Near East and South Asia

This vast and diverse area was dominated in 1971 by the tragic conflict between India and Pakistan, two nations friendly to the United States, and by continuing tension, but no fighting, in the Middle East. Although, by the end of the year, there were no overt hostilities in either part of the region, antagonisms still ran high.

In East Pakistan, the efforts of the central government to enforce its rule led to civil war that drove millions of refugees across the border into eastern India. A spiraling series of events climaxed in a brief war between India and Pakistan at the close of the year. Indian troops occupied East Pakistan—which then declared its independence—as the new state of Bangladesh.

In the Middle East, talking largely replaced shooting in 1971. A cease-fire along the Suez Canal arranged on U.S. initiative in August 1970 held throughout the year. The truce was a tenuous one, however, and despite the efforts of the United States to help resolve the basic difficulties through negotiation, the underlying tensions and bitterness remain as a threat to peace.

Chief among U.S. interests in this strife plagued but evolving region are:

- The fashioning of a permanent peace in the Middle East and in South Asia.

- The preservation of the independence and integrity of countries in the region, free of domination by outside powers.

- The solidity and stability of NATO's southeastern flank.

- The strengthening of mutually beneficial economic relations as a basis for trade expansion and area development.

The many profound differences in conditions which exist throughout the Middle East and South Asia make it necessary to shape policy so that it takes diversity fully into account. Nevertheless, there are elements common to U.S. policy in the region as a whole:

- Foremost is the need to help create the conditions which will promote a stable and enduring peace throughout the region.

- We want friendly relations with all countries in the region, and have them with most. This element implies mutual respect and

93

understanding for each other's interests and points of view, and a
genuine effort on both sides to reach accommodation where interests
and viewpoints differ.

—The countries with which we deal are sovereign, and for many,
their independence relatively new. Our ability to influence the direc-
tion of their policies is limited, especially on matters which are
essentially internal in nature or where they believe their national
security is at stake. This factor applies to the smallest as well as the
largest—to countries which receive assistance from us and those
which do not.

—Within the limits of our capacity, we provide assistance, eco-
nomic and military, to countries in the region to help them meet the
needs of development and to strengthen their ability to defend
themselves.

—We are mindful that the increased speed of communications and
transportation has stimulated new relationships among many coun-
tries of the region. Such is the case in the eastern Mediterranean and
in the Persian Gulf and is becoming increasingly true in the Indian
Ocean.

ARAB-ISRAELI DISPUTE

Although temporarily overshadowed by the conflict between India
and Pakistan, the unresolved dispute between Israel and its Arab
neighbors remains high on the list of problems which threaten world
peace and stability. Our central objective is to prevent the structure
of world peace from breaking down in the Middle East. The Ad-
ministration determined early in 1969 that it would embark upon a
major effort to obtain a solution to the Middle East problem, and
we have continued to work to promote agreement among the parties
on the terms of a peaceful settlement which all would have a stake
in maintaining.

The year 1971 was one of continuing search for a key to resolve
the dangerous dispute between Israel and its Arab neighbors. The
year began on a note of hope. As a result of the U.S. "stop shooting,
start talking" initiative, guns have remained silent along the Suez
Canal since August 1970. On December 28, 1970, Israel announced
its intention to resume participation in negotiations, under the aegis
of the U.N. Secretary General's Special Representative Gunnar
Jarring, which had broken down as a result of Soviet and Egyptian
violations of the standstill portion of the August 1970 cease-fire
agreement. There was hope that the active diplomatic effort of the

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94

President and Secretary to promote peace in the Middle East might at last lead to real progress.

In early January, Ambassador Jarring resumed his discussions with the parties to promote agreement on the terms of a peaceful settlement based on the principles of U.N. Security Council Resolution 242 of November 22, 1967. During a brief visit by the Ambassador to Jerusalem in early January, Israel handed him for transmission to the governments concerned, memoranda containing Israel's views on the "essentials of peace." Subsequently, Egypt and Jordan gave the Ambassador papers with their views and, after a further exchange of memoranda, U.N. Secretary General U Thant reported to the Security Council on February 2 that he found grounds for cautious optimism.

