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

359. Memorandum From the Deputy Assistant Secretary of State for Near Eastern, South Asian, and African Affairs (Rountree) to the Acting Secretary of State¹

Washington, July 20, 1956.

SUBJECT

• Progress Report on Iran (NSC 5504)

The attached Progress Report covering the period from January to July 1956, is scheduled for consideration at the July 26 meeting of the OCB.²

Principal developments during the period were:

1. The USSR apparently failed to weaken the Shah’s attachment to the West during his trip to Moscow. No dramatic offers of aid were made by the USSR. The Shah strongly defended Iran’s adherence to the Pact.

2. Iran’s confidence in the Pact was increased as were hopes of greater U.S. aid by U.S. adherence to the Pact’s Economic Committee.

3. Despite a U.S. grant of $20 million in March and a small allocation of oil revenues to the budget, increased expenditures presage continued deficits.

The operations of U.S. programs were generally satisfactory, although hampered by certain unsatisfactory trends in Iran, e.g. continued budgetary deficits, uncoordinated commitments of the country’s financial resources, rivalries between various intelligence services, and increasing criticism of the Shah’s arbitrary and vacillating leadership.

These trends are gradually leading to a loss of the temporary unity and momentum which resulted from the overthrow of Mosadeq and from large infusions of U.S. aid. To compensate for its own weaknesses, Iran periodically needs stimulating injections, such as U.S. affiliation with the Pact’s Economic Committee or new increments of aid. While this is not a new problem in Iran, it is imperative that the West maintain the political initiative in Iran and thereby prevent a reversion to the stagnation which is susceptible to exploitation by irresponsible Iranian elements and by the USSR.

In compliance with a request by the Board Assistants, the Working Group is attempting to prepare suggested courses of action which would help in achieving this result.

Recommendation

I recommend that you approve this Progress Report.

[Tab B]

RECENT INFORMATION ON SHAH’S TRIP TO MOSCOW³

1. When, at a reception, Voroshilov criticized Iranian foreign policies and the Baghdad Pact, the Shah made the following reply:

“… Iranian Government has never entered alliances having an aggressive character toward the Soviet Union and I can reaffirm that this will never happen. We always reject the principles of colonialism. Iran is not a new state. It is a country which counts more than 26 centuries of independent and full sovereign existence. …⁴ If Iran takes measures for its defense, this is dictated by reasons of state and the experience of the past and the general international situation.”

2. Since returning to Tehran, the Shah has given the following information to Ambassador Chapin:⁵

a. The Shah reiterated orally to the Soviets his previous assurances that Iranian territory would not be used in peacetime as a base for attacks against the USSR, but simultaneously he stressed Iran’s need to maintain strong defense forces.

b. The Soviets admitted past errors in their policy toward Iran and Turkey and blamed them on “that damned crowd of Georgians.”

c. Shepilov told the Shah no additional Arab states would ever join the Pact.

d. The Soviets made no specific offers of assistance but told the Shah of their willingness “to give assistance of any kind and in any amount should the Iranian Government so desire.”

e. The Shah accepted a general proposal for common development of resources, e.g., power and irrigation, along the common frontier.

f. The Soviets indicated interest in expanding the present trade agreement, and in increasing rice imports.

g. In conversation with Khrushchev, the Shah claims he taxed the former with continued Soviet espionage and plotting in Iran despite their professions of friendship. The Shah claims he even referred to a recently uncovered assassination plot which Communists supposedly planned. Khrushchev’s replies are unclear.

h. In the same conversation, Khrushchev boasted that England could be knocked out with 7 nuclear bombs and Turkey with 11. The Shah presumes the point was indirectly addressed to Iran.

i. As a matter of courtesy, the Shah extended a general invitation to a return visit but he believes no visit is likely within the next six months. He says he intends to put it off as long as possible.

1. Source: Department of State, OCB Files: Lot 62 D 430, Iran 1956. Top Secret. Drafted by Hannah and cleared by Baxter.
2. A draft of the progress report, Tab A, is not attached. A copy of the approved Progress Report on “United States Policy Toward Iran” (NSC 5504), July 25, is Ibid. For a report of the discussion at the OCB meeting on July 26, see Document 361.
3. Top Secret. Drafted by Hannah on July 20 and cleared by Baxter.
4. Ellipses in the source text.
5. As reported in telegrams 82, 83, and 84 from Tehran, all July 18. (Department of State, Central Files, 123–Chapin, Selden; 788.11/7–1856; and 788.11/7–1856, respectively)