Office of the Historian

317. Memorandum From the Assistant Secretary of State for Near Eastern, South Asian, and African Affairs (Allen) to the Deputy Under Secretary of State for Political Affairs (Murphy)1

Washington, July 5, 1955.

SUBJECT

  • Attached OCB Documents on Iran

The attached papers are scheduled for consideration at the July 6 meeting of the OCB.2 The Progress Report consists of the following [Page 751] sections: a) Summary of Major Actions and Decisions taken by Iran or the United States since January 15; b) an Evaluation of Progress in Implementing NSC Policies; c) a section of emerging problems which have been disclosed during the course of the past six months.

The Outline Plan of Operations consists of a detailed statement of actions planned in implementation of specific policies and directives incorporated in NSC 5504. The new outline plan is a revision of a former document and is based upon an assessment of progress made during the past six months.

Both of these documents were approved by representatives of interested agencies in OCB working committee meetings and in the OCB Board of Assistants. NEA recommends that the documents be accepted and approved in their present form.

The following specific elements in the attached reports are of particular importance:

1)
The Present Situation in Iran and American Relation to It. Throughout 1955 Iran will remain basically an unstable country led by conservative Western-oriented governments acceptable to the Shah. Since the installation of the Ala Government in April, there has been a tendency toward increasing instability which, if not arrested, might be exploited by Communists or extreme Nationalist elements. The Shah is the prime political focal point of Iran. Future stability depends largely on his success as a leader. The extent of US backing forms an important element in the Shah’s political future. Therefore, if doubt were to arise in Iran concerning the extent of American support, the Shah’s strength and the stability of Iran would be weakened.
2)
Important Items of Progress.
a)
Oil production is exceeding the agreed rate, and Iranian oil revenues in CY 1955 may reach $115 million as against the anticipated $87 million.3
b)
Loans of $85 million have been authorized as follows: $53 million from the Export-Import Bank for development assistance; $30 million from FOA for budgetary support; $2 million from FOA for technical assistance.
c)
On June 2 the USSR returned to Iran $11.2 million of gold in implementation of the recently ratified USSR–Iran agreement. Since it was already carried as backing for the currency, this gold represents no increase in Iran’s fiduciary cover.
d)
In 1955 the US provided $78.6 million of assistance to Iran. Of this only $4.2 million was for military aid and direct forces support. All types of aid now planned for fiscal 1956 total $55 million. Thus far Defense has programmed no FY 1956 funds for military assistance.
e)
As a result of the Shah’s initiative, Iran, Turkey, Iraq and Pakistan have agreed to hold military staff talks this summer. The US and UK will be represented by observers.
3)
Regional Defense and American Military Assistance.

The Shah desires Iranian affiliation with a Middle East defense arrangement, but wants prior assurance that the United States will give sufficient military assistance to enable Iran to play a significant part in Middle East defense.

On the other hand the Department of Defense has explained that further improvement of Iranian defense capabilities must await an evaluation of Iran’s armed forces (not to be available until June 1956), and the development of an overall Middle East defense strategy. There is danger that this time lag may work against American interests by complicating the timing of Iran’s entry into a Middle East pact, and by weakening the Shah’s internal position.

Meanwhile, the proper scope and objectives of military assistance to Iran will remain in doubt until a Middle East area defense strategy has been devised and until Iranian forces have been evaluated and assigned an area defense role (Para B–19 of the Progress Report). This problem of the relationship between American military assistance and the timing of Iranian entry into a Middle East defense arrangement is now the most important unresolved issue in American policy toward Iran.

  1. Source: Department of State, S/S–NSC Files: Lot 63 D 351, NSC 5504—Memoranda. Top Secret. Drafted by Hannah and cleared by Baxter.↩
  2. Reference is to an OCB Progress Report on “U.S. Policy Toward Iran,” July 6, and a June 28 version of an OCB “Outline Plan of Operations for Iran,” July 6, neither attached nor printed. (Ibid., and ibid.: Lot 62 D 430, Iran 1954–1955, respectively)↩
  3. A note on the source text, presumably in Allen’s hand, reads: “Treasury slated for Calendar Year 56[?] increase will be from 40 to 140 million.”↩