Following the exchange of papers in January, Ambassador Jarring, in an Aide Memoire to the Governments of Egypt and Israel on February 8, sought parallel and simultaneous commitments from them on the provisions and terms of a peace agreement. The Ambassador asked Israel to give a commitment to withdraw its forces from occupied Egyptian territory to the former international boundary between Egypt and the British mandate of Palestine on the understanding that satisfactory arrangements were made for: (1) establishing demilitarized zones, (2) practical security arrangements in the Sharm el-Sheikh area for guaranteeing freedom of navigation through the Straits of Tiran, and (3) freedom of navigation through the Suez Canal. Ambassador Jarring asked Egypt to commit itself to enter into a peace agreement with Israel and to make explicit to Israel, on a reciprocal basis, undertakings and acknowledgments covering the following subjects: (1) termination of all claims or states of belligerency; (2) respect for and acknowledgment of each other's sovereignty, territorial integrity, and political independence; (3) respect for and acknowledgment of each other's right to live in peace within secure and recognized boundaries; (4) responsibility to do all in their power to insure that acts of belligerency or hostility do not originate from within their respective territories against the population, citizens, or property of the other party; and (5) non-interference in each other's affairs.

In its response, Egypt gave a commitment accepting the above five points in Ambassador Jarring's memorandum and, for the first time, expressed its readiness to enter into a peace agreement with Israel subject to Israeli acceptance of certain conditions which went beyond those asked by Ambassador Jarring, including a commitment to withdraw from the Gaza Strip as well as Sinai and to accept the establishment of demilitarized zones astride the borders and a U.N.

[LC]

95

["[L0]", "peacekeeping force. Israel's reply reiterated that country's readiness to enter into negotiations with Egypt on all subjects relevant to a peace agreement between the two countries. Israel expressed the view that such a peace agreement should include several of the provisions suggested by Ambassador Jarring, and it accepted the withdrawal of Israeli armed forces from the Israel-Egypt cease-fire line \"to the secure, recognized, and agreed boundaries to be established in the peace agreement.\" Israel stated, however, that it would not withdraw to the pre-June 5, 1967, lines.", "Ambassador Jarring's efforts were thus effectively stalled by the fundamental divergence in the positions of the two parties on the important question of the border to which Israel would withdraw. Secretary Rogers, in a news conference on March 16, expressed our strong support for the continuation of Ambassador Jarring's mission. He also said we would work behind the scenes to see what could be done to bypass the problem and noted that the United States would be willing to play a \"responsible and appropriate role in a peacekeeping force.\"", "With Ambassador Jarring's efforts temporarily blocked, another peace opportunity arose. In a speech to the Egyptian National Assembly on February 4, President Sadat announced a further 30-day extension of the cease-fire and declared that Egypt was ready to clear the Suez Canal and reopen it to international navigation in return for a partial Israeli withdrawal from the east bank of the Canal as a first step toward a final settlement. On February 9, Israeli Prime Minister Mrs. Meir, in an address to the Knesset, declared that Israel, too, favored opening the Canal and was ready \"to hold discussions with Egypt on arrangements for opening the Canal, even as a separate issue from other provisions\" of an overall settlement. Egypt and Israel both indicated to us that they would like the United States to undertake a diplomatic role in working out an agreement. Both sides conveyed to us in the spring their views on an interim Canal agreement.", "During the first week of May, Secretary Rogers visited Saudi Arabia, Jordan, Lebanon, Egypt, and Israel to discuss with their leaders the possibility of an overall settlement. In Egypt and Israel, he also discussed how an interim Canal agreement might be reached. Assistant Secretary Sisco returned to Cairo immediately after the Secretary's trip and later, in July-August, he went to Israel for more detailed discussions of aspects of an interim agreement. In Israel, Mr. Sisco explored with Israeli leaders a number of ideas on how differences over an interim agreement might be reconciled. While major differences existed in the positions of the two states on many", "issues, about military strategy and policy in the Middle East, the operation of the Israeli Defense Force, and the future of the state of Israel. During the talks with the Israeli prime minister, the new secretary general agreed to help Israel in any way possible as a neutral power, and in a combative role of mainly withdrawal forces.", "On the evening of February 5, the United States announced its agreement to help Israel as a combatant power in the conflict. An interview with the Egyptian prime minister, as a neutral power, was held with the Egyptian leader, Generalplot, to discuss a plan to withdraw the Israeli forces and to open the Canal.", "The parties agreed to agree on a zone 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[L.C.]

