weak spots, of which the first was that the Shah’s “failure so far todeveloppoliticalinstitutionscouldcauseinstabilityatthetimeoftransitionfromhis authoritarian rule.”The secondweak spotwas Iran’s economy,whichwasbesetwithshortagesofskilledlabor,transportationbottlenecks,andwashighlyvulnerabletosuddenfluctuationsintheoilmarket.“Amajor(andunexpected)reduction in crude oil production and export, however, would be a crippling

setback; theeconomy, forat least twomoredecades,willbehighly-dependenton this one resource,” he wrote. Atherton had identified the major structuralweaknessinthePahlavistate:theShah’s“oilylegs.”ThatmadehisdescriptionofU.S.objectivestowardoilpricesandOPECallthemoresurreal.

At issue iswhether SaudiArabia can bring sufficient pressure on thesalesofitsGulfneighbors,particularlyIran,tore-establishtheSaudivetooverOPECpricedecisions.Highworlddemandandbottlenecks inSaudiArabiahavespared thehigherpricedproducers fromfeelinganypressurethus far and they are likely to remain in a stronger position for severalmonths before bargaining strength begins to shift in favor of the Saudistowardtheendoftheyear.OurinterestinmoderatingtheOPECpricepathisservedbyacontinuationoftheSaudipolicyuntiltheyhavedemonstratedaconvincingpotentialtofloodthemarkettothedetrimentofthekeyuppertierproducers.

U.S.officialsunderstood thata sudden fall in Iranianoil receipts threatened

theShah’s rule.Yet theirdecision to supportSaudi efforts to flood themarkethad guaranteed that Iran would see a sharp decline in its petroleum exports,presumablywithharmfuleffectsfortheIranianeconomy.ThecourseofactionAmericanofficialspursuedwouldhelpbringabouttheoutcometheyfearedthemost.AslateasMay1977,despitemountingevidencetothecontrary,theStateDepartment still confidently believed that Iran had been spared “feeling anypressure thus far” in its oil war with Saudi Arabia. It was the Shah, saidAtherton,whoheldtheupperhandinthestruggleformasteryoftheoilmarket.HowmuchpressuredidU.S.officialsthinkIrancouldwithstandfromatwo-tierflooded oil market before its economy sustained serious or perhaps evenirreversiblestructuraldamage?Nooneknewbecausenoonehadthoughttoask.InTehran,SecretaryofStateVancepersonallyofferedtheShahWashington’s

continuedsupportwhilegentlyremindinghimthat timeshadchangedandthatheneededtochangewiththem.Vancedidnotdeliverahumanrightslecturetothe Shah, nor did he link arms sales to progress on human rights. “No suchlinkage has been discussed,”Vance said at the conclusion of their two-and-a-half-hourmeeting.Thenewadministrationwantedtomakeitclearthatconcernsover human rightswould not stand in theway of close bilateral relations andcooperationon securitymatters.WhenVancedid raise the sensitive subjectofhumanrights itwas to theCENTOministerialmeetingandheplaced it in thecontext of their own national self-interest rather than high-minded notions ofindividualmorality. “Each country’s growth, prosperity and stability sooner or

later depend upon its ability to meet the aspirations of its people for humanrights,”hetoldthegathering.Improvingthelivesoftheirpeoplewouldactuallystrengthentheirlegitimacyathome.Forhispart,theShahwaspleasedwithhowthetalkswentandreassuredbyVance’sknowledgeoftheMiddleEast.Amacabretraditionhaddevelopedinwhichred-carpetvisitstoIranbyU.S.

officials were accompanied by grisly acts of terrorism. Sure enough, severalhours before the American party landed two gunmen were killed during apitched two-hour battle in the heart of downtown Tehran, not far from theAmericanembassycompound.Tendayslater,U.S.diplomatJohnStempelmetwithYoramShani,thefirstsecretaryofIsrael’sunofficialembassyinthecapital,atXanadurestaurantinTehran.TheIsraelisenjoyedclosetieswithSAVAKandfrom time to time Shani made low-key trips into the Iranian countrysidedisguised as an Australian tourist. Several weeks earlier Shani had alertedStempel to a bloody episode inwhich SAVAK agents had stormed thewronghouse,killingitsoccupantsjustastherealterroristsemergedfromthebuildingnextdoor.Shanidescribedthesecasualtiesas“unnecessaryciviliandeaths.” Inthe latest incident, the Iranian government had labeled the gunmen “IslamicMarxists.” But Shani told Stempel that the Israelis did not see it that way. Itbelievedthementobe“fanaticalright-wingMoslems.”Thetwo-hourgunbattlehadoccurredoutside theofficesof the Jewish ImmigrationAgency inTehran,andShaniimpliedthattheattackershadatonepointfoughttheirwayinsidethecomplexbeforebeingcutdowninahailofgunfire.Stempelwasalsotoldthatjusttwodaysearliersevenmembersofthesecurityforceshadbeenkilledtryingtoclearterroristsfromtwosafehousesinthecapital.OnSunday,May29,CourtMinisterAlamhadanaudienceatthepalace.The

ShahmadethepointedobservationthatduringarecenttourofSouthTehranhehadseenthousandsofveiledwomen.ThiscameasanunpleasantsurprisetothemanwhomorethananyotherhadgrantedIranianwomentheirlegal,civil,andpoliticalrights.In197737percentofuniversity-levelstudentswerefemaleandhalf of all applicants to medical schools were women. There were femalemembers of parliament and elected to local councils. Women benefited fromequal pay and equal opportunity legislation. Married women were legallyentitled to seekadivorce, and singlewomencouldobtainanabortionwithoutpriorpermissionfromamalefamilymember.Thegovernment’sministerofstateforwomen’saffairs,MahnazAfkhami,explainedtoaNewYorkTimes reporterthat Iranian women were undergoing a “spiritual revival.” She herself hadrecentlyvisitedholycitiesinSaudiArabiaandIraq.“Ifounditinmyself,”shesaid.“Thereseemstobeaneedforreligion,asifwehavemovedtoofastinadirectionthatisnotnativetous.”Itwasarevival“againstemptiness”butshould

notbeperceivedasabacklashagainsttheking’spoliticalandeconomicreform.InJune,QueenFarahflewtotheUnitedStatestoundertakeaseriesofofficial

engagements in Aspen, Los Angeles, New York, and Washington and, moreimportant,toingratiateherselfwiththeCarters.ThemeetingattheWhiteHousedid not go well. The new president’s effusive Southern charm grated on thequeen’ssensitivities.“IhadjustleftAspenwherethetalkwasaboutsuchthingsasthemeaningofdevelopment,unifiedapproach,balancebetweenpoliticalandeconomicchange,justiceandthelike,”shelatertoldherhusband’sbiographer.“ThefirstthingPresidentCartertoldmewas,‘Youlookmorebeautifulinpersonthaninyourpictures.’Iamsurehemeantthatasacompliment.ButIfounditinsulting.”Farah’s summersojournwas troubling foranother reason.Ateverystop the

Iranian party was hounded by hundreds and sometimes thousands of jeeringdemonstratorsholdingsignsthatread:“DownwiththeShah!,”“NoMoreArmsfortheFascistShah,”“U.S.AdvisersOutofIran.”Duringthequeen’sspeechataluncheoninManhattanattendedbythegovernorandcitydignitariesayoungblondwomansuddenlyleapedtoherfeetandshrieked,“That’salie!”Itwasonthistripthatshenoticedforthefirsttimethatyoungprotesterswereholdinguppictures of a stern-looking bearded cleric. “And so I asked the name of themullahwhowas idolizedbyour youngdemonstrators andwhose defiant lookmeant nothing to me.” The queen learned that he was Ayatollah RuhollahKhomeini,thehard-lineclericwhohadledthe1963revoltagainstherhusband’sWhiteRevolution reforms. “It struckme as unusual,” she said. “I had alwaysthoughtofstudentsasyoung,idealistic,liberal,progressiveindividualsseekingfreedom.WhywouldastudentinAmericademonstrateforKhomeiniandcarryhispictureasanemblemofhisbelief?”AmbassadorArdeshirZahedispent1977outsideIran,preferring to focuson

hisofficialduties rather thandealwith the increasinglypoliticalatmosphereatcourtwhere thoseclosest to the throne intensified their jockeying forposition.Heheardthemurmuringsofunrestbackhomeandforwardedthemostdetailedcomplaintsandwarnings to thepalace.Zahedihadalsobecomeawareofnewrumorscirculatingabout theShah’shealth.He took these inhisstride.HehadspentlongenoughintheShah’scompany,particularlyonthelongforeigntrips,tosuspectthatthekinghadaweakimmunesystem.TheShahfrequentlycaughtcold, and on occasion he had experienced reactions to foodstuffs likestrawberriesandmeat.TheShahwasfamouslyallergic toIraniancaviar.Earlyin theCarter administration, Zahedi had been called to attend ameetingwithretiredAdmiralStansfieldTurner,thenewdirectorofcentralintelligence.TurnertoldZahedi:“WehaveactuallystudiedtheShah’sposition.Andthereisnothing

wrongwithhim.Theonlythingis,heislookingrathertired.”ZaheditoldTurnerthattheShahtookasingleValiumcapsulebeforebedtohelphimsleep.PerhapstheValiumwastoblamefortheking’shaggardappearance?AtTurner’srequestZaheditalkedtotheShahandtheShahagreedtostoptakinghisnightlyValium.Yet an incident that occurred during the queen’s trip to Aspen made

Ambassador Zahedi wonder if something else was going on. He received arequest from thepalace to sendAmerican cancer specialists toTehran to treatQueenMotherTajal-Malouk,whohadbeendiagnosedwithbraincancer.AfterthedoctorsreturnedfromTehran,Zahedithankedthembyinvitingthemtodineattheembassy.Themoodatthetablewaslighthearteduntiloneofthedoctorscasuallymentionedanaudiencehehadhadwith theShah.“Youknow, IhaveheardtheShah,”saidthedoctortotheambassador.“Heisveryintelligent.ButIneverknewheknowssomuchaboutmedicine.Thequestionshewasasking,itwasas thoughhewasadoctorof cancer.” It suddenlydawnedonZahedi thatthere might be another patient back at the palace—the real patient. “Thatmoment Iwasshaking,”he recalled.He immediately telephoned theShahanddemanded to knowwhatwas going on.WasHisMajesty ill?Had the doctorsbeensenttoTehranaspartofanelaborateruse?TheShahputZahedi’smindatease. No, he replied, it was nothing serious, only a touch of gout. He evenrecycleda jokeofAlam’swhosemoralwas thatgout sufferersenjoyed longerlives. The Shah’s deception worked. For now, at least, his ambassador’ssuspicionswereallayed.

PLEASEGODTHATWEMAYBESPAREDTHIS

Inthesummerof1977Iran’sindustrialproductionslumped50percentandinflationwasrunningbetween30and40percent.Oilproductionfellanaverageof390,633barrelsadayinJuneanddailycrudeexportsby923,594barrels.Thenumbers for Julywere evenworse. Iranproduced4,713,767barrels a daybutexportedonly4,180,896barrelsaday.Whatmadethesefiguresexceptionalwasthat apart from several days in the springwhenSaudiArabia’s oil productionbrieflytopped11millionbarrelsaday,Saudi leadershadstillnotfullyopenedthe throttle. They were aware of their growing isolation in the Arab world,sensitive to the prospect of more domestic unrest, and no doubt feeling the“extraordinarypressure”beingbroughttobearonthembyIran.BynowenoughSaudicrudehadbeenpumpedintothesystemtopreventtheShah’sfirst-phase10 percent price hike from taking effect. Spare capacity was returning to themarketjustasoilfromtheAlaskanpipelineandtheNorthSeafieldsweresetto

come on line. Saudi Arabia had proven its point. Iran and the other OPEChardliners“nolongertakeusforgranted,”saidYamani.TheSaudisandtheIranianswerebothlookingforawayoutoftheOilWar.

On June 29, OPEC released a statement in Vienna announcing that the twoprotagonistshadsettledtheirdifferences.Iranagreedtoforgoitssecondstage5percentincreasesettotakeeffectonJuly1.SaudiArabiaandUAEagreedtheywould lift thepriceof theircrudeexportsby5percent tobring them into linewiththerestofthecartel.OPECalsoagreedtofreezepricesforallof1978.Thedecision by the majority of the cartel not to implement the July 1 price hikesaved Western consumers $2 billion. Speaking in Riyadh on the same day,CrownPrinceFahdalsoassuredPresidentCarter that theWestneednotfearasecondoilembargo.“WewillnotcuttheflowofoiltoAmericaortoanyone,”hesaid.TheShahhadnochoicebut tosettle.Hewasabeatenmanandheknewit.

EvenatthislatestageonlythirteenofSaudiAramco’sthirty-fiveoilfieldswereinproduction.“Sothere isa lotofroomforexpansion,”notedTheEconomist.Iran’swaterloggedeconomyriskedbeingsweptawayin thedeluge.PetroleumIntelligenceWeeklydescribedthesaturatedoilmarketas“sloppy,”especiallyinheavycrudes,andobservedthat“thereseemslittlehopeofareboundinpricesbefore the fourth quarter.” BusinessWeek described the United States andWestern Europe as “awash with oil. . . . With storage tanks all over Europebrimful and 40 cargoes of crude oil reportedly floating aboard tankers withnowhere to go, the companies believemarket forces now dictatemuch lowerproductionlevels.”Therewassomuchsurpluscrudeinthesystemthatrefinersbegan dumping oil “at less than cost” andMiddle East oil producers slashedtheir prices by 20 cents per barrel. “At present time, there is a glut in themarket,”concededOilMinisterJamshidAmuzegarofIran.Indeed,somuchoilhadbeenpumped into the system that themarket remained ina slump for therest of 1977. By December even Saudi Arabia was forced to cut its dailyproductionto8.3millionbarrels,amovethatpromptedTheWallStreetJournaltoreportthat“thePersianGulfkingdomissinglehandedlytryingtodryuptheoilglut”ithadcreatedearlierintheyear.Industry observerswere unanimous thatSaudiArabia hadwon thewar and

driven Iran from the market. The Vienna compromise, said BusinessWeek,marked“a clear-cut Saudi victory,” even though in the first fewweeks of thebattle“itlookedasiftheSaudishadbittenoffmorethantheycouldchew.”ThefireatAbqaiqandcoldwinterinEuropeandtheUnitedStateshadofferedpricerelief to the Iranians. But these turned out to be temporary aberrations. SaudiArabia’soilproductionwas“onceagainhoveringaround10millionbbladayas

the world oil market goes into a seasonal slump.” If Iran had insisted onimplementing its threatened 5 percent second-stage price hike on July 1, “theSaudis could indeed have swamped themarket and driven prices down.” TheSaudis were pleased with the Carter administration’s progress in forging aMiddleEastpeacedeal.Besides,highoilpricesencouragedenergyconservationintheUnitedStates,somethingtheSaudiswerekeentodiscourage:“IftheWestweaned itself fromOPEC oil, the Saudis might end up with a lot of oil thatnobodywants.”A thick blanket of brown grime and suffocating heat unfurled itself over

Tehran and brought fresh hardships to the people of Iran. Low rainfall andlengthydelaysindamconstructionplacedstrainsontheelectricalgridthatledtofrequent power outages. “These blackouts have caused widespreadinconvenience and, above all, economic losses,” reported theNew York Timescorrespondent. “Government officialsmustwalk up seven and eight stories totheir offices. Tourists get caught in elevators. Office workers swelter in 100-degree-plus temperatures without air conditioning.” In London, AmbassadorRadji learned from a visitor recently returned fromTehran that “the blackoutshaveprovedacolossalembarrassmenttotheregimeandhaveprovidedanoutletfor everyone’s pent-up and long-smoldering discontent. The situation has laidindecently bare the Government’s repeated assurances that increased militaryexpenditures would not be at the cost of improvements in people’s livingstandards.”FromthereligiousstrongholdofQum,seniorAyatollahKhonsaritelephoned

CourtMinisterAlamtoinformhimthatwaterandpowersupplieshadbeencut.Even Alam’s neighborhood was not spared, and he purchased a generator tokeepthetelephonesinhishouseworking.Hefearedthesituationwasgettingoutofhand.“Itterrifiesmethatonedayeverythingwillsimplycaveinaroundus.Please God that we may be spared this.” Alam described the government’semptyresponseas“likeascenefromsomeincrediblefarce.”The government urged shopkeepers to close their doors at 8:00 P.M. and

factoryowners to release theirworkers for early summerholidays.Conditionswere especially deplorable in the restive southern suburbs, where “cutssometimeslast8to10hoursaday.”TheburdenofthedysfunctionwasfallingonthepoorestTehranis.ThosewhoventuredontothestreetsofsouthTehraninthesummerof1977werestruckbythesullenatmosphereandthelargenumbersof youngmen standing aroundwaiting for something to do.Many had comefromthecountrysidetofindworkorseekabetterlifefortheirfamilies.Buttheeconomicslowdownhaltednewbuildingconstructionandledtohighjoblosses.FormerU.S.diplomatBillLehfeldt,bynowworkingintheprivatesectoranda

frequent visitor to Tehran, scoffed at the efforts of the Iranian government tominimize the problem. “There was more under- and unemployment than youcould shake a stick at,” he remembered. “I realize they had to manufacturenumbersforthings,butifyouwentdownintoSouthTehranin1977onawarmsummer’sday,youwonderedwhytheplacedidn’tblowupearlier.Peoplewereflocking to the townfrom thecountryside, from thesmallvillagesallover thecountry,hopingtogetinonthegravytrainandcrammedintoimpossiblelivingquartersinSouthTehran,byandlarge.Andalllookingforjobs.”ItwasaroundthistimethatGeneralHassanPakravanandhiswife,Fatemeh,

tookaroadtriptoKashanandNatanz.ItwasPakravanwhohadintervenedtosaveKhomeini’slifein1963.TwoyearslatertheShahhadreplacedhimasheadofSAVAKwithGeneralNe’matollahNasiri,anodiouscharacterwhoshowedagreat deal more flair for his real estate investments than he did watching theShah’s back. Since then, Pakravan had served as the Shah’s ambassador toPakistanandthenFrancebeforeacceptingahighpostascourtadviser.OntheirwaytoKashanthePakravansdrovethroughsouthTehran,apartof thecapitalthey hadn’t seen inmany years. “I couldn’t believemy eyes!”Mrs. Pakravanlaterrecounted.“Ijustcouldn’tbelievemyeyes—theconditionsinwhichpeoplelived!Itwasincredible!Someofthemlivedinpens,completelypatchedupwithpiecesofnylononthem.Theopen-aircanalswereheapedwithdirtandgarbage.Thewaterwasblackandsmelly.Youcouldnotimaginewhatitwas[like].Youcannotvisualizeit.”WhenGeneral Pakravan returned toTehran he sought an audiencewith the

Shahbecause,hiswifelaterrecalled,hewas“terriblyworried”bywhathehadseen.ThegeneraldescribedtothekingtheappallingconditionsinsouthTehran.“Ifyou’renotgoingtodosomethingimmediatelyfromahumanpointofview,do it for your own safety, because this is a powder keg. Twomillion peopleliving like that—your capital city is going to explode and we’ll all be sweptawaybytheexplosion.”ThenextdayPakravanshowedphotographsofwhathehadseentothequeen.AfterthattheShahbegantoreceivePakravanonaregularbasis. These were apparently distressing encounters for both men. One dayPakravanreturnedhomeandtoldhiswife,“WheneverIseetheShahIhavethesense impression he is like a drowning man who sees me as some safety towhichtocling.”Mrs.Pakravansaidofthoselastdaysoflifeonthevolcano:“Itwastoolate,toolate,toolate.”Theconditionsforageneraluprisingwereinplace.Inthesummerof1977a

small but growing number ofwealthy Iranians and longtime foreign residentsquietly put their affairs in order, emptied their bank accounts, and sent familymembers out of the country on extended “vacations.” James Saghi, a

businessmanwho“sawthewritingonthewall,”soldhishouseataprofit,andmoved to California’s Napa Valley. Others who got out early were AmericanpassportholdersBillShashua,Tehran’sPeugeotdealer,whoconfidedtoafriendthat“everythingwasgoingtofallapart,”andLloydBertman,whohadlivedinIran since the early 1950s. Bertman shared with a friend his strong personalsensethat“therearethingsthatarehappeningthatmakemeuncomfortable,soI’m going to leave.” These individuals were perceptive and knew Iran wellenoughtoseewhatwascoming.

WE’VESURRENDEREDTOTHESAUDIS

OnThursday,August4,theShahtelephonedCourtMinisterAlaminParistoaskforhisresignation.Twodayslater,AmirAbbasHoveydaresignedasprimeminister. The Shah appointed Oil Minister Jamshid Amuzegar as Iran’s newprimeministerandelevatedHoveydatoAlam’soldpostascourtminister.Alamwaspuzzledbybothappointments.Hoveyda’spremiershiphadendedin

failure and Amuzegar had never demonstrated a capacity to lead, let aloneinspire. Amuzegar announced sweeping cuts to government spending andimposedharshausteritymeasuresthatledtoevenhigherjoblossesamongpoor,unskilled, and semiskilled Iranians. In his first few weeks in office the newprimeministerfired1,700peoplefromtheFinanceMinistryandannouncedhisintention to break the back of the Plan and Budget Organization, which heinexplicably blamed for the economic mess. “The PBO had become a super-ministry,” he said in an interview with Joe Alex Morris of the Los AngelesTimes. “I’ve asked the PBO to drop all responsibilities for implementation ofprojects. We’re cutting down other employees and putting them in otherministries where they won’t be sitting around as stumbling blocks.” MorrisremindedhisreadersthatthreeyearsearlierthePBOhadwarned“ofthedangersofall-outdevelopment,andmostof itspredictionshavecometrue.Thereportwas ignoredat the time.”Amuzegar’scoursecorrectionwas“agamble,a raceagainsttime,withbuilt-incontradictionsthatareboundtosharpentheconflictswithinthesocietyastimegoeson.”Itwasdoubtfulthenewgovernmentcouldmeet the rising expectations of Iran’s swollen, sullen urban underclass.Amuzegar’s finalwords as the interview drew to a closewere not reassuring.“Wishme luck,” he said. Luckwas in short supply in Iran in the late 1970s.Amuzegar losthis jobayear laterandeventually fled toexile.Morris,a fifty-one-year-old father of two, took a sniper’s bullet to the heart in Tehran onFebruary9,1979,thedaytheIranianmonarchywasfinallyoverthrown.

Theendofempirewasathand.“Inthepastfewmonthswe’vebackeddownonoilprices,”wroteAlaminoneofhisfinaldiaryentries.“We’vesurrenderedto theSaudis,whichmeans ineffect toCarter.Oilpricesare to remain frozenuntil the end of next year. . . . These diaries must come to an end. There isnothingleftformetowritenowthatI’mcutoutofmymeetingswithHIM.”InearlyApril1978AlamwroteafinallettertotheShah.“Hesuggestedthatif

thecrisiswere allowed to fester, revolutionwould be unavoidable,”wrote hisbiographer. “The situation, he said, was far more serious than the Mossadeqcrisis of 1953.” Alam’s death eight days later on April 13 spared him thecollapsehefullyanticipated.Thenotebookshehadquietlykeptsince1968wereremoved from Iran and deposited for safekeeping in Switzerland. Alaminstructedhiswifenottopublishthem“untilsuchtimeasthePahlavidynastynolongerruledIran.”

EpilogueTHELASTHURRAH

“Wenevertookhimseriously.”

—RichardHelms

Five months earlier, on November 15, 1977, the Pahlavis traveled toWashington for a state visit that officials on both sides had hoped wouldreinvigorate U.S.-Iran relations and ease recent strains over oil prices, armssales,nuclearpower,andhumanrights.IranianofficialssawtheShah’stwelfthtriptoWashingtonandespeciallythe

official welcoming ceremony on the grounds of theWhite House as an idealopportunity to stage a “spontaneous” televised show of support for thebeleagueredcrown.AmbassadorZahedirecalledthatheexpresseddoubtsaboutthewisdomoftheplanbutwasoverruledbythepalace.MorethanonethousandIranian expatriates traveled to the capital from Chicago and Los Angeles.SAVAK picked up the tab, which included free round-trip airfare, hotelaccommodations, and $150 per person. The Iranians also arranged for 422 of464IranianofficersenrolledinmilitarytrainingprogramsatLacklandAirForceBaseinTexastoflytoWashingtonsotheroyalistcrowdwouldbestackedwithboisterousyoungmen.StudentprotestersopposedtotheShahalsomobilizedinrecordnumbersandheadedforthecapital.TheU.S.ParkPolicewasresponsiblefor providing security at the event. On the eve of the Shah’s arrival, TheWashington Post reported “some of the most intense preparations for streetdemonstrationsseenheresincethedaysoftheVietnamantiwarmovement.”TheFBIandtheStateDepartmentbothwarnedthepolicetoprepareforapotentialclash.ThebureaupassedalongwhatitconsideredsolidintelligencethatIranianstudentswerebuying largequantitiesofoil that couldbeused tomanufactureMolotovcocktails.“Weupdated [police agencies] on Iranian student activity,”saidaStateDepartmentofficial.“Ourbasicconclusion?Weweregoingtohavetrouble....Oursecuritypeoplewereveryconcerned.”TheParkPoliceandInteriorDepartmentlaterdeniedthattheinformationthey

receivedhadbeen that specific. “Iranian studentdemonstrators in thepast . . .had been orderly and peaceful,” said Major James Lindsay, the commandingofficer, “andwith no evidence of impending trouble, a decision wasmade tohave only a small-low-key police presence at theEllipse.”Hewas apparentlyunaware of anAugust 1967 incident inwhich student protesters had violentlyclashed with police in an attempt to disrupt President Johnson’s welcomingceremonyfortheShah.Lindsaytooktheviewthatyounghotheadsinthecrowdmightreactmoreaggressivelytoanintrusivepolicepresence.Onthedayofthestatewelcome he deployed only 151 police officers—including two dozen onhorseback—topatroltheEllipse,wheretherivalIranianfactionshadbeentoldtheycouldsetuptheirpickets.Riotpolicearmedwithgasmasks,shields,andtruncheonswereheldinreserve,wellawayfromthecrowds,stationedinbusesseveralblocksfromtheWhiteHousegrounds.The Pahlavis flew into Virginia on November 14 and spent the night in

Colonial Williamsburg. Ambassador Sullivan was intrigued to see so manyyoung protesters holding up Khomeini’s portrait. He knew who he was.“Although I appreciated the role that Ayatollah Khomeini had played in thestrugglebetweentheshahandShi’aclergy,thiswasthefirsttimeIhadseenhisname and portrait invoked in the struggle by the Iranian students against theshah’sregime,”herecalledlater.Likethequeen,Sullivanwasperplexedthataman with a feudal outlook could command any following outside religiouscircles. The following morning the Shah and his party flew to Washington,where they landedon theMall in twohelicopters, thendroveon to theWhiteHouse.Sullivannoticedthatthetwogroupsofprotesters,nownumberinginthethousands,“wereseparatedonlybylight,collapsiblefencingerectedinanarrowspaceofnotmore than twentyyards.Amerescattingofparkpolicemoved inthattwenty-yardstretchofnoman’sland.”ThetroublebeganassoonastheCartersandthePahlaviswalkedtothedais

for the national anthems and speeches. The students used the twenty-one-gunsalute as the signal to launch their assault on the royalists. From his vantagepoint,AmbassadorSullivanwatchedas“a suddensurgeofactivity eruptedontheellipse.”Screams,cries,andinsultsfilledtheairasmaskedprotestersarmedwith clubs, plastic shields, bike helmets, and pickets stormed the bleacherswherePahlaviloyalistssat.Othersraidedthebuildingsiteofthenowironicallynamed“PageantforPeace,”anannualholidaytraditionontheEllipse,andmadeoff with nail-studded planks with which to club their victims. “Children andelderlypersonsappearedstunnedandfrightened,”reportedtheWashingtonPostcorrespondentatthescene.Hundredsofpeoplestampededtoward17thStreettoescape themelee.“It’s terrible, terrible,” sobbedayoungwomanwho fled the

scene.Afusilladeofsticksandbottlesraineddownonthepolice,whofellbackindisarray,thenregroupedandfiredteargas.Sirensfilledtheairandtherewerewild scenes in the streets around theWhiteHouse.Apickup truckwasdriventhrough police lines. Trash canswere set ablaze.Officeworkers who tried topass through Lafayette Square were jostled and harassed by Iranian students.Other studentsarmedwithsticksattackedacaronHStreetwhosedriver theysuspected was a SAVAK agent. A convoy of ambulances rushed to evacuatemore than 120 injured people, three with serious head injuries, to local areahospitals where emergency room personnel treated the wounded in differentrooms“tokeepthemfromfightingeachother.”On theWhiteHouse lawn stunned dignitaries and reporterswatched armed

sniperswithbinocularsmoveintopositionontheexecutivemansion’srooftop.Downbelow,thetwofirstcoupleswereengulfedinacloudofteargas,chokingbacktearsandwipingtheireyeswithhandkerchiefs.TelevisionviewersinIranandelsewherewatchedtheastonishingspectacleoftheirkingbeingtear-gassedon the American president’s front lawn. “We then went into the receptionrooms,”saidQueenFarah,whohadlongfearedexactlythissortofbreakdownin security, andwho immediately suspected sinistermotiveson thepartofherhusband’scriticsintheadministration.“PresidentCarterandhiswifebeggedusto forget the incident—they were truly embarrassed—but I thought to myselfthatinRichardNixon’stimethedemonstratorswouldneverhavebeenallowedtocomesoclose tous.Didn’tpermissivenessshowadesireon thepartof thenewadministrationtoembarrassus?”The violence outside theWhite Housewas not isolated. Therewas a near-

simultaneousrisingbytwothousandstudentprotestersatAryamehrUniversityinTehrandemandinganendtodictatorshipandsupportforhumanrights.Riotpolicearrestedfiftystudentsandinjuredfortyintheensuingclashes.Thatnightrampagingstudentssetablazesixbanksandtwocardealerships.Thenextdaysawabiggerconfrontationwhen ten thousandprotesters and fivehundred riotpolicefoughtrunningbattlesthroughthestreetsofdowntownTehran.Perhapsitwasappropriate,giveneverythingthathadhappenedthepastnineyears,thatthefuseofrevolutionhadbeenlitontheWhiteHouselawn.

MohammadReza Shah, the second and last Pahlavi king, died in exile inEgypton July27,1980.TodayQueenFarah is avocal criticof Iran’s IslamicRepublicandcontinuestospeakoutinsupportofwomen’srights.Theireldestson,RezaPahlavi,isalsoaprominentopponentofthecurrentregimeinTehran.The couple’s youngest child, PrincessLeila, died of a drug overdose in 2001,

andherbrother,PrinceAlireza,committedsuicidein2011.The Shah’s former son-in-law, foreign minister, and ambassador to

Washington, Ardeshir Zahedi, lives in exile in Switzerland and is writing hismemoirs.Intheearly1980sRichardandPatNixonvisitedZahediathishomeinMontreux. Their traveling companion, former treasury secretary Bill Simon,stayed behind on the French side of the border. Zahedimade it clear that theShah’snemesiswouldneverbewelcomeinhishouse.HecontinuestospeakoutabouteventsinIranandtheMiddleEast.Ahmed Zaki al-Yamani was sacked as Saudi Arabia’s oil minister in 1986

after a series of disputes with King Fahd, who ascended the throne after thedeathofhisbrotherKingKhalidin1982.YamanileftthekingdomandwentontofoundtheCenterforGlobalEnergyResourcesinLondonin1990.DouglasMacArthurII,whosurvivedanassassinationattemptinIranin1970,

diedin1997,agedeighty-eight.JosephFarland,RichardNixon’slucklessambassadortoIranduringelection

year1972,diedin2007attheageofninety-two.FormerPresidentRichardNixonattendedtheShah’sstatefuneralinEgyptin

1980.RichardHallock, thePentagon’sGreyGhost, amasseda fortune throughhis

companiesIntrecandQuaestorbeforehisdeathin1999.TheRichardR.HallockFoundation is a donor to the National Infantry Museum, supports studentscholarshipprograms, and funds a student college lecture series. InMay2010the foundation announced a $2million grant to Columbus StateUniversity tocreate a military history professorship, the Col. Richard R. HallockDistinguished University Chair in Military History. “In his long, subsequentcareer at the Pentagon, [Colonel Hallock] was renowned for pursuing theinterestsofAmerica’ssoldiers,sometimesintheteethofvigorousbureaucraticopposition,” read the press release announcing the gift. “Upon leaving activeservice in 1967, Col. Hallock became an adviser to Defense Secretary JamesSchlesingerandconsultedonpolitical-militaryaffairs,particularlyintheMiddleEast.”James Schlesinger, who served as secretary of defense from 1973 to 1975,

also served as the first secretary of energy in President Carter’s cabinet from1977 to 1979. Schlesingerwent on to become an influential policy adviser topresidentsandtothePentagon.IntheprivatesectorheservedaschairmanoftheboardoftrusteesofMITRECorporation.Mostrecently,SchlesingerconductedareviewofhowtheUnitedStateshandlesitsarsenaloftacticalnuclearweapons.Treasury Secretary William E. Simon returned to the private sector but

remainedactiveinRepublicanPartypolitics.Heistodaywidelyregardedasone

ofthemostinfluentialconservativesofthelatetwentiethcenturyandoneofthedriving forces behind the “ReaganRevolution”of the 1980s.As treasurer andthenpresidentoftheUnitedStatesOlympicCommittee,Simonpresidedoverthe1984summergamesinLosAngeles.Hefoundedamerchantbank,WilliamE.Simon & Sons, sat on corporate boards at Halliburton, Xerox, and Citibank,servedaspresidentoftheRichardNixonPresidentialArchivesFoundation,fortwenty years as president of the Olin Foundation, and in addition served astrusteefortheHeritageFoundationandHooverInstitution.ThebusinessschoolattheUniversityofRochesterisnamedafterhim.SimonwasimplicatedintheIran-contra scandalwhen his name appeared as an officer on the board of anentity called theNicaraguan Freedom Fund, a not-for-profit group establishedwithseedmoneytoprovide“humanitarian”supportforthecontrarebelsfightingtooverthrowthegovernmentofNicaragua.Simon,whoremainedafavoriteoftheSaudis,diedonJune3,2000,atageseventy-two.HenryKissinger left government service and successfully fashionedhimself

asaseniorstatesman.In1982,hefoundedKissingerAssociates,aninternationalbusiness consultancy firm, hiring former National Security Adviser BrentScowcroftandappointinghisoldrivalBillSimontotheboardofdirectors.Overthe past two decades Kissinger’s younger hires have risen to places ofprominence in the Washington firmament. Perhaps the most well known areTimothy Geithner, secretary of the treasury in the administration of BarackObama, and the official tasked with leading the American response to theworldwidefinancialcrisisandrecessionthatbeganin2007,andJ.PaulBremer,President GeorgeW. Bush’s hapless administrator in Iraq following the 2003invasion and occupation of that country. Kissinger unsuccessfully fought topreventthereleaseofthetelephonetranscriptscitedinthisbook.Inthesecondvolumeofhisthree-volumememoirs,YearsofUpheaval(1982),

Kissinger denied that the Shahwas granted a blank check to buy unrestrictedamounts of military equipment from the Nixon administration: “This isdisingenuous;therewasnoblankcheck.”HeclaimedthatNixon’s1972pledgeto the Shah on arms sales had solely to do with the F-14 and F-15 fighteraircraft,makingnomentionofNelsonRockefeller’sinvolvementintheoriginaldecision.ConsiderthefollowingcuriouspassagefromYearsofUpheaval:

Inanyevent,onlyoneignorantofourgovernmentalprocessesoreagerto score debating points could argue that this single directive by NixonsurvivedWatergate and his resignation and drove all the decisions of thetwo subsequent administrations—during which 90 percent of the majorarmssaleswereinfactmade.IdoubtthatPresidentsFordandCarterwere

even aware of the directive—as I had forgotten it—when they approvedlater arms purchases that were incomparably larger than those approvedunderNixon.

FormerU.S. ambassador to IranRichardHelms died in 2002 at the age ofeighty-nine.InNovember1985heparticipatedinaseminarheldattheForeignService Institute to consider the lessons of the U.S. experience in Iran.AccordingtoauthorJamesBill,whoattendedtheeventandtooknotes,HelmshadthistosayaboutoneoftheworststrategicsetbacksinAmericanhistory:“Isit necessary that theUnited Stateswin every battle . . . that theU.S. run theworld?Idon’tthinkso.Attimesthingsaregoingtogosour.Let’snotgoaroundbitingournailsaboutit.”AcolleagueonceaskedHelmswhatheandKissingerhadreallythoughtabout

theShah.Helmsrepliedwithcontempt:“Wenevertookhimseriously.”

ACKNOWLEDGMENTS

Fromtheverybeginning,ProfessorGarySickofColumbiaUniversitygavegenerouslyofhis time,offeringwisecounselandencouragingme topersist inmy efforts. Gary helped me work through analytical problems and deciphersome of the most puzzling transcripts and the questions they posed. AhmadAshraf, managing editor of the Encyclopaedia Iranica, introduced me to thediaries of Court Minister Asadollah Alam and provided me with an Iranianperspective.Hedirectedmetosources,madeintroductions,andhelpedguidemyinquiry.AhmadandGarybothreviewedthemanuscriptandprovidedfeedbackforwhichIamdeeplyappreciative.Theyhavebeenmentorsinthetruestsenseof theword.Suffice tosay,anyerrorscontainedin thisbookaremineandmyresponsibility.I owe a special debt of gratitude to former government officials and retired

diplomats who agreed to meet with me to help interpret documents, shareinsights, and offer reminiscences. They too are still trying to understand theorigins and fallout from the 1979 Iranian Revolution. In the United States,former Ford administration officials General Brent Scowcroft, JamesSchlesinger,andFrankZarbofferedinvaluableinsightsintooilpolicyduringthecrisisdaysofthemid-1970s.DiplomatsHenryPrecht,BillLehfeldt,andCharlieNaas, now retired, helped provide a diplomatic perspective of events, sharedstories,andhelpeddecipherdeclassifieddocuments.DefensestrategistEdwardLuttwaktalkedtomeaboutU.S.powerprojectioninatimewhenAmericawasperceivedtobeweakathomeandabroad.FormerIranianforeignministerandambassador Ardeshir Zahedi opened his home inMontreux, Switzerland, andspent two days answering my questions, offering his own perspective, andtalkingaboutthepersonalitiesandeventsofthatearlierera.FormerSecretaryofDefenseDonald Rumsfeld and former Chairman of the Federal ReserveAlanGreenspandeclinedmyrequestsforinterviews.Ididnotreceiveresponsesfromthe office of former Secretary of State Henry Kissinger or from IranianeconomistJahangirAmuzegar.OnthesolequestionoftheShah’scancerdiagnosis,Iapproachedtheofficeof

QueenFarahseekingclarification.IwouldliketothankMr.KambizAtabai,thequeen’s chiefof staff, for forwardingmy request, and I especially thankH.M.

QueenFarahforconsideringandrespondingtomyquestions.General Brent Scowcroft’s collection of papers deposited at the Gerald R.

FordPresidentialLibraryinAnnArbor,Michigan,isoneofthemostimportanttrovesofdocumentsavailabletoAmericanforeignpolicyscholars.ThankyoutoGeirGundersonandhiscolleaguesatthelibraryforfulfillingsomanyresearchrequests, and also to Nancy Mirshah for locating the wonderful photographsfrom President Ford’s administration. Thanks also to Pamela Eisenberg at theRichardNixonLibraryinYorbaLinda,California,forlocatingpicturesfromtheNixonadministration.ScholarswhostudyU.S.-IranrelationsduringtheColdWarinvariablyturnto

thecollectionofdocumentshousedat theNationalSecurityArchiveatGeorgeWashingtonUniversity.TheNationalSecurityArchiveprovidesanunparalleledservice tohistorians through its collectionofdocuments“Iran:TheMakingofUSPolicy,1977–80,”aswellasthroughtheKissingertelephonetranscripts.ThepapersofformerSecretaryoftheTreasuryWilliamE.Simonareopento

scholarsatLafayetteCollege’sSkillmanLibrary.AlthoughIwasunabletovisitthe library, the library staff, and especially Diane Wyndham Shaw, locateddocumentsandmailedthemtome.I am grateful to Professor Gholam Reza Afkhami and the Foundation for

Iranian Studies in Maryland for making available the foundation’s invaluablecollection of oral history interviews conductedwith former high-rankingU.S.officialsanddiplomats.TheholdingsofFISofferauniquehistoricalrecordandI am appreciative to Professor Afkhami and his staff for their efforts andassistanceduringthecourseofmyresearch.My contacts at Associated Press Images, which provided many of the

photographsinTheOilKings,werePaataStanleyandDawnCohen.HaditnotbeenfortheeditorsoftheMiddleEastJournalmyresearchwould

never have been published at all. I am appreciative to John Calcrese and hiscolleagues atMEJ and for the outstanding work they do. Tehran-based LosAngeles Times correspondent Borzou Daragahi first brought the 2008 MEJarticle tomainstreampublicattention.Iwouldliketo thankBorzou,myfriendandclassmate fromColumbiaUniversity’sGraduateSchoolof Journalism, fortheinteresthehasshowninmywork.HalfwaythroughmyresearchIreturnedtomycountryofbirth,NewZealand,

toenrollinthePh.D.historyprogramatVictoriaUniversityinWellington.Mydissertation supervisors,Dr.Dolores Janiewski andDr.RobRabel, understoodthat a unique opportunity presented itself when Simon & Schuster expressedinterest in abook, and itwaswith their agreement I relocated toGreece for ayear towrite themanuscript. I would like to thank them for their advice and

support,andalsoVictoria’sadministrativeandlibrarystafffortheirsupportandcontributions in helping to make this book happen. I completed myundergraduatedegreeatVictoriatwentyyearsago,soreturningforaPh.D.waslikecompletingthecircle.IwouldliketothankthelibrariansattheWellingtonPublicLibraryandalso

thestaffattheParliamentaryLibraryofNewZealandfortheirpatiencewithmymanyresearchrequests.IwouldberemissifIdidnotsayaspecialthank-youtoDr.MarkSherwood

and the fine staff at Wellington Public Hospital for the superb surgical andaftercare procedures that got me back on my feet. I continued my physicalrehabilitation in Greece at Maggie Michailidou’s wonderful Ergofit Gym inAthens, where Giota Koutsoukou and Nikos Vavoulas provided training andfriendship.Itisabravesoulwhotakesunderherwinganunknownwriterwithvirtually

no track record of publishedwork. I amone of the luckiestwriters around tohave as my agent Sandra Dijkstra. Sandy’s enthusiasm for my work and herattention to detail havebeen a sourceof inspiration andmotivation.ToSandyand her wonderful staff at the Sandra Dijkstra Literary Agency—Natalie,Elisabeth, Elise, and Andrea—thank you for everything you have done andcontinuetodo.At Simon & Schuster, I had the great fortune to have Bob Bender as my

editor.IamgratefultoBobfortakingachanceonafirst-timewriterandguidingme through the process. For me this has been a thoroughly enjoyable andstraightforwardcollaborationandonethatIhopewillbethefirstofmany—atnopointdidwritingTheOilKingsfeellikework.Aspecialthank-youtoAssociateEditorJohannaLi,whohelpedmebringtheelementsofthebooktogether.Writingafirstbookisinmanywaysajointprojectmadepossiblebyfriends

andfamily.Tothosegenerousfriendswhogavemeabedforthenight,tookmeout to dinner, called, e-mailed, and checked in, and who have been soenthusiastic,thisbookisalsoforyou.Finally,myparentsmovedheavenandearthtohelpmeachievemydreamof

writingaworkofhistoryand it is tomy family, for their tremendous support,thatthisbookisdedicated.Ihopeitmakesupforthelongabsences.

NOTES

INTRODUCTION

PAGE1“Why should I plant a tree”: Abolqasem Ferdowsi, translated byDickDavis, Shahnameh: The Persian Book of Kings (New York: Penguin,2006),252.

1flewtoRiyadh:“CheneyMeetsSaudiKingforTalks,”NewYorkTimes,November26,2006.

1onefifthoftheworld’sprovenoilreserves:TheU.S.EnergyInformationAdministrationmakescountryanalysisbriefs availableon itsWeb site.The one on Saudi Arabia can be accessed athttp://www.eia.doe.gov/emeu/cabs/Saudi_Arabia/pdf.pdf.

1 largest producer within OPEC: Ibid. Saudi Arabia was the world’s“largestproducerandexporterof totalpetroleum liquids” in2010.Thekingdomhastheworld’slargestcrudeoilproductioncapacity.Thelateststatisticsonworldoilproductionandconsumptioncanbefoundon theWeb site for the U.S. Energy Information Administration athttp://www.eia.doe.gov.Anothergoodsourceof information is theCIAWorld Factbook at https://www.cia.gov/library/publications/the-world-factbook.“In2009,”reportsUSEIA,“SaudiArabiaexportedanaverageof 1million barrels of oil a day to theUnitedStates, accounting for 9percentofUSpetroleumimports.”

1 “to find common ground”: Sheryl Gay Stolberg and Jim Rutenberg,“Rumsfeld Resigns as Defense Secretary After Big ElectionGains forDemocrats,”NewYorkTimes,November9,2006.

1“sinceAmericacameintoIraquninvited”:NawafObaid,“SteppingintoIraq;SaudiArabiaWillProtectSunnis if theU.S.Leaves,”WashingtonPost,November29,2006.

2“Iran’sprofitsfromoilroselastyear”:NazilaFathi,“Iranian’sPlansforEconomySpurWidespreadConcern,”NewYorkTimes,May1,2006.

2KingMidas complex: “The legendaryKingMidaswas the firstMiddleEastern ruler to cherish the belief that untold mineral wealth would

enable him to realize all his dreams and ambitions,” wrote historianNikkiKeddiein“TheMidasTouch:BlackGold,EconomicsandPoliticsinIranToday,”IranianStudies10,no.4(Autumn1977):243.“Butjustbecauseallhetouchedturnedintogold,hesoondiscoveredhecouldnolonger eat. . . .Oil income is clearly not an evil in itself, but large oilincome often tempts governments into overambitious capital-intensiveurban-centeredprojectsthatbringonahostofdifficulties.”

2“Criticssaidthathisplans”:NazilaFathi,“Iranian’sPlansforEconomySpurWidespreadConcern,”NewYorkTimes,May1,2006.

3 80 percent of income from exports:https://www.cia.gov/library/publications/the-world-factbook/geos/ir.html.

3“A member of the Saudi royal family”: HassanM. Fattah, “BickeringSaudisStruggle foranAnswer to Iran’sRising Influence in theMiddleEast,”NewYorkTimes,December22,2006.

4“massiveSaudi intervention”:NawafObaid,“Stepping into Iraq;SaudiArabia Will Protect Sunnis if the U.S. Leaves,” Washington Post,November29,2006.

5 severing its ties: “Saudi Arabia Fires Security Consultant for IraqRemarks,”WashingtonPost,December7,2006.

5“[Obaid] is widely expected to return”: HassanM. Fattah, “BickeringSaudisStruggle foranAnswer to Iran’sRising Influence in theMiddleEast,”NewYorkTimes,December22,2006.

5“TheSaudigovernmentdisavowed”:HeleneCooper,“SaudisSayTheyMightBackSunnisifU.S.LeavesIraq,”NewYorkTimes,December13,2006.

5notfallingbelow$42abarrel:AccordingtoTheNewYorkTimes:“TheSaudigovernmentdoesnotdisclosewhatoilpriceituseswhenitbuildsits budget, but analysts at Samba Financial Group, a bank in SaudiArabia, say they believe the price is $42 a barrel for 2007, with oilproduction at about 9 million barrels a day.With oil averaging $66 abarrel last year, the kingdom recorded a budget surplus of nearly $71billion,Samba said, five timesmore than in2005.”See JadMouawad,“Saudi Officials Seek to Temper the Price of Oil,” New York Times,January28,2007.

5surpass$80abarrel:JadMouawad,“OilPricesContinuetoRise,withaCloseAbove$78,”NewYorkTimes,August1,2007.

5 rocketed to $98: Jad Mouawad, “Oil Price Drops Sharply as GlobalAgencySeesDemandFalling,”NewYorkTimes,November14,2007.

