Foreign Relations of the United States, 1955–1957, Near East Region; Iran; Iraq, Volume XII

332. Telegram From the Department of State to the Embassy in Iran¹

Washington, September 30, 1955—7:18 p.m.

536. Urtels 542, 543, 547, 560.²

1. Secretary Humphrey’s version Ebtehaj conversation will be forwarded shortly.³

2. Present attitude US Govt additional budgetary aid (after $15,000,000 FY 1956) not justified because:

a. US original intent was provide budgetary aid for approximately 2 years following Mosadeq downfall or through December 1955. US envisaged, with concurrence responsible Iranians that after 2 years increased tax collections and some use oil revenues would balance budget. In FYs 54 and 55 US furnished over 150 million dollars economic and technical assistance plus Ex-Im credit 53 millions. Meanwhile GOI has done little on own initiative to improve financial position.

b. Anticipating negative Congress reaction to aid requests for FY 1956 Dept made following statement re Iran to House Committee Fon Aff: “Our assistance to civilian economy planned on loan basis, repayable in dollars, as income from oil industry expected make repayment possible. Except for technical assistance, future aid to civilian economy will, after this year, be limited to such institutions as Ex-Im Bank and IBRD.”

c. Provision additional budgetary aid would be disservice to Iran by encouraging it further procrastinate on fiscal problems it alone able solve, namely increased tax collections and/or some use oil revenues for non-development purposes.

d. Iran’s problem basically political not economic. At worst GOI could authorize use oil revenues for budget deficit and borrow abroad funds required for specific development projects. US negative attitude toward budgetary aid does not preclude US consideration this approach.

3. If Iran does make useful new presentation its fiscal problems and requirements, US will of course give consideration due proposal by friendly govt but any new request by Iran will have to overcome weight above factors which predicate US present position.

4. However, Iran must allow US reasonable time study facts, figures and arguments which presumed forthcoming. For Amini to appear early October⁴ clearly would not allow sufficient time and would assure that he would meet attitude outlined above. This timing also very unfortunate view Under Secy Hoover’s absence for several weeks⁵ and Asst Secy Allen’s absence for indefinite period.⁶ Concur that unsuccessful Amini trip would be damaging his position in Iran and inimical US interests. Hoover unable visit Tehran on return from Far East.

5. Using above as you see fit, Dept leaves your discretion how best discourage Amini visit or any other visit re budgetary assistance. Discouragement may serve impress on GOI seriousness present US attitude toward additional budgetary aid.

6. Highly gratified by your question to Entezam re joining Pact unconditionally and by his answer which serves reinforce US position that financial aid must be based on its own merits and not tied to Pact.

7. Completely agree Entezam–Amini team visit to UK and US dangerous as calculated attempt create semblance US UK pressure. (Ur 548 just received.)⁷ Believe unwise for any high level Iranian visit US until Iran has either joined Pact or at least established clear public position on adherence.

Dulles

1. Source: Department of State, Central Files, 780.5/9–3055. Secret. Drafted by Crowl and cleared by Baxter and the Department of the Treasury and ICA.
2. In these telegrams from Tehran, respectively dated September 28, 28, 29, and 30, the Embassy reported a series of conversations in which high-ranking Iranian Government leaders argued for additional U.S. budgetary support for Iran in view of the high percentage of Iran’s budget required for defense. (Ibid., 888.10/9–2855, 888.10/9–2855, 780.5/9–2955, and 780.5/9–3055, respectively)

3. In telegram 542, the Embassy reported a conversation with Abdol Hasan Ebtehaj, Managing Director of the Plan Organization. The Embassy transmitted Ebtehaj’s version of a conversation he had with Secretary of the Treasury Humphrey at a recent IMF-World Bank conference in Istanbul. According to Ebtehaj, Humphrey endorsed the view that no more than 40 percent of Iran’s oil revenues should go to purposes other than economic development. Ebtehaj also claimed from Humphrey “a most satisfactory reaction” to representations that Iran was spending 60 percent of its budget for defense.

   In telegram 560 to Tehran, October 5, the Department reported Humphrey’s view of the conversation as follows:

   “Conversation informal and general. Secretary Humphrey expressed sympathy with idea using as much oil revenues possible for development but no specific figure or percentage mentioned. Re military program, Secretary expressed sympathy with idea Iran not undertake program beyond its capacity.”

4. In telegram 543, Iranian Minister of Justice Amini informed the Embassy that the Shah had designated him to go to Washington in early October to discuss Iran’s financial problems with American officials.
5. Reference is to the Hoover–Hollister trip to the Far East which began on September 30; documentation is in Department of State, Conference Files: Lot 59 D 95, CF 534–541.
6. Reference is to Allen’s trip to Egypt; see vol. XIV, pp. 533 ff.
7. Dated September 29, not printed. (Department of State, Central Files, 780.5/ 9–2955)