issues, both sides clearly wanted us to continue our effort to bring about an interim agreement. In late September and October Secretary Rogers took advantage of the presence in the United States, for the opening of the 26th U.N. General Assembly, of the Egyptian and Israeli Foreign Ministers to hold detailed discussions on this question. The Middle East question was also raised in the Secretary's talks with several of the other foreign officials in New York, including the Soviet Foreign Minister Andrei Gromyko.

On October 4, Secretary Rogers explained in a major address to the U.N. General Assembly why we considered it time to take a new step toward peace in the Middle East—an interim Suez Canal agreement. He called such a step a practical measure which could help create the confidence and trust lacking between the parties. An interim agreement would restore the use of the Suez Canal as a waterway for international shipping; it would reestablish Egypt's authority over a major national asset; it would separate the combatants; it would extend the cease-fire and diminish the risk of major power involvement; and it would produce the first Israeli withdrawal.

The Secretary stated that the positions so far outlined by the parties suggested six areas where efforts must be made to narrow differences. These included the relationship between an interim agreement and an overall settlement, the nature of the cease-fire, the zone of withdrawal, the nature of supervisory arrangements, the question of Egyptian presence east of the Canal, and the use of the Canal. Finally, the Secretary restated the United States continuing support for the mission of Ambassador Jarring to obtain an overall settlement and a lasting peace.

Four Power talks in New York have been held from time to time among France, Great Britain, the Soviet Union, and ourselves. The positions of the four participants in these talks differ in important respects. The Soviet Union argues that the Four Powers should work out an agreed position on substantive issues to guide Ambassador Jarring in his negotiations with Israel and the Arabs. The United States, on the other hand, has maintained that a genuine peace settlement can only come from an agreement reached by the parties directly involved in the dispute and not from terms devised by Ambassador Jarring, the Four Powers, or the Security Council. We did, however, agree to discuss in the Four Power forum the matter of supplementary guarantees for an overall settlement. The Soviets, however, have said they are unwilling to limit Four Power discussions to this question until agreement was reached on withdrawal. The last meeting took place on September 9, 1971.

97

[Lc]

During the search for peace in the Middle East we have continued to sell U.S. military equipment and supplies to Israel. These steps were taken in response to the large shipments of arms by the Soviet Union to Egypt in 1969 and 1970 and to the increased direct Soviet operational involvement in Egypt's air defense system. We are determined not to permit the military balance to tip against Israel. We have repeatedly made clear our belief that the balance must be maintained to avoid encouraging armed conflict and risk major power involvement. Although the United States is committed to prevention of a dangerous imbalance of armaments, this cannot be an end in itself but only part of the overall objective of achieving a peaceful settlement.