5PresidentBushpersonallyappealedtoKingAbdullah:StevenLeeMyers,

“BushProdsSaudiArabiaonOilPrices,”NewYorkTimes, January16,2008.

5 250,000 barrels a day: Jad Mouawad, “As U.S. Economy Lags, OilNationsRethinkCuts,”NewYorkTimes,March3,2008.

5 to 9.7 million barrels: Jad Mouawad, “Saudis Vow to Ignore OPECDecisiontoCutProduction,”NewYorkTimes,September11,2008.

5$118 inMay: JadMouawad, “Oil Price Rise Fails toOpen Tap,”NewYorkTimes,April29,2008.

6$147.27inJuly:WilliamJ.Broad,“ExpertsPointtoDeceptionsinIran’sMilitaryDisplay,”NewYorkTimes,July12,2008.

6 $107 a barrel: Jad Mouawad, “As Oil Prices Fall, OPEC Faces aBalancingAct,”NewYorkTimes,September5,2008.

6not fall below $90: As reported inTheNew York Times: “The drop inpriceshasalreadycreatedproblemsforoilproducers.IranandVenezuelaboth need oil prices at $95 a barrel to balance their national budgets,Russia needs $70 and Saudi Arabia needs $55 a barrel, according toDeutscheBankestimates.”JadMouawad,“OilPricesSlipBelow$70abarrel,”NewYorkTimes,October17,2008.

6$43abarrel:JadMouawad,“OPECPlansFurtherOutputCut,”NewYorkTimes,December17,2008.

6$33inJanuary2009:CliffordKrauss,“NoChangeinOilGoal,CartelIsWatchful,”NewYorkTimes,December22,2009.

6 “While much scholarly focus”: Andrew Scott Cooper, “Showdown atDoha: The Secret Oil Deal That Helped Sink the Shah of Iran,” TheMiddleEastJournal62,no.4(Autumn2008).

8“thatrarestofleaders”:HenryA.Kissinger,WhiteHouseYears(Boston:Little,Brown,1979),1261.

9 “readers who seek understanding”: William Shawcross, “ThroughHistorywithHenryA.Kissinger,”Harper’s258,no.1548(May1979):39.

11importsalmosttwothirdsofitsoil:AccordingtoPolitifacts,in2009thepercentage of U.S. oil imports was 62 percent. Seehttp://www.politifact.com/truth-o-meter/statements/2010/jun/07/john-kerry/kerry-says-us-imports-more-oil-now-911. “Imported oil accountsfor about two-thirds of U.S. consumption,” reports the CIA WorldFactbook: https://www.cia.gov/library/publications/the-world-factbook/geos/us.html.

11“Iamsaddenedthatitispoliticallyinconvenient”:AlanGreenspan,TheAgeofTurbulence(NewYork:Penguin,2007),463.

CHAPTERONE:AKINDOFSUPERMAN

PAGE15“Ifsomeonewrapsalioncubinsilk”:AbolqasemFerdowsi,translatedby Dick Davis, Shahnameh: The Persian Book of Kings (New York:Penguin,2006),263.

17YourMajesty,you’reliketheradiantsun:Ibid.,328.17“I like him, I like him and I like the country”: Conversation AmongPresident Nixon, Ambassador Douglas MacArthur II, and GeneralAlexander Haig, Washington, April 8, 1971, 3:56–4:21 P.M. MonicaBelmonte,Editor;EdwardC.Keefer,GeneralEditor,ForeignRelationsoftheUnitedStates,1969–1976,Vol.E-4,DocumentsonIranandIraq,1969–1972 (Washington: United States Government Printing Office),OfficeoftheHistorian,BureauofPublicAffairs.

18 Standing erect in elevator shoes: The Shah had a well-knownpreoccupation with his height. According to his biographer, MarvinZonis, who interviewed the Shah, the monarch was “known to wearelevatorshoesandshoeswithrelativelyhighheels.OnecanalsolookinvainforapictureoftheShahstandingsidebysidewithEmpressFarah,for thatwouldshowall tooclearly thatshewastaller thanhe.”MarvinZonis,Majestic Failure: The Fall of the Shah (Chicago:University ofChicagoPress,1991),14.

18“Ipointedout that itwillprovide”:AsadollahAlam,TheShahand I:TheConfidentialDiaryof Iran’sRoyalCourt,1969–77 (NewYork:St.Martin’s,1991),48.

18 “The Shah is clearly the most important person in Iran”: NationalSecurityCouncilFiles,VIPVisits,VisitoftheShahofIran,October21–23,1969(1of2),Box920,NationalArchives,CollegePark,MD.

18astunningblueandmaroonPersianrug:JulieandDavidEisenhower’srug is listed along with other gifts presented to the Nixon family andcollatedasapartoftheWatergatepoliticalcorruptioninvestigationinthelate1970s.ListofForeignHeadofStateGiftsPresentedtoPresidentandMrs.NixonbyH.I.M.MohammadRezaPahlavi,ShahanshahofIran;byH.I.H.ThePrincessAshraf;byH.I.M.TheEmpressFarah;andbyH.E.ArdeshirZahedi,February2,1978,EricHooglund,projecteditor,Iran:The Making of U.S. Policy, 1977–80, National Security Archive(Alexandria, VA: Chadwyck-Healey, 1990), Document Reference No.01316.

19“stoletheshow”:Alam,49.19 two thirds of the world’s known petroleum reserves: Warren Unna,“GuamPolicyNearTestinGulf,”WashingtonPost,February16,1970.

19one thirdof thepetroleumusedby the freeworld:DanielYergin,ThePrize:TheEpicQuestforOil,Money,andPower(NewYork:Simon&Schuster,1991),566.

19 89 percent of oil used by the U.S. military: Memorandum from thePresident’s Assistant for National Security Affairs (Kissinger) toPresidentNixon,Washington,October22,1970,FRUS1969–76,Vol.E-4.

19$1.5billioninrevenue:Ibid.19employedtwelvethousandAmericanexpatriates:Ibid.19 “assigned an area from Malaysia to South Africa”: Arthur Veysey,“SovietsEyeRichPersianGulfasBritishWithdraw,”ChicagoTribune,June6,1971.

19Fifty-fivepercentofNATOEurope’soil:Ibid.1990percentofJapan’spetroleumsupplies:Ibid.19 25 million barrels of oil: Bernard Gwertzman, “It Was like ComingHomeAgain,”NewYorkTimes,July29,1973.

20 twenty-one miles wide at its narrowest point: The United StatesDepartment of Energy hosts a Web site that includes profiles andstatistics for the world’s transportation “choke points”:www.eia.doe.gov/cabs.

20“interruptedbyafewmines”:ArnauddeBorchgrave,“ColossusoftheOilLanes,”Newsweek,May21,1973,15.

20“TheGulfisonebiggasolinebomb”:ArthurVesey,“SovietsEyeRichPersianGulfasBritishWithdraw,”ChicagoTribune,June6,1971.

20DuringastopoverontheislandofGuamhedescribedhisvision:RobertB.SempleJr.,“NixonPlansCutinMilitaryRoleforU.S.inAsia,”NewYorkTimes, July26,1969.Nixon’s remarks inGuamonJuly25,1969,were not included in a set speech. Instead, he spoke to reportersaccompanyinghimtoVietnam,astheofficialStateDepartmenthistorianlaternoted,“[Thepresident’s] remarkswereonabackgroundbasis, forattribution but not direct quotation.” See Louis J. Smith andDavidH.Herschler,eds.,andDavidS.Patterson,generaled.,ForeignRelationsoftheUnitedStates,1969–76,Vol.1:FoundationsofForeignPolicy,1969–72 (Washington, D.C.: U.S. Government Printing Office, 2003), 91.Nixon later claimed that his comments had been taken out of context:“TheNixonDoctrinewasinterpretedbysomeassignalinganewpolicy

thatwouldleadtototalAmericanwithdrawalfromAsiaandfromotherpartsoftheworldaswell....TheNixonDoctrinewasnotaformulaforgetting out of Asia, but one that provided the only sound basis forAmerica’sstayinginandcontinuingtoplayaresponsibleroleinhelpingthe non-Communist nations and neutrals aswell as ourAsian allies todefend their independence.” Richard Nixon, RN: The Memoirs ofRichardNixon(NewYork:Grosset&Dunlap,1978),395.

20“TheU.S.isnolongerinaposition”:WarrenUnna,“GuamPolicyNearTestinGulf,”WashingtonPost,February16,1970.

20“dealingwiththeVietnamdrawdown”:AuthorinterviewwithDr.JamesSchlesinger,June5,2009.

21“HisgoalwastomakeIran”:FISOHAinterviewwithArminMeyer,byWilliamBurr,FoundationforIranianStudies,Washington,D.C.,March29,1985,1–19.

22Operation Ajax: Almost sixty years later, the 1953 coup remains asubjectofintensedebateamongIranianandWesternscholars.Questionsremain about the extent of the CIA’s role in the affair. Exiled Iranianscholars have challenged the conventional interpretation of events,arguing instead that the “coup” was actually a nationalist uprising byIranians in support of the throne. For a straightforward account of theeventsof1953,seeMarkJ.Gasiorowski,“CoupD’etatof1332S/1953,”Encyclopaedia Iranica Web site, December 15, 1993,www.iranicaonline.org. See also the collection of academic essays inMark J.Gasiorowski andMalcolmByrne,MohammadMossadegh andthe1953CoupinIran(Syracuse:SyracuseUniversityPress,2004).Theview that theCIAwas the instrumental player is advanced byStephenKinzer inhisbest-sellingbookAll theShah’sMen:AnAmericanCoupand the Roots of Middle East Terror (Hoboken: John Wiley & Sons,2003).BiographiesofthemajorIranianparticipantsinthe1953coupcanbe found on the Encyclopaedia Iranica Web site atwww.iranicaonline.org,andalsoinAbbasMilani’stwo-volumeEminentPersians: The Men and Women Who Made Modern Iran, 1941–1979(Syracuse: Syracuse University Press, 2008). Opposing views of thecrisis are found in Gholam Reza Afkhami, The Life and Times of theShah (Berkeley: University of California Press, 2009), and DarioushBayandor,IranandtheCIA:TheFallofMossadeghRevisited(London:PalgraveMacmillan, 2010). Two authors have recently written a bookthat places the 1953 coup alongside other twentieth-century Westerninterventions in the Middle East, focusing on the personalities of the

coupmakers,inthiscasetheCIA’sKermitRoosevelt.SeeKarlE.Meyerand Shareen Blair Brysac, Kingmakers: The Invention of the ModernMiddleEast(NewYork:W.W.Norton,2008).

22“Ijustknowthathewouldhavebeen”:FISOHAinterviewwithRichardHelms, by William Burr, Foundation for Iranian Studies, Washington,D.C.,July10and24,1985,1–2.

22“Ithinkitwasagreed”:Ibid.,1–3.22Helmsfollowedevents:Ibid.22“ratherimportant”role:Ibid.,1–4.22“intimatelyinvolvedintheplanning”:Ibid.,1–1.23 “The CIA felt they had sort of a proprietary interest”: FISOHAinterviewwithDouglasMacArthur II,byWilliamBurr,Foundation forIranianStudies,Washington,D.C.,May29,1985,1–53.

23 the two code names it assigned the Shah: Andrew Borowice, “ShahCracksPoliticalWhip,”WashingtonPost,August11,1975.

23“Ijustthinkitisgoingtobeamiracle”:JamesA.Bill,TheEagleandtheLion:TheTragedyofAmerican-IranianRelations(NewHaven:YaleUniversityPress,1988),136.

23“theyaredead”:Ibid.23 less than 23 percent and often up to one third: During the 1950s thefigurewasashighas35percent.RobertGraham, Iran:TheIllusionofPower;rev.ed.(London:CroomHelm,1979),170.

23“Thebasisof theTwitchellDoctrine”:FISOHAinterviewwithArminMeyer, by William Burr, Foundation for Iranian Studies, Washington,D.C.,March29,1985,1–23.

24“maintainedourrelationship”:Ibid.,1–31.24“TheIranianswereforcedtogothrough”:Ibid.,1–28.24“alittleannoyed”:Ibid.,1–29.24themostlucrative100,000squaremiles:AminSaikal,TheRiseandFalloftheShah:IranfromAutocracytoReligiousRule(Princeton:PrincetonUniversityPress,1980),48.

24economicaidwouldnotresume:“NixonTiesAidtoIrantoSettlementonOil,”NewYorkTimes,December13,1953.

24“theoilassetsbelonged,inprinciple,toIran”:Yergin,476.24“oily legs”: The term “oily legs” was coined by Jahangir Amuzegar,whosebrother,Jamshid,wasappointedprimeministerofIraninAugust1977.JahangirAmuzegar,TheDynamicsoftheIranianRevolution:ThePahlavis’TriumphandTragedy (Albany:StateUniversityofNewYorkPress,1991),Part4,Chapter11,171.

24“oilrevenuesarethefoundation”:Aconciseandthoroughexplanationof the roleoil revenuesplayed inproppingup thePahlavi state canbefoundinMarvinZonis,ThePoliticalEliteofIran (Princeton:PrincetonUniversityPress,1971),322–25.

25toppedthebillion-dollarmark:Ibid.,323.25“publicrevenueswillpermitus”:Ibid.,324.25“HisMajestymustseetoit”:Ibid.25“TheBritishadviseme”:Alam,173.25theproddingoftheEisenhoweradministration:Fordetailedaccountsofhow Iran’s oil consortium was established, see Chapter 23 of Yergin,475–78; Chapter 2 of Saikal, 48–51; andChapter 9 of Afkhami, 187–207.

25 “light and sweet”: For a straightforward explanation of how the oilmarketswork—there are severalmarkets—and to learnmore about thedifferent gradations of crude oil, see the BBC Web site athttp://news.bbc.co.uk/2/hi/904748.stm. “Crude oil comes in manyvarieties and qualities, depending on its specific gravity and sulphurcontent which depend on where it has been pumped from,” notes theBBC.“‘Sweet’crudeisdefinedashavingasulphurcontentoflessthan0.5%.Oilcontainingmorethan0.5%sulphurissaidtobe‘sour.’”

26“anydrop inproduction”: Saikal, 50.Saikal notes that the agreement“waskeptsecretfromthepublicandtheIraniangovernmentuntil1974.”

26“bailoutKingFaisal’sdefensebudget”:Alam,220.26In1971hehostedaluncheon:Ibid.26“ripeforsubversiveactivities”:Telegram16fromtheUSDelegationtothe25CentenaryCelebrationsinShiraz,Iran,totheDepartmentofState,October15,1971,2010Z,FRUS1969–76,Vol.E-4.

26“serioustrouble”:Ibid.26“amilitarilystrongIrancouldsafeguard”:Ibid.26 “It is not likely”: Stephen D. Krasner, “The Great Oil Sheikdown,”ForeignPolicy13(Winter1973–74):133.

27wheninvestmentbecomesself-renewing:DanaAdamsSchmidt,“Iran’sProsperityThriveslikeaBubblingOasis,”NewYorkTimes,December9,1968.

27“gettingsteeperallthetime”:Ibid.27“Thegrowthofthegrossnationalproduct”:Ibid.27ArdeshirZahedi:To learnmoreaboutArdeshirZahedi,see thefirstoftwo volumes of his planned four-volume set of memoirs: ArdeshirZahedi,TheMemoirsofArdeshirZahedi,Vol.1:FromChildhoodtothe

End of My Father’s Premiership (Bethesda, MD: Ibex, 2006), andArdeshir Zahedi, The Memoirs of Ardeshir Zahedi, Vol. 2: Love andMarriage,AmbassadortoWashingtonandLondon(Bethesda,MD:Ibex,2010).SeealsoPariAbasalti,ed.ArdeshirZahedi:UntoldSecrets (LosAngeles: Rah-e-Zendegi, 2002). Abbas Milani also has a profile ofZahediinEminentPersians,327–40.

28“ItwasZahediandShahnaz”:Milani,EminentPersians,334.28 kicking him under the table: Author interview with Ardeshir Zahedi,September14–15,2010.

28“Don’tcreateaproblem,Ardeshir”:Ibid.28“agreatman”:Ibid.28Oneeveninginearly1967:Ibid.29“AndIgotkindofmad”:Ibid.29 “long hours”: Exchange of Toasts Between the President and HisImperialMajestyMohammad Reza Shah Pahlavi, Shahanshah of Iran,StateDiningRoom,NationalSecurityCouncilFiles,VIPVisits,Visitofthe Shah of Iran, October 21–23, 1969 (1 of 2), Box 920, NationalArchives,CollegePark,MD.

29 “We talked about security”: Author interview with Ardeshir Zahedi,September14–15,2010.

29“Inmyjudgement,theNixonDoctrine”:FISOHAinterviewwithArminMeyer, by William Burr, Foundation for Iranian Studies, Washington,D.C.,March29,1985,1–21/22.

30“their system hasworked for them”: Foreign Relations of theUnitedStates, 1969–76,Volume I,FoundationsofForeignPolicy, 1969–72,6.Nixon followed up the Bohemian Grove speech with an article inForeignAffairs.SeeRichardM.Nixon,“AsiaAfterVietNam,”ForeignAffairs46,no.1(October1967):113–25.

30 Later on in the White House: Author interview with Dr. JamesSchlesinger,June5,2009.

30“You’vebeenagood friend”:Author interviewwithArdeshirZahedi,September14–15,2010.

30Nixon had few if any true friends: In 1970Nixon told his cousin, thewriter Jessamyn West, “I haven’t a friend in the world.” AnthonySummers,TheArroganceofPower:TheSecretWorldofRichardNixon(NewYork:Penguin,2000),105.

30 “If I take a liking to someone”: The Shah was a stickler for courtprotocol and social rank. Like Nixon, he did not cultivate friendships.James O. Jackson, “Shah: Dedicated, Dominant, Distrustful,”Chicago

Tribune,January8,1978.30 “one of those myths”: FISOHA interview with Richard Helms, byWilliamBurr,FoundationforIranianStudies,Washington,D.C.,July10and24,1985,2–60.

30 Visitors to the Nixons’ homes: List of Foreign Head of State GiftsPresented to President and Mrs. Nixon by H.I.M. Mohammad RezaPahlavi,ShahanshahofIran;byH.I.H.ThePrincessAshraf;ByH.I.M.The Empress Farah; and By H.E. Ardeshir Zahedi, February 2, 1978,EricHooglund,projecteditor,Iran:TheMakingofU.S.Policy,1977–80,National Security Archive (Alexandria, VA: Chadwyck-Healey, 1990),DocumentReferenceNo.01316.

31“ThePresidenthasastrongfeeling”:Telcon,Kissinger-Sisco,8:00A.M.,September18,1970,NationalSecurityArchive.

31“astrongleader”:MemorandumofConversation,Washington,April1,1969,10:00A.M.,FRUS1969–77,Vol.E-4.

31“moreventuresome”:MemorandumofConversation,Washington,April1,1969,FRUS1969–77,Vol.E-4.

32onemillionbarrelsofoiladay:HenryA.Kissinger,YearsofUpheaval(Boston:Little,Brown,1982),857.Curiously,Kissinger’snotesfromhismeetingwiththeShahinApril1969donotincludethisdetail.

32 officials recommended a $100 million extension: Record of NationalSecurityCouncilInterdepartmentalGroupforNearEastandSouthAsiaMeeting,Washington,April3,1969,FRUS1969–77,Vol.E-4.

32“althoughIran’seconomicprogress”:Ibid.32 “The general issue since this [arms sales] program”: MemorandumfromthePresident’sAssistantforNationalSecurityAffairs(Kissinger)toPresidentNixon,Washington,April29,1969,FRUS1969–77,Vol.E-4.

33TheShahhadalsobeenwarned:Alam,39.33“BriefedHIMonrecentdevelopments”:Ibid.33“atraumaticevent inmymemory”:FarahPahlavi,AnEnduringLove:MyLifewithShah(NewYork:Miramax,2004),119.

34“AfewyearslaterIrefusedtoaccompanymyhusband”:Ibid.34 Among the 105 guests: To read the list of guests who attended theOctober 1969 state visit, seeMarie Smith, “Formal EraBackwith theShah,”WashingtonPost,October22,1969.

34 the president and the Shah lavished praise on each other: To read atranscript of the state toasts, see Exchange of Toasts Between thePresident and His Imperial Majesty Mohammad Reza Shah Pahlavi,ShahanshahofIran,StateDiningRoom,NationalSecurityCouncilFiles,

VIPVisits,VisitoftheShahofIran,October21–23,1969(1of2),Box920,NationalArchives,CollegePark,MD.

34a five-year,$11billioneconomicdevelopmentplan: ThomasF.Brady,“IranandWesternCompaniesClashoverOil,”NewYorkTimes,March9,1968.

3420percentayear:Ibid.34“agiantpokergame”:Ibid.34bankrolledKurdishguerrillas:SeeAlam,39,41.35 daily intelligence briefs from the CIA: Nixon harbored an antipathytoward the CIA in general. CIA director Richard Helms first becameawarethatNixonwasnotreadinghisPresident’sDailyBriefevenbeforeInaugurationDay in January 1969.Helmswrote in hismemoir that hewas never sure “how often Nixon even glanced at his PDB.” RichardHelms with William Hood, A Look over My Shoulder: A Life in theCentralIntelligenceAgency(NewYork:Ballantine,2003),377–79.

35 “impossible fags”: Henry Kissinger’s biographer, Walter Isaacson,describedhowwhenNixonmetwiththeNSCstaff“forthefirstandlasttime”inMarch1969hecommiseratedwiththemforhavingtodealwiththose “impossible fags” at the State Department. Walter Isaacson,Kissinger:ABiography(NewYork:Simon&Schuster,2005),197.

35ahistoryofcorrectingthePentagon’stopbrass:“Hewasfamiliarwitheverythinggoingonintheworld,”AmbassadorArminMeyerrecalledoftheShah.“HecouldtellyouthepriceofriceinMazanderan[province]asoverthepriceinthePhilippines.InmilitarythingshewassmarterthanmostofourPentagonpeople.”FISOHAinterviewwithArminMeyer,byWilliamBurr,FoundationforIranianStudies,Washington,D.C.,March29,1985,1–18.

35Nixonsquirmedtoavoidpersonalconfrontations:KissingerrecalledthatNixon displayed “an extraordinary nervousness”when he firstmet thepresident-elect on November 25, 1969. “His manner was almostdiffident;hismovementswere slightlyvague,andunrelated towhathewassaying,asiftwodifferentimpulseswerebehindspeechandgesture.”HenryA.Kissinger,WhiteHouseYears (Boston: Little, Brown, 1979),11.Kissinger’sbiographerWalterIsaacsonrelatedingreatdetailNixon’spropensity for sequestering himself in aWhiteHouse hideawaywith anotepad for hours at a time. Kissinger concluded that Nixon “dreadedmeetingnewpeopleorconveyingadisappointingdecisiontosomeone’sface.”Isaacson,145.

35“TheShah is indeadearnest”:Telegram4054 from theEmbassay in

IrantotheDepartmentofState,October6,1969,1230Z,FRUS1969–76,Vol.E-4.

35“nudgeoilcompanies”:Ibid.35soldon the ideabyHerbertBrownell:Memorandum for thePresidentThrough John Ehrlichman from Clark Mollenhoff, “Potential ProblemAreainConnectionwiththeVisitoftheShahofIran,”October17,1969,FRUS1969–76,Vol.E-4.

35“andIranwouldusetheproceeds”:Ibid.35“therehavebeensomescandals”:Ibid.36hisscheduleforOctober18:Telegram04195fromtheEmbassyinIrantotheDepartmentofState,October14,1969,1000Z,NationalSecurityCouncilFiles,VIPVisits,VisitoftheShahofIran,October21–23,1969(1of2),Box920,NationalArchives,CollegePark,MD.

36givingintotheShah’sdemands:IntelligenceNoteNo.743fromDeputyDirector George C. Denney Jr., of the Bureau of Intelligence andResearch to Secretary of State Rogers,Washington, October 17, 1969,FRUS1969–76,Vol.E-4.

36“deepening the involvement”:Memorandum fromHaroldSaunders ofthe National Security Council Staff to the President’s Assistant forNational Security Affairs (Kissinger), Washington, October 20, 1969,FRUS1969–76,Vol.E-4.

36American personnel be deployed: IntelligenceNoteNo. 295 from thedirectoroftheBureauofIntelligenceandResearch(Hughes)toSecretaryofStateRogers,Washington,April22,1969,FRUS1969–76,Vol.E-4.

37 “concerned about the implications”: Memorandum from HaroldSaunders of theNational Security Staff to the President’sAssistant forNational Security Affairs (Kissinger), Washington, October 20, 1969,FRUS1969–76,Vol.E-4.

37“Whatistheuseoffriendship”:Telegram116791fromtheDepartmentofState to theEmbassyofIran,July15,1969,2048Z,FRUS1969–76,Vol.E-4.

37“Althoughwehavesuggested that thePresident”:Memorandum fromHaroldSaundersoftheNationalSecurityCouncilStafftothePresident’sAssistantforNationalSecurityAffairs(Kissinger),Washington,October20,1969,FRUS1969–76,Vol.E-4.

37 “is a persistent bargainer”: Memorandum from the President’sAssistant for National Security Affairs (Kissinger) to President Nixon,Washington,October21,1969,FRUS1969–76,Vol.E-4.

37 a private meeting that lasted an hour and forty minutes: President

Richard Nixon’s Daily Diary, Tuesday, October 21, 1969,http://nixon.archives.gov/virtuallibrary/documents/dailydiary.php.

37 “excellent understanding of Iran”: Memorandum of Conversation,Washington,October22,1969,10:00A.M.,FRUS1969–76,Vol.E-4.

37toboostIran’sincomefromoil:Ibid.38“anoverkillcapability”:Ibid.38 “the problem of strengthening”: FISOHA interview with DouglasMacArthur II, by William Burr, Foundation for Iranian Studies,Washington,D.C.,May29,1985,1–18.

38“didn’tcompletelypromise”:Telcon,Kissinger-Laird,2:30P.M.,October23,1969,NationalSecurityArchive.

39“awaywillbefound”:MemorandumfromtheExecutiveSecretaryofState (Eliot) to the President’s Assistant for National Security Affairs(Kissinger),Washington,December1,1969,FRUS1969–76,Vol.E-4.

39“Predictably,theShahwillbesharplydisappointed”:Ibid.39“Asthereisnowrittenrecord”:Ibid.39“Thereare,asyouknow”:LetterfromPresidentNixontotheShahofIran,Washington,February23,1970,FRUS1969–76,Vol.E-4.

39“weshouldhaveno”:Telegram1247 from theAmbassador in Iran totheAssistant Secretary of State forNearEast andSouthAsianAffairs(Sisco),April1,1970,1430Z,FRUS1969–76,Vol.E-4.

39“TheShahcontinuestoplayhard”:MemorandumfromthePresident’sAssistant for National Security Affairs (Kissinger) to President Nixon,Washington,May13,1970,FRUS1969–76,Vol.E-4.

39 “would have trouble digesting”: Memorandum of Conversation,Washington,April14,1970,FRUS1969–76,Vol.E-4.

40“threatenedareas”:Ibid.40“shouldtheneedarise”:Ibid.40“There is little question”: Letter from Secretary of Defense Laird toSecretaryofStateRogers,Washington,October27,1970,FRUS1969–76,Vol.E-4.

40 “the unique nature of Tehran’s special relationship”: Letter fromDeputySecretaryofDefense (Packard) to theUnderSecretaryofState(Richardson),Washington,April14,1970,FRUS1969–76,Vol.E-4.

40 a long breakfast with CIA director: Memorandum for the Record,Washington,October22,1969,FRUS1969–76,Vol.E-4.

40forthefirsttimein1957:RichardHelms,ALookoverMyShoulder,417.41“Heagreedthathewouldsponsorit”:FISOHAinterviewwithRichardHelms, by William Burr, Foundation for Iranian Studies, Washington,

D.C.,July10,24,1985,1–11.41Asecondbase:InretirementHelmsconfirmedtheexistenceoftwoCIAstationsinIranduringthisperiod.Ibid.,1–10.

41indirectpersonalconnection:Ibid.,1–1.41 “The Shah nodded his head”: Memorandum for the Record,Washington,October22,1969,FRUS1969–76,Vol.E-4.

41 “on grounds of cost, lack of urgency”: Memorandum from HaroldSaunders of the National Security Council Staff to the President’sAssistant for National Security Affairs (Kissinger), Washington, April16,1970,FRUS1969–76,Vol.E-4.

41“vital to ournational security”:Memorandum from theOffice of theDirectorof theCentral IntelligenceAgency to theHonorableHenryA.Kissinger, Assistant to the President for National Security Affairs,included in Memorandum for the President from Henry A. Kissinger,April16,1970,FRUS1969–76,Vol.E-4.

41“island of stability”:Memorandum from the President’sAssistant forNational Security Affairs (Kissinger) to President Nixon, Washington,April16,1970,FRUS1969–76,Vol.E-4.

42One month later, at 3:00 P.M.: “The President’s Schedule,”New YorkTimes,May14,1970,and“For theRecord,”NewYorkTimes,May15,1970. This meeting was brought up by Ambassador Zahedi in ourinterview of September 14–15, 2010, when he recalled his encounterwithNixon after ameeting ofCENTO ambassadors.Nixon’s scheduleconfirmsthattheonlytimehemetwithCENTOambassadorsintheOvalOfficeinthe1969–72periodwasonMay14,1970.

42“TelltheShah”:AuthorinterviewwithArdeshirZahedi,September14–15,2010.

42“hewasnot suggesting”:MemorandumofConversation,Washington,April8,1971,FRUS1969–76,Vol.E-4.

43lobbiedKissingertokilloffastudy:MemorandumfromtheDirectoroftheCentralIntelligenceAgency(Helms)tothePresident’sAssistantforNationalSecurityAffairs (Kissinger),September2,1970,FRUS 1969–76,Vol.E-4.

43“exoticequipment”:Memorandumfrom[namenotdeclassified]of theNearEast andSouthAsiaDivisionof theDirectorateofPlans,CentralIntelligence, to the Deputy Director’s Executive Assistant [name notdeclassified],August10,1970,FRUS1969–76,Vol.E-4.

43“Wedon’tknowjusthowkeenly”:CentralIntelligenceAgencyOfficeofNationalEstimates,“NothingSucceedslikeaSuccessfulShah,”October

8,1971,NationalSecurityArchive.44At 3:56 on the afternoon ofApril 8, 1971:All notes from theNixon-MacArthurconversationareattributedtoConversationAmongPresidentNixon,AmbassadorDouglasMacArthurII,andGeneralAlexanderHaig,Washington, April 8, 1971, 3:56–4:21 P.M.,”FRUS 1969–76, Vol. E-4.This citation also covers all subsequent remarks made by Nixon,MacArthur, and Haig during their April 8, 1971, conversation in theWhiteHouse.

45“scared stiff”: FISOHA interviewwithWilliam Lehfeldt, byWilliamBurr,FoundationforIranianStudies,Washington,D.C.,April29,1987,February9andApril19,1988,1–9.

45“Theseboysopenedfire”:FISOHAinterviewwithDouglasMacArthurII, byWilliamBurr, Foundation for IranianStudies,Washington,D.C.,May29,1985,1–32.

45“Iamparticularlyanxious that thismatter”:Telegram5142, fromtheEmbassyinIrantotheDepartmentofState,December1,1970,0955Z,FRUS 1969–76, Vol. E-4. Ambassador MacArthur provided a vividdescriptionoftheattemptedassassinationorkidnappingin1985.SeehisFISOHA interview, by William Burr, Foundation for Iranian Studies,Washington,D.C.,May29,1985,1–32and33.

46Theambassadorwashauntedbyaremark:Ibid.,1–23.47“Bothourcountries”:“IsraeliMissionFlourishesinIran,”WashingtonPost,June8,1969.

475Takht-eJamshidAvenue:Ibid.47sixtythousandIranianJews:Ibid.47$40millionworthofIranianoil:Ibid.47 Yet Tehran’s newest supermarket: John K. Cooley, “Israeli MissionFunctions ‘Diplomatically’ in Iran,”ChristianScienceMonitor,May 9,1970.

47filmdistributioncompanies:Ibid.47ElAl,flewtworegularlyscheduledflights:Ibid.47digdeepwaterwellsinQazvin:Ibid.48TheU.S.EmbassycabledWashington:Telegram668,fromtheEmbassyinTehrantotheDepartmentofState,February24,1970,140Z,(FRUS)1969–76,Vol.E-4.

48thirtythousandsoccerfans:Ibid.48 the Shah’s 1963White Revolution: For fuller discussion of theWhiteRevolution, itsorigins, the reforms,and their impacton Iraniansocietyand the Pahlavi dynasty, the following books are helpful: Afkhami,

Chapter 10, 208–37; Ali M. Ansari, Modern Iran Since 1921: ThePahlavisandAfter (London:Longman,2003),Chapter6,147–65;SaidAmirArjomand,TheTurban for theCrown:The IslamicRevolution inIran (New York: Oxford University Press, 1986), Chapter 3, 71–74;NikkiR.Keddie,RootsofRevolution:AnInterpretiveHistoryofModernIran(NewHaven:YaleUniversityPress,1981),Chapter7,160–82;andA.Saikal,Chapter3,71–96.

49“a numb and dispirited snake and lice who float in their own dirt”:Baqer Moin, Khomeini: Life of the Ayatollah (London: I. B. Tauris,1999),89.

49“OMr.Shah,dearMr.Shah”:Ibid.,104.49itwasAlamwhoissuedtheorderfortroops:TheJune1963crackdownisasubjectoflivelydebateamongIranianscholarswithsomesuggestingthe Shah was in charge. Most believe that Alam stiffened the Shah’sbackbonewhenheoffered to takeresponsibility if thebloodshed led toeven more unrest. “Who else but Your Majesty had the courage tosupport me,” Alam asked the Shah on January 22, 1973. “Nobody,”answered the Shah. Alam, 279–80. See also Afkhami, 235–36, andMilani,EminentPersians,Vol.1,51–52.

49GeneralHassanPakravan:TolearnmoreaboutGeneralPakravan’slife,seehisbiographyinMilani,EminentPersians,474–82.

49“amanofgreatculture”:FarahPahlavi,AnEnduringLove,131.

CHAPTERTWO:GUARDIANOFTHEGULF

PAGE51 “Iran will get all available sophisticated weapons”: Telegram 4575,MajorGeneralWilliamsontoUnderSecretaryofDefenseKennethRush,June5,1972,NationalSecurityArchive.

51“Nowis timetocashincreditwithIranians”:Telegram192358,fromthe Department of State to the Embassy in Iran, October 20, 1972,2246Z,FRUS1969–76,Vol.E-4.

51 Shell blasts and the crackle of rifle fire: The following newspaperarticlesdescribe indetail theIranian takeoverof the three islands:JohnK.Cooley,“AsBritainExits,IranCommandeersHeadofPersianGulf,”ChristianScienceMonitor,December2,1971;WilliamDullforce,“IranSeizes 3 Strategic Gulf Islands,”Washington Post, December 1, 1971;“IranianTroopsOccupyThree Strategic Islands in PersianGulf, and a

SheikdomProtests,”NewYorkTimes,December1,1971.51 “I will wipe my ass”: Author interview with Ardeshir Zahedi,September14–15,2010.

52expelled sixty thousand Iraniannationals: “Thousandsof IraniansAreExpelledfromIraq,”NewYorkTimes,January1,1972.

52“closeto$1billion”:JohnK.Cooley,“Iraqi-IranianRelationsNearingCrisis,”ChristianScienceMonitor,January8,1972.

52“Wewillnotuseourfist”:Ibid.5235centsto$2.15:AminSaikal,TheRiseandFalloftheShah:IranfromAutocracy to Religious Rule (Princeton: Princeton University Press,1980), 116. Saikal’s Chapter 4, “The Emergence of Iran as an OilPower,” 97–131 is essential reading to gain an understanding of theShah’soilpoliciesandIran’semergenceasaMiddleEastpetropower.

52“AmIhearing thebigvoiceofasuperpower?”:AsadollahAlam,TheShah and I: TheConfidentialDiary of Iran’s Royal Court, 1969–1977(NewYork:St.Martin’s,1991),192.

52“FinallyIranwasabletorelyonoil”:RobertGraham,TheIllusionofPower,rev.ed.(London:CroomHelm,1979),36.

52TheShahboastedtoAlam:Alam,197.53 roads, tourist facilities, public health clinics: The Iranian governmentfailed to capitalize on the influx of foreign press by encouragingreporterstofocusonthemagnificenceofthetentcitytothedetrimentofmore practical achievements such as road construction, health, andeducation. For a thorough account of the planning that went into thePersepolis celebrations from the Iranian perspective, seeGholamRezaAfkhami, The Life and Times of the Shah (Berkeley: University ofCaliforniaPress,2009),Chapter18,404–15.

53Zahediwroteastronglywordedletter:AbbasMilani,EminentPersians:TheMen andWomenWhoMadeModern Iran, 1941–1979 (Syracuse:SyracuseUniversityPress,2008),Vol.1,330.

53“plebeianlookinggentleman”:Alam,98.53CarnivalCruiseatmosphere:ThePersepoliscelebrations—dubbed“ThePartyofParties”—attractedworldwide interest andwerebroadcast liveontheAmericantelevisionnetworkNBC.AphotoessayappearedintheOctober30,1971,editionofParisMatch,“LaFêteDesFêtes,”50–63.Reporter Sally Quinn, who attended Persepolis, wrote colorful andshrewdlyperceptivearticlesforTheWashingtonPostdescribinginoftenhumorous detail the leaders’ tent encampment in the desert. Quinn’sinterviewwithEmpressFarah,whotooktheleadinplanningPersepolis,

isparticularly insightful:SallyQuinn,“It Isn’tEasyBeingtheEmpressof Iran,” Washington Post, October 8, 1971. Alam’s diary does notmentiontheactualfestivities.Assomeonewhowasconsumedwith theevent planning he abandoned his diary writing for the year due topressures of work. For a defense of the Persepolis celebrations, seeAfkhami,Chapter18,404–22.

53 “the Shah’s revenge”: As described by Sally Quinn in “The Party’sOver,”WashingtonPost,October16,1971.

53“acquirednearly$750million”:MemorandumforDr.Brzezinski,TheWhite House, from Anthony Lake, National Security Council,“Attachment: One-Volume Compilation of Summaries of DocumentsRelating to the US-Iranian Relationship, 1941–79, January 29, 1980.”The memorandum is included in the National Security Archive’scollection of diplomatic documents, Eric Hooglund, project editor,National Security Archive, Iran: The Making of U.S. Policy, 1977–80(Alexandria, VA: Chadwyck-Healey, 1990). See Chapter 2“Military/SecurityIssues,”DocumentReferenceNo.03558,9.

53 “had fallen to a six-year low”: Office of Economic Research andCoordinated Within the Directorate of Intelligence, “IntelligenceMemorandum: Some Revenue Implications of the 14 February OilSettlement with the Persian Gulf States,” The Central IntelligenceAgency(March1971),FRUS1969–76,Vol.E-4.

54 more than 10 percent of GNP: Office of National Estimates,“Memorandum:NothingSucceedslikeaSuccessfulShah,”TheCentralIntelligence Agency (8 October 1971), National Security Archive,DocumentReferenceNo.IR00757.

54“nothaveenoughmoneytopay”:Ibid.54“the Shah of Iran is counting upon you”: Rogers’s memorandum ofDecember2,1971,isincludedwithacoverlettersentbyKissingertothepresidentonDecember28:MemorandumfromthePresident’sAssistantforNationalSecurityAffairs(Kissinger)toPresidentNixon,Washington,December28,1971,FRUS1969–76,Vol.E-4.

55“thebitch”:Nixon’sfeelingstowardMrs.GandhiwerenosecretintheWhite House. Walter Isaacson, Kissinger: A Biography (New York:Simon&Schuster,2005),373.

55 It was Nixon’s belief that Mrs. Gandhi had deceived him: Telcon,Kissinger-Nixon, 11:15 P.M., September 18, 1973, National SecurityArchive.

55“Iwastreatingherasaleader”:Ibid.

55Kissingereggedonthepresident:Telcon,Nixon-Kissinger,December4,1971,NationalSecurityArchive.

55“Becausewe are sympathetic to anything”: Telcon,Afshar-Kissinger,December4,1971,NationalSecurityArchive.

55“another thingwehavedone”:Telcon,Nixon-Kissinger,December4,1971,NationalSecurityArchive.

56Kissinger briefed Ambassador HuangHua: For a detailed account ofwho attended the talks and what was discussed, see Memorandum ofConversation,Friday,December10,1971,6:05P.M.–7:55P.M.,NewYorkCity,EastSide,NationalSecurityArchive.

57 tomonitorKissinger’s back-channel communications:Walter IsaacsondescribedthemethodsusedbyLairdatDefenseandtheJointChiefsofStaffatthePentagontospyonKissingerinhisbiographyofthenationalsecurity adviser. SeeChapter 18, “Winter of theLongKnives,” and inparticular the section “Yeoman Radford’s Spy Ring, December 1971,”380–85.

57“HenrywasveryMachiavellian”:Ibid.,198.57 “He worked his technique marvelously”: Author interview with Dr.JamesSchlesinger,June5,2009.

58youngRadfordwasasocialfriendof...JackAnderson:TheRadford-AndersonrelationshipisdetailedinIsaacson,383.

58“with considerable feeling tingedwith bitterness”:Telegram77, fromthe Embassy in Tehran to Secretary of State Rogers and AssistantSecretary forNearEastern andSouthAsianAffairs (Sisco), January5,1972,1235Z,FRUS1969–76,Vol.E-4.

58“repliedstonilythathehadvisitedus”:Ibid.58“WhileIhadmydoubtspreviously”:MemorandumfromthePresident’sAssistant for National Security Affairs (Kissinger) to President Nixon,Washington,December28,1971,FRUS1969–76,Vol.E-4.

58at4:04P.M.,localTehran time:See thepresident’sdailyschedule foraminute-by-minute breakdown of his overnight stay in Tehran athttp://nixon.archives.gov/virtuallibrary/documents/dailydiary.php.

58“absorbandreturntheaffection”:RobertB.Semple,“NixonWelcomedWarmlybyIranians,”NewYorkTimes,May31,1972.

58“Tensofthousandsofordinarycitizens”:Ibid.58“themost jubilant overseaswelcome”:CourtneyR. Sheldon, “IranianCheersWarmNixon,”ChristianScienceMonitor,May31,1972.

59“thatthestreetswerenotnearlysowell-lined”:Alam,222.59TheShahhadaskedhiscourtminister:AccordingtoAlam’sdiary,the

Shah“thenwentontosaythathewouldliketomeetNixoninprivateonthe first day of his stay.OnlyKissinger should be allowed to attend asecondmeeting.”Alam,212.

59TheShah fretted:Duringa trip to IranbyWestGermany’schancellor,WillyBrandt,theShahwarnedhim“thatoneeffectofEast-Westdétentein Europe would be to allow the Soviets to increase pressure on theMiddleEast.”Ibid.,211.

59 two of the thirteen men convicted and executed: The InternationalCommission of Jurists, The Review 8 (June 1972), National SecurityArchiveDocumentReferenceNo.IR0074.

59gunneddownonhisowndoorstep:“ChiefofIranMilitaryCourtDiesofAssassins’Bullets,”NewYorkTimes,April12,1971.

59TheShah’snephew:Anaccountof theattemptedkidnappingofPrinceShahrem,thesonoftheShah’stwinsister,PrincessAshraf,appearedinafeature article on the Shah’s rule and record in office: Jonathan C.Randel,“TheShah’sIran:ArmsDebtsandRepressionAre thePriceofProgress,”WashingtonPost,October10,1971.

60 bombers struck American landmarks: No mention of the bombingsappeared in the American press. Embassy Tehran filed its owndescription of the attacks to Secretary of State Rogers. Telegram 331,fromtheEmbassyinIrantotheDepartmentofState,January17,1972,1950Z,FRUS1969–76,Vol.E-4.

60bombs ripped through a pro-government political rally: The rally hadbeencarefullystagedbytheregimetocountercomplaintsabouthumanrightsabusesinIran.ItturnedouttobeonemoreembarrassmentfortheShah. Telegram 1218, from the Embassy in Iran to the Department ofState,February29,1972,1410Z,FRUS1969–76,Vol.E-4.

60“criticism and dissatisfactionwith theUnited States”: AirgramA-56,fromtheEmbassyinIrantotheDepartmentofState,February22,1971,FRUS1969–76,Vol.E-4.

60 “The past year or so has seen”: Office of National Estimates,“Memorandum: Nothing Succeeds like a Successful Shah,” CentralIntelligence Agency (8 October 1971), National Security Archive,DocumentReferenceNo.IR00757.

60“ThemannerinwhichtheShahprojectshisroyalwill”:Ibid.60“Financialdifficultiesarisingfromoverspending”:Ibid.60“Hisdemisewillusherinchange”:Ibid.60“producing increasing internal dislocations”: Memorandum from thePresident’s Assistant for National Security Affairs (Kissinger) to

PresidentNixon,Washington,May18,1972,FRUS1969–76,Vol.E-4.60“voicedconcern”:Ibid.60 a wish list of five big-ticket items: Memorandum from the DeputySecretary of Defense (Rush) to the President’s Assistant for NationalSecurityAffairs(Kissinger),Washington,May18,1972,FRUS1969–76,Vol.E-4.

61TheDefenseDepartmentrecommended“inprinciple”:Ibid.61Kissinger drafted amemorandum:Memorandum from the President’sAssistant for National Security Affairs (Kissinger) to President Nixon,Washington,May18,1972,FRUS1969–76,Vol.E-4.

61 “Precise and frank talk about”: Memorandum from the President’sAssistant for National Security Affairs (Kissinger) to President Nixon,Washington,October21,1969,FRUS1969–76,Vol.E-4.

61Withintenminutesoftheirarrival:Seethepresident’sdailyschedulefora minute-by-minute breakdown of his overnight stay in Tehran athttp://nixon.archives.gov/virtuallibrary/documents/dailydiary.php.

61nootherAmericanorIranianofficialswerepresent:FIOSHAinterviewwithHaroldSaunders,byWilliamBurr,FoundationforIranianStudies,Washington,D.C.,February12and27,April8andMay1,1987,2–55.

61Their first session involved: As an example of how little we actuallyknowaboutwhattranspiredinNixon’sprivatetalkswiththeShah,thereare threewidely varying time frames for their first session on the lateafternoonofMay30,1972.AlaminhisdiarysaysthepresidentandtheShahmetforoneandahalfhours.SeeAlam,222.Thepresident’sdailyscheduleallottedhimanhourandforty-fiveminutes,from5:30P.M.until7:14. Seehttp://nixon.archives.gov/virtuallibrary/documents/dailydiary.php.Kissinger’s notes say that the threemenmet from5:35 P.M. until 6:35.SeeMemorandumofConversation,Tehran,May30,1972,5:35P.M. to6:35P.M.,FRUS1969–76,Vol.E-4.Kissinger’snoteshavebeenproventobeunreliable.Thepresident’s schedulewasprepared inadvanceandprobablydidnot reflecta latestartorearlyend to the talks, letalonearunover in time.BecauseAlamwas on the scene andwatching eventslikeahawk,thenjottingthemdowninhisdiary,hisversionisthemostreliable.

61TheShahsaidhehoped:MemorandumofConversation,Tehran,May30,1972,5:35P.M.to6:35P.M.,FRUS1969–76,Vol.E-4.

62PrimeMinisterHoveydatookKissingeroutclubbing:Alamwasoftheopinion thatHoveydawanted topumpKissinger fordetailsofhis talks

withtheShah.SeeAlam,222–23.AphotographofNadinaParsadancingforKissingerwaspublishedinthenextday’sWashingtonPost.TheNewYork Times also mentioned the incident. See Robert B. Semple Jr.,“BombRocksSiteinIranJustBeforeVisitbyNixon,”NewYorkTimes,June 1, 1972, and Carroll Kilpatrick, “Nixon’s Departure from IranMarredbyTerroristExplosions,”WashingtonPost,June1,1972.

62satinKissinger’slap:CarrollKilpatrick,“Nixon’sDeparturefromIranMarredByTerroristExplosions,”WashingtonPost,June1,1972.

62whenhespottedKissingerskulking:Alam,223.62ButtheShahhadinstructedAlam:Ibid.,212.62“Inconnectionwith theschedule”:MemorandumfromthePresident’sAssistant for National Security Affairs (Kissinger) to President Nixon,Washington,May18,1972,FRUS1969–76,Vol.E-4.

