Under Secretary’s Meetings: Lot 53 D 250
Memorandum for the File, Prepared in the Department of State
Under Secretary’s Meeting April 26, 19501
secretary’s attendance at the um
Mr. Webb observed that the Secretary’s participation in the meetings on Wednesdays provides an opportunity for members to bring problems before Mr. Acheson and receive his comments. Simultaneously, these meetings give the Secretary a chance to discuss matters with the group and to offer his criticisms or indications of approval.
mdap
Mr. Ohly announced that the final draft legislation for MDAP for fiscal 1951 will go to the Bureau of the Budget tomorrow afternoon. It has been pretty well cleared. The only “open issue” is the possible Iranian program of $20 million contained in today’s paper.2 He said he would like Mr. Acheson to go over the draft as soon as he could fit it into his schedule.
the iranian crisis (UM D–97)3
Mr. Webb pointed out that the Secretary would make the final decision on the proposals of this paper and talk to the President about it when appropriate. He cautioned all members against any public reference to the Iranian problem. Any possible decision to release comment on the subject would have to be made expressly by the Secretary or Mr. McGhee. The Secretary indicated that he was in general agreement with the paper but asked whether we have brought in the British as far as we can and whether the program will meet the evil which it is intended to meet. It was his feeling that government weaknesses constitute the primary problem, with the economic distress following [Page 519] in second place. He approved of the selection of Ambassador Grady4 but asked whether the proposal would provide him with enough tools to handle the situation. (See Tab A5.)
Mr. McGhee said we cannot be sure whether we are proposing “enough” and commented that Ambassador Wiley has had to operate with insufficient resources. He added that a substantial effort will be required, and that dollars alone will not be enough.
The Shah would like to accomplish the things we want but he desires something tangible to show his people, who were disappointed when he returned from the United States without tangible evidence of U.S. economic aid.
Ambassador Grady is unusually strong in financial and economic qualifications. Although he might not need a large amount of money, it is important that he be able to produce something substantial if the Iranians move on the necessary reforms. The country is in a basically good economic position, despite difficulties, because of the prosperous oil business, for one thing. There are various development projects already under consideration which would be good credit risks.
It is expected that we could work with both the World Bank and the Exim Bank.
The psychological impact on Iran of U.S. support is important but it was agreed that we must not over-extend ourselves in that country in such a manner as to risk the collapse of our prestige. This is essentially a problem of degree. We have earlier given substantial political assurances; the present proposal is essentially financial. It should be handled discreetly, gradually, and without fanfare. It was observed that there is a fair chance of finding a satisfactory middle course, and that the risk is worth taking in view of the gravity of the situation. Certain developmental projects have already been investigated by OCI. An Exim Bank loan might not be necessary after the arrival of Mr. Grady. But if it should prove to be, we could begin by reviewing these surveys, which might possibly be accepted by Exim Bank instead of a full new investigation. Iran needs developmental projects rather than balance-of-payments loans.
The seven year plan is important to the prestige of the government.
Mr. Webb indicated that this whole problem should be reviewed by the NSC. Defense representatives have raised questions as to whether we should increase the MDAP program for Iran, in comparison to areas accorded higher priorities. It is recognized that military assistance aspects will have to be negotiated through the MDAP machinery.
[Page 520]It was noted that NEA is undertaking a revision of the last NSC paper on Iran.6
Mr. Webb emphasized the importance of selecting the right men to represent us in foreign trouble spots, and suggested a broad study of how we can help to strengthen foreign government operations in which we are interested, in ways other than spending our dollars. He mentioned the University of the Philippines as one example. He was informed that A has a paper nearly ready on this subject. Mr. Webb added that one of the projects under the President’s management improvement program relates to this same problem. It was suggested that the transfer of Ambassador Grady should be studied by P, SA–M, and other interested offices, in an effort to keep down public interest.
It was pointed out that no new funds will be available to NEA for the proposed activities and that the moneys must be shifted from other NEA areas.
Mr. McGhee, Mr. McFall, and Mr. Dulles,7 were requested to consider a program of consultation on this subject with new consultative groups of both Houses. It was noted that the question should not be taken too far on the Hill until it can be determined what military priorities will permit. Mr. Armstrong felt that the paper is sound from the intelligence viewpoint.
Mr. Barrett will work with Mr. McGhee on an information program shift in Iran and also give attention to the U.S. domestic information problem.
One of the jobs of the Ambassador will be to impress upon the Iranians the grave consequences which would result from a failure to institute reforms.
It was explained that it would not be feasible for the British rather than ourselves to take the lead in this situation, but that we intend to consult fully with them.
sterling balances
Mr. Webb mentioned that it is important to establish a position on this problem. Recent press stories on the subject were of London origin. We will have no position until the Secretary has discussed the matter with Administrator Hoffman8 and Secretary Snyder.9 He added that it is extremely important that this situation not complicate [Page 521] our relations with India and Pakistan. Serious interests of the U.S. Government are involved. We are concerned about reactions around the world, which have already begun to manifest themselves. Mr. McGhee, Mr. O’Gara, and Mr. Thompson will review this problem and consider whether we should transmit diplomatic notes on the situation. It is difficult to go ahead on this problem without knowing what international discussions the British have already had.
Mr. McGhee said that a paper has been prepared for discussion at the London meeting with the British on this subject.10 He said that the effect of the proposed Anglo-Iranian agreement would be to raise oil royalties accruing to Iran. Delay has been caused by difficulties over minor concessions, which we would like the UK to make for the sake of getting on with the agreement.
- The principal officers of the Department of State attended this meeting.↩
- Regarding the memorandum of conversation, May 4, by Secretary Acheson with President Truman, see footnote.1, p. 521.↩
- Supra.↩
- Henry F. Grady, Ambassador in Greece, was recommended by Mr. McGhee in his memorandum, April 19, on the “Iranian Crisis,” to serve as Ambassador to Iran and head the proposed survey mission to Iran to investigate the need for economic assistance. For the text of Mr. McGhee’s revised memorandum, April 26, see infra.↩
- Not printed.↩
- For the text of document NSC 54, July 21, 1949, “Report of the National Security Council on the Position of the United States With Respect to Iran,” see Foreign Relations, 1949, vol. vi, p. 545. The National Security Council did not issue a revision of this paper in 1950.↩
- John Foster Dulles, Consultant to the Secretary of State and Personal Representative of the President for the Japanese Peace Treaty.↩
- Paul G. Hoffman, Administrator of the Economic Cooperation Administration.↩
- John W. Snyder, Secretary of the Treasury.↩
- Position paper on Iran, April 27, p. 529; see also supplement to position paper on Iran, May 3, p. 540.↩