At the same time we have exercised restraint in approving shipments of arms to Israel and to friendly Arab governments, to avoid an escalation in the level of armaments in the area and to keep the focus on peace negotiations. For more than 20 years, successive Administrations have sought to prevent an uncontrolled arms race in the Middle East. In our contacts with Soviet officials we have also urged the Soviet Union to use restraint in arms dealings with Arab states in the conviction that joint action to limit arms shipments would enhance prospects for peace. The Treaty of Friendship and Cooperation signed by the Soviet Union and Egypt on May 27, 1971, is not encouraging in this respect. Article 8 of that Treaty spells out a Soviet commitment "to continue to develop cooperation in the military field . . . with a view to strengthening (Egypt's) capacity to alleviate the consequences of aggression as well as increasing its ability to stand up to aggression in general." Similarly, at the end of President Sadat's visit to Moscow in October 1971, Egypt and the Soviet Union announced that agreement had been reached on specific measures to strengthen the military might of Egypt. These developments do not contribute to the cause of peace in the Middle East.

In September 1971, Jordan again raised in the U.N. Security Council the issue of Israeli measures in the occupied section of Jerusalem. Since 1967, we have consistently held the position that Israel should take no actions in the occupied territories, including that part of Jerusalem formerly under Jordanian administration, which are inconsistent with Israel's obligations and responsibilities as an occupying power under international law, and which could prejudice the final status of Jerusalem and thus prejudice the prospects for peace. The United States voted with the other members of the Security Council for Resolution 298 which *inter alia* called upon Israel "to take no further steps in the occupied section of Jerusalem

which may prejudice national policies following the care and places in which

One of the goals of the work of the Ad- ministrations has been to provide refugees to UNRWA since 50 percent of special programing programs are based on the straits. United Nations General Assembly resolution of 1958, adding new ways to achieve the programing goals of the General Assembly, was passed at a peace conference in Washington, D.C. in 1964. Despite our efforts to reach a peace program on terms acceptable to both sides, talks in Washington have not produced an inter

MIDDLE EAST

On September 16, 1978, the United States changed its position on the Security Council's resolution on Jerusalem, voting in favor of the Council's adoption of a resolution which *inter alia* called upon Israel to"

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which may purport to change the status of the City, or which would prejudice the rights of the inhabitants and the interests of the international community, or a just and lasting peace." In a statement following the vote on this resolution, Ambassador Bush recognized the care and attention shown by Israeli authorities for the Holy Places in the occupied section of Jerusalem.

One of the more agonizing aspects of the Arab-Israeli conflict has been the fate of the nearly one and one-half million Palestine refugees. For more than two decades, the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) has provided basic relief and welfare assistance for many of these refugees. The United States has been by far the largest contributor to UNRWA, having supplied over $1/2 billion in cash and commodities since 1950. In 1971, our regular contribution constituted over 50 percent of government support for UNRWA. We also made a special contribution for UNRWA's vocational and technical training programs to help refugees become better able to support themselves and their families. UNRWA, however, is in serious financial straits. Unless new sources of income are found, the Commissioner General will be forced to cut back assistance for refugees, thereby adding to their hardship. The members of the United Nations must find ways to assure the welfare of the refugees and to promote effective progress toward their economic and social rehabilitation. In the months ahead, we will explore with other concerned governments ways to alleviate this tragic human problem.

Despite the many obstacles to peace encountered in the past year, we trust that the states directly concerned will remain committed to a peaceful settlement in accordance with Security Council Resolution 242. We will, in the year ahead, pursue our own diplomatic efforts to this end and remain ready to serve as a go-between in talks in close proximity between Egypt and Israel looking toward an interim Suez Canal agreement.

## MIDDLE EASTERN COUNTRIES

### Egypt

On September 2, 1971, the former United Arab Republic officially changed its name to the Arab Republic of Egypt.

We have not had formal diplomatic relations with Egypt since it severed relations with us at the time of the Arab-Israeli war in 1967. This absence did not, however, prevent an intensification of our

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dialogue with Cairo during 1971. Much of this dialogue was de-
voted to the negotiations for an interim agreement based on reopen-
ing the Suez Canal and a limited Israeli withdrawal as the first
step toward a final peace. Secretary Rogers' trip to the Middle East
in May included a stop in Egypt and discussion with President Sadat
and other senior Egyptian officials of a peaceful settlement of issues
threatening the Middle East with war. Egyptian Foreign Minister
Riad returned the visit by coming to Washington to see Secretary
Rogers during the U.N. General Assembly.