62“fondness for martinis”: For a vivid description of Nixon’s drinkinghabits,seeIsaacson,145–46.

62“theonlytime[thepresident]drankalot”:Ibid.,262–63.62Thepresident’simbibing:Ibid.,145–46.62“obscenities,”“mydrunkenfriend,”etc.:Ibid.,145.63 the first bombswent off: Carroll Kilpatrick, “Nixon’s Departure fromIranMarredbyTerroristExplosions,”WashingtonPost,June1,1972.

63attractingtheattentionofAlam:Alam,223.63“Oh,it’snothingveryserious”:Ibid.,230.63aloudroarshooktheareabehindthem:Foranaccountoftheterroristattacks,seeRobertB.SempleJr.,“BombRocksSiteinIranJustBeforeVisit by Nixon,” New York Times, June 1, 1972; Carroll Kilpatrick,“Nixon’s Departure from Iran Marred by Terrorist Explosions,”WashingtonPost,June1,1972;and“TombinIranBombedBeforeVisitbyNixon,”LosAngelesTimes,June1,1972.

63 the illiterate, ambitious, and strong-willed Reza Khan: For furtherreadingonRezaShahand theoriginsof thePahlavidynasty, includingthereformsofthe1920sand1930s,seeErvandAbrahamian,AHistoryofModernIran(Cambridge:CambridgeUniversityPress,2008),Chapter3, 63–96; Afkhami, Chapters 1, 2, 3–41; AliM. Ansari,Modern IranSince1921:ThePahlavisandAfter(London:Longman,2003),Chapters2, 3, 20–74; Said Amir Arjomand, The Turban for the Crown: TheIslamicRevolution in Iran (NewYork:OxfordUniversityPress,1986),Chapter3,59–68;andSandraMackey,TheIranians:Persia,IslamandtheSoulofaNation(NewYork:Plume,1998),Chapter6,157–86.

64“everyadvantage,yettheycouldn’t”:Alam,223.

64AlamurgedtheShahnottoletterrorists:Ibid.64“anyofthereportedincidents”:“TombinIranBombedBeforeVisitbyNixon,”LosAngelesTimes,June1,1972.

64“I’m going to withdraw the statement”: Carroll Kilpatrick, “Nixon’sDeparturefromIranMarredbyTerroristExplosions,”WashingtonPost,June1,1972.

64theleadersheldafinalroundoftalks:Alam’sdiary,Nixon’sschedule,andKissinger’snotesallagreeononething:thesecondsessionofformaltalks onWednesday, May 31, lasted an hour and a half, beginning at10:30A.M.andconcludingatnoon.

65 “with a discussion of terrorism”: Memorandum of Conversation,Tehran,May31,1972,10:30A.M.to12:00P.M.,FRUS1969–76,Vol.E-4.

65 an intimate luncheon for twenty-one: The guest list for the Nixons’luncheon at Saadabad Palace on May 31, 1972, is attached to thepresident’s daily schedule athttp://nixon.archives.gov/virtuallibrary/documents/dailydiary.php.

65“he’dliketoseetheculpritsexecuted”:Alam,224.65 five young Iranians accused of subversive activities: TheWashingtonPost reported the executions “lastweek for a stringof alleged terroristacts,bringingthetotalofsuchexecutionsto38inthepast16months.”Carroll Kilpatrick, “Nixon’s Departure from Iran Marred by TerroristExplosions,”WashingtonPost,June1,1972.

65Iran’sdreadedsecretpolice:ForanoverviewofSAVAK’sfunctionsinthe 1970s and its management under General Ne’matollah Nasiri, seeAfkhami, Chapter 17, 381–403; Graham, 67–71; and Milani, EminentPersians,468–73.

65 “the Kremlin may be a palace”: Asadollah Alam recalled Nixon’sremarks in his diary. See Alam, 224. No reporters were in the room.However, theWhiteHouse press secretary gave at least oneAmericanreporter a general overview of the president’s comments—minus thecomment about his wish to have American citizens executed. Nixon’sremarksabouthisstayintheSovietUnionweresoftenedtoread:“WhiletheKremlinisagreatpalace,tobethereforeightdaysisalongtime.”Carroll Kilpatrick, “Nixon’s Departure from Iran Marred by TerroristExplosions,”WashingtonPost,June1,1972.

66recalledhissurprise:Alam,224.66 students ran out and hurled rocks: American reporters and U.S. andIranianofficialswerewitnesstotheassaultonthepresidentialconvoyasitdrove to theairport.SeeAlam,225,andCarrollKilpatrick,“Nixon’s

DeparturefromIranMarredbyTerroristExplosions,”WashingtonPost,June1,1972.

66“ensurethatNixonandhisentourage”:Alam,221.66 “agreed to sell U.S. nuclear power plants”: “The Growing U.S.InvolvementinIran,”TheUnitedStatesDepartmentofDefense,January22,1975,NationalSecurityArchive,DocumentReferenceNo.IR00927.There is no doubt that Nixon, Kissinger, and the Shah discussed thepossibilityofIranattainingnucleartechnologyandfuelsattheirTehranmeetingin1972.ThiswasalludedtoinaJanuary1975reportpreparedby theU.S.Department ofDefense on theAmerican presence in Iran.Theauthorsof thereportmadeonefactual inaccuracy: theymistakenlyplaced Nixon in Tehran in 1974 instead of 1972. They then citedSecretaryKissinger’s November 1974 visit to Iran as the occasion forfurther consultations and the signing of a joint communiqué oncooperation in the field of nuclear energy. See “The Growing U.S.InvolvementInIran,”TheUnitedStatesDepartmentofDefense,January22, 1975, National Security Archive. The Shah believed Iran had toobtainnuclearpowertosustainitseconomyonceitsoilreservesranoutinthefirstdecadesofthetwenty-firstcentury.Theissueofnuclearpowerwould also be discussed during the Shah’s July 1973 state visit toWashington.

66 “Iran will get all available sophisticated weapons”: Telegram 4575,MajorGeneralWilliamsontoUnderSecretaryofDefenseKennethRush,June5,1972,NationalSecurityArchive.

66 twenty thousand: William J. Coughlin, “Egypt Ousts Russ Advisers,Experts,”LosAngelesTimes,July19,1972.

66 “operational positions in Iranian units”: Memorandum from HaroldSaundersoftheNationalSecurityCounciltothePresident’sAssistantforNational Security Affairs (Kissinger), Washington, August 2, 1972,FRUS1969–76,Vol.E-4.

67askedKissingerforguidance:Ibid.67Farlandhadhelpedfacilitate:Inthefirstvolumeofhismemoirs,WhiteHouse Years, Kissinger wrote of Farland: “Wewere fortunate that ourAmbassador inPakistan at thatmomentwas amanoutside the regularForeign Service Establishment.” For more details on Farland’s role asChinaintermediary,seeHenryA.Kissinger,WhiteHouseYears(Boston:Little,Brown,1979),722–23.

67Farlandwasaformeragent:Farland’sstatusasaformerFBIagentwasreportedinhisobituaryinTheNewYorkTimes.DennisHevesi,“Joseph

Farland, 92, EnvoyWhoHelped inKissinger Ruse,”New York Times,February1,2007.FarlandwasambassadortotheDominicanRepublicin1960.Opponentswhowanted tooverthrowthenation’sdictator,RafaelTrujillo, approached the ambassador at a cocktail party to ask him forsniperrifles.FarlandpersonallyrelayedtheirrequesttotheCIAuponhisrecall inMay 1960. Trujillowas assassinated a year later, onMay 30,1961, reportedly with weapons supplied by the CIA.Washington Postcolumnist Jack Anderson frankly described Farland as a CIA agent.ThomasPowers,TheManWhoKepttheSecrets:RichardHelmsandtheCIA(NewYork:AlfredA.Knopf,1979),167.

67“this isoneof thosecases”:Kissinger’s reply toEmbassyTehranwasmade on August 31, 1972. But the archival reference is included as abundlewiththeactualrequest,whichdatesfromAugust2.MemorandumfromHaroldSaundersoftheNationalSecurityCounciltothePresident’sAssistantforNationalSecurityAffairs(Kissinger),Washington,August2,1972,FRUS1969–76,Vol.E-4.

67 Kissinger on June 15, 1972, informed: Memorandum from thePresident’s Assistant for National Security Affairs (Kissinger) toSecretaryofStateRogers andSecretaryofDefenseLaird,Washington,June15,1972,FRUS1969–76,Vol.E-4.

67“WOW!”:Ibid.67Nixon sent John Connally: Kissinger’s aide Harold Saunders briefedNixononConnally’stalkswiththeShahonJuly12,1972.Memorandumfrom Harold Saunders of the National Security Council to PresidentNixon,Washington,July12,1972,FRUS1969–76,Vol.E-4.

67 preferred successor: In his memoir Nixon wrote of John Connally’sdecisiontoleavetheWhiteHouseduringtheWatergatescandal:“Itriedtotalkhimintostaying,butmyheartwasnotinit;IcouldnotaskamanIlikedandrespected—andwhoIhopedwouldsucceedmeintheWhiteHousein1976—totiehimselftomytroubles.”RichardNixon,RN:TheMemoirsofRichardNixon (NewYork:Grosset&Dunlap, 1978), 908.WalterIsaacsonwrotethatNixonangledforawaytoappointConnally,his“goldenboy,”tothepostofsecretaryofstatein1973.SeeIsaacson,502.

67the40Committee:Alsodescribedasthe“interagencygroupinchargeofreviewingcovertactivities”inIsaacson,258.

67presentedwithasinglepieceofpaper:U.S.HouseSelectCommitteeonIntelligence,CIA:ThePikeReport(Nottingham:Spokesman,1977),196.Details of the Kurdish operation were investigated by the U.S. House

Select Committee on Intelligence led by Congressman Otis Pike. ThePikeReportanditsfindingsoncovertoperationsandabusesbytheCIAduring the Cold War were leaked to the Village Voice newspaper inFebruary1976.Itwaspublishedinbookformin1977inGreatBritain.

68“encouragingseparatistaspirations”:Ibid.,211.68“Furthermore,theroadisopen-ended”:Ibid.68“negativeviewswerenotpresentedmoreforcefully”:Ibid.,212.68“hashesitatedtopushUSarmamentsales”:MemorandumfromHaroldSaunders of theNational Security Staff to the President’sAssistant forNationalSecurityAffairs(Kissinger),Washington,July14,1972,FRUS1969–76,Vol.E-4.

68“counseledaccordingly”:Ibid.68“AndwhataboutKissinger?”:Alam,232.68“should leave decisions onwhat to buy”:Memorandum fromHaroldSaunders of theNational Security Staff to the President’sAssistant forNationalSecurityAffairs(Kissinger),Washington,July14,1972,FRUS1969–76,Vol.E-4.

68“The decision to let the Shah buy”: FISOHA interview with HaroldSaunders,byWilliamBurr,FoundationforIranianStudies,Washington,D.C.,February12and27,April8andMay1,1987,2–56.

69andapprovedthesale:Alam,230.69 a crisply worded presidential directive: Memorandum from thePresident’s Assistant for National Security Affairs (Kissinger) toSecretaryofStateRogers andSecretaryofDefenseLaird,Washington,July25,1972,FRUS1969–76,Vol.E-4.

69“prettymuch gives us carte blanche”: Letter from JackC.Miklos toThe Honorable L. Douglas Heck, Minister-Counselor at the AmericanEmbassy, Tehran, Iran, July 26, 1972, Eric Hooglund, project editor,Iran: The Making of U.S. Policy, 1977–80, National Security Archive(Alexandria, VA: Chadwyck-Healey, 1990), Document Reference No.00784.

70 John Ehrlichman was reassuring the president’s personal lawyer:KalmbachmetwithEhrlichmanonJuly26anddemandedanassurancethatwhat hewas about to do—raise hushmoney—was legal “and thatthis is something that is proper that I should go forward with.”Ehrlichman replied, “Herb, this is proper. It’s for those fellows [theWatergatedefendants]andtheirattorneys’feesandtheirfamilies.Herb,you are to go forward with this.” J. Anthony Lukas, Nightmare: TheUnderside of the Nixon Years (Athens: Ohio University Press, 1999),

253.70Duringasix-houraerialinspection:Alam,233.70“Turningtothepracticalitiesoftheelection”:Ibid.70 Governor Nelson Rockefeller of New York placed a telephone call:Telcon,Kissinger-Rockefeller,2:58P.M.,July28,1972,NationalSecurityArchive.

71 At 1:45 P.M. Kissinger phoned Rockefeller: Telcon, Kissinger-Rockefeller,1:45P.M.,July29,1972,NationalSecurityArchive.

71 “[The Shah] had no control”: Author interview with Dr. JamesSchlesinger,June5,2009.

72torelayNixon’sresponse:Alam,233.72 to cough up a million dollars: Anthony Summers, The Arrogance ofPower:TheSecretWorldofRichardNixon(NewYork:Penguin,2000),396.

72 totaling $2 billion: Pranay Gupte, “Lobbyists in Iran Paid byGrumman,”NewYorkTimes,December13,1975.

72 fiscal year 1972–73 came to $2.8 billion: HosseinRazavi and FirouzVakil,ThePoliticalEnvironment ofEconomicPlanning in Iran, 1971–83:FromMonarchytoIslamicRepublic(Boulder:Westview,1984),63.

73 a secret $10 million Nixon presidential campaign fund: BernardGwertzman, “GAOReportAsks Justice Inquiry intoGOPFunds; Says‘Apparent Violations’ Were Committed by Nixon Re-electionCommittee,”NewYorkTimes,August27,1972.

73 Nixon’s “Mexican laundry”: “The Mexican Laundry and thePresidency,”WashingtonPost,September15,1972.

73fourcashier’schecksworth$89,000:Ibid.73 it was the president’s “wish”: Marjorie Hunter, “CIA Memo Said toQuoteHaldeman onNixon ‘Wish’ toHalt FBI Fund Study;Denial byEx-Aide,”NewYorkTimes,May22,1973.

73AndersonwasclosetoWatergateburglarFrankSturgis:AgisSalpukas,“Suspect in Raid on Democrats Drew $89,000 from Bank, Hearing IsTold,”NewYorkTimes,June24,1972.

73 “the Shah had routed hundreds of thousands of dollars”: JackAnderson, “Shah Link to Nixon Campaign Hinted,”Washington Post,June 10, 1974. FerdinandMarcos, the dictator of the Philippines, wasalso suspected of making illegal donations to the Nixon campaign in1972.Summers,396.

73“theShahhadtransferredmorethan$1million”:Ibid.73theNixoncampaigndiscourageddonations:Summers,396–97.

73 “It’s all very mysterious”: Jack Anderson, “Shah Link to NixonCampaignHinted,”WashingtonPost,June10,1974.

73Later,in1974,Andersongleefullyrecalled:Ibid.73“Ourinquiries,includingoverseascalls”:Ibid.74CIADirectorHelms...invitingAndersontolunch:“CIAFilesShow16AgentsSpiedonJackAndersoninOneDay,”LosAngelesTimes,May5,1977.

74OperationMudhen:Ibid.74 He asked Rogers to sue: Author interview with Ardeshir Zahedi,September14–15,2010.

74“ThePresident’spreoccupation”:ArthurF.BurnsHandwrittenJournals,JournalII(BlueNotebook),GeraldR.FordLibrary,November5,1971,135.

74AtelephonetranscriptfromFebruary1972:Telcon,Kissinger-Flanagan,12:35P.M.,February7,1972,NationalSecurityArchive.

75 “My lips are sealed”: Author interview with Henry Precht, June 4,2009.

75AmbassadorFarlandreceivedanoticefromtheWhiteHouse:Telegram192358, from theDepartmentofState to theEmbassy in Iran,October20,1972,2246Z,FRUS1969–76,Vol.E-4.

75“IwantedtopunchKissingerinthemouth”:Isaacson,453.75 “You don’t understand”: Stanley Karnow, Vietnam: A History (NewYork:Penguin,1997),663.

75OperationEnhancePlus:Ibid.76“entire Iranian air force”: Telegram 192358, from theDepartment ofStatetotheEmbassyinIran,October20,1972,2246Z,FRUS1969–76,Vol.E-4.

76“Nowistimetocashincredit”:Ibid.76“accelerateddeliveryofmilitaryequipment”:Telegram6317,fromtheEmbassy in Iran to theDepartmentofState,October21, 1972, 1520Z,FRUS1969–76,Vol.E-4.

76“Webelievethatpeaceisathand”:Isaacson,459.76anadditionalsixteenaircraft:Telegram196855,fromtheDepartmentofStatetotheEmbassyinIran,October30,1972,2115Z,FRUS1969–76,Vol.E-4.

77leftbehindapieceofpaper:Telegram6520,fromtheEmbassyinIrantotheDepartmentofState,October31,1972,1345Z,FRUS1969–76,Vol.E-4.

77“wewillhavetooffer”:Ibid.

77TheShahwasincensed:Telegram6611,fromtheEmbassyinIrantotheDepartmentofState,November4,1972,1405Z,FRUS1969–76,Vol.E-4.

77“atmosphereandspiritofgoodwill:Telegram6611,fromtheEmbassyin Iran to the Department of State, November 4, 1972, 1405Z,FRUS1969–76,Vol.E-4.

77Hedismissedasbogus:Telegram210666,fromtheDepartmentofStatetotheEmbassyinIran,November18,1972,1948Z,FRUS1969–76,Vol.E-4.

78“severalsalespreviouslyconsummated”:Ibid.

CHAPTERTHREE:MARITALVOWS

PAGE79“Wewelcomeyouhere”:“NixonandShahExchangePraise,ConferinOvalOffice,”NewYorkTimes,July25,1973.

79“Nixonhastheaudacitytotellme”:AsadollahAlam,TheShahandI:TheConfidentialDiaryofIran’sRoyalCourt,1969–1977(NewYork:St.Martin’s,1991),277.

79AmericanoilimportsfromSaudiArabia:“SaudiArabiaSupplyingMoreU.S.Oil,”NewYorkTimes,November11,1972.

80“the swing producer for the entireworld”: DanielYergin,The Prize:The Epic Quest for Oil, Money, and Power (New York: Simon &Schuster,1991),594.

8021percentofglobaloilproduction:Ibid.80 “Oil isn’t a weapon”: Rachel Bronson, Thicker than Oil: America’sUneasy Partnership with Saudi Arabia (Oxford: Oxford UniversityPress,2006),112.

80“Mymainworrywas”:GeoffreyRobinson,Yamani: The Inside Story(London:Simon&Schuster,1988),203.

80“Fuel policy emanates from everywhere”: “America’s EnergyCrisis,”Newsweek,January27,1973,39.

80 “Here we were”: Arthur F. Burns Handwritten Journals, Journal I(GreenNotebook),GeraldR.FordLibrary,May26,1971,141.

81“afieldKissingerknewnothingabout”:Walter Isaacson,Kissinger:ABiography(NewYork:Simon&Schuster,2005),428.

81“Peterson,that’sjustaminoreconomicconsideration”:Ibid.81“IdidnotreallywanttomakeHenrysecretaryofstate”:Ibid.,502.81“Ihadnotbeeninvolvedinthenegotiation”:HenryA.Kissinger,YearsofUpheaval(Boston:Little,Brown,1982),867.

81 On August 2, 1972, Connally phoned Kissinger: Telcon, Connally-Kissinger,12:32P.M.,August2,1972,NationalSecurityArchive.

82“I’vesortoflosttrack”:Telcon,Jamieson-Kissinger,9:05A.M.,August5,1972,NationalSecurityArchive.

82“wereusingus”:Telcon,Connally-Kissinger,1:40P.M.,August5,1972,NationalSecurityArchives.

83“thecompanieswouldbecomeinstrumentsofnations”:Kissinger,YearsofUpheaval,868.

83“if theyget intoaconfrontationwithus”:Telcon,Connally-Kissinger,1:40P.M.,August5,1972,NationalSecurityArchive.

83 “during a change of administration”: Richard Helms with WilliamHood, A Look over My Shoulder: A Life in the Central IntelligenceAgency(NewYork:Ballantine,2003),410.

83“ThePresidentrosefromasmallsofa”:Ibid.,411.84“newblood”:Ibid.84“Getridoftheclowns”:Ibid.,410.84blamedformerspychiefAllenDulles:Ibid.,382.84“Theexplanationsfor[Nixon’s]attitudes”:Ibid.84sanctioned lawbreaking: J.AnthonyLukas,Nightmare:TheUndersideoftheNixonYears(Athens:OhioUniversityPress,1999),29.

84lyingtothepublicandhisownemployees:Ibid.84“NixonandHelmshavesomuchoneachother”:StanleyI.Kutler,TheWarsofWatergate:TheLastCrisisofRichardNixon(NewYork:W.W.Norton,1992),201.

84“surprisedattheAgencypolicy”:RichardHelms,411.84“agoodbutcher”:Kutler,TheWarsofWatergate,100.84 “Suddenly, as if it were a totally new idea”: Cynthia Helms, AnAmbassador’sWifeinIran(NewYork:Dodd,Mead,1981),2.

85“flooredbytheprospect”:RichardHelms,411.85“I’mnotsurehowtheRussiansmightinterpret”:Ibid.85“That’sagoodpoint”:Ibid.,412.85“Iranisinanarea”:CynthiaHelms,2.85“DickandItalkedforlonghours”:Ibid.,3.85“He feels more positively about it”: Thomas Powers, The Man WhoKept the Secrets: Richard Helms and the CIA (New York: Alfred A.Knopf,1979),311.

86HaldemanandEhrlichmangossiped:Isaacson,466.86“He’sbeenundercare”:Ibid.86KissingerconfrontedHelms:RichardHelms,412.86“Iwassilentforamoment”:Ibid.86“Henrybristledabit”:Ibid.86 Their conversation on the evening of November 28, 1972: Telcon,Kissinger-Haldeman, 7:30 P.M., November 28, 1972, National SecurityArchive.

87“weunderstandwordhasgoneout”:Telegram7749,fromtheEmbassyinIranto theDepartmentofState,December27,1972,1318Z,MonicaBelmonte,Editor;EdwardC.Keefer,GeneralEditor,ForeignRelations

oftheUnitedStates,1969–1976,Vol.E-4,DocumentsonIranandIraq,1969–1972, Washington: United States Government Printing Office,OfficeoftheHistorian,BureauofPublicAffairs.

87“wasliterallyintearsofgrief”:Alam,264.87“for15minutesofyour time today”:Telcon,Farland-Kissinger,10:55(noA.M.orP.M.given),December23,1972,NationalSecurityArchive.

87 “you’re the best intelligence professional I know”: Telcon, Helms-Kissinger,11:30A.M.,December15,1972,NationalSecurityArchive.

87acallcamethroughtoinformhim:RichardHelms,412.88Helms’sbiographerThomasPower:ThomasPower,TheManWhoKepttheSecrets:RichardHelmsand theCIA (NewYork:AlfredA.Knopf,1979),310.

88theoiltankerOverseasAleutian:“SovietOilontheWaytoEastCoast;Amount Still Small, but It’s a Big ‘First’; Stocks Down from ’72,”ChristianScienceMonitor,January9,1973.

88Texaco, the company that serviced: Robert J. Samuelson, “3Airlines’FlightsDisruptedbyShortageofFuelinN.Y.,”WashingtonPost,January10,1973.

88Natural gas supplieswere cut off: ThomasO’Toole, “Lack of Fuel IsCripplingMiddleWest; 6Midwest StatesHurt by Shortages of Fuel,”WashingtonPost,January6,1973.

88TheDenverschoolsystemshutdown:Ibid.88aneternalflamededicatedtowarveterans:“EternalFlamePutOutduetoGasShortage,”HartfordCourant,January11,1973.

88 In Sioux City: Thomas O’Toole, “Lack of Fuel Is Crippling MiddleWest; 6Midwest StatesHurt by Shortages of Fuel,”Washington Post,January6,1973.

89postponedresumptionofclasses:“Oil-RichTexasUniversityCaughtinFuelShortage,”WallStreetJournal,January11,1973.

89 Mississippi’s chicken broiler industry: Gene Smith, “Northeast IsBracingItselfforPossibleEnergyCrisis,”NewYorkTimes, January15,1973.

89bargeswererequisitioned:Ibid.89“If anyone still needs evidence”: “NationWithout Power,”New YorkTimes,January21,1973.

89 “We’ve had a happy era of low costs”: “America’s Energy Crisis,”Newsweek,January22,1973,38.

89 250,000 tons of U.S. wheat: “Soviet Oil on the Way to East Coast;Amount Still Small, but It’s a Big ‘First’; Stocks Down from ’72,”

ChristianScienceMonitor,January9,1973.90 “the nation’s total energy resources”: “America’s Energy Crisis,”Newsweek,January22,1973,39.

90oilproductionpeakedat11.3millionbarrelsperday:Yergin,567.902.2millionbarrelsofoilperdayin1967to6.2millionbarrelsperdayin1973:Ibid.,567,591.

90 19 percent of domestic consumption in 1967 to 35 percent: Ibid. FormorenewsanalysisfromtheperiodonU.S.oilimports,seeRayVicker,“Fight over Fuel; Oil Crisis Points Up Huge Western Reliance onProducingNation,”WallStreetJournal,February4,1972,and,EdwardCowan,“OilImportsClimbingwithNoEndinSight;UpwardTrendtoU.S.AffluenceandFuelNeedsOil ImportsAreContinuing toClimb,”NewYorkTimes,May22,1973.

9070percentoftheworld’sprovenoilreserves:MarvinHowe,“InMiddleEast,OilPaystheWay,”NewYorkTimes,January21,1972.

90 the United States imported 28 million barrels of oil: David Ottaway,“Saudi Threat to Cut Oil Flow Million Barrels Daily Reported,” LosAngelesTimes,September5,1973.

90“Likeitornot,duringthenextdecade”:LawrenceMosher,“ArabOilPolicyMeansaCrisisforUS,”ChicagoTribune,September16,1973.

90“3millionbarrelsperdayofexcesscapacity”:Yergin,586.91“inlightofourlongfriendship”:Alam,277.91“Isaytohell”:Ibid.91wouldnothavetheircontractsrenewed:“IranTellsOilConsortiumPactWillNotBeRenewed,”NewYorkTimes,January24,1973.

92 a new five-year $32.5 billion economic development plan: “Iran TellsOilFirmstoSharplyIncreaseProductionorLeaveWhenPactsExpire,”WallStreetJournal,January24,1973.

92Iranianarmsordersexplodedfrom$500million:MemorandumforDr.Brzezinski, The White House, from Anthony Lake, National SecurityCouncil, “Attachment: One-Volume Compilation of Summaries ofDocuments Relating to the US-Iranian Relationship, 1941–79, January29, 1980,” Eric Hooglund, project editor, Iran: The Making of U.S.Policy,1977–80,NationalSecurityArchive(Alexandria,VA:Chadwyck-Healey,1990).

92 Richard Helms saw President Nixon: Memorandum of Conversation,2/14/73, folder “Nixon,AmbassadorHelms,”Box 1,National SecurityAdviser,GeraldR.FordLibrary.

93“IwantyounotjusttothinkofyourCIAbackground”:Ibid.

93 “As a matter of fact”: FISOHA interview with Richard Helms, byWilliamBurr,FoundationforIranianStudies,Washington,D.C.,July10and24,1985,2–63.

94“Whathappenedtoourunderstanding”:RichardHelms,412.94“our policymakers”: BernardGwertzman, “FulbrightWarns of aWaroverOil,”NewYorkTimes,May22,1973.

95asecretvisittoTehran:Alam,287.95“IfoundtheShahveryrelaxed”:MemorandumofConversation,9:50–10:40A.M.,Saturday,May12,1973,Dr.Kissinger’sOfficeintheWhiteHouse,NationalSecurityArchive.

95“shouldbeoutofhereinafewyears”:BernardWeinraub,“U.S.QuietlySendingServicementoIran,”NewYorkTimes,May2,1973.

96fivehundredAmericansoldiers,sailors,andMarines:Ibid.96“Hewantsthelateststuff”:Ibid.96OnthemorningofJune2:“U.S.OfficerShotDeadbyIranGunmen,”WashingtonPost,June3,1973.

96“Ashepassedakucheh”:CynthiaHelms,33.96TheHelmseshadarrivedinTehran:ThedatewasApril5,1973.“HelmsAssumesPostasIranAmbassador,”LosAngelesTimes,April6,1973.

97“It was like coming home again”: Bernard Gwertzman, “ItWas likeComingHomeAgain,”NewYorkTimes,July29,1973.

97“Aren’tyouannoyedthattheAmericans”:Ibid.97“WhyelsehasHelmsbeensenthere?”:JamesBill,TheEagleandtheLion: The Tragedy of American-Iranian Relations (New Haven: YaleUniversityPress,1988),213.

97 “May God save America!”: Arthur F. Burns Handwritten Journals,JournalI(GreenNotebook),GeraldR.FordLibrary,April22,1973,181.

97“evidently was the first foreign visitor”: “Nixon and Shah ExchangePraise,ConferinOvalOffice,”NewYorkTimes,July25,1973.

97“probably comedown to theoffice”: Telcon,Kissinger-ThePresident,11:25A.M.,July18,1973,NationalSecurityArchive.

98“allthosebeautifulbroads”:Isaacson,364.98 comparable to a moral vice: In his book onHenryKissinger,WalterIsaacson recorded several choice scenes in which Nixon expresseddispleasureatnewsreportsofKissingerontheHollywoodsocialcircuit.“He’smakingafoolofhimself,”NixontoldHaldemanononeoccasion.“Grownmenknowbetter.Henryhasgottostopthis.Dosomething.Dosomething.”Ibid.

98askedhisdaughterJulie:Telcon,Eisenhower-Kissinger,7:45P.M., July

10,1973,NationalSecurityArchive.98“Nixon’sSecretAgent”:“Nixon’sSecretAgent,”Time,Vol.99,No.6,Feb.7,1972.

98“Danny,whatI’mcallingyouabout”:Telcon,Kaye-Kissinger,7:55P.M.,July10,1973,NationalSecurityArchive.

99“greatadmiration”: Farah, Shahbanou of Iran, trans. FeliceHarcourt,MyThousandandOneDays(London:W.H.Allen,1978),120.

99enjoyed the company of continental blondes:William Shawcross,TheShah’s LastRide: TheFate ofAnAlly (NewYork: Simon& Schuster,1988), 339–41. Shawcross interviewed one ofMadame Claude’s girls,Ange,whoprovidedavividdepictionofhertimeastheShah’sfavoriteparamour.

99 “pimps”: Gholam Reza Afkhami, The Life and Times of the Shah(Berkeley:UniversityofCaliforniaPress,2009),51.

99“borncourtier”:Ibid.100“Theencountersdidnotalwaysconclude”:Ibid.,53.100“Farahknewaboutherhusband’sadventures”:Ibid.100anineteen-year-old:Shawcross,96.100exercisehisrightsasaMuslimhusband:Afkhami,53–54.100 “They have spread the rumor”: Habib Ladjevardi, ed.,Memoirs of

FatemehPakravan,HarvardIranianOralHistoryProject(Cambridge:CenterforMiddleEasternStudies,HarvardUniversity,1998),97–98.

100OnereportclaimedthatshefledtoEurope:Shawcross,96.Shawcrosswrote that the queen’s flight to Europewas in 1972.Alam’s diariesnowconfirmthattheGildaaffairunfoldedinthesummerof1973.

101 “sun-drenched red-carpeted platform”: “Nixon and Shah ExchangePraise,ConferinOvalOffice,”NewYorkTimes,July25,1973.

101“Wewelcomeyouhere”:Ibid.101 two hundred protesters across the street: Murrey Marder, “Shah

ArrivestoBidforBombers,”WashingtonPost,July25,1973.101atwo-hourtête-à-tête:Allcommentsfromthisfirstsessionoftalksare

quoteddirectlyfromMemorandumofConversation,MeetingwithHisImperialMajestyMohammadRezaShahPahlavi,ShahanshahofIranon Tuesday, the 24th of July at 10:43 A.M.–12:35 P.M., in the OvalOffice,NationalSecurityArchive.

101 blocked by Kissinger from sitting: Author interview with ArdeshirZahedi,September14–15,2010.

101controltheofficialtranscript:“Hewantedtowriteitinhisownway,”recalledZahedi.This explains thegaps in thehistorical recordnoted

byhistorianscurioustolearnmoreaboutNixon’spromisestotheShahonarmssales,oilprices,andnuclearenergy.Ibid.

101yawnedhiswaythroughthemeeting:Ibid.102thesecondroundoftalks:Allcommentsfromthissessionoftalksare

quoteddirectlyfromMemorandumofConversation,MeetingwithHisImperialMajestyMohammadRezaShahPahlavi,ShahanshahofIranon Tuesday, the 24th of July, 5:00–6:40 P.M., the Shah’s ReceptionRoomattheBlairHouse,NationalSecurityArchive.

106“arenewalof vows”:FISOHA interviewwith JamesSchlesinger,byWilliamBurr,FoundationforIranianStudies,Washington,D.C.,May15andJune27,1986,1–20.

106He sang “Tea for Two”: Donnie Radcliffe and Dorothy McCardle,“ChateaubriandandTonyMartin,”WashingtonPost,July25,1973.

106“unusualfriendlinesstoreporters”:Ibid.106“astraplesstubeofsequins”:LindaCharlton,“TheShahandEmpress

of IranAreFeted at aWhiteHouseStateDinner,”NewYorkTimes,July25,1973.

106“I can’t understandwhat it’s all about, can you?” DonnieRadcliffeand Dorothy McCardle, “Chateaubriand and Tony Martin,”WashingtonPost,July25,1973.

106“and rejected comparison”: DanaAdams Schmidt, “Shah ProclaimsIranNewest‘BigPower,’”ChristianScienceMonitor,July27,1973.

106givenhimeverythingheaskedfor:Alam,308.

CHAPTERFOUR:CONTINGENCIES

PAGE107 “It’s America’s inaction”: Asadollah Alam, The Shah and I: The

ConfidentialDiaryofIran’sRoyalCourt,1969–1977 (NewYork:St.Martin’s,1991),326.

107 “Can’t we overthrow one of the sheikhs”: Memorandum ofConversation, 11/29/73, folder “Kissinger, Schlesinger, Colby,Moorer,”Box2,NationalSecurityAdviser,GeraldR.FordLibrary.

107thelargestdesertwarfaretrainingexercises:“ReservistsJoinRegularsinMarineCorpsExercise,”WashingtonPost,August20,1973.

107 “Officially, no parallels are drawn”: David DeVoss, “The MarinesBattleforArgos,”Time,August27,1973,29.

107“Althoughmosttroopswerelectured”:Ibid.

108“Theytoldusnottosayanythingpolitical”:Ibid.108“ThePentagonhasacomputerplan”:Ibid.108“theentirewar,allitsbattles”:Ibid.108“Icangiveyoumyopinion”:Ibid.108 They retreated to their tents with crates of beer: “Reservists Join

Regulars in Marine Corps Exercise,”Washington Post, August 20,1973.

108Menfaintedintheheat:Ibid.108writinganarticleon skiing inEurope:DavidDeVoss, “TheMarines

BattleforArgos,”Time,August27,1973,29.108“Ourunitwassupposedtobeinatankbattle”:Ibid.108 “Can you picture Hogan’s Heroes”: “Reservists Join Regulars in

MarineCorpsExercise,”WashingtonPost,August20,1973.108“Goddamn!” screamedDennis: David DeVoss, “TheMarines Battle

forArgos,”Time,August27,1973,29.108“Comeonmen!”:Ibid.10930percentofitsoil:DanielYergin,ThePrize:TheEpicQuestforOil,

Money,andPower(NewYork:Simon&Schuster,1991),578.1092millionpeople:“TheArabWorld:Oil,Power,Violence,”Time,April

2,1973,19.109dailyexportsof2.3millionbarrelsofoil:“LibyaTakesMoreU.S.Oil

Firms,”WashingtonPost,September2,1973.109 expelled Libya’s Italian community: “The Arab World: Oil, Power,

Violence,”Time,April2,1973,19.109$200millionorder:Ibid.,18.109“ThisQaddafiisarealnut”:MemorandumofConversation,5/15/75,

folder“Ford,Kissinger,IranianShahMohammadRezaPahlavi,”Box11,NationalSecurityAdviser,GeraldR.FordLibrary.

10930centsabarrel:Yergin,580.109overrollsandarevolver:Thisepisodeisrecountedinibid.,579.109 “commercial bargaining”: Henry A. Kissinger, Years of Upheaval

(Boston:Little,Brown,1982),859.110 jumped 72 percent: “The ArabWorld: Oil, Power, Violence,” Time,

April2,1973,18.110“didnotasageneralpractice”:Kissinger,YearsofUpheaval,864.110“Ourhands-offpolicy”:Ibid.,865.110“increasinglyalarmedbytheescalatingdemands”:Ibid.,870.110“a quick word because I know”: Telcon, Clements-Kissinger, 10:14

A.M.,May15,1973,NationalSecurityArchive.

110“withextremeurgency”:Yergin,596.110 “because I don’t think anyone”: Telcon, Clements-Kissinger, 10:14

A.M.,May15,1973,NationalSecurityArchive.111“I had in all the heads of the companies”: Telcon, Rush-Kissinger,

7:10P.M.,May29,1973,NationalSecurityArchive.111“HenrywantedState”:WalterIsaacson,Kissinger:ABiography(New

York:Simon&Schuster,2005),503.112“Tellthepresidenttogofuckhimself”:Ibid.112“forNixonmyappointment”:Kissinger,YearsofUpheaval,423.112“inreducingTreasury’srole”:ArthurF.BurnsHandwritten Journals,

Journal II (Blue Notebook), Gerald R. Ford Library, April 4, 1974,200.

112“causeeconomictroublefortheFrench?”:Ibid.,April19,220–21.112“H.attimesstrikesmeasamadman”:Ibid.112theLibyanleaderannouncedtheexpropriation:HenryTanner,“Libya

Takes over All Oil Companies Operating There,” New York Times,September2,1973.

112hikingtheiroilpricesby30percent:DavidOtttaway,“SaudiThreattoCut Oil Flow Million Barrels Daily Reported,” Los Angeles Times,September5,1973.

112refusepaymentindollars:Ibid.112 “restrict oil production increases”: Jim Hoagland, “Faisal Seen

Backing Cairo by Using Oil to Press U.S.,” Washington Post,September2,1973.

1128.5millionbarrelsto20millionbarrels:Ibid.11211millionbarrelsofoilperday:NicholasC.Proffitt,“AnArabBlend

ofOilandPolitics:Faisal’sThreat,”Newsweek,September10,1973,15.

112require24million:Ibid.113from1.6billiontonsin1970to2.8billiontons:JuandeOnis,“Arabs’

EmergingOilStrategy,”NewYorkTimes,September4,1973.113anannual6.9percent:Ibid.113soaredby30percent:Ibid.113“Faisalisnobluffer”:NicholasC.Proffitt,“AnArabBlendofOiland

Politics:Faisal’sThreat,”Newsweek,September10,1973,13.113warnings provided to them: For details of the warning provided to

NixonandKissingerbyKingHusseinofJordan,seePatrickTyler,AWorld of Trouble: TheWhiteHouse and theMiddleEast—From theColdWar to theWaronTerror (NewYork:Farrar,Straus&Giroux,

2009),125.Soviet leaderLeonidBrezhnev’swarning isdescribed indetailinthesamebookonpages122–30.Nixon’saccountcanbereadinhismemoir.SeeRichardNixon,RN:TheMemoirsofRichardNixon(NewYork:Grosset&Dunlap,1978),885.

113 “The result would be catastrophic for them”: Memorandum ofConversationBetweenAbbaEban,IsraeliMinisterofForeignAffairs,and Dr. Henry Kissinger, Assistant to the President for NationalSecurityAffairs, Saturday,May 12, 1973, 9:50–10:40A.M., NationalSecurityArchive.

113“Sadatisnotbright”:Ibid.114“told us in August, 1973”: “Aramco Aide Says FaisalWarned U.S.

LastAugustofWar,”NewYorkTimes,February22,1974.114“Logic requires”: Nicholas C. Proffitt, “An Arab Blend of Oil and

Politics:Faisal’sThreat,”Newsweek,September10,1973,12.114“amoresuitablepoliticalatmosphere”:Ibid.115“keepthePersianGulf”:MemorandumofConversation,9/5/73,folder

“Kissinger,Schlesinger,”Box2,NationalSecurityAdviser,GeraldR.FordLibrary.

115 “Let’s talk contingency plans”: Ibid. When the author asked Dr.Schlesingertoreviewthetranscriptandplaceitincontext,hepausedbefore giving a considered and measured response. He said hemisspoke when he used the words “contingency plans” during hisSeptember5,1973,discussionwithKissinger.Acontingencyplan,heexplained,woulddescribewhat theUnitedStatesmightdo. ItwouldhavebeenmoreaccurateforhimtohavesaidtoKissinger,“Let’stalkcontingencies.”ThatwouldhaveimpliedwhattheIraniansmightdo.Left unsaidwas the reality that the Shahwould never have invadedand occupied Kuwait without receiving the permission of hisAmericanally.Schlesingerwas reluctant toprovidedetailsabout therole theShahwas supposed toplay inanyU.S.decision to seizeoilfields in Kuwait and Saudi Arabia. He did confirm that he had notbeenbriefedbyKissingeronthemeetingwiththeShahinBlairHouseinJuly1973whenPersianGulfcontingencyplanningwasfirstraised.HelefttheimpressionthathebelievedatthetimethathehadinheritedacontingencyplanpreparedbyU.S.officials—notonedeveloped inTehran. Dr. Schlesinger offered his views in an interview with theauthoronJune5,2009.

115“TheShahwantstoknowiftheF-14andF-15mix”:MemorandumofConversation,9/5/73,folder“Kissinger,Schlesinger,”Box2,National

SecurityAdviser,GeraldR.FordLibrary.115 “Oil without a market”: Bernard Gwertzman, “A Mideast Pledge:

PresidentIsSeekingaSettlementtoEndOilThreatsbyArabs,”NewYorkTimes,September6,1973.

116 “Because of our relationship with Nixon”: Author interview withArdeshirZahedi,September14–15,2010.

116“Itwashardlymarketforces”:Editorial,“Inflation,OilandthePressConference,”WashingtonPost,September9,1973.

116 “dangerous poppycock”: Rowland Evans and Robert Novak, “Mr.Nixon’sEmptyThreat,”WashingtonPost,September10,1973.

116 news reports of theMarine exercises in theMojave: Jim Hoagland,“ArabFear of InvasionStirsAngerTowardU.S.,”Washington Post,September24,1973.

116“to drop paratroopers”: Henry Tanner, “U.S. Neutrality onMideastUrged,”NewYorkTimes,October4,1973.

116“DotheythinkinWashington”:JimHoagland,“ArabFearofInvasionStirsAngerTowardU.S.,”WashingtonPost,September24,1973.

116“Nixongang”:Ibid.116“Thebacklashisdefinitelythere”:Ibid.117“MyGod,doesn’therealize”:RowlandEvansandRobertNovak,“Mr.

Nixon’sEmptyThreat,”WashingtonPost,September10,1973.117“Becausehewasadvisedbyafool”:HarryB.Ellis,“SaudisBecoming

‘Bankers’ to the World,’” Christian Science Monitor, October 10,1973.

117“areno longercompatible”:ClydeH.Farnsworth,“OilNationsWillAskRiseinPricesatOct.8Parley,”NewYorkTimes,September17,1973.

117The fourthArab-Israeliwar: RobertMacFadden, “Arabs and IsraelisBattleonTwoFronts;EgyptiansBridgeSuez;AirDuelsIntense,”NewYork Times, October 7, 1973; “Black October: Old Enemies atWarAgain,”Time,October15,1973,6.

117“Tellhimhe’sunderanobligation”:Alam,326.118aMiragejetloadedwithanatomicbomb:asrecalledinTyler,141.118EarlyonthemorningofOctober10:Foracompletetranscriptoftheir

conversation,seeKissinger-Schlesinger,8:27A.M.,October10,1973,NationalSecurityArchive.

118 to a dramatic and historic pause at 2:05 P.M.: James M. Naughton,“AgnewQuitsVicePresidencyandAdmitsTaxEvasionin’67;NixonConsultsonSuccessor,”NewYorkTimes,October11,1973.

118“withbarelytremblinghands”:Ibid.118PresidentNixonnominatedGeraldFord: JohnHerbers,“GeraldFord

Named by Nixon as the Successor to Agnew,” New York Times,October13,1973.

119 quit the talks: Felix Kessler, “Persian Gulf Oil Producers, WesternFirms Halt Talks; Concerns Mull OPEC Demands,” Wall StreetJournal,October10,1973.

119 “would have exceptionally serious”: Clyde H. Farnsworth, “TalksCollapseonOilPriceRise,”NewYorkTimes,October12,1973.

119At 12:49A.M. on Saturday,October 13: For a complete transcript oftheirconversation,seeSchlesinger-Kissinger,12:49A.M.,October13,1973,NationalSecurityArchive.

120“AsIsraelbegantofallapart”:Isaacson,521.120“Thestep isbeing taken”: JohnW.Finney,“U.S.ReportedReady to

ReplaceSome JetFightersLost in Israel,”NewYorkTimes, October14,1973.

120Nixon’snational security team: For a full transcript of theirmeeting,see Memorandum of Conversation, Approximately 9:16 A.M.–11:00A.M., Sunday, October 14, 1973, The Situation Room in the WhiteHouse,NationalSecurityArchive.

122 Saudi oil minister Zaki Yamani warned: Edward Cowan, “A SaudiThreatonOilReported,”NewYorkTimes,October16,1973.

1228.5millionbarrelsperday,with600,000ofthoseboundfor:Ibid.122“thepolicywefollowedin1958”:DanaAdamsSchmidt,“NixonHints

U.S.Intervention,”ChristianScienceMonitor,October16,1973.122 monthly 5 percent cuts in production: Richard Eder, “U.S. Chief

Target:ReductionIsSmallerThanExpected—EffectUncertain,”NewYorkTimes,October18,1973.

123from$3.01perbarrel to$3.65:“RiseinOilPricesSeemsaRecord,”NewYorkTimes,October19,1973.

12310percent:“SaudisCutOilOutputby10%toPutPressureonU.S.,”NewYorkTimes,October19,1973.

123from$4.90to$8.92:WilliamD.Smith,“CutoffinOiltoU.S.OrderedbyLibya,”NewYorkTimes,October20,1973.

123jumpedby70percent to$5.11:“Rise inOilPricesSeemsaRecord,”NewYorkTimes,October19,1973.

123“Wearemastersofourowncommodity”:Yergin,606.123“Stunned and confused”: William D. Smith, “Cutoff in Oil to U.S.

OrderedbyLibya,”NewYorkTimes,October20,1973.

123“whattheproducingcountriesappeartohavedone”:Ibid.123“atleastonemillionbarrels”:Ibid.123 fired Watergate special prosecutor Archibald Cox: Douglas E.

Kneeland,“NixonDischargesCoxforDefiance;AbolishesWatergateTask Force; Richardson and Ruckelshaus Out,” New York Times,October21,1973.

124 “not surprised”: “Oil Flow to U.S. Halted by Saudis,” New YorkTimes,October21,1973.

124The next day, Kuwait, Qatar, Bahrain, andDubai: Richard Eder, “4MoreArabGovernmentsBarOilSuppliesforU.S.,”NewYorkTimes,October22,1973.

124“asagitatedandemotionalasIhadeverheardhim”:Kissinger,YearsofUpheaval,581.

124“thosebastards”:Tyler,169.124 drunken stupor: In A World of Trouble, Patrick Tyler writes: “By

eveningonOctober 24,Nixon, exhaustedby theweek’s events,wasdrinking heavily. SeeTyler, 67. Presidential historianRobertDallek,notingHaig’sandKissinger’sopinionthatNixonwas“toodistraughttoparticipateinthepreliminarydiscussion,”raisedthepossibilitythatthepresidentwasnotonlyinebriatedbutsedatedduringthecrisis.SeeRobertDallek,NixonandKissinger:Partners inPower (NewYork:HarperCollins, 2007), 530.RogerMorris, aNixon aide, later quotedaidestoKissingerassayingNixonwas“upstairsdrunk...slurringhiswordsandbarely rousedwhenHaigandKissinger tried todealwithhim in the firstmoments of the crisis.” SeeAnthony Summers,TheArroganceofPower:TheSecretWorldofRichardNixon (NewYork:Penguin,2000),460.

