Foreign Relations of the United States, 1949, The Near East, South Asia, and Africa, Volume VI

891.00/5–949: Telegram

The Acting Secretary of State to the Embassy in Iran

secret

Washington, May 25, 1949—1 p. m.

477. Urtels 558 Apr 26, 564 Apr 28, 576 Apr 29 and 626 May 9.¹ Our preliminary thoughts on Saed ltr fol.

1. Saed appears exaggerate Iran’s war damages. So far as we know, Iran’s “natural resources” did not suffer. We recognize presence three fon armies, plus arbitrary interference Iran affairs by Soviets, caused hardships and dislocations during war period but we are aware no evidence these had any effect on country’s econ potential. Only lasting change in econ situation seems to have been expansion AIOC production which is beneficial.

2. Statement that Iran’s “weak budget” does not have power repair damages or meet Iran needs seems contradicted by reported surplus in Gov receipts during year just past and by ambitious plans for 7 yr econ development which both Iran and fon experts have repeatedly said could be supported by Iran econ with certain assistance at a later date in form IBRD credit and fon private capital investment.

3. Saed assertion that aid to Turk adds to danger to Iran is illogical. If followed to conclusion it wld mean that Iran wld be safer if all free countries were as weak as Iran. Policy of strengthening all countries threatened by USSR equally in order present continuous ring of steel equally strong at all points wld be wholly impracticable. Apart from fact that US resources unequal to task, all countries are not able utilize and maintain same kinds and quantities mil equip or support mil forces of same magnitude. True deterrent to war and Sov aggression against Iran lies in overall strength and firmness of free nations, not in individual mil strength of any one.

4. Iranians seem to have exaggerated idea Amer econ aid to Turk. This aid consists of ECA credits (not grants) amounting to 39 million Dols for first year, 36 million Dols Ex-Im Bank credit granted 2 years ago only half of which has been utilized, and 16 million special credits for surplus property, purchase and repair of ships. Funds under all these credits are made available only on basis careful preparation presentation and justification of projects for which they are to be used. Note also that Turk has drawn down gold and fon exchange balances by one-third since end of war, and present budget position actually much weaker than Iran’s. Turk road building program received only 5 million dols out of first year mil aid allocations and nothing from 2nd year allocations. Future Turk road program will be financed out of domestic resources and ECA credits (not grants) which must be justified and repaid in substantially same fashion as Iran wld have to justify and repay an IBRD or other loan for same purpose.

5. Tehran Declaration of 1943 (re urtel 576) contained no assurances of econ assistance for post-war rehabilitation other than promise that Iran wld be included among participants in post-war econ conferences. Statement in Declaration that 3 Powers wld continue to give such econ assistance as possible subject to their other commitments was clearly intended to apply only to wartime circumstances when world-wide shipping and supply difficulties had made Iran imports dependent upon good will of Allies.

6. We agree your analysis (urtel 564, Apr 28) econ projects listed by Saed. Non-controversial projects considered part 7-Year Plan, however, and Dept has been assuming econ aid shld be within framework that plan, not isolated special requests. Further, we have been assured by Iranians themselves that general econ and fon exchange position wld make it possible execute plan without direct grants by US. As matter of fact, Iranians have stated, and figures available to us do not contradict, that loan from IBRD wld not be necessary for first year or so of program. If and when Iran believes a loan is necessary and presents justified application (which they have not done as you know) we will support them at IBRD. If some change in Iran econ situation has made execution plan impracticable without US grant, full explanation shld be given; otherwise, we do not see how justify Dept support. This especially true since temper Cong and advanced stage ECA appropriation requests wld seem make it impossible to obtain special funds for Iran in near future.

7. If Saed determined request loans to finance individual projects instead overall IBRD financing, you might remind him that we have repeatedly expressed willingness support all sound Iran requests for IBRD or Ex-Im Bank credits. In any case, Dept willing support Ex-Im Bank loan of approximately $1 million for purchase well-drilling machinery and irrigation pumps along lines indicated Deptel 841, Sept 8, 1948.² Even for this magnitude aid, however, Saed shld know by now that fon Govts desiring help must themselves prepare plans and specifications and consult with US to determine whether they can be fitted into overall policies and resources US as determined by Congress.

8. We are convinced that Iran’s urgent need is for technical assistance and repeat UnSecy Webb’s statement to Ambassador Ala Apr 29 that Iran shld plan receive such aid under terms Truman Point Four Program and Smith–Mundt Act. Preliminary US and UN program established by Dept for Cong presentation provides $1-¼ million for fon exchange expenses and salaries 73 technicians to be sent Iran, 32 Iran trainees to go abroad, including $265,000 for demonstration material and equip. No provision capital for project financing. Emphasis for Iran is in fields agriculture and forestry, $350,000; health, $325,000; irrigation, $220,000; transportation, $120,000; industry, $75,000; industrial training, $67,000, and education, $50,000. Above program highly tentative. May be changed according IranGov needs. (All details this para still confidential. Iran officials can be informed only of type of program and fields of emphasis, stressing that size and character program depends Cong action. In accordance Depcirins May 3,³ particularly page 7, you shld not solicit, but may accept, proposals technical cooperation.)

9. We also note that US makes large contributions to international organizations such as IMF, ILO, FAO, WHO, UNESCO and ICAO in addition to IBRD. One of the purposes of US contributions to these programs is to enable them to help countries such as Iran. It is up to Iran, therefore, to make use of agency programs available and to join organizations such as FAO so as to benefit by their programs.

10. We are increasingly of opinion that perhaps greatest contribution we cld make to Iran econ improvement, in addition to conspicuous integrated pilot projects, wld be through effective en couragement of specific measures within exclusive competence of IranGov itself (e.g., speed-up implementation 7–Year Plan, land reform, improvement tax structure).

We realize foregoing not fully satisfactory basis for meeting Iran requests and complaints. It is intended only as step toward clarification thinking between Dept and Emb. Wld appreciate your comments and further suggestions re steps we might take within means available and manner of approach which wld meet real Iran difficulties and prevent undesirable political developments. Also which of preceding points you wld propose to include in written reply Saed, which you think shld be discussed orally, and which left completely unstated.⁴

Webb

1. No. 626 not printed; but see footnote 1, p. 512.
2. Foreign Relations, 1948, vol. v, Part 1, p. 178.
3. Not printed.
4. In reply on May 30, Ambassador Wiley expressed his entire agreement with telegram 477 and suggested that in preparing a written reply to the Prime Minister points 6, 7, and 8 be included without details; that points 2, 4, and 9 be given orally; and that points 1, 3, 5, and 10 be omitted (telegram 714, from Tehran, 891.00/5–3049).