There have been other moves toward an improved U.S.-Egyptian relationship. We agreed during Secretary Rogers' visit to Cairo, for example, to increase our representation in Cairo and Egypt's representation in Washington by several officials, to a new total of 20. These staffs, under the aegis of protecting powers (Spain in Cairo and India in Washington), carry out most of the functions of diplomatic posts. The two countries also came to an agreement on the rescheduling of Egypt's debt of $145 million to the United States in suspension since the rupture of diplomatic relations. Egypt will now repay this debt over a period of seven years, thereby improving its credit standing in the world community.

We are, of course, still far from enjoying the normal, across-the-board relations with Egypt that we would like and continue ready to resume. We are legislatively barred from extending aid to Egypt in the absence of diplomatic relations. U.S.-Egyptian trade is small, although there has been significant private U.S. investment in Egyptian petroleum. Cultural activities have continued but at a reduced level. A major complicating factor between the United States and Egypt continues to be the large Soviet military presence there, with its unsettling implications for NATO in the eastern Mediterranean and for the military balance in the Middle East.

Israel

In a year of active diplomacy, the United States and Israel con-
sulted closely on many matters of bilateral interest, including ap-
proaches to a settlement of the Middle East conflict, arms balance
and arms supply, U.S. financial assistance, trade interests, and sci-
entific cooperation. The intensity of the diplomatic activity was re-
flected in the number of visits by high-level officials of the Israeli
Government, including the Prime Minister, to the United States
and by the Secretary's visit to Israel during his trip to the Middle
East.

The objectives of the United States and Israel are similar, particu-
larly on a negotiated settlement of the Middle East conflict within

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the framework of U.N. Security Council Resolution 242 of November 22, 1967. Nevertheless, differences in emphasis and approach on specific issues have arisen—many related to the peace negotiations, not surprising given the complex array of factors involved.

One of the more persistent problems during 1971 was Israel's interest in purchasing additional military aircraft, especially Phantom jets, from the United States. In early December, the President and Secretary Rogers discussed with Prime Minister Meir the way in which Israel's long-term needs for modernizing and maintaining the capacity of its defense forces could be accomplished in the context of our on-going policy of maintaining the military balance. In their talks, they also explored ways by which the United States and Israel could contribute to diplomatic efforts to achieve a peace settlement.

U.S. military and economic assistance has helped Israel to progress economically, in spite of its heavy defense burden. For Israel, 1971 was a year of full employment and rising foreign exchange resources.

During 1971, Israel proceeded to draw down the $500 million in special military credits authorized and appropriated by the Congress late in 1970. We have requested substantial additional foreign military sales credits for FY-72 and have informed the Congress that any appropriations for supporting assistance (grant funds) will be utilized on a priority basis. The United States also continued to furnish Public Law 480 commodity sales credits ($53.4 million) and Export-Import Bank credits.

## Jordan

The continued independence and stability of moderate Jordan is an essential element in the search for an Arab-Israeli peace settlement. Jordan must be strong and viable to make a positive contribution toward an enduring peace in the area. Accordingly, through economic and military assistance and by diplomatic support, the United States has helped to maintain Jordan's independence.

The armed clash between the Jordanian army and Palestinian fedayeen groups, which broke out in the fall of 1970, gradually subsided in 1971. Sporadic fighting continued through the first half of 1971, but by the end of July the government was firmly in control throughout Jordan. The cease-fire between Jordan and Israel was successfully maintained during the year.

The reestablishment of internal security by forceful action against the fedayeen led to imposition of economic sanctions against Jordan by some of its Arab neighbors. Of the $105 million subsidies which

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Jordan had received annually since 1967 from Saudi Arabia, Kuwait, and Libya, only Saudi Arabia continued its $40 million annual payments. Libya and Kuwait suspended their subsidies, and these payments have not been resumed.