125KissingeraskedHaigifheshouldwakeupthepresident:Dallek,530.125“NoIhaven’t”:Ibid.125“whowasshuttlingbackandforth”:AuthorinterviewwithDr.James

Schlesinger,June5,2009.125“Haig reported that the President was about and following events”:

Ibid.125“stooddowntheirforces”:Ibid.126“increases readiness without the determination”: Kissinger,Years of

Upheaval,587–88.126 he told his colleagues that Nixon: In Years of Upheaval, Kissinger

alleges thathe“didnotknowwhatconversationsHaighadhadwithNixonintheearlyhoursofthemorning.”Infact,Kissingerknewvery

wellthepresidentwaspassedoutupstairsintheResidence,andthatheandHaighadengagedinanelaboratedeceptionwiththeircolleaguesto hide the extent of Nixon’s true condition. Kissinger, Years ofUpheaval,593.

126Kissinger turned to Admiral ThomasMoorer: Author interviewwithDr.JamesSchlesinger,June5,2009.

126 To reinforce the message: The additional steps are outlined inKissinger,YearsofUpheaval,589.

126“tomoveatfullspeed”:Ibid.,589.126“sped to secret positions off the Soviet coast, prepared to launch”:

Summers,460.126“Ifwecan’tdowhatisright”:Kissinger,YearsofUpheaval,589.126“YouandIweretheonlyonesforit”:Dallek,530.126“dreadfullyanxious”:Alam,330.126 Kissinger telephoned Israeli ambassador Simcha Dinitz: For a

complete transcript of their conversation, see Kissinger-Dinitz, 9:38A.M.,October26,1973,NationalSecurityArchive.

127120,000barrelsofoilperday:DrewMiddleton,“U.S.AirForceandNavy Help on Saudis’ Defenses,” New York Times, November 18,1973.

128aSoviet flotillaofninetyvessels: Ibid.;DrewMiddleton,“U.S.NavySetback Giving Soviet an Edge in Mideast,” New York Times,November10,1973.

128“Well,weonlyhaveonefacility”:Telcon,Schlesinger-Kissinger,3:03P.M.,October23,1973,NationalSecurityArchive.

128“TheNavalWarCollege”:AsrecountedinJeffreyRobinson,Yamani:TheInsideStory(London:Simon&Schuster,1988),101.

128thefirstshipmentofNorthropF-5Ejetfighters:DrewMiddleton,“U.S.Air Force and Navy Help on Saudis’ Defenses,” New York Times,November18,1973.

128thirtyPhantomF-4aircraft:Ibid.128“We are tracking down”: Juan de Onis, “Saudi Arabia Is Tracking

‘Every’BarrelofU.S.Oil,”NewYorkTimes,November6,1973.129 met over breakfast on Saturday, November 3: Memorandum of

Conversation, 11/03/73, folder “Kissinger, Schlesinger, Colby,Moorer”Box2,NationalSecurityAdviser,GeraldR.FordLibrary.

129 itsnativepopulation:EdwardR.F.Sheehan,“UnradicalSheiksWhoShaketheWorld,”NewYorkTimesMagazine,March24,1974.

129“IwaspreparedtoseizeAbuDhabi”:Robinson,102.Dr.Schlesinger

toldJefferyRobinson,authorofYamani,thathehadbeenpreparedtoorder the invasionofAbuDhabi.Butheprovidedno informationonthe actualmilitary planning thatwas involved.He confirmed to thisauthor the validity of those attributed statements.He also confirmedthattheinvasionwouldhavebeenanamphibiousoperationinvolvingtheMarines.DeclassifiedtranscriptsoftheWashingtonSpecialActionGroupmeetingsin1973providerevealingnewdetailsandsuggestthatthe plan came closer to activation than anyone outside the WhiteHouseeverknew.Indeed,Schlesinger’sremarksconfirmthatMarineswerebeingmovedintoplaceinthelastweekofNovemberandreadiedforaction.Inhisinterviewwiththeauthor,Dr.Schlesingerconfirmedthatversionofevents.

129“Somethingsmall”:Ibid.129 “Abu Dhabi would give us what we want”: Memorandum of

Conversation, 11/03/73, folder “Kissinger, Schlesinger, Colby,Moorer”Box2,NationalSecurityAdviser,GeraldR.FordLibrary.

130theShahreceivedformalnotification:Alam,330.131“allowanyforeignpowertoestablish”:DevMuraka,“GrowingU.S.

TiestoIranIrkKremlin,”ChristianScienceMonitor,June5,1975.131“opined that theWatergate affair”: National Security Council Files,

VIPVisits,Visitof theShahof Iran,July24–26,1973(1of2),Box920,NationalArchives,CollegePark,MD.

131stoppedreceivingfortnightlyreports:Alam,316.1318.3 million barrels to 6.2 million barrels: Juan de Onis, “Kissinger

FailstoSwaySaudisfromOilEmbargo,”NewYorkTimes,November10,1973.

131 “You can make Israel withdraw”: Memorandum of Conversation,11/29/73, folder “Kissinger, Schlesinger, Colby, Moorer,” Box 2,NationalSecurityAdviser,GeraldR.FordLibrary.

132“for the time being”: Bernard Gwertzman, “U.S. Retaliation on OilRejected,”NewYorkTimes,November20,1973.

132“countermeasures”:MarilynBerger,“ArabsWarnedbyKissingeronOilCutoff,”WashingtonPost,November22,1973.

132“because yourwhole economy”: “Saudi ArabiaWarns U.S. AgainstOilCountermoves,”NewYorkTimes,November23,1973.

132 Kuwait laid land mines: “Kuwait Threatens Oilfield DestructionShouldU.S.StepIn,”NewYorkTimes,January10,1974.

132“the Arab character of Jerusalem”: “Faisal Interview,”WashingtonPost,November23,1973.

132 “They think we knocked off [King] Idris”: Memorandum ofConversation, 11/29/73, folder “Kissinger, Schlesinger, Colby,Moorer,”Box2,GeraldR.FordLibrary.

132“averyinterestingmessagefromSaudiArabia”:Telcon,Schlesinger-Kissinger,10:15A.M.,November28,1973,NationalSecurityArchive.

133 “is a friend of the United States”: Memorandum of Conversation,11/29/73, “Kissinger, Schlesinger, Colby, Moorer,” Box 2, NationalSecurityAdviser,GeraldR.FordLibrary.

133 Eighty-nine percent of the fuel: Memorandum from the President’sAssistantforNationalSecurityAffairs(Kissinger)toPresidentNixon,Washington,October22,1970,MonicaBelmonte, editor;EdwardC.Keefer,GeneralEditor,ForeignRelationsoftheUnitedStates,1969–1976,Vol.E-4,DocumentsonIranandIraq,1969–1972,Washington:United States Government Printing Office, Office of the Historian,BureauofPublicAffairs,Vol.E-4.

134 “Can’t we overthrow one of the sheikhs”: Memorandum ofConversation,11/29/73,“Kissinger,Schlesinger,Colby,Moorer,”Box2,GeraldR.FordLibrary.

134“The energy crisis is likeWatergate”: “ATime of Learning to LivewithLess,”Time,December3,1973,35.

134“throughthewind-blownAtlantic”:Ibid.,33.134reduceprivateautomobileuseby30percent:Ibid.134impactofa9.6percentjump:Ibid.13418percentreduction:Ibid.135“proprietorofalicensedhouseofprostitution”:Ibid.,35.135“hasfoundawaytoretainheat”:Ibid.135“Tellthepeopletoturnofftheirelectricblanketsandcuddle”:Ibid.135awomanwascrushedtodeath:Ibid.,46.135gossipexchangedbetweentwoshoppers:Ibid.135 “It’s a mad final fling”: “The Beleaguered Islands,” Newsweek,

November26,1973,38.135shedding133points: “ATimeofLearning toLivewithLess,”Time,

December3,1973,34.135pricesofCadillacscollapsed25percent:Ibid.,35.135closingsixteenassemblyplants:Ibid.135 10 percent reduction in oil consumption: “Prospects for America,”

Newsweek,December3,1973,40.136“Oil is like bread”: “Shah Asks End of Oil Embargo,”Washington

Post,November23,1973.

136“In theirhearts”:Author interviewwithArdeshirZahedi,September14–15,2010.

CHAPTERFIVE:OILSHOCK

PAGE137 “If I was the President”: Telcon, Scowcroft-Kissinger, 9:35 A.M.,

January30,1974,NationalSecurityArchive.137 “To hell with Kissinger”: Asadollah Alam, The Shah and I: The

Confidential Diary of the Royal Court, 1969–1977 (New York: St.Martin’s,1991),366.

137FifteenmilesoutsideTehran:TheArmyDaycelebrations followedahighly scripted format each year. This account includes importantdetailsprovidedbyImperialCourtMinisterAsadollahAlam,andalsobytheAmericanwriterRichardT.Sale,whowroteaboutArmyDayinthefourthofaseriesofhighlycriticalarticlesonIranthatappearedinTheWashingtonPostin1977.RichardT.Sale,“ArmyIstheKeystonetotheShah’sPower,”WashingtonPost,May11,1977.

137“silverbreastplatesandhelmets”:Ibid.137aflyoverof150Phantomjets:Alam,343.138 two secret auctions: William D. Smith, “Price Quadruples for Iran

CrudeOil,”NewYorkTimes,December12,1973.138 less than 4 percent of Iran’s: Bernard Weinraub, “Iran Keeps Oil

Flowing Despite Reported Pressure from Arabs,” New York Times,December18,1973.

13843 percent of the petroleum consumed: BernardWeinraub, “Shah ofIran Urges Arabs to End Their Oil Embargo,” New York Times,December22,1973.

138 pulling their money from American banks: Clyde H. Farnsworth,“ArabsCut Funds atBanks ofU.S.,”NewYorkTimes,December7,1973.

138another750,000barrels:JuandeOnis,“ArabsSetNewOilCutbacks,”NewYorkTimes,December9,1973.

138“dumbfounded”and“flabbergasted”:BernardWeinraub,“RecordOilPrices in Iran Are Expected to Affect Arabs,” New York Times,December16,1973.

138$17.40perbarrel:WilliamD.Smith,“PriceQuadruplesforIranCrudeOil,”NewYorkTimes,December12,1973.

138$1.5billioninnewgovernmentrevenues:BernardWeinraub,“RecordOil Prices in Iran Are Expected to Affect Arabs,”New York Times,December16,1973.

138“Therearealotofpeoplegroping”:Ibid.138“Thecountriesseehowhungry”:Ibid.138“wanandweary”:BernardWeinraub, “Shah of IranUrgesArabs to

EndTheirOilEmbargo,”NewYorkTimes,December22,1973.139“untilshaleorgasificationofcoalbecomesprofitable”:Memorandum

ofConversation,MeetingwithHisImperialMajestyMohammadRezaShahPahlavi,ShahanshahofIranonTuesday,the24thofJulyat10:43A.M.–12:35P.M.,intheOvalOffice,NationalSecurityArchive.

139 “Of course it’s going to rise”: Oriana Fallaci, “An Oriana FallaciInterview:TheShahofIran,”TheNewRepublic,December1,1973.

139from5.8millionbarrelsperday:MemofromtheStateDepartmenttoNationalSecurityAdviser,NationalSecurityCouncilFiles,VIPVisits,VisitoftheShahofIran,July24–26,1973(1of2),Box920,NationalArchives,CollegePark,MD.

139“You’veincreasedthepriceofthewheatyousellus”:OrianaFallaci,“AnOrianaFallaci Interview:TheShahof Iran,”TheNewRepublic,December1,1973.

140“explosive deficit in the balance of payments”: Hossein Razavi andFirouzVakil,ThePoliticalEnvironmentofEconomicPlanninginIran,1971–1983:FromMonarchytoIslamicRepublic(Boulder:Westview,1984),62.

140“Iranianpurchasesandorders”:MemofromtheStateDepartmenttoNationalSecurityAdviser,NationalSecurityCouncilFiles,VIPVisits,VisitoftheShahofIran,July24–26,1973(1of2),Box920,NationalArchives,CollegePark,MD.

141Major items on the Shah’s shopping list: The items are listed in theStateDepartment’smemotoKissinger.Ibid.

141Moscow’snewrapidmobilityforce:RobertGraham,Iran:TheIllusionof Power, rev. ed. (London: Croon Helm, 1979), 177. The Soviets’rapid mobility force had also been a top concern of White Houseofficialswhen they declared their nuclear alert inOctober 1973 (seeChapter4).

141“Although Iran’s economic growth was averaging”:Michael Raoul-Duval Papers (Domestic Council; White House IntelligenceCoordinating Group; White House Operations Office), OPECObjectives—FEAStudy (1)-(2), Box 6, Prepared for FrankG. Zarb,

Administrator,FederalEnergyAdministration,byInternationalEnergyAffairs,April4,1974,GeraldR.FordLibrary.

141The$36billionFifthPlan:Graham,79.141annualeconomicgrowthrateof11.4percent:RazaviandVakil,70.141“perilouslyclosetoabsorptivecapacity”:Ibid.141Theonethirdofthestatebudget:Graham,170.142“Thepressuresforanincrease”:RazaviandVakil,70.142“anticipatedinflowsoffinancialresources”:Ibid.,68.142“signaledthattherewasindeedanunderstanding”:Ibid.142 “that he thought there was a growing gap”: Memorandum for Dr.

HenryA.Kissinger, Assistant to the President for National SecurityAffairs,fromMr.KermitRoosevelt,April26,1972,“MeetingwiththeShahofIran,”NationalSecurityArchive.

142plottoeitherkillorkidnap:“12AccusedinIraninPlottoKillShah,”NewYorkTimes,October3,1973.

142“somesortofblooddisorder”:GholamRezaAfkhami,TheLife andTimes of the Shah (Berkeley: University of California Press, 2009),548.AccordingtoQueenFarah,thesymptomsofherhusband’sillnessfirst appeared in the “autumn of 1973.” See Farah Pahlavi, AnEnduringLove:MyLifewith theShah (NewYork:Miramax, 2004),242.

144“listless; lookedsad”:ArthurF.BurnsHandwrittenJournals,JournalII(BlueNotebook),GeraldR.FordLibrary,December6,1973,200–204.

144“nottheslightestunderstanding”:Ibid.144Helmslefttheirmeeting:Alam,350.144“So we charged experts to study”: “A Talk with the Shah of Iran,”

Time,April1,1974,41.145TheBritishambassadorlatertoldAlam:Alam,348.145“thathehadassumed”:WalterIsaacson,Kissinger:ABiography(New

York:Simon&Schuster,2005),563.145“couldnotunderstand”:Telcon,Kissinger-Anderson,3:10P.M.,June5,

1975,NationalSecurityArchive.145“useourinfluenceformoderation”:Kissinger,YearsofUpheaval,885.146 “we are establishing the prices ourselves”: The U.S. embassy in

Tehran obtained a summarized text of the Shah’s remarks andforwarded them toWashingtononJanuary23,1974.“DepartmentofStateAirgramfromAmericanEmbassyinTehran,onShah’sRemarkstoDelegates to TehranOPECMeeting, January 23, 1974,”National

SecurityArchive.146 double the price of a barrel of oil: Bernard Weinraub, “Oil Price

Doubled by Big Producers on Persian Gulf,” New York Times,December24,1973.

146“Theindustrialworldwillhavetorealize”:Ibid.146 470 percent: “Arab Oil Has Gone Up 470% in a Year,” New York

Times,December30,1973.146$112 billion: “Faisal andOil:Driving Toward aNewWorldOrder,”

Time,January6,1975,8.146Iranquadrupleditsoilrevenues:Ibid.,11.146toclimbto$98billion:Graham,79.147 50 percent a year: “Faisal and Oil: Driving Toward a New World

Order,”Time,January6,1975,11.147soaredfrom$3.9billionto$24billion:Ibid.,12.147“Amongotherthings,thismeans”:“ArabOilHasGoneUp470%ina

Year,”NewYorkTimes,December30,1973.147Francecalculated:“Energy:HowHighIsUp?”,Newsweek,January7,

1974,22.147 Spain’s $500 million trade surplus: Joe Gandelman, “Madrid Loses

SomeofItsGlow,”ChristianScienceMonitor,October29,1976.147“Inpushingupprices”:“TheShahGoestotheBrink,”TheEconomist,

December29,1973,22.147“Theoilincreasetousis$10billion”:MemorandumofConversation,

December28,1973,“Kissinger,Schlesinger,Colby,Moorer,”Box3,NationalSecurityAdviser,GeraldR.FordLibrary.

147“We had a policy in the Department of Defense”: Author interviewwithDr.JamesSchlesinger,June5,2009.

148“Kissinger had nothing to contribute”: Arthur F. BurnsHandwrittenJournals,JournalII(BlueNotebook),GeraldR.FordLibrary,January8,1974,214.

148“Thediplomaticresponsewastotry”:FIOSHAinterviewwithRichardHelms,byWilliamBurr,FoundationforIranianStudies,Washington,D.C.,July10&24,1985,1–37.

148“AsIrecall,HisImperialMajesty”:Alam,350.149 “I was involved in delivering”: FIOSHA interview with Richard

Helms,byWilliamBurr,FoundationforIranianStudies,Washington,D.C.,July10&24,1985,1–37.

149 “idiot”: Alam wrote that on the eve of the Tehran conference theBritish ambassador read the morning’s papers and realized that

somethingwasafoot.Hewrotea letter forAlam togive to theShahexpressingconcern“thatOPECisgreatlytoincreasethepostedpriceofGulfcrude.”Theambassadorwrote thenotebefore theShahheldthepressconferenceandbeforethefinalpricewasannounced.Alam,348. This exchangemakes clear that theBritish ambassador did notknowoftheShah’srealintentions.

149 “relations between the United States and the Saudis”: AuthorinterviewwithDr.JamesSchlesinger,June5,2009.

149 a secretly recorded telephone conversation: Telcon, Kissinger-Anderson,3:10P.M.,June5,1975,NationalSecurityArchive.

150 authorize an increase in Iranian oil production: DanMorgan, “IranAsksGoodsforOil,”WashingtonPost,January18,1974.

150 “enable Iran”: Memo from the State Department to the NationalSecurityAdviser;NationalSecurityCouncilFiles,VIPVisits,Visitofthe Shah of Iran, July 24–26, 1973 (1 of 2), Box 920, NationalArchives,CollegePark,MD.

151“definitelyusingoilasa lever”:DanMorgan,“IranAsksGoods forOil,”WashingtonPost,January18,1974.

151 The president had flown out to California: “Energy: How High IsUp?,”Newsweek,January7,1974,18.

151 “Look at Amin”: Memorandum of Conversation, 2/9/74, “Nixon,Kissinger, Shultz, Simon,”Box3,National SecurityAdviser,GeraldR.FordLibrary.

151withfistsandknives:“PanicatthePump,”Time,January14,1974,17.151whatlookedlikeahandgrenade:Ibid.151“Youaregoingtogivemegas”:Ibid.151gasolinetruckswerehijacked:Ibid.,18.151Motorists inHawaii: “TheTimesTheyAreA-Changin’,”Newsweek,

February18,1974,22.152“andtherehavebeenscoresoffistfights”:Ibid.,20.152TruckersbesiegedthetownofStreator:Ibid.,21.152“Thekeyduringthatperiod”:AuthorinterviewwithFrankZarb,June

11,2009.152gas lines in thenation’scapital: “TheTimesTheyAreA-Changin’,”

Newsweek,February18,1974,19.152“Iwentintoaline”:Telcon,Kissinger-Sisco,9:20A.M.,February18,

1974,NationalSecurityArchive.152 “If I was the President”: Telcon, Kissinger-Scowcroft, 9:35 A.M.,

January30,1974,NationalSecurityArchive.

152 traffic deaths: Memorandum of Conversations, 2/21/74, “CabinetMeeting,”Box3,NationalSecurityAdviser,GeraldR.FordLibrary.

153amanwho“terrified”hisstaff: JudyBachrach,“WilliamSimon, theEnergeticCzar,”WashingtonPost,January13,1974.

153“Cleanoffyourdesk”:Ibid.153hecontributed$15,000:WilliamE.SimonwithJohnM.Caher,ATime

forReflection:AnAutobiography(Washington,D.C.:Regnery,2004),54.

153“AlbertSpeer’sposition”:Ibid.,84.153“A Fitzgerald Hero inWashington”: “TheWhirlwind Confronts the

Skeptics,”Time,January21,1974,22–27.153Heworkedtillteno’clockeachnight:JudyBachrach,“WilliamSimon,

TheEnergeticCzar,”WashingtonPost,January13,1974.153halfanhouradayatmost:Ibid.153emptyingbucketsof coldwater:BenjaminWallace-Wells, “Giuliani’s

PolicyProfessor,”WashingtonPost,October26,2007.153“fun,charming,enchantingandwitty”:Simon,120.153“NO!EastCoastEstablishment!”:Ibid.,65.153“IthoughtthatSimonwasawipe-out”:Telcon,Nixon-Kissinger,7:00

P.M.,January23,1974,NationalSecurityArchive.154“He has himself locked in concrete”: Telcon, Nixon-Kissinger, 5:35

P.M.,February5,1974,NationalSecurityArchive.154“in the presence of our ambassador”: Telcon, Kissinger-Haig, 5:31

P.M.,February6,1974,NationalSecurityArchive.154 Nixon held a thirty-five-minute meeting: Memorandum of

Conversation, 2/7/74, “Nixon, Ambassador al-Sowayel, Scowcroft,”Box3,NationalSecurityAdviser,GeraldR.FordLibrary.

155“whatoughttohappen”:Telcon,Nixon-Kissinger,9:04A.M.,October14,1973,NationalSecurityArchive.

155American newspapers republished his interview: Oriana Fallaci, “AnOriana Fallaci Interview: The Shah of Iran,” The New Republic,December1,1973.

155 “The sugar-coated image”: “Shah of Iran: Visions, Wives.” LosAngelesTimes,January7,1974.

156“two or three times”:Wolfgang Saxon, “Shah Finds No Cut in OilFlowtotheU.S.,”NewYorkTimes,February24,1974.

156“created tremors inWashington”: William D. Smith, “OilWatchersFocusontheShahofIran,”NewYorkTimes,March7,1974.

156hegashedhishead:Simon,88.

156“inconsiderablepainanddiscomfort”:Ibid.,89.156 “irresponsible and just plain ridiculous”: “Denies Shah’s Charge,”

ChicagoTribune,February26,1974.156“AreyoutellingmetheShahofIran”:Simon,89.156“I’ll say this Mr. Simon”: Tim O’Brien, “Defends Nixon on Crisis

‘End,’”WashingtonPost,February27,1974.156twenty-four-hourSecretServiceprotection:Simon,93.157“IremembertheSecretService”:Ibid.157 “well-placed sources”: “Simon May Have Hurt Chance for

Promotion,”ChicagoTribune,February27,1974.157“consternation and anger”: “Iran Considered Action Against U.S.,”

WashingtonPost,March2,1974.157Heapologized:Alam,361.157“TheShah,inmyopinion”:Simon,89.157“WearegoingalloutnowontheSaudis”:Telcon,Kissinger-Clements,

2:45P.M.,March7,1974,NationalSecurityArchive.158 “as you know, Mr. President”: Telcon, Nixon-Kissinger, 5:50 P.M.,

March11,1974,NationalSecurityArchive.158“WashingtonreliesonZakiYamani”:Alam,359.158Theoilembargowaslifted:JuandeOnis,“MostArabLandsEndBan

onOilShipmentsforU.S.;SaudisPlanOutputRise,”NewYorkTimes,March19,1974.

158raisingoilpricesbyafurther5percent:JuandeOnis,“SaudisSaidtoHaveIssuedUltimatumtoPreventOil-PriceIncreaseatParley,”NewYorkTimes,March20,1974.

1588.3millionbarrelsaday:WilliamD.Smith,“SaudiOilOutputUpbyMillionBarrels,”NewYorkTimes,March26,1974.

15811.2millionbarrelsaday:Ibid.158increaseof37percent:Ibid.159Iraq’sSaddamHussein:DanielYergin,ThePrize:TheEpicQuestfor

Oil,Money,andPower(NewYork:Simon&Schuster,1991),614.1599percentofthe55.8millionbarrelsofoil:Ibid.159“madeevenmoresevere”:Ibid.159Kissingerhostedatop-levelmeeting:Thecommentsmadeduringthis

meeting can be found in Secretary’s Meeting with Oil CompanyExecutives, Friday, March 29, 1974, 5:15 P.M., National SecurityArchive.

160“Thisreflectsasharpacceleration”:“InflationRisesto2-DigitRatein17Countries,”LosAngelesTimes,April12,1974.

160 Rates of inflation: “Faisal and Oil: Driving Toward a New WorldOrder,”Time,January6,1975,12.

160$10billionfuelbill:Ibid.160riceharvestscollapsed40percent:Ibid.162 “The desire of Iran’s leadership”: Michael Raoul-Duval Papers

(Domestic Council; White House Intelligence Coordinating Group;WhiteHouseOperationsOffice),OPECObjectives—FEAStudy (1)-(2),Box6,PreparedforFrankG.Zarb,Administrator,FederalEnergyAdministration,byInternationalEnergyAffairs,April4,1974,GeraldR.FordLibrary.

163 “Iran is not a volcano”: Mohamed Heikal, The Return of theAyatollah: The Iranian Revolution from Mossadeq to Khomeini(London:AndréDeutsch,1981),104.

163theShahbrokefromhisvacation:Alam,362.163“In the33rdyearofanoftenuncertainreign”:“Oil,Grandeuranda

ChallengetotheWest,”Time,November4,1974,28.163“ButIhavesomanyaspirations”:Alam,360.163whoaskedhimtosend:Ibid.,363.164“Iwastold”:EmailfromKambizAtabai,officeofHerMajestyQueen

FarahPahlavi,October30,2010,totheauthor.164Dr. Fellinger later recalled: Fellinger made his observations on the

Shah’sdiagnosis toDr.AmirAslanAfshar,anaide to theking,afterthe revolution.Afshar recalledhisdiscusionwithDr.Fellinger in aninterview with Dr. Mostafa Alamouti in November 2003. Theinterviewcanbeaccessedonlineatwww.iranvajahan.net.

164 ending his association: Author interview with Kambiz Atabai,November2,2010.

165“Hadhegone”:Ibid.165commentedonhiswanappearance:BernardWeinraub,“ShahofIran

UrgesArabstoEndTheirOilEmbargo,”NewYorkTimes,December22,1973.

165Pompidou’squietdetermination:Alam,361.165 “Pompidou is dying”: Memorandum of Conversation, 9/5/73,

“Kissinger, Schlesinger, Wickham, Scowcroft,” Box 2, NationalSecurityAdviser,GeraldR.FordLibrary.

165 “had an analysis made”: Memorandum of Conversation, Sir AlecDouglas-Home, Foreign and Commonwealth Secretary of GreatBritain and Dr. Henry A. Kissinger, Secretary of State, Tuesday,February26,1974,9:07A.M.–10:45A.M.,NationalSecurityArchive.

165“twocarswithflashinglights”:FarahPahlavi,AnEnduringLove,244.166Flandrintooknote:Ibid.,245.166“asfarashewasconcerned”:Ibid.,247.166Theysettledonadiagnosis:Ibid.166 “We have to prepare”: Author interview with Kambiz Atabai,

November2,2010.166“TheShahispushing”:Ibid.166“TohellwithKissinger”:Alam,366.167Cabindaoilwas low in sulfur:ArthurVecsey, “Perspective:Portugal

FeelingBurdenofColonies,”ChicagoTribune,May1,1974.167Portugal’s$400millioninincome:Ibid.167$650millionannualcost:Ibid.167 “Discontent over unchecked inflation”: “Portugal’s Army Seizes

ControlandProclaimsDemocraticGoal,”NewYorkTimes,April26,1974.

168$200millionmilitarybaseatBandarAbbas:DrewMiddleton,“ShahofIranDueinU.S.toSeekWeapons,”NewYorkTimes,July22,1973.

168$600millionnavalbaseat:Ibid.168securean“option”:Theword“option”wasusedbythenSecretaryof

DefenseSchlesingertodescribewhathereferredtoas“conversations”betweenthePentagonandIranianofficialsoverChabahar:“Ihavenodoubt that therewere exploratory conversations on the part of navalofficers with their Iranian counterparts regarding the availability ofbases in the Indian Ocean during periods of emergency. Indeed, Ivaguely recall those conversations.But that is quite different from acommitmentasisimpliedhere.AcommitmentbytheUnitedStatestouse certain facilities. Commitment is the wrong word. If they wereseeking options on those facilities, that would have been quiteappropriate. And indeed I expect that that indeed was the case.” Infact,underthetermsofthetreatysignedbetweenIranandtheSovietUnionin1962,theShahhadpromisedMoscowhewouldneverallowtheconstructionof rocketlaunchingsitesbyoutsidersonIraniansoil.Schlesinger’s use of the word “option” suggests that Tehran andWashingtonwere looking forways to avoid needlessly antagonizingtheSovietUnion,whichwasalwayssensitivetobaseconstructiononitssouthernperiphery.FISOHAinterviewwithJamesSchlesinger,byWilliamBurr,FoundationforIranianStudies,Washington,D.C.,May15andJune27,1986,2–53.

CHAPTERSIX:CRUELSUMMER

PAGE169 “The financial markets”: Memorandum of Conversation, 7/9/74,

“Nixon,Simon,Scowcroft,”Box4,NationalSecurityAdviser,GeraldR.FordLibrary.

169 “I will have to meet and talk with the Shah”: Memorandum ofConversation, 7/30/74, “Nixon, Simon, Rush, Scowcroft,” Box 4,NationalSecurityAdviser,GeraldR.FordLibrary.

169the“queenbeeatthecenterofthehive”:Ibid.169“Ifyouhavemoney”:HenryMitchell,“HenryandthePrinceand1,400

Guests,”WashingtonPost,June8,1974.169 sworn in almost a month earlier: Bill Simon was confirmed by the

CongressasthenewtreasurysecretaryonApril30,1974,andswornin on May 8. William E. Simon with John M. Caher, A Time forReflection: An Autobiography (Washington, D.C.: Regnery, 2004),104.

170 5.7 million people living atop 132 billion barrels of crude oil: “ADesertKingFacestheModernWorld,”Time,January6,1975.

170“America runs on oil”: HenryMitchell, “Henry and the Prince and1,400Guests,”WashingtonPost,June8,1974.

170“hadbeenfirstintheswimmingpool”:“HisHighnessPrinceFahdhadbeen the first in the swimmingpool at an afternoonparty, anutterlyreliablesourcesaid—atthispartyeverywomanwhowentswimminggot an Arabian dress.” Henry Mitchell, “Henry and the Prince and1,400Guests,”WashingtonPost,June8,1974.

170everyoneate fromfullplates:“Itwasgreat,weateouton the terraceandtheyateitup.Butwereallyfilledtheirplatewithmorethantheycould handle.” Telcon, Simon-Kissinger, 3:00 P.M., June 7, 1974,NationalSecurityArchive.

170 turned down by David Rockefeller: Arthur F. Burns HandwrittenJournals,JournalII(BlueNotebook),GeraldR.FordLibrary,217–18.

170“graveshortcomings”:Ibid.171“Whatamess!”:Ibid.171“Dependenton theWest formilitaryanddiplomaticsupport”:Henry

A.Kissinger,YearsofRenewal(NewYork:Touchstone,1999),672.171“oneministerofhistrainingandcapacities”:Ibid.,673.171“was,Ithink,alittlehurt”:Telcon,Simon-Kissinger,10:45A.M.,June

21,1974,NationalSecurityArchive.172“[Bill Simon]andHenryhad”:Author interviewwithGeneralBrent

Scowcroft,April6,2010.172“mesmerized”:Ibid.172“AndwhateverYamaniwas”:Ibid.172“Thetwoofthemwerealwaysatloggerheads”:Authorinterviewwith

FrankZarb,June11,2009.172“Withatwo-by-four!”:Ibid.172 In Yamani’s telling of the story: Yamani recounted the story to his

biographer, Jeffrey Robinson, Yamani: The Inside Story (London:Simon&Schuster,1988),115–16.

173“Weusedtocorrespondquiteregularly”:Ibid.,206.173His ambassador in Washington wisely talked him out of it: Author

interviewwithArdeshirZahedi,September14–15,2010.173“Bynomeans”:Alam,373.173AlamassumedNixon:Ibid.,376.173“There’smorethanmeetstheeye”:Alam,380.174 At 10:00 A.M. on July 9: Memorandum of Conversation, 7/9/74,

“Nixon,Simon,Scowcroft,”Box4,NationalSecurityAdviser,GeraldR.FordLibrary.

174“He is gettinga lot ofmail”:ArthurF.BurnsHandwritten Journals,Journal II (BlueNotebook),GeraldR.FordLibrary,April 21, 1974,223.

174“beganbyexpressinghisskepticism”:Ibid.,June24,1974,229.174total$60billion:“Simon’sToughTour,”Time,July29,1974.174KingFaisalwouldhold$10billion:Ibid.174 “With Faisal, I have raised it privately”: Memorandum of

Conversation, 7/9/74, “Nixon, Simon, Scowcroft,” Box 4, NationalSecurityAdviser,GeraldR.FordLibrary.

176While in the French Riviera: “Simon’s Tough Tour,” Time, July 29,1974.

176 “The Shah is a nut”: “Simon to Skirt ‘Nut’ Meeting,” ChicagoTribune,July16,1974.

176“SimontoSkirt‘Nut’Meeting”:Ibid.176“Iambesiegedbyqueries”:Simon,89.176“takenoutofcontext”:Ibid.176“Justexactlyhowdoyoucall”:Ibid.176“was using the vernacular”: James L. Rowe Jr., “SimonCalls Shah

Quote‘Misleading,’”WashingtonPost,July17,1974.

176KissingertelephonedAmbassadorArdeshirZahedi:Telcon,Kissinger-Zahedi,4:23P.M.,July15,1974,NationalSecurityArchive.

177 “I can remember it being rolled out one day”: Eugene L. Meyer,“WhentheIraniansBoreGifts:RememberingtheSubtleSeductionofHighUSOfficialsbyZahedi,”WashingtonPost,December1,1979.

177“He’scertaintheyturned”:Ibid.177 There had been a scene: Author interview with Ardeshir Zahedi,

September14–15,2010.177YamanihopedtobreaktheShah’slock:Detailsoftheoilauctionwere

outlined in the followingarticleby JuandeOnis, “SaudiArabiaandIraninOil-PriceStalemate,”NewYorkTimes,September10,1974.

178“is speaking about lower oil prices”: JackAnderson, “Shah of IranCulpritinHighOilPrices,”WashingtonPost,June5,1979.

178“Mybelief”:Ibid.178thepresidentwasstillasleep:Simon,111.178hewastoldthepresidentwasintheLincolnSittingRoom:Ibid.178“Itwasasifhecouldpulldownascreen”:Ibid.,113.179 “The Arabs are acting like nouveaux riches”: Memorandum of

Conversation, 7/30/74, “Nixon, Simon, Rush, Scowcroft,” Box 4,NationalSecurityAdviser,GeraldR.FordLibrary.

179Thepresident clenched his fountain pen: JackAnderson, “NixonLetShahDriveUpOilPrices,”WashingtonPost,June1,1979.

179thefirstoffourGermanbankstofail:“FearsofDeepRecessionGrowinWesternEurope,”WashingtonPost,August30,1974.

180predictedinflationof20percentinBritain:Ibid.180 “In France there’ll be a popular front”: Memorandum of

Conversation, 2/9/74, “Nixon, Kissinger, Shultz, Simon,” NationalSecurityAdviser,GeraldR.FordLibrary.

180“Wewill have toaid Italy”:MemorandumofConversation, 7/30/74,“Nixon,Simon,Rush,Scowcroft,”Box4,NationalSecurityAdviser,GeraldR.FordLibrary.

181“the felon”: Arthur F. Burns Handwritten Journals, Journal II (BlueNotebook),GeraldR.FordLibrary,December6,1973,200–204.

181Everyonewaslyingtohim:“Nixongotveryparanoid....Hethoughtat the end everyone was lying”: Ronald Kessler, In the President’sSecretService:BehindtheSceneswiththeAgentsintheLineofFireandthePresidentsTheyProtect(NewYork:Crown,2009),32.

181Hewasdrinkingeveryothernightnow:Ibid.181 “[Treasury] would like to have a meeting”: Telcon, Kissinger-

Ingersoll,5:15P.M.,August1,1974,NationalSecurityArchive.181hadclimbed from$2.8billion:HosseinRazaviandFirouzVakil,The

Political Environment of Economic Planning in Iran, 1971–1983:FromMonarchytoIslamicRepublic(Boulder:Westview,1984),63.

182revenuesrocketedto$17.8billion:Ibid.182“Wehavenoreallimitonmoney”:LewisM.Simons,“Shah’sDreams

Are Outpacing Iran’s Economic Boom,”Washington Post, May 26,1974.

182 $1 billion in oil receipts each month: James Clarity, “Rich butUndeveloped,IranSeeksMorePower,”NewYorkTimes,June3,1974.

182“Foratleastadozenyears”:Ibid.182“Inflation is runningwild”: LewisM. Simons, “Shah’sDreamsAre

OutpacingIran’sEconomicBoom,”WashingtonPost,May26,1974.182 In the city ofMashhad: James F. Clarity, “A ‘Revolution’ in Iran—

ReportontheProgress,”NewYorkTimes,December22,1974.182unabletofeedtheirfamilies:Alam,374.182“standing on what appears to be the top of the world”: Lewis M.

Simons, “Shah’s ‘Phobia’ Pushes Iran,”Washington Post, May 27,1974.

183moviestarsJeffChandlerandSophiaLoren:Ibid.183recordedthebizarrescene:Alam,387.183 approving the appointments and promotions: Steven R. Ward,

Immortal: A Military History of Iran and Its Armed Forces(Washington,D.C.:GeorgetownUniversityPress,2009),209.

183 “His Imperial Majesty has an extraordinary ability”: Lewis M.Simons, “Shah’s Dreams Are Outpacing Iran’s Economic Boom,”WashingtonPost,May26,1974.

183“Theprimarytopicinallourmeetings”:DavidRockefeller,Memoirs(NewYork:RandomHouse,2003),356.

183“increaseddramatically”:Ibid.,360.183“wewereneversuccessful”:Ibid.,361.184“hadtoldmethattheShah”:Ibid.,359.184“anarrogancethatunderlay”:Ibid.184“reallyfeelingtheiroats”:Ibid.184 “the embassy was certainly concerned”: FISOHA interview with

Richard Helms, by William Burr, Foundation for Iranian Studies,Washington,D.C.,July10&24,1985,1–42.

185“I not only make the decisions”: JosephKraft, “What Restrains theShah?,”WashingtonPost,April27,1975.

18525.9percenteachyear for thenext fiveyears:RobertGraham, Iran:TheIllusionofPower,rev.ed.(London:CroonHelm,1979),80.

185doubledfrom$35billionto$69billion:Ibid.,78.185“Myheadisspinning”:Alam,382.185“wassubjecttothevagariesofworldsupply”:RazaviandVakil,68.185“AttheendoftheRamsarmeeting”:Graham,83.186infatuationwithBigPusheconomics:RazaviandVakil,67.186unveiled a $3 billion plan: Eric Pace, “Teheran PlanningOne of the

World’sLargestPlazas,”NewYorkTimes,September1,1975.186astaffoffivethousand:DeeWedemeyer,“Iran’sGrandLibrary,”New

YorkTimes,March7,1976.186 to rebuild the seven fluted columns of Xerxes: Eric Pace, “Iran,

GlorifyingHer Past,WillRebuild 7Columns ofXerxes,”New YorkTimes,September7,1975.

186twosupersonicConcordeairliners:“IranianConcordeAccords,”WallStreetJournal,October6,1972.

186Hesigneda$6billion tradedealwithFrance:“France in$6BillionIran Pacts; Premier Sees No Devaluations,” New York Times,December24,1974.

186“I will sell you aspirins”: David Holden, “Shah of Shahs, Shah ofDreams,”NewYorkTimesMagazine,May26,1974.

187At10:00A.M.on Saturday,August 3:MemorandumofConversation,8/3/74,“Kissinger,Simon,Burns,Ingersoll,Enders,”Box4,GeraldR.FordLibrary.

187 “Falling prices would quickly bring the revenues”: Stephen D.Krasner, “The Great Oil Sheikdown,” Foreign Policy 13 (Winter1973–74):131–32.

189 total monetary reserves of $453 billion: Leonard Silk, “EnergyWarRumblings,”NewYorkTimes,September25,1974.

189“theworldbankingsystem”:Ibid.189 “huge foreign debts”: Christopher C. Joyner, “The Petrodollar

PhenomenonandChangingInternationalEconomicRelations,”WorldAffairs,Vol.138,No.2(Fall1975),152–76.

190“Iwouldliketodiscussthemostimportantissue”:Simon,114.190“Iexpecttocontinue”:Ibid.,115.190“seemedtohearnothing”:Ibid.191“It’sallover,Bill”:Ibid.,116.191“Bill,whatareyoudoing?”:Ibid.191“walkedpastKenandme”:Ibid.,117.

191“frozeninmyspot”:Ibid.191“TheAmericanpeoplearetoowise”:Ibid.191 Cynthia Helms, wrapped in a dressing gown: Cynthia Helms, An

Ambassador’sWifeinIran(NewYork:Dodd,Mead,1981),85.191“Itwasawarmandstarrynight”:Ibid.,86.192“Forus,itwasadramaticandsoberingmoment”:Ibid.192thethenprincelysumof$60,000:Ibid.,11.192CynthiaHelmslikenedthecompound:Ibid.192ahybridofcontemporaryAmericanandPersianarchitecture:William

H.Sullivan,MissiontoIran(NewYork:W.W.Norton,1981),38.192“Wewerechargedamonthlyrent”:CynthiaHelms,11.192“Ininquiringwhythiswasso”:Sullivan,40.192Shi’aMuslimscitedculturalreasons:Ibid.193 The warehouse was actually a basement: FISOHA interview with

Armin Meyer, by William Burr, Foundation for Iranian Studies,Washington,D.C.,March29,1985,1–44.

193tookacloseinterest:RichardHelmswithWilliamHood,ALookoverMy Shoulder: A Life in theCentral IntelligenceAgency (NewYork:Ballantine,2003),421.

193Cynthia Helms came downstairs: The account of the intruder at theembassyisfoundinCynthiaHelms,52–54.

194gallopinginflationof18.7percent:ClydeH.Farnsworth,“InflationinU.S.WorryingEurope,”NewYorkTimes,September5,1974.

194800,000unemployed:“AQuestionofStability—AndSurvival,”Time,November18,1974,17.

194a$2billionloan:PaulHoffman,“ItalianRedsBidforPowerShare,”NewYorkTimes,September2,1974.

194Italyagreedtopayinterestof8percent:Ibid.195buildingsinthePortuguesecapitalLisbon:Foranoverviewofvoting

patternsandelectoralstrengthofsupportofCommunistPartychaptersin Western Europe, see “Western Europe’s New Landscape,”Newsweek,October28,1974,10–13.

195Inflationwasrunningatbetween30and40percent:BowenNorthrup,“LivingwithDemocracy:AfterDictatorship,PortugalFindsAdjustingto Free Government Is Harder than Expected,”Wall Street Journal,July11,1974.

195$2.8billiontradedeficit:“NewGreekLeadersHopetoGetEconomyBackonCourse‘Soon,’”WallStreetJournal,July29,1974.

195“perennialdeficitinGreece’sinternationalpaymentsaccount”:Ibid.

195Greektourismrevenues:CharlesMohr,“AthensExpectedtoMoveonEconomicProblems,”NewYorkTimes,July27,1974.

195“Theywantanewpatron”:StevenV.Roberts,“GreekMinisterToursWesternEurope,”NewYorkTimes,September6,1974.

195“Nobodyreallywantsthem”:Ibid.196“Theincreasingcostofoil”:BernardGwertzman,“KissingerSeesOil

Crisis Periling Western Society,” New York Times, September 27,1974.

196“Youhavetolookuponhim”:Ibid.

CHAPTERSEVEN:SCREAMINGEAGLE

PAGE197Bring up a little lion cub: Abolqasem Ferdowsi, translated by Dick

Davis,Shahnameh:ThePersianBookofKings (NewYork:Penguin,2006),243.

199 “I will tell the Shah”: Memorandum of Conversation, “Kissinger,Dinitz,” Monday, December 23, 1974, 6:45–7:45 P.M., NationalSecurityArchive.

199“Pride comes before a fall”: AsadollahAlam,The Shah and I: TheConfidentialDiaryofIran’sRoyalCourt,1969–1977 (NewYork:St.Martin’s1991),391.

199 “or face possible social unrest”: Harry B. Ellis, “Ford Told MoreInflation May Spark Unrest; Narrows List for Key White HousePosts,”ChristianScienceMonitor,August14,1974.

199“Myfirstpriority”:Ibid.199“Henry isagenius”:Walter Isaacson,Kissinger:ABiography (New

York:Simon&Schuster,2005),601.199“Fordhasjustgottorealize”:Ibid.200“Iwouldtakehoweverlongitrequired”:Ibid.,604.200PresidentFord’s first briefing on oil:MemorandumofConversation,

8/17/74,“Ford,Kissinger,”Box5,NationalSecurityAdviser,GeraldR.FordLibrary.

201“Yes,andIthinkweallthoughtthat”:AuthorinterviewwithGeneralBrentScowcroft,April6,2010.

202“Tosomeextent,argumentsoveroilprices”:Emphasisintheoriginaldocument authored by Kissinger’s aide Winston Lord. BriefingMemorandum for the Secretary of State from S/P Winston Lord,DepartmentofState,“StrategiesfortheOilCrisisandtheScenarioforthe September 28Meeting,” September 21, 1974, 6, EricHooglund,project editor, Iran: The Making of U.S. Policy, 1977–80, NationalSecurity Archive (Alexandria, VA: Chadwyck-Healey, 1990),DocumentReferenceNo.00893.

202Iran’sambassadorArdeshirZahediwasusheredintotheOvalOffice:Memorandum of Conversation, 8/21/74, “Ford, Iranian AmbassadorArdeshirZahedi,”Box5,NationalSecurityAdviser,GeraldR.FordLibrary.

203Umar al-Saqqaf . . . stopped by the Oval Office eight days later:Memorandum of Conversation, 8/29/74, “Ford, Kissinger, SaudiArabianForeignMinisterUmaral-Saqqaf,”Box5,NationalSecurityAdviser,GeraldR.FordLibrary.

204high-watermarkof1,051points:“EconomicIlls:AnyPrescription?,”Newsweek,September30,1974,32.

204 collapsed a staggering 86 percent: “Seeking Relief from aMassiveMigraine,”Time,September9,1974,35.

20479percent:Ibid.204“Investorshaveseemedfrightened”:Ibid.204Housingstartsfell38percent:Ibid.,39.204taxpayer-fundedbailoutof$10millionamonth:Ibid.204 Massachusetts General Hospital stopped changing bed linen every

day:Ibid.205roseby5.6percent:MemorandumfortheVicePresident,July3,1975,

U.S. Council of Economic Advisers, “Alan Greenspan—1975 (2),”Box19,GeraldR.FordLibrary.

205 children living in poverty: “Draft Copy of Report on Poverty in theUnited States,” July 2, 1975, U.S. Department of Commerce, U.S.CouncilofEconomicAdvisers,“AlanGreenspan—1975(2),”Box19,GeraldR.FordLibrary.

205real incomedeclined4percent:Memorandumfor theVicePresident,July3,1975,U.S.CouncilofEconomicAdvisers,“AlanGreenspan—1975(2),”Box19,GeraldR.FordLibrary.

20546percentofAmericanstoldGallup:“SeekingRelieffromaMassiveMigraine,”Time,September9,1974,36.

205 “the soaring cost of oil and fertilizer”: “Economic Ills: AnyPrescription?,”Newsweek,September30,1974,38.

205“lostenoughwheat”:Ibid.,39.205childmortalityinTanzania:Ibid.,38.205207percentannuallyinChile:Ibid.,31.205 the price of heating oil jumped 60 to 100 percent: “Faisal and Oil:

DrivingTowardaNewWorldOrder,”Time,January6,1975,12.205FrenchpresidentVáleryGiscardd’Estaing:Ibid.205ElectricallightdisplayswerebannedinBritain:Ibid.205thefloodlightsaroundtheAcropolis:Ibid.205“making love to a corpse”: Peter R. Kann, “Land of No Peace: As

VietnameseKeepLosingLives,USLosesOnlyMoney,”WallStreetJournal,September13,1974.

205 “overwhelmed”: George McArthur, “A Crisis Swells Amid theBustle,”LosAngelesTimes,June3,1974.

205$1.50agallon:Ibid.205vast oil deposits in the coastalwaters off theMekongDelta: “South

Vietnam:LandofHigh-RiskOpportunity,”Nation’sBusiness,March1974,26.

206“PleaseGod, just let thembring inonewell”:GeorgeMcArthur,“ACrisisSwellsAmidtheBustle,”LosAngelesTimes,June3,1974.

206 “What happens in the economic realm”: Thomas E. Mullaney,“ScrutinizingWorldwideIlls,”NewYorkTimes,September8,1974.

206$100billion:Ibid.206$16billion:Ibid.206“Thequadruplingoftheprice”:Ibid.206“a screaming eagle”: Leonard Silk, “EnergyWar Rumblings,”New

YorkTimes,September25,1974.206 “The danger is clear”: Dennis Farney, “Ford Warns of Possible

Retaliation if Oil Nations Threaten Economy,”Wall Street Journal,September24,1974.

207“harshandeventhreatening”:Ibid.207“Whathasgoneupbypoliticaldecision”:BernardGwertzman,“Ford

and Kissinger Warn Exorbitant Prices of Oil Imperil World’sEconomy,”NewYorkTimes,September24,1974.

207 “Yesterday’s actions were a signal”: Marilyn Berger, “2 ObjectivesSeeninU.S.MovesonOil,”WashingtonPost,September25,1974.

207 “economic catastrophe”: Rowland Evans and Robert Novak,“EconomicFears andFrustrations,”WashingtonPost, September 28,1974.

207“adrasticbusinessdecline”:Ibid.208“on the brink of a terrifying collapse”: “How theCityWas Saved,”

TheEconomist,January5,1974,79–80.208FranklinNational:“TheBigCashCrunch,”Newsweek,September30,

1974,44.208“indangerofsuccumbing”:Ibid.208“skyrocketingescalationofenergycosts”:RowlandEvansandRobert

Novak, “Economic Fears and Frustrations,” Washington Post,September28,1974.

208“AmericaWarns the Arabs”: “U.S. OilWarning Stirs Arab Anger,”LosAngelesTimes,September25,1974.

208“FordThreatenstoSeize”:Ibid.

208“Itiscallingforcooperation”:Ibid.208“No one can dictate to us”: “Shah Rejects Bid by Ford for Cut in

PricesofOil,”NewYorkTimes,September27,1974.209“Fordisanutterbooby”:Alam,389.209“Pridecomesbeforeafall”:Ibid.,391.209Hewasmuchmorepreoccupied:Ibid.210“militaryunderstanding”:“ShahOffersPlanfor IndianOcean,”New

YorkTimes,September29,1974.210“Itwasprimarilyused foruniversityresearch”:MaziarBaheri,“The

Shah’s Plan Was to Build Bombs,” http://www.newstatesman.com,September11,2008.

210“IwasresistingtheeffortsofAmericanfirms”:AuthorinterviewwithDr.JamesSchlesinger,June5,2009.

211 “Certainly, and sooner than is believed”: Department of Defense,National Military Command Center, “Subject: Interview with theShah,”MessageCenter,June24,1974,NationalSecurityArchive.

211“Ialwayssuspected”:MaziarBaheri,“TheShah’sPlanWastoBuildBombs,”http://www.newstatesman.com,September11,2008.

211“off the cuff”: Department of Defense, National Military CommandCenter, “Subject: Shah’s Alleged Statement on Nuclear Weapons,”MessageCenter,June25,1974,NationalSecurityArchive.

211“Atthattime,reprocessing”:WilliamBurr,“ABriefHistoryofU.S.-IranianNuclearNegotiations,”The Bulletin of the Atomic Scientists,January/February2009,Vol.65,No.1,p.23.

211 “If Iran were to seek a weapons capability”: memorandum forSecretaryofDefense,“Subject:NuclearenergyCooperationWithIran(U)—Action Memorandum,” June 22, 1974, National SecurityArchive.

211“I should make it meticulously clear”: Michael Getler, “Long-TermImpactofArmsSalestoPersianGulfQuestioned,”WashingtonPost,January30,1975.

211“Bymid-1974,theshapeandscope”:MemorandumforDr.Brzezinski,The White House, from Anthony Lake, National Security Council,“Attachment:One-VolumeCompilation of Summaries ofDocumentsRelatingtotheUS-IranianRelationship,1941–79,January29,1980.”The memorandum is included in the National Security Archive’scollection of diplomatic documents, Eric Hoogland, project editor,Iran:TheMakingofU.S.Policy,1977–80,NationalSecurityArchive(Alexandria, VA: Chadwyck-Healey, 1990). See Chapter 2,

“Military/SecurityIssues,”DocumentReferenceNo.03558.212 “He was our baby, but now he has grown up”: Jack Anderson,

“Kissinger toPressShahonOilCosts,”WashingtonPost,November1,1974.

212“Thelatestsurgeinoilrevenues”:EricHoogland,projecteditor,Iran:The Making of U.S. Policy, 1977–80, National Security Archive(Alexandria,VA:Chadwyck-Healey,1990),DocumentReferenceNo.00899.

212“TheShah’sambitiousdevelopmentprogram”:Ibid.,2.212“The cost of living in Iran”: James F. Clarity, “Iran’s Flood of Oil

MoneyAggravatesHerInflation,”NewYorkTimes,October7,1974.213arashonhisface:Alam,386.213 not responded to the French doctors’ diagnosis: Farah Pahlavi, An

EnduringLove:MyLifewith theShah (NewYork:Miramax, 2004),251.

213“Medically,thepatientwasstillinexcellentshape”:FarahPahlavi,AnEnduringLove,252.

213“averypainfulexercise”:Alam,388.213$500millionproject:SeymourHersh, “IranSignsRockwellDeal for

PersianGulfSpyBase,”NewYorkTimes,June1,1975.214Accordingtooneofthefewpublishedreports:SeymourHershofThe

NewYorkTimesandBobWoodwardofTheWashingtonPostprovidedthemostdetailedaccountsofIbexandthetensionsitgeneratedwithinthe U.S. government and between the United States and Iran. Twoarticles by Christian Science Monitor reporters provide additionalhelpful insights. See Harry B. Ellis, “Behind ‘Listening Post’ DealCloserU.S.-IranRelations,”ChristianScienceMonitor,June5,1975;Seymour Hersh, “Iran Signs Rockwell Deal for Persian Gulf SpyBase,”New York Times, June 1, 1975;DevMuraka, “GrowingU.S.Ties to Iran Irk Kremlin,”Christian ScienceMonitor, June 5, 1975;and Bob Woodward, “IBEX: Deadly Symbol of U.S. Arms SalesProblems,”WashingtonPost,January2,1977.

214 eleven ground monitoring posts: Bob Woodward, “IBEX: DeadlySymbol ofU.S.ArmsSalesProblems,”WashingtonPost, January 2,1977.

214fifteenCIAemployees:Ibid.214$50millioncontract:SeymourHersh, “IranSignsRockwellDeal for

PersianGulfSpyBase,”NewYorkTimes,June1,1975.214 the bidders were cautioned by the CIA: Bob Woodward, “IBEX:

Deadly Symbol of U.S. Arms Sales Problems,” Washington Post,January2,1977.

214RockwellhiredUniversalAeroServicesCo.Ltd.:Ibid.214“thenecessarymarketingservices”:Ibid.214OnFebruary17,1975:Ibid.214WhenhevisitedAndrewsAirForceBase: “ShahVisitsAirBase and

thenMeetsSchlesinger,”NewYorkTimes,May17,1975.214Toufanian,nostrangertointrigue:Foracomprehensivebiographyof

General Toufanian’s life, see Abbas Milani, Eminent Persians: TheMenandWomenWhoMadeModernIran,1941–79,Vol.1(Syracuse:SyracuseUniversityPress,2008),490–94.

215 liable for the grand sum of $4,526,758: Bob Woodward, “IBEX:Deadly Symbol of U.S. Arms Sales Problems,” Washington Post,January2,1977.

215ChaseManhattanbankaccountinGeneva:Ibid.215theIbexmoneytrail:AsreportedbyWoodward,ibid.“Ithasbecomea

standardpracticeon‘covert’projects,suchasIbex,tohideorinsulatesome of the payments that go out to U.S. contractors,” wroteWoodward. “This is done in the interests of secrecy. In the case ofIbex, letters of credit of more than $47 million were sent to Riggs[NationalBank]bytheIraniangovernment.Checkstocontractorsontheprojectweredrawnfollowingaseriesofcomplicatedtransactionsinvolving theCIA and theToucheRossWashington office.”Ononeoccasion, theIraniangovernmentdepositedacheckfor$5million inRiggsNationalBankinWashington“forpaymentondemand”bytwomen identified as CIA employees. A second time, former CIAemployee Donald Patterson was paid a $55,000 commission toauthorize payments of $1.1 million to the prominent auditing andaccountingfirmToucheRoss.Hisaction in turn triggered“paymentstoU.S.defensecontractorsfromanother$47milliondepositedattheRiggs bank by Iran.” ToucheRoss’s contract included language thatconveniently relieved the firm of “liability for any fraud, collusion,illegalitiesandmalfeasance.”

215 shut out of Ibex: Seymour Hersh, “Iran Signs Rockwell Deal forPersianGulfSpyBase,”NewYorkTimes,June1,1975.

215OfficeofMunitions:Ibid.215hireawayformerand:Ibid.215“amazed”:Ibid.215“Wecan’tsaywhotheShah’stargetswouldbe”:Ibid.

215 front-page article: Dev Muraka, “Growing U.S. Ties to Iran IrkKremlin,”ChristianScienceMonitor,June5,1975.

216“itwillbebuiltbyAmericans”:Ibid.216 climbed to 7.1 percent: “The Economy: Trying to Turn It Around,”

Time,January20,1975.2166.5millionunemployed:“AWorldOutofWork,”Newsweek, January

20,1975.216RonandJillStuber:TheStubers’storywasreportedinTheNewYork

Times:“U.S.JobSeekersLookingtoIran,”NewYorkTimes,April20,1975.

216morethanonehundredapplications:Ibid.216“Wearebeingflooded”:Ibid.216 seventeen thousand Americanswere already living in Iran: Director,

Special Regional Studies, The Pentagon, “The Growing U.S.InvolvementinIran,”January22,1975,NationalSecurityArchive.

216increase20percentayear:Ibid.216Sixty-eightpercentoftheincomingarrivals:Ibid.216“toprovideadvancedweaponssystems”:Ibid.216eighteentothirtymonths:Ibid.217$6billioninexpenditure:Ibid.217eventuallynumberingfiftythousand:Ibid.217“OurambitionistomakeasmuchofAmerica”:RichardT.Sale,“The

Shah’sAmericans,”WashingtonPost,May12,1977.217TheyworshippedataPresbyterianchurch:Director,SpecialRegional

Studies, The Pentagon, “The Growing U.S. Involvement in Iran,”January22,1975,NationalSecurityArchive.

217threeexclusivelyAmericanelementaryandsecondaryschools:Ibid.217sixtyschoolbuses:JamesA.Bill,TheEagleandtheLion:TheTragedy

of American-Iranian Relations (New Haven: Yale University Press,1988),387.

217threefootballteams:Ibid.217thelargestofitskind:Ibid.,388.217TheypreferredtobuytheirCoca-Cola:Ibid.217 Georgetown University signed an $11 million contract: “U.S. Job

SeekersLookingtoIran,”NewYorkTimes,April20,1975.217GeorgeWashingtonUniversitytrainedfifty-fourIranianarmyofficers:

Ibid.217 Harvard accepted a $400,000 grant: William Claiborne, “U.S.

CollegesHelpPlanSchoolsforIran,”WashingtonPost,April9,1975.

217NewYork’sColumbiaUniversityaccepted$361,000:Ibid.218“Therearetonsofdollarsthere”:Ibid.218“We’respendingsomuchmoney”:Alam,524.218 Many of the government-to-government deals: For a list of

government-to-government contracts in 1974, see Director, SpecialRegionalStudies,ThePentagon, “TheGrowingU.S. Involvement inIran,”January22,1975,NationalSecurityArchive,12–13.

218U.S. defense contractors rushed to enter: For a list of co-productioncontractsin1974seeibid.,21.

218“Themajordistributionalchange”:Ibid.219“ManyAmericanfamilies”:Ibid.,23.219He liked to take his family:William Lehfeldt’s story of his family’s

drive into the countryside outside Kashan was included in an oralhistory interview. See FISOHA interviewwithWilliam Lehfeldt, byWilliamBurr,FoundationforIranianStudies,Washington,D.C.,April29,1987,February9andApril19,1988,3–139.

220Thesecretaryofstateassuredtheking:MemorandumofConversation,“King Faisal, Secretary Kissinger,” Riyadh, October 13, 1974,NationalSecurityArchive.

220Kissingerwas in Islamabad:MemorandumofConversation,“Bhutto,Kissinger,”PrimeMinister’sOffice,Islamabad,Pakistan,October31,1974,1400–1530,NationalSecurityArchive.

223 Kissinger was in Tehran: Memorandum of Conversation, “Ansary,Kissinger,” Saturday, November 2, 1974, 9:40 A.M.–10:35 A.M.,Ministry ofEconomicAffairs andFinance,Tehran, Iran,Meeting ofU.S.-Iran Joint Commission, National Security Archive. During themeetingAnsary recited a list of economic statistics to impress uponthe Americans the great strides being made “under the dynamicleadership and initiative of His Imperial Majesty, the Shahanshah.”Iran expected “to pump $180 billion into the development of ourcountry,” and by 1983 Iran’s gross national product would be $190billion.Per capita incomewould reach$4,000by that time. Industrywouldgrowata rateof16–18percentannuallyandagricultureby7percent.By1983,“wehopewewillproduceonemillioncarsayear,3milliontelevisionsetsayear,3.2millionrefrigeratorsayear . . .400millionpairsofshoes,15milliontonsofsteelandonemilliontonsofaluminum.”By1983, every third Iranian householdwould have twocarsandtwotelephones,andeveryfamilywouldhaveatelevisionandrefrigerator.The statisticswere so fantastic as to bemeaningless but

that did not stopKissinger from applauding the vision behind them,“Becauseyoucertainlythinkinbigterms,andthatiswhattheworldneedsrightnow.”

223“Kissingerflewinthisafternoon”:Alam,395.224“hopelessolddonkey”:Ibid.,442.224“thatidiotFord”:Ibid.,440.224“thatFordwassothick”:Ibid.,486.224 “And one of the notions”: Author interview with Brent Scowcroft,

April16,2010.225“theUnitedStatesisnowattempting”:MurreyMarder,“Kissinger:Oil

PriceCutNotGoalNow,”WashingtonPost,November3,1974.225 “B-S,” “F. Bull!”: State Department Telegram, “Subj: Press

Conference of Shah of Iran,” November 2, 1974, National SecurityArchive.

225 Kissinger was in the prime minister’s residence: Memorandum ofConversation,“Rabin,Peres,Kissinger,”Thursday,November7,1974,9:45–11:26P.M.,ThePrimeMinister’sResidence,Jerusalem,NationalSecurityArchive.

227Hawadesspublishedaninterview:JosephFitchett,“ShahHintsPolicyTilttoArabs,”WashingtonPost,December13,1974.

227 “rushed to high officials”: Rowland Evans and Robert Novak, “AWarningfromtheShah,”WashingtonPost,December19,1974.

227“iscausinghigh-levelconsternation”:Ibid.228On Monday evening, December 23: Memorandum of Conversation,

“Kissinger,Dinitz,”Monday,December23,1974,6:45–7:45P.M.,TheSecretary’sOffice,DepartmentofState,NationalSecurityArchive.

228 in December Kissinger and Zahedi agreed: Telcon, “Kissinger-Zahedi,”8:48A.M.,December10,1974,NationalSecurityArchive.

CHAPTEREIGHT:POTOMACSCHEHERAZADE

PAGE229“YouheardtheShahsoldouttheKurds?”:NationalSecurityAdviser:

Kissinger Reports on USSR, China, andMiddle East Discussions—Kissinger’sTrip,Vol.I(2),Box3,GeraldR.FordLibrary.

229 “Tehran continues to be”: Memorandum of Conversation, TheSecretary’sPrincipalsandRegionals’StaffMeeting,July7,1975,8:00A.M.,NationalSecurityArchive,32–33.

229spotpricesof$9.50and$10hadbeenrecorded:JuandeOnis,“ArabOilExportsTrail1974’sPace,”NewYorkTimes,March1,1975.

229from30millionto26millionbarrels:Ibid.229$30billion in spendingcommitments:HarryB.Ellis, “Iran’sRace to

Modernize Before the Oil Runs Out,” Christian Science Monitor,January2,1976.

229 Iran was now running a giant deficit: “Iranian Deficit Totals $4Billion;LoansAsked,”WallStreetJournal,July28,1975.

230“AsenseofemergencyengulfsWashington”:HarryB.Ellis, “GloomGrips U.S. Economic Team,”Christian ScienceMonitor, January 6,1975.

230“othersegmentsoftheeconomyarecollapsing”:Ibid.230“thenation’soutputofgoodsandservicesdeclined”:“TheEconomy:

TryingtoTurnItAround,”Time,January20,1975,15.230NewcarsalesforDecemberplummeted:Ibid.230 Detroit automakers shed seventy thousand jobs: “A World Out of

Work,”Newsweek,January20,1975,34.230“Withfewexceptions”:Ibid.230“thebaseofoursociety”:U.S.CouncilofEconomicAdvisers,Box19,

“Greenspan, Alan—1975 (2), Memorandum for the Vice President,January22,1975,GeraldR.FordLibrary.

23186percentofAmericansdisapproved:“TheEconomy:TryingtoTurnItAround,”Time,January20,1975,15.

231 “We are in trouble”: John Herbers, “Drastic Reversal,” New YorkTimes,January14,1975.

231anearnestconservativefromWyoming:ForaprofileofDickCheneyatthis time, see Lou Cannon, “Stepping Out of Rumsfeld’s Shadow,”WashingtonPost,November6,1975.

231“They’reliketwopeasinapod”:AldoBeckman,“Rumsfeld’sDeputyO.K.withFord,”ChicagoTribune,July21,1975.

231“blitzkrieg”:AldoBeckman,“RisetoPowerStartling:RumsfeldPuts‘Blitz’onWhiteHouse,”ChicagoTribune,March23,1975.

231 “Mr. Rumsfeld has been accumulating power”: John Herbers,“Rumsfeld and Marsh Emerge as Key White House Powers,” NewYorkTimes,January12,1975.

231“whohisnextCabinetchangemightbe”:AldoBeckman,“Ford’sStaffChief: Don Rumsfeld Keeps Finding Room at the Top,” ChicagoTribune,February9,1975.

231 a man not known for his humility: According to Kissinger: “Being

juniortohiscolleaguesdidnotcrimpEnders’sstyle,forhumilitywasnotoneofhisdistinguishingcharacteristics”:HenryKissinger,YearsofRenewal(NewYork:Simon&Schuster,2000),675.

232 “That proposal set off the angriest debate”: Rowland Evans andRobertNovak, “TheDecisions atVail,”WashingtonPost, January2,1975.

232 “would protect American domestic production”: Memorandum ofConversation, Foreign Economic Policy, June 10, 1975, NationalSecurityArchive.

232PresidentFordwas“irritated”:LouCannon,“SimonDeniesHeWillLeave,”WashingtonPost,January17,1975.

232“expectedtoleavetheCabinetsoon”:Ibid.232“ofaWallStreetbondtrader”:JosephKraft,“WilliamSimon:Onthe

WayOut?,”WashingtonPost,January14,1975.232ralliedtoprovideSimon:LouCannon,“SimonDeniesHeWillLeave,”

WashingtonPost,January17,1975.232ArthurBurnsalsointervened:RowlandEvansandRobertNovak,“The

CampaignAgainstSimon,”WashingtonPost,January20,1975.233“I am the chief economic spokesman”: LouCannon, “SimonDenies

HeWillLeave,”WashingtonPost,January17,1975.233 “upsetting the established routine”: FISOHA interview with James

Schlesinger, by William Burr, Foundation for Iranian Studies,Washington,D.C.,May15andJune27,1986,1–31.

233monetaryreservesof$1.2 trillion:CliftonDaniel,“KissingerRemarkonForceSparksWideSpeculation,”NewYorkTimes,January7,1975.

233“Let’strythelow-costoption—war”:PhilipShabecoff,“WhiteHouseDeclines toAdd toKissinger Remarks onUse of Force,”New YorkTimes,January4,1975.

233“averydangerouscourse”:MurreyMarder,“Kissinger:‘UseofForce’An Option,” Washington Post, January 3, 1975. The Post articleincludesafulltranscriptofKissinger’sremarkstoBusinessWeek.

233Commentarypublisheda lengthyessay:RobertW.Tucker, “Oil:TheIssueofAmericanIntervention,”Commentary,Vol.59,No.1(January1975).

234Harper’spublished“SeizingArabOil”:Miles Ignotus,“SeizingArabOil: The Case for U.S. Intervention: Why, How, Where,”Harper’s250,no.1498(March1975):44–62.

234“ThenthereisIran”:Ibid.,60.234 “The Iranians could take Kuwait”: Memorandum of Conversation,

9/5/73, folder “Kissinger, Schlesinger,” Box 2, National SecurityAdviser,GeraldR.FordLibrary.

234 Department of Defense: See Andrew Huggins, “Power and Peril:America’sSupremacyandItsLimits,”WallStreetJournal,February4,2004.

234developingcontingencyplans:AndrewMarshallwasappointedto theposition of head of the Defense Department’s Office of NetAssessment in 1973, the office responsible for developing militarycontingencyplans,aposthehasheldeversince.Hehasbeencloselyassociatedwiththe“neo-cons.”Authorshipof“SeizingArabOil”hasbeenattributedovertheyearstoEdwardLuttwak,aprominentdefenseconsultantwhointhemid-1970sworkedforJamesSchlesinger.Inaninterviewwith theauthor in June2009,hedenied soleauthorshipofthearticlebutconfirmedthatitwasproducedbyMarshall’sOfficeofNetAssessment,withwhichhewasaffiliatedatthetime.Luttwakhasneverdenied“conveying”thearticletoHarper’seditorLewisLaphamforpublication.

235“It has deeply shocked the upper echelons”: JohnK. Cooley, “WhoWrote the Article: Oil Seizure Talk Irks U.S. Saudis,” ChristianScienceMonitor,March12,1975.

235“PrinceFahd[ofSaudiArabia]askedme toconvey”:MemorandumofConversation,4/29/75,“Ford,Kissinger,JordanianKingHussein,”Box11,NationalSecurityAdviser,GeraldR.FordLibrary.

235“excessive”arms sales:MichaelGetler, “ArmsSalesMayRaiseOilCost,”WashingtonPost,April28,1974.

235 “without national security studies”: Michael Getler, “Long-TermImpactofArmsSalestoPersianGulfQuestioned,”WashingtonPost,January30,1975.

236“hascarriedoutamajorNationalSecurityCouncilstudy”:Ibid.236“basicallytactical”:Ibid.236“Also,atourinstigation”:DepartmentofStateActionMemorandum,

To the Secretary, from Alfred A. Atherton, Jr., and Nelson F.Sievering,Jr.,“NuclearEnergyAgreementforCooperationwithIran,”December6,1974,NationalSecurityArchive.

236 half his nuclear power program: Report of theNSSM 219WorkingGroup, Nuclear Cooperation Agreement with Iran, 1, NationalSecurityArchive.

23620percentofaprivatelyrun:Ibid.236$1billioninreceipts:Ibid.

237“obligated to place all its nuclear facilities”: Emphasis in original.Department of State Action Memorandum, To the Secretary, fromAlfredA.Atherton,Jr.,andNelsonF.Sievering,Jr.,“NuclearEnergyAgreement for Cooperation with Iran,” December 6, 1974, NationalSecurityArchive.

237 “could have serious”: Report of the NSSM 219 Working Group,NuclearCooperationAgreementwithIran,NationalSecurityArchive.

237 Shultz was ushered into the Oval Office: For a transcript of theconversation, see Memorandum of Conversation, 2/7/75, “Ford,Kissinger,GeorgeShultz,”Box9,NationalSecurityAdviser,GeraldR.FordLibrary.

238“Itwasatoughissue”:AuthorinterviewwithFrankG.Zarb,June11,2009.

239describedhimaslookingtanned:MarilynBerger,“IranOilPledgedtoIsrael,”WashingtonPost,February19,1975.

239“Swisspolicepatrolledtheairport”:Ibid.239“Wehaveneverboycottedanybody”:Ibid.240between$200and$400million:Ibid.240 “The Iranian stuff is going well”: Memorandum of Conversation,

3/4/75,“Ford,Kissinger,”Box4,NationalSecurityAdviser,GeraldR.FordLibrary.

240 “frightened of being assassinated”: National Security Adviser:Kissinger Reports on USSR, China, andMiddle East Discussions—Kissinger’sTrip,Vol.I(2),”Box3,GeraldR.FordLibrary.

240“Whyarealltheflagsup?”:Ibid.241 four and a half hours: Asadollah Alam, The Shah and I: The

ConfidentialDiaryofIran’sRoyalCourt,1969–1977 (NewYork:St.Martin’s,1991),417.

241 to allow Iranian Shi’a pilgrims: FISOHA interview with RichardHelmsbyWilliamBurr,Foundation for IranianStudies,Washington,D.C.,July10and24,1985,1–34.

241theKurdswerelosingground:AuthorinterviewwithArdeshirZahedi,September14–15,2010.

241$16million:ThePikeReport(Nottingham:Spokesman,1977),196.241“actedineffectasaguarantor”:Ibid.241U.S.participationintheKurdishoperation:Ibid.242“[TheShah]hasapparentlyused”:Ibid.,214.242“auniquelyusefultool”:Ibid.242Thesecretaryofstateinsistedtheycontinue:Ibid.,197.

242“hetrustednoothermajorpower”:Ibid.,212.242“agiftofthreerugs”:Ibid.242“Asyouareaware”:Ibid.,213.242“In the long runwe believeAmericans”: For a full transcript of the

Kissinger-Asad meeting, see National Security Adviser: KissingerReportsonUSSR,China, andMiddleEastDiscussions—Kissinger’sTrip,Vol.I(2),Box3,GeraldR.FordLibrary.

243a late working dinnerwith PrimeMinister Yitzhak Rabin: For a fulltranscriptoftheKissinger-Rabinconversation,seeIbid.

244 “There is confusion and dismay”: The Pike Report (Nottingham:Spokesman,1977),215.

244“IsheadquartersintouchwithKissinger’soffice”:Ibid.245“ourheartsbleed”:Ibid.,215–16.245“Noreplyhasbeenreceived”:Ibid.,216.245200,000refugees:Ibid.,217.245“theUnitedStatesGovernmentrefusedtoadmit”:Ibid.245 “It’s like the wolf and the lamb”: Memorandum of Conversation,

3/19/75, “Ford,Kissinger,KuwaitiAmbassadorSalemS.Al-Sabah,”Box10,NationalSecurityAdviser,GeraldR.FordLibrary.

246 “People knew about Khomeini”: FISOHA interview with RichardHelmsbyWilliamBurr,Foundation for IranianStudies,Washington,D.C.,July10and24,1985,1–34.

246As thekingwasgreetinghisguests:Themostvividaccountofwhathappened that day comes fromYamani himself in an interviewwithbiographer Jeffrey Robinson. Jeffrey Robinson, Yamani: The InsideStory(London:Simon&Schuster,1988),141–45.

246 “mentally deranged”: Juan de Onis, “Saudis See Planning in theAssassination,”NewYorkTimes,March29,1975.

247“Anextraordinaryconjunctionofforces”:“OnceAgain,anAgonizingReappraisal,”Time,April7,1975.

247“OurMiddleEastpolicy”:Telcon,Kissinger-Fisher,7:10P.M.,March24,1975,NationalSecurityArchive.

247“Americanforeignpolicy”:JosephC.Harsch,“KissingerandtheEraofU.S.Pullback,”ChristianScienceMonitor,March28,1975.

248Jacksonwrote toKissingeronMarch22:RowlandEvansandRobertNovak, “Kissinger and Jackson: The Feud Goes On,” WashingtonPost,April13,1975.

248“Well,Ithinknot,frankly”:Telcon,Kissinger-Javits,2:20P.M.,May8,1975,NationalSecurityArchive.

248 The ambassador was recalled from Tehran thirteen times: ThomasPowers,TheManWhoKepttheSecrets(NewYork:AlfredA.Knopf,1979),339.

248“Inthosedays”:RichardHelmswithWilliamHood,ALookoverMyShoulder: A Life in the Central Intelligence Agency (New York:Ballantine,2003),436.

249“Yousonofabitch!”:Powers,339.249anextensivebriefingpaper fromhissecretaryofstate:Memorandum

toPresidentFord fromSecretaryofStateHenryKissinger, “Strategyfor Your Discussions with the Shah of Iran,” May 13, 1975, EricHoogland,project editor, Iran:TheMakingofU.S.Policy, 1977–80,NationalSecurityArchive(Alexandria,VA:Chadwyck-Healey,1990),DocumentReferenceNo.00955.

250“Tellhimyouusedmoreforcethannecessary”:ForatranscriptoftheFord-Kissinger conversation, see Memorandum of Conversation,5/15/75,“Ford,Kissinger,”Box11,NationalSecurityAdviser,GeraldR.FordLibrary.

251The Fords welcomed the Pahlavis: Martha M. Hamilton, “PresidentGreetsShahas300PicketinPark,”WashingtonPost,May16,1975.

251Brent Scowcroft took notes: Memorandum of Conversation, 5/15/75,“Ford, Kissinger, Iranian Shah Mohammad Reza Pahlavi,” Box 11,NationalSecurityAdviser,GeraldR.FordLibrary.

252 “We picked her because the Shah”: Donnie Radcliffe and JeanetteSmyth,“FordDancingintotheNightAfterWordsofPraisefromtheShah,”WashingtonPost,May16,1975.

252 “The Air Force String Players”: Cynthia Helms, An Ambassador’sWifeinIran(NewYork:Dodd,Mead,1981),184.

252“Shahbunny”: Sally Quinn, “Iranian Nights andWashington Daze,”WashingtonPost,May19,1975.

252fixturesoftheWashingtonestablishment:ForaguestlistofattendeestotheFords’statedinnerforthePahlavis,seeTheWashingtonPost,May16,1975,B1.

252 The Shah was back in the Oval Office: For a transcript of theconversation, see Memorandum of Conversation, 5/16/75, “Ford,Kissinger, IranianShahMohammadRezaPahlavi,”Box11,NationalSecurityAdviser,GeraldR.FordLibrary.

253TheShahhadspentthedayatAndrewsAirForceBase:“ShahVisitsAir Base and Then Meets Schlesinger,” New York Times, May 17,1975.

254 “He posed for photographs”: Sally Quinn, “Iranian Nights andWashingtonDaze,”WashingtonPost,May19,1975.

254ItwasthelargestU.S.flagcontributor:L.WilliamSeidmanEconomicFiles (White House Economic Affairs Office), “Letter from O. RoyChalk to President Ford,” February 13, 1975, Airlines—IranianInvestmentinPanAm(1)-(4),Box38,GeraldR.FordLibary.

254“Wehavelost30to35percent”:MarilynBerger,“NewOilPriceRiseExpectedbyShah,”WashingtonPost,May18,1975.

254 30–35 percent oil price increase: “Iran Says Oil Prices Must Rise30%–35%toOffsetInflation,”WallStreetJournal,June6,1975.

254“AmericaBowsLowastheShahPaysaVisit”:JosephKraft,“AmericaBowsLowastheShahPaysaVisit,”WashingtonPost,May22,1975.

255EachmorningacarwithanIraniandriver:Themostdetailedaccountof the murders of Colonels Shaffer and Turner appeared in TheWashington Post. See Andrew Borowiec, “U.S. Men Killed inAmbush,”WashingtonPost,May27,1975.

255upwardoftwohundred:Ibid.255 two government officials had been assassinated: “TerroristViolence,

Triggered byWidespread Dissidence Among Young, Appears to BeRisinginIran,”NewYorkTimes,May22,1975.

255nine young detainees shot in Evin prison: Andrew Borowiec, “U.S.MenKilledinAmbush,”WashingtonPost,May27,1975.

255“Acarblockedthepathoftheirvehicle”:Ibid.256 the bombing of the American cultural center: Andrew Borowiec,

“Moslem Fundamentalists Fight Shah’s Reforms,”Washington Post,June24,1975.

256The attack on the colonels’ car was in revenge: Andrew Borowiec,“U.S.MenKilledinAmbush,”WashingtonPost,May27,1975.

256“There was concern on my part”: FISOHA interview with RichardHelms,byWilliamBurr,FoundationforIranianStudies,Washington,D.C.,July10and24,1985,2–71.

256 “I did away with the Peace Corps”: Ibid. For a discussion of thepositive role played by the PeaceCorps in Iran, seeBill,The EagleandtheLion,380.

256 ten Americans managed 142 volunteers: Director, Special RegionalStudies, The Pentagon, “The Growing U.S. Involvement in Iran,”January22,1975,NationalSecurityArchive.

256 fifty retired military personnel: Memorandum for the President,“Subject: DOD Activities and Interests in Iran,” The Secretary of

Defense,May17,1975,NationalSecurityArchive.256“strolled into the ancient FridayMosque”: Bill, The Eagle and the

Lion,380.SandraMackeyrecounted thesame incidents inherbook.See SandraMackey, The Iranians: Persia, Islam and the Soul of aNation(NewYork:Penguin,1988),252.

256“passedthetimebydrinking,fighting”:EricPace,“U.S.InfluenceonIran:GiganticandDiverse,”NewYorkTimes,August30,1976.

257accostedbyAmericanmeninthestreets:Bill,TheEagleandtheLion,382.

257American defense contractors: Author interview with Henry Precht,June4,2009.

257AnIraniantaxidriverwasshot:Bill,TheEagleandtheLion,380.257“sand-niggers,”“ragheads,”and“stinkies”:Ibid.,381.257“Americans are desecratingmosques”: AndrewBorowiec, “Moslem

Fundamentalists Fight Shah’s Reforms,”Washington Post, June 24,1975.

257“That’swhereNixonandKissingerwentwrong”: FISOHA interviewwithArminMeyer,byWilliamBurr,Foundation for IranianStudies,Washington,D.C.,March29,1985,1–50.

257“adisasterarea”:AuthorinterviewwithDr.JamesSchlesinger,June5,2009.

257setupahot line:RonaldL.Soble,“JobsAbroad:CanPromiseMeetReality?”LosAngelesTimes,June1,1976.

257rampantdruguse:Ibid.257offeringitsemployeesclassesinFarsi:Ibid.257“CompaniesstartedsendingworkerstoIrantoofast”:Ibid.257The helicopter pilots employed by Bell: “U.S. Arms Sales to Iran,”

MiddleEastResearchandProjectInformation51(October1976):15–18.

258SAVAKinformers:Ibid.258AmbassadorHelmsrefusedtomeetwiththepilots:Ibid.258“muchthesameasmigrantworkers”:Ibid.258 the driver of a U.S. embassy car: Andrew Borowiec, “Shah Cracks

PoliticalWhip,”WashingtonPost,August11,1975.258 “Well, in addition to Beirut”: Memorandum of Conversation, The

Secretary’sPrincipals’andRegionals’StaffMeeting,Monday,July7,1975,8:00A.M.,NationalSecurityArchive,32–33.

CHAPTERNINE:HENRY’SWARS

PAGE259 “Greenspan is terribly worried”: Memorandum of Conversation,

6/12/75,“Ford,Kissinger,”Box12,NationalSecurityAdviser,GeraldR.FordLibrary.

259“The Shah is seeing French doctors”: Author interviewwith HenryPrecht,June4,2009.

260“alloureconomists”:MemorandumofConversation,5/29/75,“Ford,Kissinger, FRG Chancellor Helmut Schmidt,” Box 12, NationalSecurityAdviser,GeraldR.FordLibrary.

261Schmidt and Ford met again: Memorandum of Conversation, 7/27–28/75, “Ford, Kissinger, FRG Chancellor Helmut Schmidt, ForeignMinisterHans-DietrichGenscher,”Box14,NationalSecurityAdviser,GeraldR.FordLibrary.

26184.9 million barrels a day to 64.9 million barrels: “Drastic Falls inKuwaitandSaudiOilOutput,”TheTimes(London),May20,1975.

261slid12percent,to5.4millionbarrels:“IranIndicatesItWillPressforBig Boost in Petroleum Price at Next OPEC Session,”Wall StreetJournal,September9,1975.

261 17.7 percent: John K. Cooley, “Budget Deficit Troubles Iran,”ChristianScienceMonitor,July31,1975.

2618.1millionbarrelsaday:“IranIndicatesItWillPressforBigBoostinPetroleum Price at Next OPEC Session,” Wall Street Journal,September9,1975.

26127percentinKuwaitand41percentinLibya:Ibid.262 “economic path toward”: Hossein Razavi and Firouz Vakil, The

Political Environment of Economic Planning in Iran, 1971–1983:FromMonarchytoIslamicRepublic(Boulder:Westview,1984),80.

262“By1975theeconomywasoutofcontrol”:Ibid.,83.262onaverage250days:JoeAlexMorrisJr.,“IsItforReal:NewBroom

StirsLotsofDustinIran,”LosAngelesTimes,October7,1977.262a backlog of 800,000 tons of goods: Harry B. Ellis, “Iran’s Race to

Modernize Before the Oil Runs Out,” Christian Science Monitor,January2,1976.

26210percentofthemachinery:Ibid.262$2 billion in demurrage: Joe Alex Morris Jr., “Is It for Real: New

Broom Stirs Lots of Dust in Iran,” Los Angeles Times, October 7,

1977.262 “eventually turned up in a warehouse”: Cynthia Helms, An

Ambassador’sWifeinIran(NewYork:Dodd,Mead,1981),176.262 four thousand trucks: Asadollah Alam, The Shah and I: The

ConfidentialDiaryofIran’sRoyalCourt,1969–1977 (NewYork:St.Martin’s,1991),464.

262“The highways are choked”: “Confidential: Cable fromAmbassadorHelms to Department of State,” August 4, 1975, National SecurityArchive.

262“Thegovernmenthadtoscour”:Ibid.262“Duringthesummerof1975”:CynthiaHelms,173.263AfemaleWorldBankemployee:Ibid.,172.263EmbassyTehran conductedan evaluation: “Confidential:Cable from

AmbassadorHelmstoDepartmentofState,”August4,1975,NationalSecurityArchive.

264“historyprovidesdiscouragingprecedents”:Ibid.264seminarystudentsinQum:Forascholarlyanalysisofthe1975unrest

inQumanditsconnectiontotheIslamicRevolutionof1978–79,seeCharlesKurzman,“TheQumProtestsand theComingof theIranianRevolution, 1975 and 1978,” Social Science 27, no. 3 (Fall 2003):287–325.

264“like a harlot”: Andrew Borowiec, “Moslem Fundamentalists FightShah’sReforms,”WashingtonPost,June24,1975.

264haltingspending:“DropinOilRevenueCited,”NewYorkTimes,June17,1975.

264$10billionshortfallinincome:Ibid.264 77 percent capacity: Eric Pace, “Iran, Despite Her Oil Wealth, Is

BorrowingonaGrandScale,”NewYorkTimes,August15,1975.264Iranianbankswereforced:Ibid.264 “Our revenues have dwindled considerably”: Eric Pace, “Iran Is

ExhortedtoDevelopThrift,”NewYorkTimes,May28,1975.264 The Shah’s decision three months earlier: To learn more about the

Shah’sdecisiontodeclareaone-partystateinIraninMarch1975andfor more of his views on democracy and pluralism, the followingreferencesarehelpful:ErvandAbrahamian,AHistoryofModernIran(Cambridge:CambridgeUniversityPress, 2008),Chapter 5, 149–54;Gholam Reza Afkhami, The Life and Times of the Shah (Berkeley:University of California Press, 2009), Chapter 19, 423–40; Ali M.Ansari,Modern Iran Since 1921: The Pahlavis and After (London:

Longman, 2003), Chapter 7, 185–87; Abbas Milani, The PersianSphinx:AmirAbbasHoveydaandtheRiddleoftheIranianRevolution(Washington, D.C.: Mage, 2004), Chapter 13, 274–80; and AminSaikal, The Rise and Fall of the Shah: Iran from Autocracy toReligiousRule(Princeton:PrincetonUniversityPress,1980),Chapter8,188–91.

265 “there are vague signs”: Letter from the Embassy in Iran to theCountry Director for Iran (Miklos), October 30, 1972, ForeignRelationsoftheUnitedStates(FRUS)1969–76,Vol.E-4.

265thedeclarationofaone-partystate:“1-PartyStateDeclaredinIran,”WashingtonPost,March3,1975.

265“Pressreportstothecontrary”:CablefromAmbassadorHelmstotheDepartment of State, “The Iranian One-Party State,” July 10, 1975,NationalSecurityArchive.

265 “You knew the Shah before”: Memorandum of Conversation,“Kennedy, Kissinger,” June 10, 1975, 5:30 P.M., Secretary’s Office,NationalSecurityArchive.

267 “just for your information”: Telcon, “Kissinger-Kraft,” 10:43 A.M.,February21,1975,NationalSecurityArchive.

267WhiteHouseEconomicPolicyBoard:TolearnmoreabouthowFord’sEconomic Policy Board functioned, the following article is helpful:PhilipShabecoff,“PresidentFord’sEconomicPolicyMachine,”NewYorkTimes,July20,1975.

267attackedas“false”:HarryB. Ellis, “SimonChallenges Shah onOilPrices,”ChristianScienceMonitor,May27,1975.

267“forpoliticalblackmail”:NickThimmesch,“WhatSimonSaysAbouttheShahofIran,”ChicagoTribune,June5,1975.

267“SecretarySimonisnotbashful”:Ibid.268IntheOvalOfficeonJune12:MemorandumofConversation,6/12/75,

“Ford,Kissinger,”Box12,NationalSecurityAdviser,GerardR.FordLibrary.

268 “cannot understand why”: Jack Anderson, “Whatever the ShahWants?,”WashingtonPost,June22,1975.

268 “We definitely do not want”: Memorandum of Conversation,“Kissinger, Zarb, Greenspan, Robinson, Gompert,” June 23, 1975,12:45–2:00 P.M., “Bilateral Oil Deal with Iran,” National SecurityArchive.

270“additionalsuppliesofoil”:Alam,427.270“Thesearen’texactly”:Ibid.

270“Behind the scenes”: Jack Anderson and LesWhitten, “U.S. AidesDemolishtheShah’sArguments,”WashingtonPost,June27,1975.

270 “Jack Anderson called me last week”: Telcon, “Kissinger-Simon,”3:18P.M.,June27,1975,NationalSecurityArchive.

270 “They are small timers”: Telcon, 5:45 P.M., August 13, 1975,“Kissinger-Robinson,”NationalSecurityArchive.

270“There isn’t a brain between the two of them”: Telcon, August 15,1975,“Kissinger,Robinson,Bremer,”NationalSecurityArchive.

270“TheShahisatoughcookie”:MemorandumofConversation,June23,1975, 12:45–2:00 P.M., “Bilateral Oil Deal with Iran,” NationalSecurityArchive.

271 “They [the Israelis] want reimbursement”: Memorandum ofConversation, 7/5/75, “Ford, Kissinger,” Box 13, National SecurityAdviser,GeraldR.FordLibrary.

271“CIAFinds Shah Insecure”: JackAnderson and LesWhitten, “CIAStudyFindsShahInsecure,”WashingtonPost,July11,1975.

271“wouldnotallowthecolumntobecirculated”: JackAnderson,“TheShah’sConnections,”WashingtonPost,November27,1977.

272preventinghisofficialsfromreadingCIAanalyses:Ibid.272“Ithinkyoushouldjustgoahead”:Telcon,12:30P.M.,July14,1975,

“Kissinger,Zarb,Greenspan,Robinson,Scowcroft,Covey,”NationalSecurityArchive.

273 “Iran May Be Spending Beyond Means”: Jack Anderson and LesWhitten, “IranMayBeSpendingBeyondMeans,”Washington Post,July31,1975.

273PresidentFordreceivedPrimeMinisterTakeoMiki:MemorandumofConversation, 8/6/75, “Ford, Kissinger, Miki,” Box 14, NationalSecurityAdviser,GeraldR.FordLibrary.

27373percentofitsoil:Ibid.274 “Zarb and Greenspan are dragging their feet”: Memorandum of

Conversation, 8/7/75, “Ford, Kissinger,” Box 14, National SecurityAdviser,GeraldR.FordLibrary.

274 “was paralyzed because of the hostility”: Author interview withGeneralBrentScowcroft,April6,2010.

274“verymuchdisappointed”:Alam,434.275 the Shah received a Saudi delegation: EricHooglund, project editor,

Iran:TheMakingofU.S.Policy,1977–80,NationalSecurityArchive(Alexandria,VA:Chadwyck-Healey,1990),DocumentReferenceNo.00988.

275intendedtoreplacehim:LindaCharlton,“U.S.WillReplaceEnvoytoSaudisinBigShuffle,”NewYorkTimes,August21,1975.

275 “How was our Pro-consul there?”: Memorandum of Conversation,“Kennedy, Kissinger,” June 10, 1975, 5:30 P.M., Secretary’s Office,NationalSecurityArchive.

275“AlthoughtheSaudis”:JackAndersonandLesWhitten,“U.S.Didn’tPressShahonOilPrices,”WashingtonPost,September21,1976.

275“the Shah of Iran for an armed invasion”: Jack Anderson and LesWhitten, “Saudis Suspect an Iran-U.S. Plot,” Washington Post,September17,1976.

276 “from what we know”: Eric Hooglund, project editor, Iran: TheMaking of U.S. Policy, 1977–80, National Security Archive(Alexandria,VA:Chadwyck-Healey,1990),DocumentReferenceNo.00988.

276declaredbeforetheIranianparliament:“IranIndicatesItWillPressforBig Boost in Petroleum Price at Next OPEC Session,”Wall StreetJournal,September9,1975.

276“Ihavereadofsomeconversations”:Telcon,September2,1975,“OilPrice Increase and the Producer-Consumer Dialogue,” NationalSecurityArchive.

277Hewrotea“strictlypersonal”letter:JackAndersonandLesWhitten,“U.S.Didn’tPressShahonOilPrices,”WashingtonPost,September21,1976.

277six-pagememotothepresident:Ibid.277“couldraiseseriousquestions”:Alam,438.277“Haveyouseentheletter”:Ibid.,440.278“Ialsoappreciateverymuch”:Ibid.,438–39.278“Butwhyonearth”:Ibid.,442.278 10 percent increase in price: “Oil-Price Boost of 10% Is Voted by

OPECCartel,”WallStreetJournal,September29,1975.278“veryhappy”: “OPEC,DespitePressure,SticksTogether,”NewYork

Times,September29,1975.278“thewalkoutwasalsocalculated”:Ibid.278“canonlyberegardedbytheSaudis”:Alam,445.279“AideDeniesShahofIranIsIll”:AlbinKrebs,“AideDeniesShahIs

Ill,”NewYorkTimes,September23,1975.279“The Shah is seeing French doctors”: Author interviewwith Henry

Precht,June4,2009.279heruminatedwithatleastoneformercolleague:Authorinterviewwith

GeneralBrentScowcroft,April6,2010.279“Iknowthatheliedtomeaboutit”:FISOHAinterviewwithRichard

Helms,byWilliamBurr,FoundationforIranianStudies,Washington,D.C.,July10and24,1985,1–25.

281 “We can anticipate”: Report of the NSSM 219 Working Group,NuclearCooperationAgreementwithIran,NationalSecurityArchive,3.

281“potentiallyconflictinggoals”:Memorandumfor theAssistant to thePresident forNationalSecurityAffairs,Subject:DepartmentofStateResponse to NSSM 219 (Nuclear Cooperation with Iran), April 18,1975,NationalSecurityArchive,1.