This loss of revenue caused serious economic problems for Jordan. These difficulties were compounded in July 1971, when Syria and Iraq closed their borders to all Jordanian traffic. The border with Iraq was reopened October 20, 1971. Jordan attempted to cope with its financial problems by cutting governmental expenses and intensifying revenue collection efforts, but the need for outside economic assistance remained large.

The immediate threat to Jordan's internal stability thus assumed a different form—the financial solvency of the government. By extending $35 million in economic supporting assistance in 1971, the United States helped alleviate the situation. In addition, the United States continued to provide military assistance to Jordan in 1971 to help that country modernize its military forces and enhance its ability to meet internal and external threats to its security.

## Lebanon

Through its key location in the Middle East, as well as through its cultural ties with the West and its free institutions, Lebanon is able to make an important contribution toward better understanding between the Western nations, including the United States, and the countries of the Arab world. For these reasons, as well as because of the close ties that have developed between Lebanon and the United States, we have a deep interest in the territorial integrity, security, and independence of the country.

Tension declined along Lebanon's border with Israel. Although the fedayeen maintained a presence in southern Lebanon, disarray among the fedayeen organizations coupled with setbacks in Jordan eased the internal pressure on the Lebanese Government. This situation has had a salutary effect upon Lebanon's service-oriented economy, which had suffered as a result of the tensions in the area. Tourism rebounded, and reached its highest level since the June 1967 war. In addition, Lebanon remained an important regional center for hundreds of American business firms.

The United States continued as one of Lebanon's top suppliers, accounting for an estimated 10 percent of Lebanon's total import purchases. Accurate trade figures are not yet available for 1971, but imports from the United States in 1970 amounted to $68 million out of total imports of $699 million.

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The Lebanese Parliament approved a five-year arms moderniza-
tion program in August 1971 to strengthen the country's ability to
maintain its security. In November 1971, the Lebanese purchased a
modest amount of arms from the Soviet Union on a one-time basis.
It is expected, however, that the bulk of their arms needs will be
purchased from the United States and western Europe.

Syrian Arab Republic

Diplomatic relations have not been resumed between Syria (where
Italy represents our interests) and the United States. The Syrian
Government has, however, shown some interest in encouraging
American business to reenter the market and, accordingly, has taken
steps toward settlement of certain debts owed to U.S. Government
agencies. There has been no open change in Syria's negative atti-
tude toward a negotiated settlement of the Arab-Israeli dispute, but
the government seems to have moved away from the active support
of Palestinian guerrilla elements it gave during the Jordanian civil
disturbances of late 1970.

Iraq

In the absence of diplomatic relations, the United States is repre-
sented in Baghdad by the Belgian Government. Hopes for improved
relations with the Iraqis were set back by the government's takeover
of U.S. Embassy property in Baghdad on the grounds that security
of nearby government buildings required this step. A Department of
State negotiating team visited Baghdad prior to the takeover in an
attempt to reach agreement over the property. It was hospitably
received but found little official Iraqi inclination to moderate the
government's expressed hostility toward the United States.

Arabian Peninsula/Persian Gulf

The Arabian Peninsula/Persian Gulf area is of major strategic and
economic interest to the United States because of the extensive Amer-
ican participation in the Peninsula's vast petroleum industry and
our own interest in the orderly political and social evolution of the
peoples of the area.

At the beginning of 1971, a breakdown of negotiations between
the Persian Gulf member governments of the Organization of
Petroleum Exporting Countries (OPEC) and the American and
other Western concession holding companies seemed possible. In-
ability to agree on adjustments in oil revenues might have led to an
interruption in the flow of Middle East oil. In January, Under

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Secretary Irwin visited the capitals of Iran, Kuwait, and Saudi Arabia to consult with officials of those governments on ways to avoid an oil crisis. Partly as a result of these consultations, commercial negotiations proceeded, resulting in five-year agreements on pricing which were financially advantageous to the producing states but which also promised stability in the international oil industry. At the end of the year, new issues arose, however, centering around compensation to the OPEC countries to offset the devaluation of the dollar and OPEC demands for equity participation in the oil companies' operations.