281 “some are concerned”: Report of the NSSM 219 Working Group,NuclearCooperationAgreementwithIran,NationalSecurityArchive,4.

281“fuelcyclecapabilities”:Ibid.,4.281“multinationalplant”:MemorandumfortheAssistanttothePresident

forNationalSecurityAffairs,“Subject:DepartmentofStateResponseto NSSM 19 (Nuclear Cooperation with Iran),” April 18, 1975,NationalSecurityArchive.

281“Iranhasnodearth”:TelegramfromJackMiklos,EmbassyTehran,tothe State Department,Washington, July 17, 1975, National SecurityArchive.

282 “The Iranians recognize and resent”: Telegram from AmbassadorRichardHelms,EmbassyTehran,toJointChiefsofStaff,DepartmentofDefense,November26,1975,NationalSecurityArchive.

282“Werecognizetheimportance”:MemorandumfortheAssistanttothePresidentforNationalSecurityAffairs,Subject:NuclearCooperationAgreementwithIran:NSSM219(C),TheSecretaryofDefense,April25,1975,NationalSecurityArchive.

282“Idon’trecallthatIhadanydirectbriefings”:FISOHAinterviewwithJames Schlesinger, byWilliamBurr, Foundation for Iranian Studies,Washington,D.C.,May15andJune27,1986,1–15.

283“Icouldnotcontrolit”:Ibid.,1–35.283“IurgedtheShah”:Ibid.,1–11.283Schlesingernever learnedabout thisdirective:Author interviewwith

Dr.JamesSchlesinger,June5,2009.283“isnotcorrectorconsistent”:MartinR.HoffmanPapers,“Memofor

Mr.Schlesinger,June19,1975,”Iran—RichardHallock,1974–76(1)-(2),GeraldR.FordLibrary.

284$20millionoverfiveyears:PranayGupte,“LobbyistsinIranPaidbyGrumman,”NewYorkTimes,December13,1975.

284“Itwasnormalpractice”:Ibid.284MembersofCongressdemandedtoknow:Ibid.284second$200millionloanoffered:Ibid.284anauditpreparedbyNorthropCorporation’saccountingfirm:Ibid.284$200millioninkickbacks:MichaelC.Jensen,“BribesbyNorthropof

$450,000 for 2 Saudi Generals Reported,”New York Times, June 5,1975.

284Prominent among the“sales agents”:WilliamH. Jones, “Northrop’sManintheMiddleEast,”WashingtonPost,June7,1975.

284 leveraged his background in intelligence: David Binder, “NorthropCitesUndercoverRole,”NewYorkTimes,June7,1975.

284“runningclosetoabilliondollars”:Ibid.284“oldpersonalfriend”:Ibid.284“TheShahcouldnothavebeenmorecordialpersonally”:Ibid.284RoosevelttoasktheShahtolobby:GaylordShaw,“SenateUnitTells

ofMoreNorthropPayoffsAbroad,”LosAngelesTimes,June7,1975.285paid$2,697,067:MartinR.HoffmanPapers,Directorate forDefense

Information Press Division, “Query from Vern Guidry,WashingtonStar,May28,1976,”Iran—RichardHallock,1974–76(1)-(2),GeraldR.FordLibrary.

285Hallock casually asked Schlesinger: FISOHA interview with JamesSchlesinger, by William Burr, Foundation for Iranian Studies,Washington,D.C.,May15andJune27,1986,1–42.

285“Isimplytoldhimitwastotallyunacceptable”:Ibid.285Hallock’ssonhadreportedlyfallenill:Ibid.,1–43.285 “a multi-million dollar contract”: Barry Rubin, Paved with Good

Intention: The American Experience and Iran (New York: OxfordUniversityPress,1980),165.

285General Toufanian paid him a handsome cash settlement: FISOHAinterview with William Lehfeldt, by William Burr, Foundation forIranian Studies, Washington, D.C., April 29, 1987, February 9 andApril 19, 1988, 3–151. This charge was repeated to the author onbackground by a second former U.S. official who knew Hallock inTehran.

285 Thirty-five years later: To this author, Dr. Schlesinger describedHallock’s behaviorwith evident distaste as “kind of a total personaltransformation. . . . He saw temptation and he could not resist it.”

Schlesingeradded:“FromwhatIgather[Hallock]didnotgiveadviceoncost-effectivedecisionsbuthemayhavegivendecisionsonhowtomake cost-ineffective decisions. I kind ofwashedmyhands ofDickwhen these issues about him surfaced. I must say that was a greatpersonaldisappointment.Thiswasafellowwhowasagoodbudgeteer,analyst,andsuddenly if Iwant tobelievewhat Ihearwasfeatheringhis ownnest.”Author interviewwithDr. JamesSchlesinger, June5,2009.

285“SpiroAgnewpassedthrough”:Alam,416.285“wasacquittedofanywrong-doing”:Alam.,469.286 “I have a paper on Iran and its problems”: Memorandum of

Conversation,9/2/75,“Ford,Schlesinger,”Box15,NationalSecurityAdviser,GeraldR.FordLibrary.

286Americanpopulation:InhispresentationtoFord,SchlesingercitesthenumberofAmericans in Iranat100,000.Thisnumberwas toohigh.SchlesingerwasmostlikelyreferringtothetotalnumberofAmericansinthePersianGulf,notinIran.EitherthatorScowcroft,thenotetaker,misheardtheoriginalestimateandtranscribedthewrongnumber.

286 on October 10, Ford told Schlesinger: Memorandum for Dr.Brzezinski, theWhiteHouse, fromAnthonyLake,NationalSecurityCouncil, “Attachment: One-Volume Compilation of Summaries ofDocumentsRelatingtotheUS-IranianRelationship,1941–79,January29, 1980.” See the National Security Archive’s collection ofdiplomaticdocumentsentitledEricHooglund,projecteditor,Iran:TheMaking of U.S. Policy, 1977–80, National Security Archive(Alexandria,VA:Chadwyck-Healey,1990),Document03555.

286$10 billion inU.S.weapons:Memorandum for the President, “DODActivities and Interests in Iran,” May 19, 1975, National SecurityArchive. The archive had stamped a date of May 19, 1975, on thedocument,whichmaybe a draft version of the one thatwent to thepresident’sdesk.ButthereislittledoubtthatthissamedocumentwastheonethatSchlesingerpresentedtoPresidentFordonSeptember2,1975.

286“thespecterofseveremanagementproblemsdownstream”:Ibid.286“Frankly,theU.S.itself”:Ibid.287“Well,Ihadconsiderableconcernsaboutit”:FISOHAinterviewwith

James Schlesinger, byWilliamBurr, Foundation for Iranian Studies,Washington,D.C.,May15andJune27,1986,1–11.

287[Alexis]deTocqueville:AlexisdeTocqueville,TheAncienRégimeand

theRevolution(NewYork:Penguin,2008).Dr.Schlesingerconfirmedhis concerns in an interviewwith the author on June 5, 2009. As astudent of history, Schlesinger was familiar with the writings ofTocqueville, thenineteenth-centuryFrenchhistorianwhohadstudiedthe origins of theFrenchRevolution.Hewas also influenced by theworkofHarvardhistorianErnestMay,whoseseminalbook,Lessonsof the Past, was published in 1973. May used the examples of theAmericanexperience inWorldWar II, the startof theColdWar, theKoreanWar, and escalation in Vietnam to warn policy makers thatthey “ordinarily use history badly.” He cautioned officials inWashington not to assume that patterns of history were repeatingthemselves but to “free themselves from the analogies, parallels, ortrend-readings which they might otherwise unthinkingly apply.” Beimaginative,heurged,andbemorediscriminating.Avoid thehistorytrap—avoidfutureVietnams.Schlesingertookittoheart.SchlesingerdidnotraiseTocquevillewhenhemetprivatelywiththeShahin1973and then again in 1975 “because that was the kind of thing that islikelytohaveirritatedhim.AndIfelttheirritationunnecessary.ButIstressedwhatwasthesubstantivepointabouttrainedpeople.Itdidnot—it affected his course of action somewhat, but not significantly, aswecanseeinretrospect.”

288 Zahedi informed the Shah: Abbas Milani, The Shah (New York:PalgraveMacmillan,2011),331.

288 “I hate to bring this up”: Memorandum of Conversation, 10/2/75,“Ford,Kissinger,”Box15,NationalSecurityAdviser,GeraldR.FordLibrary.

288knowntohistoryas the“HalloweenMassacre”:To learnmoreabouttheeventsofNovember1975,thefollowingnewspaperandmagazinearticlesprovideahelpfulcontextandawealthofdetails:“Ford’sBigShuffle,” Newsweek, November 17, 1975; “Ford’s Costly Purge,”Time,November17,1975;LouCannon,“Rumsfeld:SilentArchitect,”WashingtonPost,November4, 1975; JohnW.Finney, “Ex-PentagonChief Met with President Sunday,” New York Times, November 4,1975; Leslie H. Gelb, “Ford Discharges Schlesinger and Colby andAsks Kissinger to Give Up His Security Post,” New York Times,November3,1975;NicholasM.Harrock,“GeneralGrahamIsSaidtoHave Quit as the Chief of Defense Intelligence,” New York Times,November 4, 1975; and George C. Wilson, “Schlesinger-KissingerSchismDeep,”WashingtonPost,November4,1975.

289 “shocked”: Christopher Lydon, “Reagan Shocked at SchlesingerOuster,”NewYorkTimes,November4,1975.

289 “The guy that cut me up”: Telcon, 2:35 P.M., November 3, 1975,“Kissinger-Simon,”NationalSecurityArchive.

289OnDecember22,KissingertelephonedRobertEllsworth:Telcon,5:20P.M., December 22, 1975, “Kissinger-Ellsworth,” National SecurityArchive.

CHAPTERTEN:THESPIRITOF’76

PAGE291“Igenuinelyfear”:AsadollahAlam,TheShahandI:TheConfidential

Diary of Iran’s Royal Court, 1969–1977 (New York: St. Martin’s,1991),464.

291 “The dilemma we are in”: Memorandum of Conversation, 7/9/76,“Ford,Kissinger,SaudiDeputyPrimeMinisterAbdallahbinAbdal-Aziz-Saud,” Box 20, National Security Adviser, Gerald R. FordLibrary.

291 “peaceful nuclear explosions”: Department of Defense Cable0508432,“IranianNuclearPolicy,”January5,1976,NationalSecurityArchive.

291Iranwouldnotallowforeigngovernments:Ibid.292a hundred nuclear power plants: ThomasO’Toole, “S.Africa Set to

SellIranUraniumOre,”WashingtonPost,October12,1975.292occupied territoryofNamibia:FromEmbassyTehran,Departmentof

State Airgram, Subject: The Atomic Energy Organization of Iran,April15,1976,NationalSecurityArchive,15.

292“Thisstoryhasbeendeniedpublicly”:Ibid.292“seeking foreign—including American”: Telegram fromAmbassador

RichardHelms,EmbassyTehran,toJointChiefsofStaff,DepartmentofDefense,November26,1975,NationalSecurityArchive.

292OnJanuary12,atetchyHenryKissinger:Foracompletetranscriptofthe January 12, 1976, meeting, see Secretary’s Staff Meeting,Memorandum of Proceedings, January 12, 1976, 8:11A.M., NationalSecurityArchive.

293 another big price increase: “Shah Threatens Oil Price Rise,”WashingtonPost,January18,1976.

294 Two days later: Secretary’s Staff Meeting, Memorandum ofProceedings,January14,1976,8:00A.M.,NationalSecurityArchive.

294OnJanuary19,DefenseSecretaryRumsfeldhostedGeneralToufanian:There are three independent sources to confirm the account ofRumsfeld’s confrontation with General Toufanian. Their standoffoccurredonJanuary19,1976.OnJanuary30,newspapercolumnistsRowlandEvans andRobertNovakdevoted a column to it:RowlandEvans and Robert Novak, “The Troubles of the Arms Merchant,”

Washington Post, January 27, 1976. See also JohnW. Finney, “IranMay Reduce Arms Buying,”Washington Post, February 4, 1976. Amoredetailedaccountofthequarrelwaspublishedin1977inafeaturearticleinTheWashingtonPost:RichardT.Sale,“ArmsQuarrelsStrainU.S.-IranTies,”WashingtonPost,May13,1977.

294“uninformed...nothisownman”:Ibid.294“Yeah, but the price of your oil has tripled”: JohnW. Finney, “Iran

MayReduceArmsBuying,”WashingtonPost,February4,1976.294Toufanianwrotea scathingassessmentofRumsfeld:BobWoodward,

“IBEX: Deadly Symbol of U.S. Arms Sales Problems,”WashingtonPost,January2,1977.

294“It’s raw, it’s awfully raw”: Richard T. Sale, “Arms Quarrels StrainU.S.-IranTies,”WashingtonPost,May13,1977.

294“Attempting to bullyRumsfeld”: Rowland Evans andRobertNovak,“TheTroublesof theArmsMerchant,”WashingtonPost, January27,1976.

295 “Nothing good would happen”: Bob Woodward, “IBEX: DeadlySymbol ofU.S.ArmsSalesProblems,”WashingtonPost, January 2,1977.

295“Igenuinelyfear...”:Alam,464.295“wasstalling”:Cable018839fromDeputySecretaryofStateSiscoto

SecretaryKissinger,“OilAgreementwithIran,”January24,1976,L.William Seidman Files (WH Economic Affairs Office), Scowcroft,Brent (White House National Security Adviser), (1)-(2), Gerald R.FordLibrary.

295“Thebastardshavethrowndown”:Alam,459.295plungedby1.7millionbarrels:Ibid.295$6billionshortfall:Ibid.296reachedan“understanding”:Cable018839fromDeputySecretaryof

StateSiscotoSecretaryKissinger,“OilAgreementwithIran,”January24, 1976,L.WilliamSeidmanFiles (WHEconomicAffairsOffice),Scowcroft, Brent (White House National Security Adviser), (1)-(2),GeraldR.FordLibrary.

296 on January 30, Ansary telephoned Kissinger: Telcon, “Kissinger-Ansary,”3:30P.M.,January30,1976,NationalSecurityArchive.

296436,000-strongarmed forces:Memorandum for thePresident, “DODActivities and Interests in Iran,” May 19, 1975, National SecurityArchive.

296“Ifyoutrytotakeanunfriendlyattitude”:“U.S.IsWarnedbytheShah

AgainstCuttingArmsFlow,”NewYorkTimes,March15,1976.297Kissinger signed a presidentialmemo:Memorandum fromHenryA.

Kissinger to thePresident, “Message for theShahof Iran,”February11,1976,NationalSecurityAdviser,PresidentialCorrespondencewithForeign Leaders, Box 2, Iran—The Shah (1)-(2), Gerald R. FordLibrary.

298abreakfastmeetingwithHushangAnsary:Cable037659fromUnderSecretaryRobinson to SecretaryKissinger, “YourBreakfastMeetingwith Ansary, February 15, 1976,” February 16, 1976, L. WilliamSeidman Files (WH Economic Affairs Office), Scowcroft, Brent(White House National Security Adviser), (1)-(2), Gerald R. FordLibrary.

298cablesummaryofthetalks:Ibid.299“Are thingsmoving satisfactorily”: Telcon, “Kissinger-Ansary,” 4:48

P.M.,April2,1976,NationalSecurityArchive.299 “Now the question was what did”: Author interview with General

BrentScowcroft,April6,2010.300“mentally ill”:Telcon, “Kissinger-Zahedi,” 10:55A.M., June1,1976,

NationalSecurityArchive.300“WhatwasitSimonsaidlastyear?”:Telcon,“Kissinger-Zahedi,”4:30

P.M.,June2,1976,NationalSecurityArchive.301He detested his Republican rival: In the privacy of theOvalOffice,

Fordreferredto“thatsonofabitchReagan”inKissinger’spresence.SeeMemorandum of Conversation, 8/30/76, “Ford, Kissinger,” Box20,NationalSecurityAdviser,GeraldR.FordLibrary.

301“HowdidyoumakeoutwithAnsary”:MemorandumofConversation,3/30/76,“Ford,Kissinger,”Box18,NationalSecurityAdviser,GeraldR.FordLibrary.

302 “I think it was probably”: Author interview with General BrentScowcroft,April6,2010.

302helicoptertoNixon’soceansideretreat:AuthorinterviewwithArdeshirZahedi,September14–15,2010.

302“LetmetalktotheIranians”:MemorandumofConversation,3/30/76,“Ford-Kissinger,”Box18,NationalSecurityAdviser,GeraldR.FordLibrary.

302“IhavetalkedtothePresident”:Telcon,“Ansary-Kissinger,”April2,1976,4:48P.M.,NationalSecurityArchive.

302 to buy one billion barrels of petroleum: Memorandum for BrentScowcroft from Robert Hormats, “Your Meeting with Secretary

KissingerandFrankZarb,Saturday,March13,10:15A.M.,”L.WilliamSeidman Files (WH Economic Affairs Office), Scowcroft, Brent(White House National Security Adviser), (1)-(2), Gerald R. FordLibrary.

302“Itisimportantthatwemove”:Ibid.302 to sell 300 million barrels: Telcon, “Kissinger-Zarb,” 12:29 P.M.,

August3,1976,NationalSecurityArchive.302$3discountperbarrel:MemorandumforBrentScowcroftfromRobert

Hormats, “Your Meeting with Secretary Kissinger and Frank Zarb,Saturday, March 13, 10:15 A.M.,” L. William Seidman Files (WHEconomic Affairs Office), Scowcroft, Brent (White House NationalSecurityAdviser),(1)-(2),GeraldR.FordLibrary.

302 “Zarb’s proposals would put him in a spot”: Telcon, “Kissinger-Ansary,”4:48P.M.,April2,1976,NationalSecurityArchive.

303“theartisthadgraspedFord’snativestupidity”:Alam,486.303anIranianarmy tribunal:“10IranRebelsGetDeathfor8Killings,”

LosAngelesTimes,January1,1976.303Thedourpublicmood:EricPace,“TroubledIranCelebratesReignof

Shah’sFather,”NewYorkTimes,March3,1976.303Arumorhadtakenhold:Alam,475.303“Particularlyonthatday”:FarahPahlavi,AnEnduringLove:MyLife

withtheShah(NewYork:Miramax,2004),261.303 “traumatized by the conflicting winds”: Jane W. Jacqz, editor,

“OpeningAddressbyHerImperialMajestyTheShahbanouofIran,”Iran:Past,PresentandFuture(NewYork:AspenInstitute/PersepolisSymposium,1976),9.

303“alarming”:EricPace,“IranianAidesandScholarsStressUrgencyofSocialReforms,”NewYorkTimes,October10,1975.

303“vulnerabletopopulardisaffection”:Ibid.303“dangerous”:EricPace,“TehranProjectsFaceChallenges,”NewYork

Times,June6,1976.304“frompokinghisnose”:Alam,472.304swellingonherhusband’supperlip:FarahPahlavi,AnEnduringLove,

262.304immersingherand theiroldestson,CrownPrinceReza, in theartof

statecraft:Ibid.304“SeveraltimesaweekRezaandI”:Ibid.304PresidentFordwrotealetterofcongratulations:LetterfromPresident

Ford toHis ImperialMajestyMohammadRezaPahlavi,Shahanshah

of Iran, March 19, 1976, Presidential Correspondence with ForeignLeaders,Box2,“Iran—TheShah(1)-(2),NationalSecurityAdviser,”GeraldR.FordLibrary.

304theShah’sstrickenreaction:CynthiaHelms,AnAmbassador’sWifeinIran(NewYork:Dodd,Mead,1981),83.

304“destroyedPersepolis”:Ibid.304“theslownessofdecision-making”:Alam,477.304 “The steps leading”: Jehan Sadat, A Woman of Egypt (New York:

Simon&Schuster,1987).342.305“ratheralarmedtoseesomanyofthegirlswearingtheveil”:Alam,

483.305“CharlesJourdanIncident”:Theversionofeventsdescribedherewas

recalledbyFatemehPakravan,wifeofGeneralHassanPakravan,inanoral history interview for Harvard University: Habib Ladjevardi,editor, Memoirs of Fatemeh Pakravan: Wife of General HassanPakravan:ArmyOfficer,Chief of the State Intelligence and SecurityOrganization, CabinetMinister, andDiplomat, Harvard Iranian OralHistory ProjectVI, IranianOralHistory Project (Cambridge: CenterforMiddleEasternStudies,HarvardUniversity,1998),115–17.

306eighty-ninepeopleinTehranwerekilled:JoeAlexMorrisJr.,“PoliceKill2Terrorists inDowntownTehran,”LosAngelesTimes,May13,1977.

306 four policemen and eleven terrorists were killed: Eric Pace, “14ReportedSlaininTehranClash,”NewYorkTimes,May17,1976,and,“Iran Violence Grows as Extremists Raided,” Christian ScienceMonitor,May21,1976.

306“theentiremovement”:Alam,489.306“StartrektoIran,withGlitter”:WilliamBrannigan,“StartrektoIran,

with Glitter,” Washington Post, May 24, 1976, and “Suzy Says:Celebrities Inaugurate New York-Tehran Flight,”Hartford Courant,May19,1976.

306“byallaccountsthemostrefreshing”:WilliamBrannigan,“StartrektoIran,withGlitter,”WashingtonPost,May24,1976.

307asmiletothefaceofAmbassadorHelms:Ibid.307“Theywerewined, dined and entertained”: JackAnderson and Eric

Pace,“IranianAidesandScholarsStressUrgencyofSocialReforms,”WashingtonPost,October10,1975.JackAndersonandLesWhitten,“Torture,TerrorinIran,”WashingtonPost,May29,1976.

307Thereveredcleric’sfuneral:EricPace,“AMysteryinIran:WhoKilled

theMullah?,”NewYorkTimes,May12,1976.307“Fewregimeshavebeenfoolhardy”:ErvandAbrahamian,AHistoryof

ModernIran(Cambridge:CambridgeUniversityPress,2008),152.307intrusivenewmeasures:Ibid.308 outright bribery in the form of $6 million in cash: Seymour Hersh,

“CIA IsReported toGiveAnti-Reds in Italy $6Million,”New YorkTimes,January7,1976.

308 the collapse of the lira: Alvin Shuster, “Italy Is Showing Strain ofCrisis,”NewYorkTimes,January22,1976.

308$500million—half its foreigncurrencyreserves:AlvinShuster,“ItalySeeksHelptoBolsterLira,”NewYorkTimes,January23,1976.

308$500millionloan:Ibid.308makeemergencyfundsavailable:Ibid.308governedallmajorcitiesnorthofRome:AlvinShuster,“Italy’sReds

BuildPowerbyTacticsofModeration,”NewYorkTimes,January18,1976.

308fiveofItaly’stwentyregions:Ibid.30848percentoftheItalianpopulation:Ibid.308“Ithasreachedthepoint”:Ibid.308“Ifindithardtoaccept”:MemorandumofConversation,“Kissinger,

Crosland,”Saturday,April24,1976,9:15–10:50A.M.,Officer’sMess,WaddingtonRAFBase,Lincolnshire,UK,NationalSecurityArchive.

308 double-digit levels of unemployment and inflation: Jacque Leslie,“Violence inSpainFedbyRecession,”LosAngelesTimes,March5,1976.

308“Wethinkthatthepoliticalsituationhasimproved”:MemorandumofConversation, “Kissinger, Areilza,” January 25, 1976, 9:45 A.M.,ForeignOfficeGuestVilla,Madrid,Spain,NationalSecurityArchive.

309 “We are now entering a period”: Memorandum of Conversation,“Kissinger, Soares,” January 26, 1976, 3:30 P.M., TheDepartment ofState,NationalSecurityArchive.

309a roaring crowd of forty thousand: FloraLewis, “ItalianCommunistChief,inParis,PessimisticonElectionResult,”NewYorkTimes,June4,1976.

30922percentofAmericanssupported:“22%inPollSayU.S.ShouldActifItalyRedsWin,”LosAngelesTimes,June21,1976.

309 the Communists captured forty-nine new seats: Alvin Shuster,“Christian Democrats Top Italian Vote but Red Gain Leaves CrisisUnresolved,” New York Times, June 22, 1976; Alvin Shuster,

“Communists Gain 49 Crucial Seats in Italy Contest,” New YorkTimes,June23,1976.

310 Italy’s neofascist far right: Alvin Shuster, “Communists Gain 49CrucialSeatsinItalyContest,”NewYorkTimes,June23,1976.

310“The essential problemwhich we confronted”: Bernard Gwertzman,“KissingerVoicesConcernonItaly,”NewYorkTimes,June23,1976.

310“Bill Simon is going to treat Italy”: Edwin L. Dale Jr., “IMF LoanHeldWaytoAidItaly,”NewYorkTimes,June30,1976.

310“Italyneedsademocraticalternative”:MemorandumofConversation,“Kissinger, Leber,” July 1, 1976, 10:45 A.M., Secretary’s Office,NationalSecurityArchive.

310electedaCommunisttothepowerfulpostofpresident:AlvinShuster,“Italy’sMajor PartiesGiveReds aKeyLegislative Post,”New YorkTimes,July4,1976.

310 on July 10 he telephoned Henry Cabot Lodge: Telcon, “Kissinger-Lodge,”12:05P.M.,July10,1976,NationalSecurityArchive.

310 President Giovanni Leone asked: Sara Gilbert, “Andreotti NamedPremierinItaly,”WashingtonPost,July14,1976.

311 $11.51 per barrel: LewisW. Simons, “Oil Cartel Fails to Agree onPriceHike,”WashingtonPost,May29,1976.

31115percentpricerise:Ibid.311somethingthatSheikhYamanimadeclearwasunacceptable:Ibid.311“Intoday’sinterdependentworld”:Ibid.311“inordertosave”:Alam,492.311OnJune1,SyrianarmoreddivisionsinvadedLebanon:HenryTanner,

“Damascus Sends Troops and Tanks into Mid-Lebanon,”New YorkTimes,June2,1976.

312Melloyhadbeenshotintheheadandchest:JamesM.Markham,“USAmbassador and Aide Kidnapped and Murdered in Beirut CombatSector,”NewYorkTimes,June17,1976.

312 President Ford ordered the evacuation: “US Bids Citizens LeaveLebanon,”NewYorkTimes,June19,1976.

312incomingshellsrippedthroughanairliner:“JetlinerBlastedinBeirutAirport,”NewYorkTimes,June28,1976.

312adashfortheSyrianborder:“FordOrdersEvacuationofAmericansinLebanon,”NewYorkTimes,June18,1976.

312“thePLOmightbesodesperate”:Telcon,“Kissinger-Atherton,”6:40P.M.,July12,1976,NationalSecurityArchive.

312“theeffectiveassistance”:CablefromPresidentFordtoKingKhalid,

July 27, 1976, Presidential Correspondence with Foreign Leaders,King Khalid, Box 4, National Security Adviser, Gerald R. FordLibrary.

312stomachpains,askinrash,andheadaches:Alam,489.313“changeofplan”:Ibid.,497.313thebasementofabuildingnearMehrabadairport:“IranAgentsKill

10inShootout,”LosAngelesTimes,June30,1976.313HamidAshraf, themostwantedman in Iran:AbbasMilani,Eminent

Persians:TheMenandWomenWhoMadeModern Iran,1941–1979(Syracuse:SyracuseUniversityPress,2008),includesachapteronthelifeofHamidAshraf,Vol.1,96–102.

313securityforcesringedtheneighborhoodseventimes:Ibid.313thenumberofjoblessAmericans:EdwardCowan,“JoblessRateUpto

7.5%forJunefromMay’s7.3%,”NewYorkTimes,July3,1976.313 Alan Greenspan, had gone before Congress: Edwin L. Dale Jr.,

“Economy Will Outperform Forecast, Greenspan Says,” New YorkTimes,June11,1976.

314 thesteepest fall inconsumerretail spending: “RetailSalesFell1.2%LastMonthto$52.64Billion,”WallStreetJournal,June11,1976.

314“Variationsinthepaceofeconomicactivity”:Ibid.314 the June jobs report: EdwardCowan, “Jobless RateUp to 7.5% for

JunefromMay’s7.3%,”NewYorkTimes,July3,1976.314 “Temporary pauses of this kind aren’t uncommon”: “Burns Is

Optimistic About the Economy, Calls Consumer-Outlay LullTransitory,”WallStreetJournal,July1,1976.

314“unsuitableentertainment”:BettyFordwithChrisChase,TheTimesofMyLife(NewYork:Harper&Row,1978),223.

314225tallshipssaileduptheHudsonRiver:RichardF.Shepard,“Nationand Millions in City Joyously Hail Bicentennial,”New York Times,July5,1976.

314 “The Pentagon is incredible”: Memorandum of Conversation,“Kissinger, Helms, Atherton, Eilts, Pickering, Oakley,” 8:00 A.M.–10:00A.M.,August7,1976,NationalSecurityArchive.

314agiantAmerican flag litupamountainside:As recounted inSandraMackey,The Iranians:Persia, Islamand theSoul of aNation (NewYork:Penguin,1998),251.

314Thenextmorning’s:NewYorkTimesreported:ClydeH.Farnsworth,“U.S.Banks’BiggerRole,”NewYorkTimes,July5,1976.

315Wall Street was eager to establish a presence: JamesM.Markham,

“Spain’s Foreign Debt Rise Is Worrying Businessmen,” New YorkTimes,December1,1976.

315 “Concern has been expressed in Congress”: Clyde H. Farnsworth,“U.S.Banks’BiggerRole,”NewYorkTimes,July5,1976.

315Some40percentofBankofAmerica’searnings:Ibid.315halfofitsoutstandingloans:Ibid.315“someshareofresponsibility”:“IMFAideCitesBanks’RoleinDebt

ProblemsofDevelopingNations,”WallStreetJournal,April30,1976.315$250billionattheendof1975:Ibid.31540percentofthosetotals:Ibid.316“disturbinglyhighlevels”:HobartRowen,“PoorNations’Borrowings

Questions,”WashingtonPost,June17,1976.316“theabilityofthesecountries”:Ibid.316Peru,Indonesia,andArgentina:HobartRowen,“BanksQuestionedon

LoanPolicies,”WashingtonPost,July18,1976.316$15billionand$17billioninprivatebankloans:Ibid.316“inagreedydriveforprofits”:Ibid.316“Howcanpresumablysophisticatedbankers”:Ibid.316 In the first six months of 1976: Edwin Dale Jr., “IMF Loans in 6

MonthsTopAnyPreviousYear’s,”NewYorkTimes,July13,1976.316ThebiggestuserofthefundwasGreatBritain:Ibid.316 “possible collapse of the economy”: Michael Hatfield, “Healey

Warning of ‘Collapse of Economy,’” The Times (London), July 21,1976.

317At10:30A.M.onFriday,July9,1976:MemorandumofConversation,7/9/76, “Ford,Kissinger, SaudiDeputy PrimeMinisterAbdallah binAbd al-Aziz-Saud,” Box 20, National Security Adviser, Gerald R.FordLibrary.

3182,500Maverickair-to-surfacemissiles:LeslieH.Gelb,“U.S.ReadytoSellMissilestoSaudis,”NewYorkTimes,August1,1976.

318“thecontinuingbuild-up”:Ibid.

CHAPTERELEVEN:ROYALFLUSH

PAGE319 “Many countries have in fact”: Letter to His Imperial Majesty

MohammadRezaPahlavi,ShahanshahofIran.FromPresidentGeraldR.Ford,October29,1976,Box2,PresidentialCorrespondencewith

ForeignLeaders:Iran—TheShah(z),GeraldR.FordLibrary.319 “Nothing could provoke more reaction in us”: Presidential

Correspondence with Foreign Leaders, Iran—The Shah (2), “Letterfrom His Imperial Majesty the Shahanshah Aryamehr to PresidentGerald R. Ford,” Box 2, National Security Adviser, Gerald R. FordLibrary.

319 released a damning report: “U.S. Military Sales to Iran,” A StaffReport to theSubcommitteeonForeignAssistanceof theCommitteeon Foreign Relations, United States Senate, July 1976 (Washington,D.C.:U.S.GovernmentPrintingOffice,1976).

319“outofcontrol”:LeslieH.Gelb,“StudyFindsIranDependentonU.S.inUsingWeapons,”NewYorkTimes,August2,1976.

319 “without U.S. support on a day-to-day basis”: Don Oberdorfer,“Uncontrolled Sale of Arms to Iran Traced to Nixon,”WashingtonPost,August2,1976.

319 “cynical and dangerous”: Richard Bergholz, “President DefendsPoliciesinFaceofCarterAttack,”LosAngelesTimes,September10,1976.

319“Itcouldn’tbeaworsetime”:MemorandumofConversation,8/3/76,“Ford, Kissinger, Scowcroft,” Box 20, National Security Adviser,GeraldR.FordLibrary.

320“Iamreallymad”:MemorandumofConversation,8/7/76,“Kissinger,Helms,Atherton,Eilts,Pickering,Oakley:GuidanceforAmbassadorsEilts andPickering,” 8:00A.M.–10:00A.M.,August 7, 1976,NationalSecurityArchive.

321“themostdiligentstatesman”:AsadollahAlam,TheShahandI:TheConfidentialDiaryofIran’sRoyalCourt,1969–1977 (NewYork:St.Martin’s,1991),500.

321“astupid,narrow-mindedbunch”:Ibid.,501.321 The Shah hosted the American delegation: Thomas W. Lippmann,

“Shah Denies Charge That Iran Buys Too Many Weapons,”WashingtonPost,August7,1976.

321He had arranged a sightseeing trip: Bernard Gwertzman, “Abroadwith Kissinger, Some Exercises in Diplomacy,” New York Times,August12,1976.

321awasteofhistime:Ibid.321 “The secretary appeared bored”: Associated Press, “Kissinger’s

Diplomatic...IfQueasy,”ChicagoTribune,August7,1976.321“lookedaway,paled”:BernardGwertzman, “AbroadwithKissinger,

SomeExercisesinDiplomacy,”NewYorkTimes,August12,1976.321threehundredF-16sandtwohundredF-18s:“IranSeeks300General

Dynamics F16s, Near Double of What U.S. Agreed to Sell,”WallStreetJournal,September13,1976.

322“Can theUnited States”: BernardGwertzman, “Shah Cautions U.S.AgainstArmsCut,”NewYorkTimes,August7,1976.

322 sell another $10 billion in military equipment: Bernard Gwertzman,“Iranians Planning to Spend $10 Billion on U.S. Arms,”New YorkTimes,August8,1976.

322asanafterthought:AuthorinterviewwithHenryPrecht,June4,2009.322 “on historical precedent”: Henry A. Kissinger, Years of Upheaval

(Boston:Little,Brown,1982),672.322“idlemusing”:Ibid.322 “In Iran, I don’t think we realize”: Memorandum of Conversation,

8/13/76,“Ford,Kissinger,”Box20,NationalSecurityAdviser,GeraldR.FordLibrary.

323Zarbreturnedtoinformthepresident:AuthorinterviewwithFrankG.Zarb,June11,2009.

323“nit-pickingTalmudicscholar”:Ibid.323Zahedi had grown close to Reagan: Author interviewwith Ardeshir

Zahedi,September14–15,2010.323Zahedihadturnedthemdown:Ibid.323stayedintheReagans’hotel:Ibid.323“Fordwasanice,wonderfulperson”:Ibid.324“ThisiswhyFordwasmaybealittleupset”:Ibid.324 “Now that we have gotten rid of”: Memorandum of Conversation,

8/30/76,“Ford,Kissinger,”Box20,NationalSecurityAdviser,GeraldR.FordLibrary.

324 a red Volkswagen veered sharply: The most detailed account of theAugust28,1976,slayingsofthreeAmericancontractorsinTehranwasofferedbyAmbassadorRichardHelmstoanassociatewhokeptnotesoftheirconversation.ItwasfirstreportedbyBobWoodward.SeeBobWoodward, “IBEX: Deadly Symbol of U.S. Arms Sales Problems,”WashingtonPost,January2,1977.

325Cottrellhadbeenshadowed:Ibid.325 Cottrell was employed by Rockwell: Paul B. Finney, “Letter from

Tehran:Pomp,Progress,andTerrorism,”BusinessWeek,November22,1976.

325 “One of the pistols was stolen”: Bob Woodward, “IBEX: Deadly

Symbol ofU.S.ArmsSalesProblems,”WashingtonPost, January 2,1977.FormerSecretaryofDefenseSchlesingertoldtheauthorthatthetheft was plausible and that it didn’t surprise him.Author interviewwithDr.JamesSchlesinger,June5,2009.

325tippedoffbyIsrael’sMossad:Alam,503.325“forthisatrocity”:Ibid.325“stayedclosetohome”:“AmericansinIranWaryAfterKillings,”Los

AngelesTimes,August30,1976.325170 frightenedAmericans:WilliamBranigan, “FrightenedAmericans

SeektoImproveSecurityinIran,”WashingtonPost,August31,1976.325registeringathotelsunder falsenames:PaulB.Finney,“Letter from

Tehran:Pomp,Progress,andTerrorism,”BusinessWeek,November22,1976.

325twentyChevroletsandlimousineswereoutfitted:Ibid.325“sometimeshadnightmares”:CynthiaHelms,AnAmbassador’sWife

inIran(NewYork:Dodd,Mead,1981),180.326 surrounded by sixteen: Paul B. Finney, “Letter from Tehran: Pomp,

Progress,andTerrorism,”BusinessWeek,November22,1976.326AmbassadorHelmsnowaskedhisstaff:Author interviewwithHenry

Precht,June4,2009.326between45,000andfiftythousandAmericans:Ibid.326WalterMondalecitedthedeaths:RobertShogan,“MondaleUrgesU.S.

toCurbArmsSales,”LosAngelesTimes,August31,1976.326“Thepatternisspurtandpause”:PhilipShabecoff,“GreenspanFinds

Economic‘Pause,’”NewYorkTimes,August31,1976.326 “From an economist’s standpoint”: Alan Greenspan, The Age of

Turbulence(NewYork:Penguin,2008),75.326 7.9 percent: Hobart Rowen and James L. Rowe Jr., “Jobless Rate

Increasesto7.9PerCent,”WashingtonPost,September4,1976.327“Economistsandanalystsnoted”:LeonardSilk,“SpendingShortfall:

ASlowdownReason?,”NewYorkTimes,October14,1976.327“thebiggestbudgetarygaffe”:Ibid.327 “in a state of chaos”: James L. Rowe Jr., “Handling a Longer

Slowdown,”WashingtonPost,November14,1976.327“Iftheoil-producingcountries”:Ibid.327 13.8 percent inflation: Michael Keats, “Besieged British Economy

UndergoesNewBattering,”WashingtonPost,September23,1976.3271.5millionpeopleoutofwork:Ibid.327“Thingsaregoingtogetworsebeforetheygetbetter”:Ibid.

32712percent: JimHoagland,“FranceFreezesPrices,”WashingtonPost,September23,1976.

327athree-monthwageandpricefreeze:Ibid.327ceilingof$11billion:Ibid.327Thedealtosellthousandsofnew-generationsmartmissiles:LeslieH.

Gelb,“U.S.ReadytoSellMissilestoSaudiArabia,”NewYorkTimes,August1,1976.

328“TheSaudishavebeenveryhelpful”:MemorandumofConversation,8/30/76,“Ford,Kissinger,SenatorsCaseandJavits,”Box20,NationalSecurityAdviser,GeraldR.FordLibrary.

328 to deliver a letter from President Ford: Telegram 6093 from theEmbassy in Jidda to the Department of State, September 8, 1976,1000Z, Box 205, L.William Seidman Files (WH Economic AffairsOffice,BrentScowcroft(WhiteHouseNationalSecurityAdviser),(1)-(2),GeraldR.FordLibrary.

328“willcertainlynotapproveapricerisethisyear”:Ibid.328“themainobjectiveof the letter”:MemorandumforBrentScowcroft

fromRobertHormatsandRobertB.Oakley,“LettertoKingKhalid,”Presidential Correspondence with Foreign Leaders, Saudi Arabia—King Khalid, Box 4, National Security Adviser, Gerald R. FordLibrary.

329At11:00A.M.onFriday,September17:MemorandumofConversation,“Ford, Saudi Arabian Foreign Minister Prince Saud bin Faisal Al-Saud,”Box21,NationalSecurityAdviser,GeraldR.FordLibrary.

330 at 3:00 P.M. on September 23: “Strategy Paper for the President onDecember Oil Price Decision,” Box 5, OPEC—National SecurityAdviser, NSC International Economic Affairs Staff Files, Gerald R.FordLibrary.

330 1,000-pointmark: Richard L. Stout, “Stock Market Up, but Will ItSwaytheVoter?”ChristianScienceMonitor,September23,1976.

330 of between 10 and 20 percent: Bill Newkirk, “Oil Price RiseDilemma,”ChicagoTribune,October11,1976.

330OfficialsurgedPresidentFordtowriteletters:“StrategyPaperforthePresidentonDecemberOilPriceDecision,”Box5,OPEC—NationalSecurity Adviser, NSC International Economic Affairs Staff Files,GeraldR.FordLibrary.

330 Frank Zarb was assigned the task: Ibid. Zarb confirmed that hetraveled to Caracas to raise the issue of oil prices with Venezuelanofficials in an interview with the author on June 11, 2009. He was

reluctanttodivulgewhatthosediscussionsentailed.331Kissingerwasaskedtomeet:Ibid.331theU.S.ArmyCorpsofEngineers:“StrategyPaperforthePresidenton

December Oil Price Decision,” Box 5, OPEC—National SecurityAdviser, NSC International Economic Affairs Staff Files, Gerald R.FordLibrary.

331 a record 293 million barrels: Thomas O’Toole, “Oil Storage TanksBrimming,”WashingtonPost,October30,1976.

331more than three thousandadvisers andguests: ThomasE.Mullaney,“BankersSeekingAnswersatIMF,”NewYorkTimes,October5,1976.

331 $45 billion: Leonard Silk, “The Problem of Enormous Buildup ofInternationalDebt,”NewYorkTimes,November11,1976.

331$20billion:Ibid.331$10billion:Ibid.331“Noonereallyknows”:Ibid.332“to affect the credit worthiness”: Edwin L. Dale Jr., “Head of IMF

UrgesHalttoBorrowingtoCoverDeficits,”NewYorkTimes,October4,1976.

332“areapproachingthelimits”:EdwinL.DaleJr.,“SimonSaysNationsConsumingOilFace$50BillionDeficit,”NewYorkTimes,October5,1976.

332 “We shall not waver!”: Labor Government in Britain SurvivesParliamentChallenge on Fiscal Policy,”LosAngelesTimes, October12,1976.

332 $3.9 billion: Peter T.Kilborn, “Britain toAsk IMF For $3.9BillionLoan,ItsBorrowingLimit,”NewYorkTimes,September30,1976.

332an“economicpolicysosavage”:HobartRowen,“PoundSinkstoNewLow,”WashingtonPost,October26,1976.

332“Nobodywantstotalkaboutit”:Ibid.333 “Of course, the economic situation is serious”: Memorandum of

Conversation, “Kissinger, Forlani,” September 30, 1976, NationalSecurityArchive.

333$300millionloan:NedTemko,“PortugalSeeks$300MillioninU.S.toBoostReserves,”WashingtonPost,November4,1976.

333Inflationwasrunningto30percent:MarvineHowe,“TheAftermathofPortugal’sRevolutionIsExpensive,”NewYorkTimes,November21,1976.

33320percentofthepopulation:Ibid.333$4.3billionoilbill:JoeGandelman,“MadridLosesSomeofItsGlow,”

ChristianScienceMonitor,October29,1976.333endingtelevisiontransmissions:Ibid.33362milesperhour:Ibid.333“Theenergycrisis”:Ibid.333a “hot autumn”: StanleyMeisner, “Observers See ‘Hot Autumn’ in

Spain,”LosAngelesTimes,October15,1976.333One third of Spain’s outstanding foreign debt: James M. Markham,

“Spain’s Foreign Debt Rise Is Worrying Businessmen,” New YorkTimes,December1,1976.

334“Thegrowingforeigndebt”:Ibid.334“Howmuchpressurehas therebeen”:“TheWesternWorldWillNot

RegretOurProgressMarch,”KayhanWeeklyInternationalEdition9,no.450(December18,1976).

334“I cannot accept this as a crisis”: “Shahanshah: IranWillMake It,Iranian-Style,” Kayhan Weekly International Edition 9, no. 449(December11,1976).

334“purejealousy”:Ibid.334notroubleabsorbinga15percentrise:“TheWesternWorldWillNot

RegretOurProgress,”KayhanWeeklyInternationalEdition9,no.450(December18,1976).

334“Ifyoujustdecidedtoworkalittlemore”:Ibid.335AnAmerican visitor to Toufanian’s office: The visitor to Toufanian’s

officewasWashington Post reporterWilliam Brannigan, who wroteabout their encounter. See William Brannigan, “Iran’s Military, OilChiefsSplitoverPriceIncrease,”WashingtonPost,December9,1976.

335athree-hourseminar:MemorandumforAmbassadorEdwardS.Little,Chairman,HumanResourcesCommittee,CentralIntelligenceAgency,fromDavidH.Blee,NationalIntelligenceOfficerfortheMiddleEast,“Subject: Reporting Assessment—Focus Iran,” 4 November 1976.EricHooglund,projecteditor,Iran:TheMakingofU.S.Policy,1977–80, National Security Archive (Alexandria, VA: Chadwyck-Healey,1990).

336“Washingtondoesnothaveaclearperception”:Ibid.337“Gosh, the programs the Shah has coming”: Lee Lescaze, “General

BrownIsinHotWaterAgain,”WashingtonPost,October19,1976.337“obviouslyinelegantphraseology”:Ibid.337“trulyhilarious”: “Shah:BrownHasApologized,”WashingtonPost,

October26,1976.337asurveyofarmssalesundertakenbyDavidRonfeldt:DavidRonfeldt,

Working Note: “U.S.-Iranian Arms Transfer Relationships: AHistoricalAnalysistoMay1972(U),”Preparedfor theOfficeof theAssistant Secretary of Defense (International Security Affairs), N-9586-ISA (Santa Monica: RAND Corp.: October 1976), EricHooglund,project editor, Iran:TheMakingofU.S.Policy,1977–80,NationalSecurityArchive(Alexandria,VA:Chadwyck-Healey,1990).

338 the Shah frankly admitted: Arthur Unger, “MikeWallace Interview:Incisive Look at the Shah,”Christian ScienceMonitor, October 21,1976.A full transcriptof the interviewwaspublishedonpage22 oftheOctober22,1976,editionofTheNewYorkTimes: “TheShahonIsrael,Corruption,Tortureand...”

338 Kissinger had no choice: “U.S. Queries Iran on Snooping Here,”WashingtonPost,October29,1976.

338JackAndersonreported: JackAnderson, “Iran’sSAVAKCopiesCIADirtyTricks,”HartfordCourant,October29,1976.

338SAVAK’sseniorhandler:Ibid.AndersonnamedthehandlerasMansurRafizadeh,anattachéattheIranianmissiontotheUnitedNations.

339theambassadorcalledonCourtMinisterAlam:Alam,517.339“eyes only for the ambassador”: Cable 267996, “EyesOnly for the

Ambassador,”October30,1976,Box2,PresidentialCorrespondencewithForeignLeaders:Iran—TheShah(2),GeraldR.FordLibrary.

339 The president’s letter to the Shah: Letter to His Imperial MajestyMohammadRezaPahlavi,ShahanshahofIran,fromPresidentGeraldR.Ford,October29,1976,Box2,PresidentialCorrespondencewithForeignLeaders:Iran—TheShah(2),GeraldR.FordLibrary.

339above 6million barrels a day: JoeAlexMorris Jr., “Oil ProductionSoarsinPersianGulfArea,”LosAngelesTimes,November8,1976.

340 10:00 A.M. local time: Cable 3109227, “For the Secretary from theAmbassador,”October31,1976,EricHooglund,projecteditor, Iran:The Making of U.S. Policy, 1977–80, National Security Archive(Alexandria,VA:Chadwyck-Healey,1990),Reference#01117.

340“AfterHisMajestyhasopportunity”:Ibid.340 Richard Helms’s resignation: William Brannigan, “Helms Seen as

Ready to Retire as U.S. Ambassador to Iran,” Washington Post,November2,1976.

341“Look,Idon’tgiveagoodgoddamn”:MemorandumofConversation,“Kissinger, Scowcroft,” 10:19 A.M., October 25, 1976, NationalSecurityArchive,76.