During 1971, returns on U.S. private investment—almost all of it in the oil industry—in the Arabian Peninsula and Persian Gulf states continued to make a major contribution to the U.S. balance of payments. Repatriated earnings of U.S. private corporations, together with trade, once again contributed nearly $1 billion to our net balance of payments.

MIDDLE EAST OIL PRODUCTION—1971 (Estimated)
(In thousand barrels per day)

<table><tr><td>Saudi Arabia</td><td>4,731</td></tr><tr><td>Iran</td><td>4,514</td></tr><tr><td>Kuwait</td><td>3,170</td></tr><tr><td>Iraq</td><td>1,692</td></tr><tr><td>Abu Dhabi</td><td>900</td></tr><tr><td>Qatar</td><td>429</td></tr><tr><td>Egypt</td><td>300</td></tr><tr><td>Oman</td><td>291</td></tr><tr><td>Others</td><td>512</td></tr></table>

The United States traditionally close ties with Saudi Arabia were reinforced by a series of high-level visits during the year. In May, the Secretary of State went to Riyadh on the first leg of his visit to several Middle Eastern capitals. In late May, King Faisal paid a visit to Washington for talks with President Nixon, during which they discussed candidly our respective approaches to a just peace settlement in the Middle East. Saudi Arabia and Kuwait were among the 10 countries visited by Vice President Agnew in July.

American technical expertise, both government and private, played a major role in support of the Saudi Arabian Government's accelerating program of modernization and development. Among those projects completed during the year was a five-million-gallon-per-day sea water desalinization plant in Jidda, constructed for the

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Saudi Arabian Government under the supervision of the U.S. Department of the Interior's Office of Saline Waters.

The Sultan of Oman, who came to power in July 1971, moved to implement his policies for economic and social progress in this previously politically isolated part of the peninsula. The U.S. Government has recognized the Sultanate since the early 19th century, and in October 1971, agreed to establish formal diplomatic relations with the Sultan.

Although formal diplomatic relations have not been resumed, the United States maintained contact with the Government of the Yemen Arab Republic, which is faced with challenging economic problems in the wake of the prolonged Yemeni civil war. To the south, the People's Democratic Republic of Yemen continued to show no interest in seeking resumption of relations with the United States.

The year 1971 was an historic year in the Persian Gulf. The long-standing protective treaty relationship between the United Kingdom and the nine small sheikdoms along the eastern coast of the Arabian Peninsula was terminated. By early December, the British had ended their special role in the Gulf under arrangements promising future cooperation among both the Arab states and Iran. Three new and independent states emerged, Bahrain, Qatar, and the United Arab Emirates.

Throughout these developments, the U.S. interest was to encourage all parties to cooperate for the future welfare and stability of the region. The United States quickly recognized these three new entities and established diplomatic relations with them. Prospects for increasing oil and industrial wealth promise a bright future for these states already well on the path of economic and social development.

The State of Kuwait, a leader in using its oil revenues for social development at home and economic assistance to other countries, will benefit substantially from recent oil settlements. During the year, Kuwait played a constructive role in Gulf developments and made a significant contribution toward Middle East economic development. It suspended, however, its financial assistance to Jordan.

## Iran

In 1971 Vice President Agnew represented the United States at Iran's celebration of the 2500th anniversary of the founding of the Persian Empire. The U.S. objectives in Iran are to foster and strengthen the close and friendly relations which exist between us; to assist Iran, in accordance with the Nixon Doctrine, in attaining economic and military self-reliance; and to insure the continued flow

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