341placedacalltoSenatorTedKennedy:MemorandumofConversation,

“Kissinger-Kennedy,” 2:50P.M., October 22, 1976,National SecurityArchive.

341“Youwererightaboutthepause”:Greenspan,76.341 “no formal liaison with SAVAK agents”: Memorandum of

Conversation,“Kissinger,Atherton,Saunders,Murphy,Covey,”12:30P.M.,November4,1976,NationalSecurityArchive.

341“ItoldZahediIhoped”:Ibid.341 Ardeshir Zahedi delivered the Shah’s letter of reply: Presidential

Correspondence with Foreign Leaders, Iran—The Shah (2), “Letterfrom His Imperial Majesty the Shahanshah Aryamehr to PresidentGerald R. Ford,” Box 2, National Security Adviser, Gerald R. FordLibrary.

342TheIranianForeignMinistryissuedacarefullywordedstatement:JackAnderson,“Shah’sThreats toKissingerRevealed,”WashingtonPost,July31,1979.

342“Thestatementservesnotice”:Ibid.342 Henry Kissinger telephoned Roy Atherton: Telcon, “Kissinger-

Atherton,”9:55A.M.,November8,1976,NationalSecurityArchive.343ZahediandAthertonmetthenextday:MemorandumofConversation,

“Meeting with Ambassador Zahedi,” November 9, 1976, EricHooglund,project editor, Iran:TheMakingofU.S.Policy,1977–80,NationalSecurityArchive(Alexandria,VA:Chadwyck-Healey,1990).

343“virtuosoperformance”:Ibid.343“AmbassadorZahediwasquicktoassureus”:Ibid.343“any illegal or improper activity”: “No Improper Activities by Iran

EnvoysFound,”HartfordCourant,November11,1976.344SyrianpresenceinBeirut:JamesF.Clarity,“SyrianArmyUnitsMove

intoBeiruttoEnforceTruce,”NewYorkTimes,November11,1976.344 United Nations Security Council unanimously voted: Peter Grose,

“Vote by U.S. Against Israel at U.N. Linked to Effort for MideastTalks,”NewYorkTimes,November12,1976.

344 “pacing the floor”: Philip Shabecoff, “Greenspan Sees RecoverySlowerthanFordForecast,”NewYorkTimes,November13,1976.

344“could lead todisaster”:HobartRowen,“OtherNations’DebtsMayPlagueU.S.,”WashingtonPost,December14,1976.

344“AfterabriefIndianSummer”:DonCooke,“PortentsofGloomSeepintoForecastsonGlobalEconomy,”LosAngelesTimes,November21,1976.

344BankofAmericawas theworld’s largestbank:AsdescribedbyTime

magazine,“AwayfromSecrecy,”Time,November29,1976,40.344“thebank’sappraisal”:Ibid.345“alegitimateneed”:Ibid.345“I have never seen Europe so confused”: Don Cooke, “Portents of

GloomSeepintoForecastsonGlobalEconomy,”LosAngelesTimes,November21,1976.

345“Therealworrynow”:Ibid.345 300,000: “Inflation Endangers Economy in France, Boosts Left’s

Hopes,”WashingtonPost,November13,1976.345 the one million mark: Richard F. Janssen, “France’s Troubles Stir

Washington Worries, Economic and Political,”Wall Street Journal,December8,1976.

345 three out of four businessmen: “Inflation Endangers Economy inFrance,BoostsLeft’sHopes,”WashingtonPost,November13,1976.

345CapitalbeganleavingFrance:Ibid.345“Someobserversbelievethesituation”:Ibid.345“There isa feelingquitesuddenly”:DonCooke,“PortentsofGloom

Seep into Forecasts on Global Economy,” Los Angeles Times,November21,1976.

345 “France scares the hell out of me”: “France’s Troubles StirWashington Worries, Economic and Political,”Wall Street Journal,December8,1976.

345 the government approved an austerity budget: SariGilbert, “ItaliansPassAusterityPlan;CommunistAbstentionIsKey,”WashingtonPost,November13,1976.

345$7billionto$17billion:TakaskiOka,“TrufflesandJoyRidesJangleItaly’sFinances,”ChristianScienceMonitor,November18,1976.

345“Whatwill it take”: Hobart Rowen, “Dealingwith Italy’s EconomicWoes,”WashingtonPost,December2,1976.

346$700million:Ibid.346$1billion:Ibid.346 plotting a right-wing coup: William Mathewon, “Portugal’s Plight:

Curing Economic Ills Is Crucial to Survival of Regime in Lisbon,”WallStreetJournal,November19,1976.

346 huge rally in downtown Madrid: James M. Markham, “Franco IsHonoredaYearAfterDeath,”NewYorkTimes,November21,1976.

3468.5percent:Robert S.Cameron, “QuebecElectionMayHaveMajorImpact,ifFavoredSeparatistPartyGainsPower,”WallStreetJournal,November15,1976.

346nationalaverageof7.1percent:Ibid.346forecasttohit9.1percent:Ibid.346acenterpieceofhiscampaign:“SeparatistsWinStaggeringVictoryIn

QuebecElection,”LosAngelesTimes,November16,1976.346“Discontentoverinflation”:“IntheShadowofaNewGlobalSlump,”

Time,November29,1976,33.347“It seems to have taken the defeat”: Vivian H. Oppenheim, “OPEC

PoisedtoJuggleThosePricesAgain,”LosAngelesTimes,December12,1976.

347“Howcanyourun”: Ibid.TheofficialquotedwasWilliamSeidman,oneofPresidentFord’stopeconomicadvisers.

347“I called in the Saudi and Iranian Ambassadors”: Memorandum ofConversation, “Ford,Kissinger,”Box 21,National SecurityAdviser,GeraldR.FordLibrary.

347AmbassadorZahedihadaverydifferentrecollection:AuthorinterviewwithArdeshirZahedi,September14–15,2010.

348TheStateDepartmentadmitted:AssociatedPress,“Kissinger’sPhoneTranscripts Moved from Rockefeller Estate,” New York Times,December30,1976.

348 Kissinger had met with Ed Yeo: Memorandum of Conversation,“Kissinger,Yeo,Sonnenfeldt,Rogers,Covey,”5:50P.M.,November3,1976,NationalSecurityArchive.

348“HehasaterribleviewofMargaretThatcher”:Ibid.349“AfteryouleftthemeetingonFriday”:MemorandumofConversation,

“Ford, Kissinger, Scowcroft,” Box 21, National Security Adviser,GeraldR.FordLibrary.

350 “could touch off massive strikes”: Bernard D. Nossiter, “BritainRejects Hard-LineMeasures in Economic Crisis,”Washington Post,December4,1976.

350“Itisintheeconomicinterest”:MemorandumofConversation,“Ford,Schmidt,” November 23, 1976, Box 21, National Security Adviser,GeraldR.FordLibrary.

350Australiahaddevalueditscurrency:“AustraliaDevaluesCurrencyby17.5%,”NewYorkTimes,November29,1976.

350NewZealand’sgovernmentsuspendedforeignexchangetrading:Ibid.350 “I am gravely concerned”: Memorandum of Conversation, “Ford,

Saudi Ambassador Ali Alireza,” November 29, 1976, Box 21,NationalSecurityAdviser,GeraldR.FordLibrary.

351“intolerable”:FloraLewis,“IsraeliChiefInsistsThatOnlyLebanese

ControlBorderArea,”NewYorkTimes,November29,1976.351KissingerwasbackintheOvalOffice:MemorandumofConversation,

“Ford, Kissinger,” December 3, 1976, Box 21, National SecurityAdviser,GeraldR.FordLibrary.

352 climbed back up to 8.1 percent: “Jobless Rate Climbs to 8.1%,Wholesale Price Rise Is Level,”Wall Street Journal, December 6,1976.

352 Alan Greenspan admitted: Hobart Rowen, “Greenspan Says theEconomy IsWeaker than Expected,”Washington Post, December 3,1976.

352“ahigherdegreeofcaution”:Ibid.352hiketheirpricesby6percent:EdwardCowan,“WhiteHouseCriticizes

SteelPriceRise,”NewYorkTimes,December3,1976.352“He said youwere very impressive”:MemorandumofConversation,

“Ford, Kissinger,” December 3, 1976, Box 21, National SecurityAdviser,GeraldR.FordLibrary.

CHAPTERTWELVE:OILWAR

PAGE353“Bankruptcy isworse thandefeat”: Eric Pace, “Iran Said toReview

ArmsBuyinginU.S.BecauseofOilLag,”NewYorkTimes,February9,1977.

353 “Our great diplomacy”: Memorandum of Conversation, “Ford,Kissinger,” January 4, 1977, Box 21, National Security Adviser,GeraldR.FordLibrary.

353FortypercentofAmerica’soilneeds:“FiddlingDangerouslyWhiletheFuelBurns,”Time,December20,1976,37.

3534percentincrease:Ibid.353“Thebraveconservationmeasures”:Ibid.354PresidentFordwelcomedAmbassadorArdeshirZahedi:Memorandum

ofConversation,December 7, 1976, Box 21, “Ford, CEAChairmanGreenspan, IranianAmbassadorArdeshir Zahedi,”National SecurityAdviser,GeraldR.FordLibrary.

354 “before their delivery was completed”: R. W. Apple Jr., “CarterAttacks,FordDefendsU.S.ForeignStancein2ndDebate,”NewYorkTimes,October7,1976.

355“Instead of carte blanche expenditure”: Hossein Razavi and Firouz

Vakil,ThePoliticalEnvironmentofEconomicPlanninginIran,1971–1983:FromMonarchytoIslamicRepublic(Boulder:Westview,1984),93.

355TheheadlinesinTehran’sEnglish-languageKayhanInternational:SeeKayhanWeeklyInternationalEdition9,no.448(December4,1976),andKayhanWeekly International Edition 9, no. 450 (December 18,1976).

356 “and any oil price increase”: Don Oberdorfer, “U.S. Reiterates ItsOppositiontoOPECOilPriceIncrease,”WashingtonPost,December10,1976.

357 Italy repaida$486million loan: “EECAgrees toPay Italy’sBritishDebt,”NewYorkTimes,November3,1976.

357 “Our problem is the Army”: Memorandum of Conversation,“Kissinger, del Prado,” 10:20 A.M., December 2, 1976, NationalSecurityArchive.

357masked gunmen kidnapped: James M. Markham, “Leading SpanishAideKidnappedinMadrid,”NewYorkTimes,December12,1976.

357PrimeMinisterAdolfoSuárezwasnowlessconfident:JoeGandelman,“Referendum Puts Spanish Government on Defensive,” ChristianScienceMonitor,December13,1976.

357battledhundredsofleftistdemonstrators:MiguelAcoca,“Leftists,RiotPoliceClash atMadridDemonstration,”WashingtonPost, December14,1976.

357“aqualifiedvoteofconfidence”:MarvineHowe,“GovernmentPartyEmerges asWinner in PortugalVoting,”NewYorkTimes, December14,1976.

358 a six-month price freeze: Flora Lewis, “Saudi Arabia’s Oil MinisterUrgesa6-MonthPriceFreezeforOPEC,”NewYorkTimes,December15,1976.

358“isnotasstrong”:Ibid.358 a 4:51 meeting: Memorandum of Conversation, “Ford, Saudi

Ambassador Ali Alireza,” December 14, 1976, National SecurityAdviser,GeraldR.FordLibrary.

358“We are used to such statements”: Joe AlexMorris Jr., “Oil CartelSharplySplitoverIssueofPriceHike,”LosAngelesTimes,December16,1976.

358“This is a game that he always plays”: “The OPEC Supercartel inSplitsville,”Time,December27,1976.

358“maneuver . . . all want to raise the price”: “SaudiMinister Quits

OPECTalks,”LosAngelesTimes,December16,1976.358pricesgoup10percent:RogerVielvoye,“Split inOpecBringsTwo-

TierOilPriceRisesof5%and10%,”TheTimes(London),December17,1976.

358 $12.70 a barrel: “Opec Eleven Charging Less than 10pc on SomeHeavyCrudes,”TheTimes(London),December30,1976.

358$13.30abarrel:Ibid.359add$3.5billion:“FiddlingDangerouslyWhiletheFuelBurns,”Time,

December20,1976,37.3592centsagallon:Ibid.359“Anysignofwhite-robedmovement”:“Opec:TheInsideStoryof the

InsideStory,”TheEconomist,December25,1976,78.359“somanytriedtocramintothelift”:Ibid.359mistookhimfortheoilministerfromEcuador:Ibid.359hidingoutinthebowlingalley:Ibid.359“Latenightdramas”:Ibid.359Cutsof$1.69billionin1977and$2.51billion:PeterKilborn,“Britain

AgainCurbsSpendinginEfforttoReviveEconomy,”NewYorkTimes,December16,1976.

359“incompetentmanagementoftheeconomy”:Ibid.359“essentiallyTorypolicies”:Ibid.359“excellent”:Ibid.360 8.5 million barrels a day: “Sheikh Yamani’s Christmas Box,” The

Economist,December25,1976,78.36010millionbarrelsaday...30millionbarrels:“SaudiArabiaPledges

MoreOilAfterOpecPriceSplit,”TheTimes(London),December18,1976.

360“IsitfairforallOPEC”:“TheOPECSupercartelinSplitsville,”Time,December27,1976,49.

360 “Heavy crudes are the focus”: “No First-Round Knock-out,” TheEconomist,February13,1977.

360“Thethirdworldandallprogressivenations”:EricPace,“Iran’sNewsMediaAssailsYamani,”NewYorkTimes,December21,1976.

360“puppet”: “Iran Papers andRadioCall Saudi Traitor toOil Cartel,”LosAngelesTimes,December21,1976.

360“saboteurwhoknifedOPECfrombehind”:Ibid.360“Ifonehastocreateamuseumoftraitors”:Ibid.361$4billion:Ibid.361“Christmasbox”:“SheikhYamani’sChristmasBox,”TheEconomist,

December25,1976,78.361 $10 billion in 1977: “The OPEC Supercartel in Splitsville,” Time,

December27,1976,49.36160percent:Ibid.36137.4percent:Ibid.361$4billion:Ibid.361onlyhalfapercent:“SaudiArabiaPledgesMoreOilAfterOpecPrice

Split,”TheTimes(London),December18,1976.361 “We are extremely worried”: “Saudis Kept Oil Down for Political

Reasons,”TheTimes(London),December30,1976.361“WeexpecttheWest”:JoeAlexMorrisJr.,“OilPriceRiseWillHoldat

5%,SaudiOfficialSays,”LosAngelesTimes,December18,1976.361“has raised all sorts of possibilities”: Bernard Gwertzman, “Saudis

LinkingOiltoPrice,”NewYorkTimes,December18,1976.362“there is a strong link”: FloraLewis, “Yamani SaysTalksLoomon

EndingDualOilPrice,”NewYorkTimes,January28,1977.362“awell-conceived framework”:StevenRattner,“SaudisPickingNew

OilCustomers;HigherOutputSeenAimedatIraq,”NewYorkTimes,January13,1977.

362 “to slow down neighboring Iran’s”: Rowland Evans and RobertNovak,“OilPriceTensions,”WashingtonPost,February26,1977.

36225percent of its imported petroleum: JimHoagland and J. P. Smith,“‘Coincidence of Objectives’ Ties Saudis, U.S.” Washington Post,December20,1977.

362$40billioninvested:Ibid.3625percentof its importedoil:BriefingMemorandum,April30,1977,

“YourMeetingwiththeShah,May13,1977,”EricHooglund,projecteditor, Iran: TheMaking ofU.S. Policy, 1977–80, National SecurityArchive (Alexandria, VA: Chadwyck-Healey, 1990), Briefing BookState,May13,1977,DocumentReferenceNo.IR01164.

362 “to affect US interest rates”: Jim Hoagland and J. P. Smith,“‘Coincidence of Objectives’ Ties Saudis, U.S.” Washington Post,December20,1977.

362“Wearereachingthepoint”:Ibid.362 “Yamani went into the OPEC meeting”: “The Strain on OPEC,”

Newsweek,January24,1977,47.362 “Talleyrand of the Oil World”: Eric Pace, “Saudi Arabia’s Sheik

Yamani,Talleyrand of theOilWorld,”New York Times, January 30,1977.

362“Saudi Arabia Comes of Age”: Joe Alex Morris Jr., “Saudi ArabiaComesofAgeinArabPolitics,”LosAngelesTimes,February2,1977.

363“Saudis’ Influence Is Growing”: Flora Lewis, “Saudis’ Influence IsGrowing,”NewYorkTimes,January30,1977.

363“the best goddamn base we have ever had”: Paul Martin, “GettingStronger: ‘TheBestBaseAmericaHasEverHad’ in SaudiArabia,”TheTimes(London),February21,1977.

363“closer monitoring of their operations”: Paul Lewis, “Paul VolckerSpeaksOut,”NewYorkTimes,December19,1976.

363“While I continue to fear”: “Letter to King Khalid,” December 29,1976, Presidential Correspondence with Foreign Leaders, SaudiArabia—King Khalid, Box 4, National Security Adviser, Gerald R.FordLibrary.

36394.2percentinfavor:JamesM.Markham,“MadridRejoicesoverPollVictory,”NewYorkTimes,December17,1976.

363“irresponsible and shortsighted”: “Mr. Ford Attacks 10pc Oil PriceRise as ‘Irresponsible and Shortsighted,’” The Times (London),December18,1976.

363TreasurySecretarySimoninsisted:Ibid.364$3.9billionloan:HobartRowen,“$3.9BillionIMFLoantoBritainIs

Approved,WashingtonPost,January4,1977.364 $3 billion standby credit: Hobart Rowen, “Britain Receives $3 Bill

CredittoBackSterling,”WashingtonPost,January11,1977.364“We should also get credit”: Memorandum of Conversation, “Ford,

Kissinger,” Box 21, January 4, 1977, National Security Adviser,GeraldR.FordLibrary.

364TheNationalSecurityCouncildidtrytoassess:AuthorinterviewwithGeneralBrentScowcroft,April6,2010.

364underestimatedtheseverityoftheeconomicproblems:Ibid.364“[oil]producersthatliefarthestfromtheirmarkets”:“TheSaudisAre

Serious,”TheEconomist,January1,1977,56.364attendedtheambassador’sfarewellluncheon:Alam,527.365 “SAVAK is not authorized”: Jack Anderson, “Shah’s Threats to

KissingerRevealed,”WashingtonPost,July31,1979.365“aninflammatory,publicbrouhaha”:Ibid.365Heflewoutlaterthatday:TheLosAngelesTimesreportedthatHelms

returnedtotheUnitedStatesfromIranonDecember27,1976.“HelmsLeavesLastUSPost,”LosAngelesTimes,December27,1976.

365“BythetimeIleftTehran”:RichardHelms,ALookoverMyShoulder:

A Life in the Central Intelligence Agency (New York: Ballantine,2003),421.

365 “Roger Channel”: Jack Anderson, “Shah’s Threats to KissingerRevealed,”WashingtonPost,July31,1979.

365“wouldnotbeabletooverlookthepresence”:Ibid.365afront-pageexposé:BobWoodward,“IBEX:DeadlySymbolofU.S.

ArmsSalesProblems,”WashingtonPost,January2,1977.365“yourgovernmentdetermine”:MartinR.HoffmanPapers,Directorate

for Defense Information Press Division, “Letter from General H.Toufanian,ViceMinisterofWar,toTheHonorableDonaldRumsfeld,SecretaryofDefense,”January8,1977,Iran—RichardHallock,1974–76(1)-(2),GeraldR.FordLibrary.

366 “This relationship has been nurtured”: Martin R. Hoffman Papers,DirectorateforDefenseInformationPressDivision,“LetterfromTheHonorable Donald Rumsfeld, Secretary of Defense, to General H.Toufanian, ViceMinister ofWar,” January 19, 1977, Iran—RichardHallock,1974–76(1)-(2),GeraldR.FordLibrary.

366 “I don’t know anybody”: Eliot Janeway, “Carter Failed to HeedWarningsonShah,”ChicagoTribune,January30,1979.

366 a meeting between the two men: The Simon-Carter meeting ismentionedbyRowlandEvansandRobertNovak, “BushandSimon:AudienceswithCarter,”WashingtonPost,November27,1977.

366“PresidentCarteraskedmealltherightquestions”:Ibid.366“Wemustgivethem”:Alam,535.367“aparadiseofindolenceandsloth”:DavidHirst,“ShahTellsIranians

toWork,”WashingtonPost,December26,1976.367“The question now is whether Yamani”: Ronald Taggiasco, “Tough

TalkonOil,ArmsInvestments,”BusinessWeek,January24,1977,36.36714millionbarrelsaday:“YamaniSaysSaudisCanRaiseOutputofOil

by50%,”NewYorkTimes,January15,1977.367 “an act of aggression”: J. P. Smith, “Saudis Failing to Meet Oil

ProductionPromise,”WashingtonPost,June27,1977.367 “[Washington’s] colonial appointee”:William E. Schmidt, “I’m Not

Judas,”Newsweek,January24,1977.368 85 percent of foreign exchange: Nicholas Cumming-Bruce, “Shah

FeelsPinchfromLossofExports,”TheTimes(London),February18,1977.

368 plunged 38 percent: “How the Opec Fight Will Be Won,” TheEconomist,January15,1977.

3682millionbarrels: “IranReportsExportsofOilDecline34.7%,”NewYorkTimes,January12,1977.

368theNationalIranianOilCompanyreported:“IranReportsDeclineof10%inOilSales,”LosAngelesTimes,January6,1977.

3681.2millionbarrelsadayto693,000barrelsaday:Ibid.368dropped to $460million: Parviz Raein, “ExportsDrop Since Iranian

PriceIncrease,”WashingtonPost,January12,1977.368$672million:Ibid.368losing$20millionaday:“MysteryDevelopsoverCheaperCrudefrom

SaudiArabia,”WallStreetJournal,February10,1977.368 7 percent: “How the Opec Fight Will Be Won,” The Economist,

January15,1977,78.368 “Iran needs a quick agreement”: Nicholas Cumming-Bruce, “Shah

FeelsPinchfromLossofExports,”TheTimes(London),February18,1977.

368to$19.5billionfrom$22billion:RayVicker,“GrowingPains:DespiteItsOilMoney, Iran’sEconomySuffers fromManyShortages,”WallStreetJournal,April11,1977.

368between$10billionand$12billion:Ibid.368 imposed a spending freeze: Nicholas Cumming-Bruce, “Shah Feels

PinchfromLossofExports,”TheTimes(London),February18,1977.368 canceled a loan: “Iran Plans Foreign Aid Cuts After Drop in Oil

Revenues,”LosAngelesTimes,January12,1977.368accept a $500million loan: “Iran’sCabinetAgrees on $500Million

LoantoNarrowItsDeficit,”WallStreetJournal,January17,1977.369massive naval base at Chabahar: Eric Pace, “Iran Said to Review

ArmsBuyinginU.S.BecauseofOilLag,”NewYorkTimes,February9,1977.

369$3.8billionworthofaircraft:Ibid.369“hehadforewarnedeveryone”:ParvizC.Radji,In theServiceof the

Peacock Throne: The Diaries of the Shah’s Last Ambassador toLondon(London:HamishHamilton,1983),48.

369“Normallyaquiet,reserved”:Ibid.,49.369“Wehavesquanderedeverycent”:Alam,537.369“Wehavebeenthwarted”:Ibid.,538.369Hoveydavisitedhim:Ibid.369“Bankruptcy isworse thandefeat”: Eric Pace, “Iran Said toReview

ArmsBuyinginU.S.BecauseofOilLag,”NewYorkTimes,February9,1977.

369 20million barrels: James Tanner, “Fuel Feud: OPEC Oil-PriceWarWidensastheCartelWatchesUSDemand,”WallStreetJournal,April20,1977.

370“18shipsaretakingonoil”:RayVicker,“PushforPetroleum:AlreadyAwash inOil, SaudiArabia IsRaising ItsRate ofProduction,”WallStreetJournal,March8,1977.

370rebounded30percent: “IranianOil ExportsReboundedwithRise of30%LastMonth,”WallStreetJournal,March3,1977.

3705.5millionbarrelsofoiladay:Ibid.370“Ifthey[thecountries”:“UnexpectedDemandFrustratestheSaudiOil

Gamble,”TheEconomist,February21,1977.370 soared to 9.3 million barrels: James Tanner, “OPEC Oil-Price War

WidensastheCartelWatchesUSDemand,”WallStreetJournal,April20,1977.

370increaseof540,000barrels:Ibid.370toppingoutat9.7millionbarrels:Ibid.370 rendered “inoperable”: Jahangir Amuzegar, The Dynamics of the

IranianRevolution:ThePahlavis’TriumphandTragedy(Abany:StateUniversityofNewYorkPress,1991),180.

370productionfell16percent:JoeAlexMorrisJr.,“HigherPriceCutsIranOilOutput16%,”LosAngelesTimes,May16,1977.

370“Sinceoilhadbeenexpected”:RobertGraham,Iran:TheIllusionofPower,rev.ed.(London:CroomHelm,1979),100.

370denouncedfromBeirut:MordechaiAbir,SaudiArabiaintheOilEra:Regime and Elites, Conflict and Collaboration (Boulder: Westview,1988),144.

371unrestamongAramcooilworkers:Ibid.371whenthephonerang:Alam,540.371 “The sky was black”: Thomas Lippman, “Fire in Pipeline Still

RestrictingSaudiOilOutput,”WashingtonPost,May13,1977.371$100millioninlostrevenue:Abir,144.371Localreportssuggestedotherwise:Ibid.371declarean“Arabianrepublic”:Ibid.371suppliedwithflashlights:RayVicker,“GrowingPains:DespiteItsOil

Money,Iran’sEconomySuffersManyShortages,”WallStreetJournal,April11,1977.

371“Tehran’sstreetsaresopacked”:Ibid.371“Afewmonthsago”:JoeAlexMorrisJr.,“IsItforReal:NewBroom

StirsLotsofDustinIran,”LosAngelesTimes,October7,1977.

372Cargowasmovingagain:RayVicker,“GrowingPains:DespiteItsOilMoney,Iran’sEconomySuffersManyShortages,”WallStreetJournal,April11,1977.

372costof$32million:Ibid.372“Iran in the past three years”: “Growing Pains in Iran,”The Times

(London),January5,1977.372$22billion to$19.5billion:RayVicker,“GrowingPains:Despite Its

Oil Money, Iran’s Economy Suffers from Many Shortages,” WallStreetJournal,April11,1977.

372“Andeventhoughthisyear’s”:Ibid.372“Thedropinoilexports”:Graham,100.373“Fearing a foreseeable deterioration”: Farah Pahlavi, An Enduring

Love:MyLifewiththeShah(NewYork:Miramax,2004),264.373used theword “cancer”:William Shawcross,The Shah’s Last Ride:

TheFateofanAlly(NewYork:Simon&Schuster,1988),237.373“WhentheFrenchpresident”:FarahPahlavi,AnEnduringLove,266–

67.374“Iamonlyaskingyoutohelpme”:GholamRezaAfkhami,TheLife

and Times of the Shah (Berkeley: University of California Press,2009),549.

374When Vance learned of Zahedi’s presence: The encounter betweenCyrus Vance and Ardeshir Zahedi at Jay Rockefeller’s inaugural onJanuary 17, 1977, was described to me by Zahedi in an interviewconductedonSeptember15,2010.ForanaccountofthefestivitiesinCharleston,seeJamesBranscome,“Rockefellers:PoliticalOuts,Ins,”WashingtonPost,January18,1977.

374 “Everything they asked, I answered”: Ibid. Author interview withArdeshirZahedi,September14–15,2010.

375threehundredtofourhundredpoliticalprisoners:JayRoss,“IranPutsBrakesonDevelopment,”LosAngelesTimes,August21,1977.

375 Iranians were encouraged to bring any complaints: Marvine Howe,“IraniansUseParty toVoiceGrievances,”NewYorkTimes, July 10,1977.

375“demandmoreschools”:Ibid.376“IfyouAmericansaregoingtobesomoral”:“WhatPriceMorality?,”

Newsweek,March14,1977.376“Theproblemwe’refacedwith”:SeymourHersh,“ProposedSalesof

FighterstoIranChallengedWithinAdministration,”NewYorkTimes,October9,1977.

376“It was quite apparent in Washington”: Gary Sick, All Fall Down:America’s Tragic Encounter with Iran (New York: Random House,1985),22.

377“considerable experience in dealingwithauthoritariangovernments:WilliamH.Sullivan,MissiontoIran:TheLastU.S.Ambassador(NewYork:W.W.Norton,1981),16.

377“innocentofanydetailedknowledgeofIran”:Ibid.377“consideredsecondaryqualifications”:Ibid.377“didn’twant tobe there”:FISOHAinterviewwithWilliamLehfeldt,

byWilliam Burr, Foundation for Iranian Studies,Washington, D.C.,April29,1987,February9andApril19,1988,3–149.

377spokenoFarsi:Ibid.377“TheEmbassy’sdisarray”:Ibid.,3–153.377 Vance received a briefing paper: Briefing Memorandum, April 30,

1977, “Your Meeting with the Shah, May 13, 1977,” Secret, EricHooglund,project editor, Iran:TheMakingofU.S.Policy,1977–80,NationalSecurityArchive(Alexandria,VA:Chadwyck-Healey,1990),BriefingBookState,May13,1977,IRO1164.

379“Nosuchlinkage”:JoeAlexMorrisJr.,“NoRightsLinktoIranArmsSale—Vance,”LosAngelesTimes,May14,1977.

379 “Each country’s growth”: Charles Mohr, “Vance, in Iran, AssertsStabilityDependsonRights,”NewYorkTimes,May15,1977.

379apitchedtwo-hourbattle:JoeAlexMorrisJr.,“PoliceKill2TerroristsinDowntownTehran,”LosAngelesTimes,May13,1977.

380“unnecessary civiliandeaths”: Conversationwith the First Secretaryof the IsraeliMission,March6,1977,EricHooglund,projecteditor,Iran:TheMakingofU.S.Policy,1977–80,NationalSecurityArchive(Alexandria,VA:Chadwyck-Healey,1990),DocumentReferenceNo.IR01154.

380“IslamicMarxists”: JoeAlexMorris Jr., “PoliceKill 2 Terrorists inDowntownTehran,”LosAngelesTimes,May13,1977.

380“fanaticalright-wingMoslems”:ConversationwiththeFirstSecretaryof the IsraeliMission,May 23, 1972, Secret,Memorandum Tehran,EricHooglund,projecteditor,Iran:TheMakingofU.S.Policy,1977–80, National Security Archive (Alexandria, VA: Chadwyck-Healey,1990),DocumentReferenceNo. IR01176,2.Theaccount in theLosAngeles Times described the location of the attack as being near “aJewishagency,”whichwasassumedtobetheIsraelitrademissioninIran.

380tryingtoclearterroristsfromtwosafehouses:Ibid.380OnSunday,May29:Alam,543.380 37 percent: Marvine Howe, “Iranian Women Return to Veil in a

ResurgenceofSpirituality,”NewYorkTimes,July30,1977.380halfofallapplicantstomedicalschools:Ibid.380femalemembersofparliament:Ibid.380electedtolocalcouncils:Ibid.380couldobtainanabortion:Ibid.380“spiritualrevival”:Ibid.380ingratiateherself:Alam,550.380“IhadjustleftAspen”:Afkhami,449.381 “Down with the Shah!” Judith Cummings, “Lunch for Empress

InterruptedbyShoutof‘DownwithShah,’”NewYorkTimes, July8,1977.

381“NoMoreArmsfortheFascistShah”:ChrisWoodyardandRichardC.Paddock,“ShahofIran’sWifeHonored;ProtestStaged,”LosAngelesTimes,July6,1977.

381“U.S.AdvisersOutofIran”:Ibid.381“That’salie!”:JudithCummings,“LunchforEmpressInterruptedby

Shoutof‘DownwithShah,’”NewYorkTimes,July8,1977.381“AndsoIaskedthename”:FarahPahlavi,AnEnduringLove,271.381“Itstruckmeasunusual”:Afkhami,449.381 Zahedi spent 1977 outside Iran: Author interview with Ardeshir

Zahedi, September 14–15, 2010. This paragraph is based on myinterviewwithhim.

382“Youknow,IhaveheardtheShah”:Ibid.382“ThatmomentIwasshaking”:Ibid.382slumped50percent:JoeAlexMorrisJr.,“IsItforReal?NewBroom

StirsLotsofDustinIran,”LosAngelesTimes,October7,1977.38230and40percent:Ibid.382Oilproductionfell:“DailyIranianCrudeProductionandExportsFell

fromJunetoJuly,”NewYorkTimes,August10,1977.382exportedonly4,180,896barrels:Ibid.38211millionbarrels:JamesTanner,“OPEC’sPlight:Cartel’sMainTask

Is toPreventPriceDrop;SaudiOutput IsKey,”WallStreetJournal,December15,1977.

382 “extraordinary pressure”: J. P. Smith, “Saudis Failing to Meet OilProductionPromise,”WashingtonPost,June27,1977.

382 “no longer take us for granted”: James Tanner, “OPEC’s Plight:

Cartel’sMain Task Is to Prevent PriceDrop; SaudiOutput IsKey,”WallStreetJournal,December15,1977.

382OPEC released a statement in Vienna: Steven Rattner, “9 in OPECDrop Planned 5%Rise for Price ofOil,”New York Times, June 30,1977.

383$2billion:Ibid.383“Wewillnotcuttheflowofoil”:Ibid.383 thirteen of Saudi Aramco’s thirty-five oil fields: “Opec’s Real

Problems,”TheEconomist,July9,1977.383“Sothereisalotofroomforexpansion”:Ibid.383“sloppy”:“GlutLeads toCuts inOpecPrices,”TheTimes (London),

July25,1977.383 “awash with oil”: “The Oil Glut Shows OPEC’s Production,”

BusinessWeek,August22,1977,23.383“at less thancost”: “GlutLeads toCuts inOpecPrices,”The Times

(London),July25,1977.38320centsperbarrel:Ibid.383“Atpresenttime”:JamesTanner,“OPEC’sPlight:Cartel’sMainTask

Is toPreventPriceDrop;SaudiOutput IsKey,”WallStreetJournal,December15,1977.

3838.3millionbarrels:Ibid.383“thePersianGulfkingdom”:Ibid.383 “a clear-cut Saudi victory”: “The Saudis Still Reign over OPEC,”

BusinessWeek,July18,1977,19.383“onceagainhovering”:Ibid.384“IftheWestweaneditself”:Ibid.384“These blackouts have caused”:MarvineHowe, “Iran Fights Power

Shortage,ThreattoDevelopment,”NewYorkTimes,July11,1977.384“theblackoutshaveproved”:Radji,93.384waterandpowersupplies:Alam,545.384“likeascenefromsomeincrediblefarce”:Ibid.,546.384 urged shopkeepers: Marvine Howe, “Iran Fights Power Shortage,

ThreattoDevelopment,”NewYorkTimes,July11,1977.384“cutssometimeslast8to10hoursaday”:Ibid.384“Therewasmoreunder-andunemployment”:FISOHAinterviewwith

William Lehfeldt, by William Burr, Foundation for Iranian Studies,Washington,D.C.,April29,1987,February9andApril19,1988,3–154.

385“I couldn’t believemy eyes!”: Habib Ladjevardi, editor,Memoirs of

FatemehPakravan:WifeofGeneralHassanPakravan:ArmyOfficer,Chief of the State Intelligence and Security Organization, CabinetMinister, and Diplomat, Harvard Iranian Oral History Project VI,IranianOral History Project (Cambridge: Center forMiddle EasternStudies,HarvardUniversity,1998),120–22.

385“terriblyworried”:Ibid.385“Ifyou’renotgoingtodosomething”:Ibid.385“WheneverIseetheShah”:Ibid.386 “saw the writing on the wall”: FISOHA interview with William

Lehfeldt, by William Burr, Foundation for Iranian Studies,Washington,D.C.,April29,1987,February9andApril19,1988,3–167.

386“everythingwasgoingtofallapart”:Ibid.386“therearethingsthatarehappening”:Ibid.,3–168.386fired1,700peoplefromtheFinanceMinistry:JoeAlexMorrisJr.,“Is

It for Real?: New Broom Stirs Lots of Dust in Iran,” Los AngelesTimes,October7,1977.

386“ThePBOhadbecomeasuper-ministry”:Ibid.387asniper’sbullettotheheart:BillBilleter,“JoeAlexMorrisJr.,Times

Writer,ShotDeadinIran,”LosAngelesTimes,February10,1979.387“Inthepastfewmonths”:Alam,556.387“Hesuggestedthatifthecrisis”:AbbasMilani,EminentPersians:The

Men and Women Who Made Modern Iran, 1941–1979, Vol. 1(Syracuse:SyracuseUniversityPress,2008),44–45.

387depositedforsafekeepinginSwitzerland:Alam,vii.387“untilsuchtime”:Ibid.

EPILOGUE:THELASTHURRAH

PAGE388“Wenevertookhimseriously”:Authorinterview,June2009.388 Ambassador Zahedi recalled that he expressed doubts: Author

interviewwithArdeshirZahedi,September14–15,2010.388MorethanonethousandIranianexpatriates:PaulW.Valentine,“Shah

of Iran’s Friends, Foes Mobilize for His Visit,” Washington Post,November13,1977.

388 SAVAK picked up the tab: Author interview with Ardeshir Zahedi,September14–15,2010.AlsoseeJimHoagland,“IranEmbassyRole

in’77MarchesProbed,”WashingtonPost,February9,1979.388 $150 per person: Paul W. Valentine, “Shah of Iran’s Friends, Foes

MobilizeforHisVisit,”WashingtonPost,November13,1977.388422of464Iranianofficers:Ibid.388“someofthemostintensepreparations”:Ibid.388warnedthepolice:PaulW.Valentine,“FBIWarnedParkPoliceAbout

IranianViolence,”WashingtonPost,November29,1977.389manufactureMolotovcocktails:Ibid.389“Weupdated[policeagencies]”:Ibid.389deniedthattheinformationtheyreceived:Ibid.389PresidentJohnson’swelcomingceremony:“LBJCallsIran’sProgressa

Lesson‘OthersHavetoLearn,’”WashingtonPost,August23,1967.389151policeofficers:PaulW.Valentine,“2IranFactionsClash;24Hurt

atWhiteHouse,”WashingtonPost,November16,1977.389twodozenonhorseback:Ibid.389Riotpolice:Ibid.389“Although I appreciated the role”: William H. Sullivan,Mission to

Iran: The Last U.S. Ambassador (NewYork:W.W. Norton, 1981),126.

389“wereseparatedonlybylight”:Ibid.,127.389“asuddensurgeofactivity”:Ibid.390Othersraidedthebuildingsite:LindaCharlton,“ClashesandTearGas

Mar Shah’s Welcome in Capital,” New York Times, November 16,1977.

390“Children and elderly persons”: PaulW.Valentine, “2 IranFactionsClash; 124 Hurt at White House,”Washington Post, November 16,1977.

390“It’sterrible,terrible”:NewYorkTimes,November16,1977.390 A pickup truck was driven through police lines: Washington Post,

November16,1977.390Officeworkers:Ibid.390120injuredpeople:Ibid.390“tokeepthemfromfightingeachother”:Ibid.390armedsniperswithbinoculars:Ibid.390“Wethenwent intothereceptionroom”:FarahPahlavi,AnEnduring

Love:MyLifewiththeShah(NewYork:Miramax,2004),270.390 two thousand student protesters: William Brannigan, “Iranian Riot

PoliceClashwithStudents,”WashingtonPost,November17,1977.390tenthousandprotesters:Ibid.

391 a $2 million grant to Columbus State University:www.columbusstate.edu.

391“Inhislong,subsequentcareeratthePentagon”:Ibid.392He is todaywidely regarded: SeeSimon’s obituary inTheNewYork

Times: Richard W. Stevenson, “William E. Simon, Ex-TreasurySecretaryandHighProfileInvestor,IsDeadat72,”NewYorkTimes,June5,2000.

392 Nicaraguan Freedom Fund: Thomas B. Edsall, “The TowerCommission Report; The Private War; Documents Seem to LinkLobbyists,ArmsSupplies,”WashingtonPost,February27,1987.

393 “This is disingenuous”: Henry A. Kissinger, Years of Upheaval(Boston:Little,Brown,1982),669.

393“Inanyevent,onlyoneignorant”:Ibid.,670.393“IsitnecessarythattheUnitedStateswineverybattle”:JamesA.Bill,

TheEagleand theLion:TheTragedyofAmerican-IranianRelations(NewHaven:YaleUniversityPress,1988),356.

393“Wenevertookhimseriously”:Thecommentwasrecalled inanoff-the-recordportionofaninterviewtheauthorconductedinJune2009.

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INDEX

AbdullahbinAbdal-Aziz-Saud,KingofSaudiArabia,1–3,5,6,291,317–

18Abrahamian,Ervand,307Abrams,Elliott,248AbuDhabi,26,119,123,124,129–30,133,148,189,435nAbuMusa,51AbuRudeisoilfields,239,271,274Afghanistan,19,41,104,163,164leftistcoupin,101–2Afkhami,GholamReza,99–100Afkhami,Mahnaz,380Afshar,Aslan,74,443nAgeofTurbulence,The(Greenspan),326Agnew,Spiro,53,106,285resignationof,118,226Ahmadinejad,Mahmoud,2–3,5,6AirForce,U.S.,36,39,78,128,129,215,254,284,335–36AirForceStringPlayers,252AirIran,306Airport1975(film),205Ajax,Operation,22–23,24,85,142,340Akins,James,145,178,275Alam,Asadollah,9,13,19,29,33,34,45,49,52,68,72,77,91,92,106,

145,149,173–74,183,185,208–9,218,270,274,277,278,279,285,291,295,296,303,304,306,311,312–13,321,339,366,371, 375,380,382,384,412n,413n–14n,417n,437n,440n

cancerof,163–64,369,373deathof,387Farlandand,69–70,72,74–75Helmsand,87,96,140,148onKissinger-Shah1974meeting,223–24in1972Tehranmeeting,59,62–66resignationof,386Shah’scancersecretand,142–43,165,213

onShah’sromances,99–100Alamouti,Mostafa,443nAlbert,Carl,152AlexanderIII(theGreat),KingofMacedonia,304Alexei,CzarevitchofRussia,167Algeria,119,124,154,188,220,251AlgiersAgreementof1975,245–46,275Alireza,AliAbdullah,317,329,350,358AlirezaPahlavi,PrinceofIran,391AlkaliCanyon,Operation,107–8Allende,Salvador,116Allon,Yigal,243AlSharq,208Ameen,Michael,Jr.,114AmeradaHess,159“AmericaBowsLowastheShahPaysaVisit”(Kraft),254AmericanBanker,176AmericanEnterpriseInstitute(AEI),235AmericanSchool,217,314Amin,Idi,151Amuzegar,Jahangir,24,266,278,383,386,405nAmuzegar,Jamshid,405nAnderson,Greg,108Anderson,Jack,58,73–74,149–50,178,268,270–73,300,307,338Anderson,Robert,161Andreotti,Giulio,310–11,333Angola,167,296,317Anne,PrincessofEngland,135Annenberg,WalterandLee,302,323Ann-Margret,252Ansary,Hushang,31,183,223,239,267,274,295–96,298–300,301,302,

322,349,369,456n–57nArab-IsraeliWarof1973,8,155,219,247DEFCONalertin,126–27disengagementtalksand,239–40,241,271,274Faisal’swarningof,113–14Kissinger-Shahexchangesand,114–15,118,119–20nuclearshowdownin,128–29oilembargoand,123–24

oilpricesand,119,122–23onsetof,117–18SovietUnionand,113,117,118,124–126,128–29U.N.and,119,124U.S.airliftin,119–24WSAGcrisismeetingon,124–27Arafat,Yasser,109,370Aramco (Arabian-AmericanOilCompany),79–83,91,93,109,110, 114,

129,133,161,203,371,383Areilza,JoseMaria,308–9Argentina,160,315,316Army,U.S.,114,335–36ArmyCorpsofEngineers,U.S.,331ArmySignalCorps,U.S.,57AryamehrUniversity,390Asad,Hafezal-,240–43,311Ash,Roy,231Ashraf,Hamid,313Ashraf,Princess,416nAssociatedPress,47,157,321Astaire,Fred,252Atherton,Roy,229,258,294,297,341–43U.S.-Iranrelationsmemoof,377–78AtlanticRichfield,159,161AtomicEnergyCommission,80,210AtomicEnergyOrganizationofIran,210,291AtomsforPeaceprogram,210Australia,209,213,350Austria,45,164–65Ayadi,Karim,163–66,213Ayandegan,360Azerbaijan,137Azores,167–68

Baader-MeinhofGang,260Bahrain,51,124,128,134,275Bailey,Pearl,252Baker,Howard,84

Bakr,AhmadHassanal-,103BancodeLongresyMexico,73BancoInternacional,73Bangladesh,57BankMelli,183,284BankofAmerica,315,331“VoluntaryDisclosureCode”of,344–45BankofEngland,207–8BankofInternationalSettlements,315–16Barker,Bernard,73Barre,Raymond,327,345Barzani,Mustafa,241–42,244–45BaudouinI,KingofBelgium,17BayofPigs,73BBC,405nBechtelCorporation,236,281Belgium,45,160BellHelicopter,218–19,256,257–58Berlinguer,Enrico,195,308–10Bermuda,214Bernard,Jean,163,165–66,213,372–73Bertman,Lloyd,386Bhutto,ZulfikarAli,134,220–23Bierwirth,John,284Bill,James,97,393Blachowicz,Delphine,177Blee,David,336Bork,Robert,123Boumediène,Houari,188Brandt,Willy,415nBrazil,331Bremer,J.Paul,392Brezhnev,Leonid,56,124,125–26,129,155,241,431nBrinkley,David,177BritishPetroleum(BP),24,52Brown,GeorgeS.,337Brownell,Herbert,34,35–36Buckley,James,232BulletinofAtomicScientists,211

BureauofMines,80Burma,46Burns,Arthur,9,10,74,80–81,97,111,143–44,148,170–71, 174, 188,

189–90,231,260,268,314,349Bush,GeorgeH.W.,56,289,300Bush,GeorgeW.,1,5,11,392BusinessWeek,233,367,383

Cabinda,167Caetano,Marcello,167Callaghan,James,327,332,348–49,350,359,364Cambodia,242–43,246,248,249,250Canada,8,167,346Captain&Tennille,314CarrilloSolares,Santiago,357Carter,Jimmy,212,303,314,319,340,347,354,358,365,366,374,375–

76,383,390Carter,Rosalynn,351–52Carteradministration,347,361,383–84Case,Clifford,327CBSNews,156CenterforGlobalEnergyResources,391CenterforStrategicandInternationalStudies,4CentralIntelligenceAgency(CIA),9,33,35,40,57,67,68,75,77,93,96,

114,116,131,174,196,212,222,228,248–49,268,270, 284, 308,341,342,365,455n

Helmsseminarof,335–37,338Ibexprogramand,214–15Irancoupof1953and,22–23,238,403n–4ninIranembassy,192–93Iranianeconomyanalyzedby,53–54,213Iranlisteningpostsof,39,40–41,43,85,193,331,338Kurdinsurgencyand,241–42,244Nixon’shatredof,84,87,407n–8nOfficeofNationalEstimatesof,43OperationMudhenof,74psychologicalprofileofShahof,271–72,300terrorisminIranmonitoredby,59–60

Watergatescandaland,73,178CentralTreatyOrganization(CENTO),42,130,132,374,379,410nChamberofDeputies,Italian,309,310Chandler,Jeff,183Chapman,Betty,257CharlesJourdanincident,305–6ChaseManhattanBank,170,183–84,195,215,284,315,368ChemicalBank,331Cheney,Richard“Dick,”1,3,4,231,289ChicagoTribune,90,176,231,267Chile,93,205Allendeoverthrownin,116China,People’sRepublicof,56,67,74ChristianDemocratParty,Italian,261,308,309–10ChristianScienceMonitor,228,230,235,247,454nChristie-Miller,Duncan,108Church,Frank,23Churchill,Winston,22,180Citibank,315,331,392Claude,Madame,99Clements,William,109,110–11,121–22,157,161,162Colby,William,130,147,213,289ColdWar,8,20,21,28,193,471nColumbiaUniversity,217–18ColumbusStateUniversity,391Commentary,233,321CommerceDepartment,U.S.,230CommonMarket,195CommunistParty,French,309CommunistParty,Italian,308,310,345CommunistParty,Portuguese,195CommunistParty,Soviet,215CommunistParty,Spanish,357ConfederationofIndustry,327Conforte,Joe,135Congress,U.S., 1,57,124,131, 152, 199, 232, 268, 269, 284, 302, 313,

315,328,329,351,374seealsoHouseofRepresentatives,U.S.;Senate,U.S.Connally,John,67,80–83,93,285,420n

ConstantineII,KingofGreece,17Constitution,U.S.,152ContinentalOil,159CossackBrigade,63Cottrell,William,324–25CouncilofEconomicAdvisers,10,230,313,327,344CouncilofState,Spanish,357Cox,Archibald,123Cronkite,Walter,230Crosland,Anthony,308Cuba,73Cunhal,Alvaro,195Cyprus,195,199CyrusII(theGreat),KingofPersia,26,163,210Czechoslovakia,104,127

Dallek,Robert,434nDavallu,Amir-Hushang,99DefenseDepartment,U.S., 9,36,39,42,43, 44, 57, 66, 67, 77, 96, 111,

128,133,147,169,216,218–19,222,223,257,269,272,281, 284,285,289,290,293–94,319,320,335–36,337,338,419n

Grummandealand,72,101Ibexprojectand,214–15Iran’snuclearprogramquestionedby,210–11OfficeofNetAssessmentof,459n–60nreviewofU.S.-Iranrelationscalledforby,286–87DefenseIntelligenceAgency,289,335–36deGaulle,Charles,18–19,30delPrado,Manuel,357democracy,29–30,33,50,155,194,308,333,345DemocraticNationalCommittee,70DemocraticParty,U.S.,1,319,366,375Dennis,Richard,108détentepolicy,59,61,65,89,102,196,233Diba,Farideh,100DiBonna,Charles,120Dingell,John,238Dinitz,Simcha,126–27,243

Dobrynin,Anatoly,155DominicanRepublic,420ndominotheory,196Dorsey,B.R.,161Douglas-Home,Alec,165DowJonesIndustrialAverage,204Dubai,124Dulles,Allen,84

Earthquake(film),205EarthResourcesTechnologySatellite,218EastPakistan,55,56Eban,Abba,95,113–14,121EconomicCooperationCommission,169EconomicPolicyBoard,267–68,270,274Economist,The,147,208,360,361,364,383EdwardsandBrownCoalCo.,88–89Egypt,59,65,66,67,80,95,109,113,117,120,125,154,173,176,219,

227–28,239–40,241,251SovietFriendshipTreatywith,59Soviettechniciansexpelledfrom,69–70seealsoArab-IsraeliWarof1973Ehrlichman,John,62,70,72,73,86,97,421n82ndAirborneDivision,U.S.,126Eisenhower,David,18,402nEisenhower,DwightD.,12,22,23,27,32,154,215funeralof,17–18,31Eisenhower,JulieNixon,18,98,402nEisenhoweradministration,24,25,32,36,122,210ElAl,47elections,U.S.:of1960,84of1968,29,153of1972,8,70,72–73,77,80,83,422nof1976,8,230,288,301,311,314,317,318,320,323,334,338–41,342of1980,341Elizabeth,QueenMother,209ElizabethII,QueenofEngland,135,314

Ellsworth,Robert,169,289–90,298–99,320,322EmersonElectric,218Enders,Thomas,188,231–32,458nEnhancePlus,Operation,75–77EnvironmentalProtectionAgency,80Esso(StandardOil),24,25Etemad,Akbar,210–11,291Ethiopia,95,133,134,209EuropeanCommunity,361,375Evans,Rowland,116,227,294,362,473nExpansion,L’,345Exxon,159,161,203

Fahd Ibn Abdul Aziz al-Saud, King of Saudi Arabia, 105, 169–70, 235,246,277,312,328,362,383,391,445n

Fairbanks,Douglas,Jr.,252Faisal,KingofSaudiArabia,26,36,48,118,161,169,169,171,172,178,

179,191,229,235,240,275Aramcorenegotiationsand,79–80,81,83assassinationof,246–47,251Kissinger’sappraisalof,221Kissinger’s1974visitwith,220Nixon’svisitwith,173,174–75oil embargo and, 110, 112–13, 123–24, 127, 131–32, 133, 149, 154–55,

157,158warwarningsof,113–15FaisalibnMusadAbdelAziz,Prince,246–47Fallaci,Oriana,139,155Farah Pahlavi, Queen of Iran, 13, 49, 52, 99, 142, 156, 209, 307, 402n,

413ninJFKWhiteHousevisit,33–34in1975Washingtonvisit,251–52in1977U.S.visit,380–81,390–91inPahlaviJubilee,303–4Shah’scancersecretand,280,372–74Shah’sfirstmeetingwith,28Shah’sinfidelitiesand,100Farland,Joseph,67,68–69,70,72,74–77,78,85,87,391,420n

Farsiou,Ziaddin,59Fawzia,QueenofIran,27FederalAviationAdministration,218FederalBureauofInvestigation(FBI),67,73,83,85,152,178,341,388–

89FederalCommunicationsCommission,218FederalEnergyAdministration,9–10,238FederalEnergyCommission,171FederalEnergyOffice,144,152,153FederalHighwayAdministration,218FederalReserve,9,10,112,188,308,363Fellinger,Karl,164,166,443nFerdowsi,Abolqasem,1,15,17,197FerdowsiUniversity,217FifthPlan,141–42,185,229,243,262,264,355,368,370FinancialMinistry,Iranian,386FinancialTimes,185,370Finland,331Fish,Howard,294Fisher,Max,247Flandrin,Georges,165–66,213,372–73Ford,Betty,199,251,314Ford,Cristina,106Ford,Gerald,6,7,9,10,123–24,190,227,230,235,237,238,246,259,

295,301,303,304,311,312,314,315,319,322,326,334,347,348,349,352,358,364

Abdullah’sU.S.visitand,317–18Agnewreplacedby,118–19Alireza’smeetingwith,350–51bilateraloildealand,268,271,273,274,297–300briefedonoilcontroversy,200–202Detroitaddressof,206–9,220Khalid’scorrespondencewith,363Kissingerreappointedby,199–200Kissinger’sU.S.-Iranbriefingpaperand,249–50Mayaguezincidentand,250–511976electionand,323–24,340–41Nixonpardonedby,199Saqqaf’sintroductorymeetingwith,203–4

Saudiarmsalestalksand,328–30Schlesingerfiredby,288–89Schlesinger’smeetingwith,280–81Schlesinger’sU.S.-Iranpaperand,285–86,287Schmidt’smeetingwith,259–60,261Shah’scorrespondencewith,277–78,339–42Shah’s1975visitand,250–55Shah’ssnubof,254atVailsummit,231–33Zahedi’smeetingswith,202–3,354–56Ford,Henry,II,106Ford,John,99Fordadministration,6,7,172,195,202,208,215,227,236,245,255,274,

281,292,295,313,319,335,341,344,353,361,366HalloweenMassacreand,288–89OPECpolicyand,346–47Saudiarmssalesand,318ForeignMinistry,Iranian,342ForeignServiceInstitute,393Forlini,Arnaldo,333Formosa,242Forrestal,USS,31440Committee,67–68France,8,40,53,106,112,135,145,147,160,180,186,189,194–95,205,

210,220,261,309,310,333,341,361,385economiccrisisin,327,331,334,345–46,356Franco,Francisco,180,308,346,357FranklinDelanoRoosevelt,USS,126FranklinNational,208FrenchRevolution(1789),6,471nFridayMosque,256Fulbright,J.William,78,101energycrisisspeechof,94

Gandhi,Indira,55,62,92,209,221Gaza,2Geithner,Timothy,392GeneralDynamics,369

GeneralMotors,135GeorgetownUniversity,217GeorgeWashingtonUniversity,217Germany,DemocraticRepublicof(EastGermany),125Germany,FederalRepublicof(WestGermany),38,53,106,135,179,189,

194–95,208,260,310,334,348Germany,Nazi,31,196Germany,Weimar,180Ghana,316Gilda(affair),100,428nGiscardd’Estaing,Válery,205,261,373GolanHeights,117,119GoldmanSachs,195Goldwater,Barry,28,232Grace,PrincessofMonaco,53Graham,Daniel,289Graham,Robert,185,370GreatBritain,8,22,25,38,42,53,64,68,93,106,116,130,141,180,189,

260,261,316,361,363,3751976 economic crisis in, 327, 331–34, 341, 346–49, 351, 357, 359, 364,

368PersianGulfpulloutof,19,21,44GreatDepression,89,134,190,230GreaterTunb,51GreatNortheastBlackoutof1965,89Greece,160,180,194–95,205Greenspan,Alan,10,11,230,260,296,313,314,326–27,341,344,352,

354,356bilateraloildealand,268–70,272–73,274GrummanCorporation,71,101,219,256,257,284,294Guam,20GulfOil,24,25,159,161

Haig,Alexander,44,49,56,111,125–26,154,170,174,190,434nHaileSelassie,EmperorofEthiopia,53,183Haldemann,H.R.“Bob,”73,83–87,88,94,97,178,427nHalliburton,392Hallock,Richard,8,283–85,365–66,391–92,470n

HalloweenMassacre,288–89Hamas,2–3Hammer,Armand,109Hancock,USS,130,131,133,143Harper’s,234–35,460nHarsch,Joseph,247–48HarvardUniversity,217Hassan,KingofMorocco,92Hawadess,227Hawkins,LewisLee,96,303Healey,Denis,180,316,332Helms,Cynthia,84–85,88,96,191–94,252,262–63,304,325–26Helms,Pearsall,41Helms,Richard,9,42,43,67,68,83,97,102,104,105,111,117,130,149,

163,184,193,211,246,256,258,259,264,276,281,284,285,292,295,296,298,306,307,311,325–26,339,342,374

Alamand,87,96,140,148appointedambassadortoIran,84–88,92,94CIAseminaron,335–37,338congressionaltestimonyof,93,248–49deathof,393,407n–8nIbexprojectand,213–14,215“KillerSchorr”outburstof,248–491953Irancoupand,22onNixon-Shahrelationship,30oilcrisisand,92–94oilpricemisunderstandingof,144–45SAVAKscandaland,364–65,388Shahand,40–41Shah’sOne-Party-StateDeclarationand,279–80Watergatescandaland,73,74,84,93,178HeritageFoundation,392Hersh,Seymour,215,454nHezbollah,2–3Hitler,Adolf,31–32,260Holocaust,31HooverInstitution,392Hope,BobandDolores,252Hormats,Robert,302,328

HouseofCommons,British,332,359HouseofRepresentatives,U.S.,119,248JudiciaryCommitteeof,178SelectCommitteeonIntelligenceof,241WaysandMeansCommitteeof,156HouseofSaud,7,26Hoveyda,Abbas,29,45,58,97,142–43,369,386,417nHuangHua,56humanrights,30,33,99,193,375,376,378,416nHumphrey,Hubert,23,319–20Hunter,Robert,266Hussein,KingofJordan,122,131,235Hussein,Saddam,77,95,103,159,226,251,275,311Kurdsand,240–46Hyland,William,177

Ibexspyproject,8,213–16,325,375,354n–55nCIAand,214–15DefenseDept.and,214–15Hallockscandaland,365–66Helmsand,213–14,215NewYorkTimesexposéon,215SovietUnionand,214,215–16Iceland,160Idris,KingofLibya,132Independence,Project,144,353Independence,USS,126India,38,102,163,205,209,220,291Pakistan’swarwith,seeIndia-PakistanWarof1971SovietFriendshipTreatywith,55,59India-PakistanWarof1971,8,54,95,102Iranand,56–57Kissingerand,55–56onsetof,54–55U.S.’spro-Pakistanpolicyand,55–56Indonesia,209,316,331inflation,270,335,346inIran,212,262

oilshockand,160,167–68,174,179,182,190,195,199,205, 313, 333,346

Ingersoll,Robert,181,188,292–93InteriorDepartment,U.S.,389InternationalAtomicEnergyAgency(IAEA),237InternationalCommissionofJurists,59InternationalCommitteeoftheRedCross,375InternationalMonetaryFund,189,308,310,315–16,350,351,359,384Manilameetingof,331–34IntrecCorp.,285,391Iran,1,7,8,19–20,26,27,42,94,113,116,119,121,130,159,162,178,

179,187–88,200,201,220,243,311,318,330,347,348,401nAlgiersAgreementand,245–46Americancitizensin,216–19,256–57,283,319,325–26,470n–71nanti-Americanbacklashin,255–57,303Arab-Israeliwarand,117ArmyDaycelebrationsin,137–38,437nCIAanalysisofeconomyof,53–54CIAlisteningpostsin,39,40–41,43,85,193,331,338corruptionin,283–84economiccrisisin,295,297–99,355,366–72,375exodusofwealthycitizensfrom,385–86FifthPlanof,141–42,185,229,243,355,368,370Hamasand,2–3Helmsappointedambassadorto,84–88,92,94Hezbollahand,2–3imperialambitionsof,162–63India-PakistanWarand,56–57inflationin,182Israel’srelationshipwith,47–48,95–96,115,202,209,321Jewishcommunityof,47Kissinger’s1974visitto,223–24middleclassof,1421953coupin,22–23,210,238,403n–4n1972U.S.electionand,72–731978–79revolutionin,2,6,279,466nnuclearprogramof,2,6,8,210–11,237,240,291–92oilembargoexploitedby,139–42,144–47Pahlavicultofpersonalityin,182–83

PahlaviJubileecelebrationin,303–4PersianGulfislandsseizedby,51–52,105petrodollarfortuneof,181–82Ramsarmeetingand,184–86religiousestablishmentof,48–49,219,222SaudiArabiaandoilrevenuesof,1–6SaudiArabia’soilwarwith,seeOilWarof1977Shi’asof,219,222,246,307Shultz’stripto,236–37SixthPlanof,355socialunrestin,303,305–7,312–13,466nSouthAfrica’suraniumdealwith,292SovietUnion’s1962agreementwith,130–31,444n–45nterrorismin,59–60,62–63,65,90,303,306,324–25,379U.S.analysisof,162–63U.S.embassyin,191–94U.S.’srelationshipwith,seeU.S.-IranrelationshipWatergatescandaland,72–74,115,116women’sstatusin,380inWorldWarII,21Iran-contrascandal,392IranResourceCenter,257Iraq,3,19,34,38,49,52,62,65,67,75,77,80,94–95,102,104,117,119,

128,148,158,160,243,320AlgiersAgreementof1975and,245–46Kurdsand,240–41SovietUnion’sFriendshipTreatywith,59IraqWar,1,4Isaacson,Walter,76,200,408n,427nisolationism,131,249Israel,2,4,27,38,62,65,94,95,108,113–15,116,143,149, 158, 167,

173,188,189,219,226,247,291,320,328,344,351,358,375indisengagementtalks,239–40,241,271,274Iran’srelationswith,47–48,95–96,115,202,209,321Kissinger’s1974visitto,219–20,225–26Kurdsand,242–43Lodmassacrein,64,651973warand,seeArab-IsraeliWarof1973Shah’sthreatagainst,227–28

Italy,8,135,160,180,194,195–96,220,260,261,357,361,363financialcrisisof1976in,331,334,341,345–46,347,351,356politicalcrisisof1976in,308–11

Jackson,Henry“Scoop,”156,233,238,248,276Jamieson,Ken,82–83,161–62,203Janeway,Eliot,366Japan,19,21,27,29,45,46,90,113,121,160,189,220,260,334,361oilembargoand,135,147,158–59oilshockand,273–74JapaneseRedArmy,64Javits,Jacob,248,328Jean,GrandDukeofLuxembourg,17JewishImmigrationAgency,380Jews,174,247ofIran,47Jobert,Michel,145,149–50JohnF.Kennedy,USS,126Johnson,Alexis,77–78Johnson,LyndonB.,21,23,29,32,44,224,373,389Johnsonadministration,23,89–90JointChiefsofStaff,39,57,71,125,126,281,335–36,337Radfordspyringof,57–58Jones,Tom,36Jordan,47,56,103,113,117,122,251JuanCarlos,KingofSpain,308–9,357,363JusticeDepartment,U.S.,123,223,366

Kalmbach,Herbert,70,72,421nKaye,Danny,98–99KayhanInternational,337,355,366–67Kazakhstan,41Keddie,Nikki,400nKennedy,Edward,265–66,275,293,341Kennedy,JohnF.,23,32,44,84,174,303,373Kennedyadministration,48Kenya,133

Khaddam,Abal-Halim,240Khalatbary,AbbasAli,74Khaled,Prince,246–47Khalid,KingofSaudiArabia,4,246,276,312,317,328,348, 358, 360,

363,370,391Khan,Yahya,55–56,95Khatam,Mohammad,284Khayyám,Omar,34KhmerRouge,250Khomeini,AyatollahRuhollah,49,222,246,264,381,385,389Khonsari,Ayatollah,384Khrushchev,Nikita,215King,John,64Kissinger,David,319Kissinger,Henry,7,20,26,28,34,37,38,39,40,51,57,66,68–69,80,92,

95,96,107,109,115–16,117,123,130,134,137,139,140,142,143,145,146,148,153–54,155,161,162,165,166–67,178,179,180–81,184,190,193,196,199,204,209,228,233,234,236,239,247,248,257,258,264,267,278,280,295,308,309,310,311,312,314,315,317,323,324,331,336,340,345,346,353,354,355,357,362,376,408n,417n,427n,432n,434n,457n

Ansary’snegotiationswith,295–96,299–300Arab-IsraeliWarand,118–20,129–30,132–33Aramcoissueand,82–83Barzani’sletterto,244–45bilateraloildealand,267–75,289–91,295–302DannyKayeaffairand,98Eban’stalkswith,113–14EdwardKennedy’sconversationwith,265–66filesonU.S.-Iranrelationssequesteredby,347–48,374Fordbriefedonoilcrisisby,200–202Fordbriefingpaperof,249–50Ford’sreappointmentof,199–200Ford-Zahedimeetingand,202–3Grummandealand,70–72,284HalloweenMassacreand,289Ibexprojectand,215India-PakistanWarand,55–56IranArmsdealdebateand,41–43,67

Iran’sregionalrelationsand,102–3Jobert’smeetingwith,149–50Kraft’scriticismof,254–55lastIrantripof,319,320–22latercareerof,392–93Libyaoilcrisisand,110–11inMiddleEast-AsiaTour,219–26,240–41neoconservativesfaultedby,320–21at1972Tehranmeeting,59–62,64–65in1974Israelvisit,219–20,225–261976oilpricedebateand,334–35nucleardealtalksand,236–37,240,281,292–94,419noilindustrymeetingand,159–60onRosalynnCarter,351–52SAVAKscandaland,341–42,364–65Schlesinger’smemodivertedby,288Schlesinger’stelephoneconversationswith,118–20,129–33Shah’sArab-IsraeliWarexchangeswith,114–15,118,119–20Shah’scorrespondencewith,274–75Shah’s1973Washingtonvisitand,98,102–3,104–5,106Shah’s1974visitand,223–24Shah’s1975visitand,250–55Shah’sone-man-ruleexchangewith,31–32Shah’srelationshipwith,8–9Shah’sZurichmeetingwith,239–40Simon’sfeudwith,154,171–72,187–88,200–201Simon’s“nuts”remarkand,176–77supereconomypolicyof,218U.N.speechof,207U.S.-Saudioilembargotalksand,157–58WSAGcrisismeetingand,124–27Yamanidislikedby,171Yamani’smeetingwith,276–77Yeo’smeetingwith,348–49Kissinger,Nancy,224,319KissingerAssociates,392KittyHawk,USS,163Korea,DemocraticPeople’sRepublicof(NorthKorea),183KoreanWar,45,471n

Kosygin,Alexei,101–2Kraft,Joseph,232,267Kissingercriticizedby,254–55Krongard,Robert,324–25Kurds,34,62,67–68,103,104,173,226,229,240,275,291,375betrayalof,240–46,247,248,251Kuwait,19–20,25,26,40,90,94–95,102,103,104–5,117,119,122–23,

124,132,148,161,178,189,220,261,275,285,320,368,431n–32n

LabourParty,British,180,316,327,359Laird,Melvin,36–37,38,39,40,41,42,44,57,61,67,69,71,235Lambert,Allen,316Lambrakis,George,377Laos,246,250Lapham,Lewis,460nLeachman,Cloris,306Lebanon,2,47,122,244,317,329,344,358Syrianinvasionof,311–12Leber,Georg,310Lehfeldt,William,219,384,456nLeila,PrincessofIran,391Leone,Giovanni,310–11

LesserTunb,51LessonsofthePast(May),471nLévesque,René,346LibraryofCongress,348Libya,27,80,111,116,119,123,124,132,160,178,261,358,378oilindustrynationalizedby,108–10,112,115Lindsay,James,389Littoncompany,294Lodge,HenryCabot,310Lodmassacre,64–65Long,Clarence,235LópezPortillo,José,351,357Lord,Winston,56,202Loren,Sophia,183LosAngelesTimes,155,344,347,363,371,386,496nLourenzoMarques,134Love,John,120,122Luns,Joseph,46Luttwak,Edward,459n–60n

Maariv,196MacArthur,Douglas,45MacArthur,Douglas,II,23,34,38–39,40,48,52,58,68,209,325,391Nixon’sconversationswith,44–46,48–49,55–56McCloy,John,159McDonnellDouglas,106Maginnes,Nancy,169Mahvi,Abolfath,214Majidi,AbdulMajid,264,295,372Malaysia,19Malouk,Taial-,QueenMother,381ManhattanProject,144Marchais,Georges,195,309Marcos,Ferdinand,17,375,422nMarineCorps,U.S.,107–8,114,116,122,129,133,134,250Marshall,Andrew,459n–60nMartin,Tony,106,306–7MassachusettsGeneralHospital,204

Maverickmissiles,60–61,78,318Mavros,George,195May,Ernest,471nMayaguezincident,250–51Meir,Golda,118Melloy,Francis,311–12Mexico,331Meyer,Armin,21,23–24,29,257,408nMiddleEastJournal,6Miki,Takeo,273–74Miklos,Jack,281Milbank,Tweed,Hadley&McCloy,159Milliez,Dr.,213,372–73Mitchell,John,152MITRECorporation,392MobilOil,159,161MohammadRezaPahlavi,ShahofIran,2,4,6,7,8,10,11,51,79,85,89,

94,107,109,111,115,126,130,136,137,159,168,170,172, 173,178,181,182,190,192,199,200,201,203,222,229,264,276,294,301, 311, 312–13, 319, 331, 342–43, 352, 353, 354, 360, 363, 366,375–76,406n,408n,412n,428n,431n–32n

ArmyDaycelebrationsand,138BigPusheconomyof,185–86bilateraloildealand,267,269–71,274–75,295–97,300,302cancerof,142,163–67,213,279–80,372–74,381–82,443nCIA’spsychologicalprofileof,271–72,300Connally’smeetingwith,67–68deathof,391atEisenhower’sfuneral,18–19EnhancePlusOperationand,75–77Fallaci’sinterviewwith,139,155inFarEasttour,209–10Ford’scorrespondencewith,277–78,339–42onFord’sDetroitaddress,208–9heightconsciousnessof,402nHelmsand,40–41hereditarylineof,27–28Ibexprojectand,213,215imperialambitionof,138,162–63,209,211,212

invasionofSaudiArabiaproposedby,252Israelthreatenedby,227–28Kissinger’sArab-IsraeliWarexchangeswith,114–15,118,119–20Kissinger’scorrespondencewith,274–75Kissinger’slastvisitwith,320–22Kissinger’s1974visitwith,223–24Kissinger’srelationshipwith,8–9Kissinger’sZurichmeetingwith,239–40Kurdsbetrayedby,241–45,247,248,251,291maritalinfidelitiesof,99–100micromanagementstyleof,183in1973Washingtonvisit,96–106,283,419nin1975Washingtonvisit,250–551976oilpricedebateand,334–35,3391977OilWarand,366–67in1977Washingtonvisit,388–91Nixon’scorrespondencewith,148–49Nixon’smeetingswith,27–30,32–35,37–40,48Nixon’s1972Tehranvisitand,58,60–66Nixon’spersonalrelationshipwith,30–31Nixon’spoliticalcollapseand,173–74nucleardealsoughtby,236–37,240,281,293,419noilembargoexploitedby,140–42,144–47oilpricesasviewedby,139–40onone-manrule,31–32one-party-statedeclaredby,264–65,466nPahlaviJubileecelebrationsand,303–4Persepoliscelebrationsand,52–53petropowerof,150–51atRamsarmeeting,184–86,187Rockefellerfamilyand,183–84Sadatand,227–28SAVAKscandaland,34160Minutesinterviewof,156atTehranoilsummit,145–46U.S.armssalesdebateand,41,43–44,66–68,75U.S.-Israelrelationsand,47–48U.S.public’scriticismof,155–56U.S.’sIranpresenceand,95–96

Vietnampeacesettlementand,75–76onWatergate,131Watergatefundingand,72–73WhiteRevolutionof,48–49,91,155,381willandtestamentdeliveredby,142–43MohammadZahirShah,KingofAfghanistan,101Mondale,Walter,326Moore,Henry,262Moorer,Thomas,57,126,130,147MorganGuarantyTrustCompany,315,316,331MorganStanley,331Morocco,47,92,117,164Morris,JoeAlex,371,386–87Mossad,Israeli,325Mossadegh,Mohammad,21–22,25,115,116,117,147,222,238Mountbatten,Louis,17Mozambique,134,168Mudhen,Operation,74Mullaney,Thomas,206“MuskratLove”(song),314Musmann,Bob,108MustangRanch,135

Namibia,292Nasiri,Ne’mattollah,385Nasserism,48NationalAeronauticsandSpaceAdministration(NASA),218NationalGuard,U.S.,152NationalHistoryMuseum,391NationalIranianOilCompany,91–92,138,183,293,335,368NationalPressClub,208NationalSecurityAgency(NSA),57,215NationalSecurityCouncil(NSC),9,68,165,201,212,236,280,281,287,

288,289,338,367,376,408nGroupforNearEastandSouthAsiaof,32oilpricemeetingof,330–31Navy,U.S.,114,129,133,134,335–36oilembargoand,127–28

NBC,413nneoconservatives,233,248,276,320–21,459n–60nNetherlands,135,158NewRepublic,139Newsweek,80,113,230,279,359,367,376NewYorkCity,310NewYorkTimes,2,3,5,27,58,76,89,97,120,138,147,156,168,182,

206,212,215,231,266,275,279,308,314,315,327,334,361,363,380,384

NewZealand,209,350NgoDinhDiem,31–32,92,310NguyenVanThieu,75–76,205Nicaragua,392NicholasII,CzarofRussia,167Nigeria,159Nixon,Pat,33,58,64,65,101,153,391Nixon,RichardM.,6,7,8,9,10,12,17,18–19,23,24,26,35,38,41,49,

51,53,54,55,57,58,74,75,78,79,89,91,93,96, 117, 123, 130,132,134,139,145,146,148,151,162,167,169,190,210,216,220,221,222,233,235,236,249,257,259,275,277–78,280,281, 283,296,300,301,302,322,345,390,391,406n, 407n–8n, 419n, 427n,428n,435n

collapsingpresidencyof,180–81drinkingproblemof,62,124–25,181,434nFord’spardonof,199ingrandtourofMiddleEast,173–75HelmsappointedambassadortoIranby,84–88Iranarmssalesdebateand,32–33,37–40,42–44,66–68MacArthur’sconversationswith,44–46,48–49,55–56“madman”theoryof,115–16in1972Tehranmeeting,58,61–62,64–65in1972Tehranvisit,58–66oilembargoand,143–44,154–55,157–58paranoiaof,181resignationof,191–92,226Shah’scorrespondencewith,148–49Shah’smeetingswith,27–30,33–35,37–39,48Shah’spersonalrelationshipwith,30–31Simonasviewedby,170–71

Simon’sadmirationof,153–54Simon’soilpriceconversationwith,174–76VietnamWardrawdownand,20–21WSAGcrisismeetingand,124–26,435nNixon,Tricia,18Nixon administration, 26, 83, 88, 109, 110, 113–14, 117, 131, 149, 150,

172,185,338,353andlackofenergypolicy,80–81oilcrisisof1970–73and,90–91oilembargoresponseof,143–44,151oilpricedebateand,187–89NixonDoctrine,20,29,37,67,130,247,337,377,403nNorthAtlanticTreatyOrganization(NATO),19,46,78,86,87,169,187,

195,196,231,309,333,334,350NorthernTier,55NorthropCorporation,36,284NouvelObservateur,116Novak,Robert,116,227,294,362,473nNuclearNon-ProliferationTreaty,237,281

Oakley,Robert,328Obaid,Nawaf,4–5Obama,Barack,392OccidentalPetroleum,109,112OfficeofEconomicOpportunity,34OfficeofManagementandBudget,80oilembargoof1973–74,8,151,219anti-U.S.backlashand,116–17Arab-IsraeliWarand,123–24earlyoilshortagesin,88–89energycrisisof1970–73and,88–89exemptionsfrom,158–59globaleconomyand,135impactof,158–59Iran’sexploitationof,139–42,144–47Japanand,135,147,158–59Kissinger-Faisaltalksand,131–32Kissinger-Jobertmeetingand,149–50

Libya’snationalizationofoilindustryand,108–10,112liftingof,158Nixonadministrationand,143–44,151Nixon-Shahcorrespondenceand,148–49onsetofArab-IraeliWarand,123–24,128–29OPEC’sTehransummitand,145–46perceivedU.S.invasionthreatin,116–17proposedmilitaryinterventionand,129–34SaudiArabiaand,154–55U.S.economyaffectedby,134–36U.S.Navyand,127–28U.S.oilproductionand,112–13oilshockof1974–75:andAmericanexodustoIran,216–19bankcollapsesand,179–80,207–8barterdealsand,160–62decliningdemandforoiland,229–30,259Euro-Communismthreatand,194–96,308–10,345,351Europeaneconomyand,179–80,194–96andfearofgreatdepression,204–5foodcrisisand,205governmentcollapsesand,194–95governmentdefaultsand,307–8inflation and, 160,167–68,174, 179, 182, 190, 195, 199, 205, 313, 333,

346internationaleconomyand,194–95,196,205–6,260–61Japanand,273–74Kissinger-Simonfeudand,154,171–72,200–201lendingcrisesand,189,331–34militaryinterventionquestionand,233–35Nixonadministrationmeetingonuseofforceand,187–90oilindustrymeetingon,159–61onsetof,151–52Portugalcoupand,167–68Ramsarmeetingand,184–86,187recessionand,216,217–18,314,326Shah’soilpriceincreasesand,139–41,144–46,148–49,151Simon’scongressionaltestimonyand,156–57stagflationand,190

unemploymentand,216,313–14,326–27,345,346,352U.S-Saudirelationshipand,174–79WestGermanrescuepackagesand,194–95OilWarof1977:Abqaiqpipelinefireand,371,383andArabhostilitytowardSaudis,370–71Iranianeconomyand,364,366–72,382–85oilproductionand,369–70,382–83OPEC’sDohameetingand,358–61reactionto,362–63SaudiArabiaand,358–63,366,370–71,382settlementof,382–83Okun,ArthurM.,327OlinFoundation,392Oman,19,130,140OperationAjax,22–23,24,85,142,340OperationAlkaliCanyon,107–8OperationEnhancePlus,75–77OperationMudhen,74Organisation forEconomicCo-operation andDevelopment (OECD),160,

345OrganizationofPetroleumExportingCountries (OPEC), 1,4,5–6, 7, 10,

143,158,160,174,175,185,189–90,200,206,227,229,233, 238,254,268,269,271,275–77,293,295,301,302,327,328,330, 331,332,334,340,348,366,384,440n

Balimeetingof,311Dohameetingof,317,327,354,358–61hardenedU.S.policyfor,346–47,350,353andsettlementofOilWar,382–83atTehransummit,145–46,172Viennameetingof,278OriolyUrquijo,AntonioMaríade,357OverseasAleutian,88–89

Packard,David,40PahlaviNationalLibrary,186Pakistan,19,42,46,59,62,67,93,102,134,163,215,221,281,317,385India’s1971warwith,seeIndia-PakistanWarof1971

Kissinger’s1974visitto,219–20Pakravan,Fatemeh,100,385Pakravan,Hassan,49,100,385PalestineLiberationOrganization(PLO),122,312,370Panama,316PanAmericanairlines,204,217,254pan-Islamism,2ParkPolice,U.S.,388–89Parsa,Nadina,62PartiQuébécois,Canadian,346Patterson,Donald,455nPeaceCorps,60,216,256peakoil,139Peres,Shimon,225–26,243Pérez,CarlosAndrés,175,330–31Perle,Richard,248PersianBookofKings,The(Ferdowsi),1,15,17,197PersianGulf,59,90Britishpulloutfrom,19,21,44oilof,19–20seealsospecificcountriesPeru,315,316PeterI(theGreat),CzarofRussia,63Peterson,Peter,81,89PetroleumIntelligenceWeekly,383Philippines,46Phillips,Mark,135Pickering,Thomas,320PlanandBudgetOrganization,Iranian,141,181,185,264,271,295,355,

372,386PlanetOilandMinerals,35Poland,160Politburo,Soviet,103Pompidou,Georges,145,165–66,280Porter,William,328–29Portugal,8,159,180,194,195–96,243,310,357,361,363coupattemptsin,167–68,2461976economiccrisisin,333,346,350–51,3561976politicalcrisisin,309

Powers,Thomas,88Pravda,215PresidentialSuccessionActof1792,118Prince,Harold,63ProjectIndependence,144,353PropellerClub,114PuertoRico,310

Qaddafi,Muammaral-,52,109–10,112,116,123,132,240Qatar,124,189,275Quinn,Sally,254,413nRabin,Yitzhak,196,225–26,228–29,243–44Radford,Charles,57–58Radji,Parviz,384Rainier,PrinceofMonaco,53Ramsbotham,Peter,149RANDCorporation,337Rappleye,Willard,Jr.,176Rastakhiz,360Razavi,Hossein,186Reagan,Ronald,28,231,288,289,323–24ReaganRevolution,392RepublicanParty,U.S.,231,268,319,323–24,328,375,392ResurgenceParty,Iranian,375,378RezaCyrusPahlavi,CrownPrinceofIran,100,142,304,391RezaShahPahlavi,ShahofIran,21,63,219reformsof,63–64Rhodesia,159RichardNixonPresidentialArchivesFoundation,392RichardR.HallockFoundation,391Richardson,Elliot,123RiggsNationalBank,455nRobinson,Charles,237,268–70,272,276,296,298,299Robinson,Jeffery,435nRockefeller,David,170,183–84,284,354,368,374Rockefeller,Jay,376,495nRockefeller,Nelson,28,70,169,183,230,248,304,347,354,374,393Grummandealand,70–72,284

nominatedforvicepresidency,202–3RockwellInternational,214–15,325Rogers,William,28,31,32,39,40,41,54,58,69,73,74,101,109,111–12Rohatyn,Felix,344Romanovdynasty,167Ronfeldt,David,337Roosevelt,Kermit“Kim,”22,34,35–36,142,284Roosevelt,Theodore,22Rowen,Hobart,316RoyalDutchShell,24RoyalMarines,British,108Rubin,Barry,285Ruckelshaus,William,123Rumor,Mario,194Rumsfeld,Donald,1,7–8,34,87,231,295,298–99,320,322,337“HalloweenMassacre”and,288–89Toufanian’sconfrontationwith,294,335,365–66,473natVailsummit,231–32Rush,Kenneth,111,122,123,162,179,190RussianRevolution(1917),6

Sabah,Salemal-,245Sabeti,Mrs.,305–6Sabeti,Parviz,305Sadat,Anwaral-,69–70,112,113,124,130,154,176,227–28,244,252,

304–5Sadat,Jehan,304–5Sadri,Ja’farqoli,63Safavian,Abbas,213,373Saghi,James,386Sale,RichardT.,437nSalomonBrothers,152–53SambaFinancialGroup,400nSaqqaf,Umaral-,203–4SaudbinFaisalal-Saud,Prince,81,83,329–31SaudiArabia,8,19–20,25,26–27,40,44,56,65,94,102,103,104–5,110,

112–13,114,116,132,145,149,154,160,161,162, 164, 171, 173,174,182,187–88,200,206,221,228,229,238,240,251,252, 261,

269,275,276,285,289,311,320,347,351,399n,342nArab-IsraeliWarand,117–19,123Aramcodealrenegotiatedby,79–83,93Harper’sessayand,234–35Iran’soilrevenuesand,1–7Iran’soilwarwith,seeOilWarof1977Kissinger’s1974visitto,219–20Lebanoncrisisand,312oilembargoand,124,127–28,154–55,157atOPEC’sDohameeting,358–63petropowerof,3–6RasTanuraterminalof,370Shi’apopulationof,371U.S.’soilrelationshipwith,3–7,79–80,169–70,173–81Saunders,Harold,68–69,341SAVAK,49,53,64,65,215,258,305,307,379–80,385,388,390U.S.operationsscandaland,338,341–43,364–65Schlesinger, James, 7–8,10, 20–21, 57, 72, 87, 115, 121, 125, 128, 134,

147,149,165,210,231,233,234,253,257,431n–32n,435n,444n–45n,460n,470n–71n,481n

Arab-IsraeliWarand,118–20,129–30,132–33Ford’sfiringof,288–89Ford’smeetingwith,280–81Iranarmssalesopposedby,211–12Kissinger’sphoneconversationswith,118–20,129–33latercareerof,392onShah’s1973statevisit,105–6U.S.-Iranrelationspaperof,285–86,287Schmidt,Helmut,179,194,259–60,347–48Ford’smeetingswith,259–60,261Schmidt,William,367Schorr,Daniel,248–49SchweizerischeBankGesellschaft,73Scowcroft,Brent,9,10,93,130,152,172,179,201–2,237,242,251,272,

274,279,286,289,297,299–300,302,317,329, 349–50, 354, 358,392,471n

SecretService,U.S.,64,156,157SecurityCooperationCommission,169Seidman,William,268

“SeizingArabOil,”234–35,459n–60nSenate,U.S.,73,248,268armssalesreportof,319–22,325ForeignRelationsCommitteeof,23,78,94,105,319Fulbright’senergycrisisspeechin,94Watergatehearingsof,97SeventhFleet,U.S.,127Shaffer,Paul,255–56,303,463nShahnaz,PrincessofIran,27–28Shahrem,Prince,416nShalev,Mordechai,228Shamsabadi,AyatollahAbolhassan,307Shani,Yoram,379–80Shashua,Bill,386Shawcross,William,9Shawwaf,Hassan,329Shi’as,19,63ofIran,219,222,246,307Shultz,George,80,144,151,152,153,157,238inIrantrip,236–37Siakalincident,59,313Sick,Gary,376Sidewindermissiles,318Silk,Leonard,206,327Simon,Carol,153,157,170,190,252Simon,WilliamE.,7,10,144,151,159,161,169,190–91,201,202,203,

207,208,231,239,252,259,266,277,286,294–95,296,298, 310,315,317,319–20,322,348,354,359,361,362,363,391

appointedTreasurysecretary,170backgroundof,152–53bilateraloildealand,267–68,270,274Carterdislikedby,366congressionaltestimonyof,156–57Ford’sreappointmentof,200HalloweenMassacreand,289atIMF’sManilameeting,331–32Kissinger’sfeudwith,154,171–72,173–79,200–201latercareerof,392Nixonadministrationand,153–54

Nixon’sviewof,170–71“nut”remarkof,176–77oilpricedebateand,173–79,181,188–89Yamaniand,172–73,175Singapore,205,209Sisco,Joseph,152,293–94,296,297SixDayWar,48SixthFleet,U.S.,127SixthPlan,35560Minutes,156,337Smith,Donald,324–25Soares,Mario,309,333,346SocialDemocraticParty,German,260SocialistParty,Portuguese,309,357SoconyMobilOil,24Soraya,QueenofIran,22,27SouthAfrica,19,64,134,159,209Iran’suraniumdealwith,292SouthYemen,158SovietUnion,10,19,31,39,40,55,62,64,65,84,85,95,104,105,113,

137,180,193,249,261,342,375,419nAfghanistanand,101–2Arab-IraeliWarand,117,118,124–25,128–29expelledfromEgypt,69–70Ibexprojectand,214,215–16India’sfriendshiptreatywith,55Iraninvadedby,21Iran’s1962agreementwith,130–31,444n–45nU.S.’swheat-for-fuelprogramand,89Sowayel,Ibrahimal-,154–55Spain,8,147,180,194–95,310,315,361,363economiccrisisof1976in,308–9,333–34,346,356,357Speer,Albert,153Spiegel,Der,361Spiritof’76,The,58,66SriLanka,160Stalin,Joseph,22,31StandardOil(California),24,159StandardOil(Esso),24,25

StandardOilofNewJersey,82StateDepartment,U.S.,9,18,35,39–40,42,45,46,64,67,69,75,77,81,

96,97,140,148,150, 170, 173, 177, 187, 221, 244, 255, 257, 258,266, 267–68, 270, 281, 286, 292, 296, 298, 307, 326, 335–36, 337,338,348,356–57,374,378–79,388

BureauofIntelligenceandResearchof,36OfficeofMunitionsof,215SAVAKscandaland,342–43steelindustry,352,356Stempel,John,379–80Stevens,Connie,306stockmarketcrashof1929,190,204StraitofHormuz,20,51–52Stuber,Jill,216Stuber,Ron,216Sturgis,Frank,73Suárez,Adolfo,333SuezCanal,117,124,239Sullivan,William,374–77,389Sultan,Prince,105Sunnis,4,19Switzerland,164Symington,Stuart,58Syria,77,109,113,117,119,120,154,173,188,219,240,244,329,344,

351Lebanoninvadedby,311–12

Taiwan,160,243,249Tanzania,205Tavoulareas,William,161–62Taylor,Elizabeth,306–7“TeaforTwo”(song),106TeheranAgreement(1971),52,117TehranInternationalExhibition,213TehranUniversity,66TexasOilCompany(Texaco),24,88,159Thatcher,Margaret,348,359“There’sNoTomorrow”(song),106

ThirdArmy,Egyptian,124,130ThirdWorld,160,210Thomas,Helen,232Time,98,153,163,204,247,346Times(London),368,372Tito(JosipBroz),180Tocqueville,Alexisde,287,471nToucheRoss,455nToufanian,Hassan,214,285,294,335,365–66,369,473nToweringInferno,The(film),205Trans-IranianRailway,63TreasuryDepartment,U.S.,112,130,153,169–70,174,175,179,180,187,

200,207,255,259,270,274,307,319,335–36Trujillo,Rafael,420nTuchman,Barbara,11Tudeh(Communist)Party,Iranian,22,49Tunisia,117Turkey,42,47,49,56,62,130,195,199,242,243,249,253,256,281,320Turkial-Faisal,Prince,1,5Turner,Jack,255–56,303,463nTurner,Stansfield,381Tuwayjiri,Sheikh,317TwinPillarspolicy,44Twitchell,Hamilton,23,27,66TwitchellDoctrine,23–24,59,218,235,322demiseof,69

U-2spyplane,215Uganda,151unemployment,345,346oilshockand,216,313–14,326–27,345,346,352UnitedArabEmirates,90,129,286,358,360,382UnitedFeatures,73UnitedLeft,195UnitedNations,103,127,207,227,331,338,344Arab-IsraeliWarand,119,124UnitedNationsChildren’sFund(UNICEF),98–99UnitedStates,8,109,162,167,352,362

GreenspanPauseand,327inflationin,160India-PakistanWarand,55–56Iran’srelationswith,seeU.S.-Iranrelationship1970–72energycrisisin,88–92oildependencyof,7,11oilembargoand,134–36oilproductionof,112–13onsetofoilshockin,151–52recessionsin,326–27Saudioiland,3–7,79–80,169–70,173–81SovietUnion’swheat-for-fuelprogramand,89unemploymentin,352UnitedStatesInformationService,63,219UnitedStatesOlympicCommittee,392UniversalAeroServicesCo.Ltd.,214–15U.S.-IranJointCommission,223,237U.S.-Iranrelationship:andAmericansinIran,286–87armssalesdebateand,23–24,26,32–33,36–40,53,66–69Atherton’smemoon,377–78Brownelloildealand,35,223–24corruptionissueand,283–85dualcivil-militaryprogramsand,218–19Ford-Schlesingermeetingon,280–81HalloweenMassacreand,288–89Iran-Israelirelationshipand,47–48Kissinger-Fordbriefingpaperon,249–50Kissinger’ssequesteredfileson,347–48nadirof,291,2941977Washingtonvisitdemonstrationsand,389–91Nixon’sTehranvisitand,29–30nuclearissueand,236–37,281–82,291–94,419noilconsortiumand,24–27,34–35,37,47,91–92,93Ronfeldt’sreporton,337–38Schlesingeron,282–83Schlesinger’smemoon,285–88Shah’spetropowerand,150–51TwinPillarspolicyand,44

TwitchellDoctrineand,23–24,27,34–35U.S.presenceinIranand,95–96VietnamWardrawdownand,20–21,75–76U.S.News&WorldReport,296–97U.S.-SaudiSecurityCooperationCommission,289

Vakil,Firouz,186Vance,Cyrus,374,375,379,495nAtherton’smemoto,377–78Vanik,Charles,156Venezuela,90,145,159,175,178,330–31,401n,483nVietnam,DemocraticRepublicof(NorthVietnam),75,243Vietnam, Republic of (South Vietnam), 20, 75–77, 86, 205–6, 246, 248,

249,250,310,317VietnamWar,7,10,37,86,108,122,471nDiemassassinationin,31EnhancePlusOperationand,75–77Iranandwindupof,75–77U.Sdrawdownin,20–21VoiceofAmerica,191Volcker,Paul,363vonMarbod,Eric,294

Wallace,Mike,156WallStreetJournal,207,345,372,383Warhol,Andy,252Warwick,Dionne,252WashingtonPost,4,58,87,116,151,157,170,215,227,235–36,239,254,

266,268,270,306,316,333,345,365,371,388,390,413nWashingtonSpecialActionGroup(WSAG),124–27,129,133Watergatescandal,7,10,72,94,105,106,116,122, 123, 124, 128, 134,

173,242,339,420n,421nandcallsforimpeachment,125,178,180CIAand,73,178collapsingpresidencyand,180–81DNCbreak-inand,70–71Helmsand,73,74,84,93,178

Iranconnectionand,72–74,115,116“Mexicanlaundry”and,73,85Nixon’sresignationand,191–92,226Senatehearingson,97Shahon,131“smokinggun”conversationand,178,190Welander,Robert,57West,Jessamyn,406nWestPakistan,56Wheeler,Earle,39–40,41,42–43WhiteRevolution,48–49,91,155,381Whitlam,Gough,210Wilkins,Willie,108WilliamE.Simon&Sons,392Williamson,Ellis,66,68Witteveen,H.Johannes,315,332Wolfowitz,Paul,248Woodward,Bob,365,454n–55nWorldBank,189,263Manilameetingof,331–34WorldWarII,45,471n

Xerox,392

Yamani,AhmedZakial-,7,122,123,128,132,145,148,158,208, 224,246,268,275,276–77,348,366,367,382

Kissinger’sdislikeof,171latercareerof,391oilauctioninitiativeof,177–78,181,204onoilpolicy,80atOPEC’sBalimeeting,311atOPEC’sDohameeting,358–63Simonand,172–73,175Yamani(Robinson),435nYearsofUpheaval(Kissinger),81,393Yeganeh,Mohammad,254Yeo,Ed,348–49

Yergin,Daniel,80,90,159YomKippurWarseeArab-IsraeliWarof1973Yugoslavia,180

Zahedi,Ardeshir,10,27,30,42,53,74,116,136,157,167,209,216,228,241,300,302,306,340,347,350,352,374,388,410n,495n

diplomaticstyleof,28–29Ford’smeetingswith,202–3,354–56latercareerof,391in1973Washingtonvisit,101–41976U.S.electionand,323–24SAVAKscandaland,342–43Shah’scancersecretand,381–82Simon’s“nuts”remarkand,176–77Zahedi,Fazlollah,27Zaire,316Zarb,Frank,10,152,171,172,233,270,272,273,290,296,322–23,330–

31bilateraloildealand,238–39,240,267–69,274,295,298–99,302,349Ziegler,Ron,64Zonis,Marvin,25,402nZumwalt,Elmo,71