Foreign Relations of the United States, 1950, The Near East, South Asia, and Africa, Volume V

CFM Files; Lot M–88: Box 149: May FM Meeting C, D Series¹

Paper Prepared in the Bureau of Near Eastern, South Asian, and African Affairs²

secret
[FM D D–8]

[Washington,] April 27, 1950.

May Foreign Ministers Meetings³ Position Paper on Iran

i. problem

The Department would like first to review with the British delegation the Iranian picture as a whole, describe its present plans, obtain the British reaction thereto, and solicit British support for certain of the steps the Department contemplates taking. Secondly it is felt desirable to express to the British our concern over the failure of the Iranian Parliament to ratify the Anglo-Iranian Oil Company concession, a failure the Department believes attributable in large measure to a too rigid stand by the Company and the British Government.

ii. background

A. General

Reports reaching the Department during the past three months have reflected a situation in Iran which in the opinion of the Department requires prompt and rigorous action by the Iranian Government if Iran is not to become an easy prey for Communism. Unfortunately the Iranian Government has shown conclusively that without outside assistance and prodding it cannot take any effective action to meet the situation. The present critical situation arises from a number of factors:

1. A business depression of some magnitude arising out of the crop failures of last year, overstocking of consumer goods on the pait of merchants, and lack of foresight on the part of the Iranian Government. This depression has resulted in increasing unemployment, numerous bankruptcies of small businesses, and a growing feeling of fear on the part of Iran’s leaders. It offers a fertile field for Communist exploitation and the illegal “Tudeh” Party has not been slow in taking advantage of it.

2. Increased Communist activity throughout the country has shown that the clandestine Tudeh Party has perfected its organization since its banning in February 1949 and is now prepared to exploit general Iranian discontent to the fullest. While accurate information is lacking on the total membership of the Party, and the gains it has made among the lower classes in Iran, it seems certain as shown by its increased propaganda activities that the Party is well financed and has embarked on a carefully planned and vigorous campaign to convert the Iranian people to Communism.

3. Those who might be naturally resistant to the blandishments of the Tudeh Party have no one to turn to for leadership and there are no political parties in Iran that would normally be able to attract followers and offer hopes for a better life. The leadership of the Shah and the Iranian Government is totally unsatisfactory. For a while the Shah had symptoms of being able to offer the Iranian people effective leadership but in recent months he has shown rather conclusively that he cannot follow a consistent course and that his lofty statements of principle seldom, if ever, become translated into action.

4. There is a definite belief in Iran that that country has been left alone to face the Soviet threat without outside assistance or support. The Iranians believe they have taken great risks in openly placing their country in the Western camp and are coming to feel very strongly that further risks of this sort would be most dangerous without some tangible sign that the West is willing to assist Iran. The Shah has made the remark that “American aid stops at Iran’s borders” and his countrymen share this belief. American aid to date has consisted of a $26,000,000 surplus arms credit, a commitment to give Iran a small amount of grant military assistance, and a tentative promise of technical assistance under the Point Four program, if approved by Congress.

5. The Iranian political system is unable to adapt itself to meet a critical situation both because of basic organic defects and selfishness and incompetence on the part of most Iranian officials. Confronted with the factors outlined above, it has shown itself almost helpless and the Iranian Government clearly cannot be expected to take remedial action by itself.

B. The Anglo-Iranian Oil Company Question

An important factor is the Anglo-Iranian Oil Company agreement, a revision of which has been approved by the Government but not ratified by the Majlis. The Iranians are pressing for further concessions by AIOC and Company thus far has refused to concede any of the remaining points, the principal one of which concerns the amount of funds allocated to the general reserve from which 20 percent are payable to the Iranian Government. We feel that there is considerable justification in the Iranian demands. In the meantime, royalties are being paid to the Iranian Government on the basis of the old agreement, which provides considerably less than the amount required to implement the Iranian Seven Year Development Program. The Iranians have informally suggested that the United States use its good offices to bring about an agreement to satisfy the Majlis and clear the way for implementation of the Development Program.

iii. discussion

A. The General Situation

To meet the situation described above, the Department is presently considering the following:

1. When requested by the Iranian Government, it will despatch a mission to Iran to study the situation and be prepared to recommend to the United States Export-Import Bank loans to finance economically justifiable projects in Iran’s Seven Year Program.

2. Any loans thus granted will be dependent on Iran’s agreeing to and putting into force certain basic and obvious reforms designed to improve its economic situation. These probably will include a relaxation of its currency cover requirements, a more liberal credit policy, a more rigid foreign exchange control, and a more effective tax program.

3. The Mission will remain in Iran for as long a time as may be required to stabilize the situation and will have rigid control over the use of the loans granted by the Export-Import Bank.

4. The United States will, if possible, moderately increase the limited amount of military assistance presently contemplated for Iran.

5. The Department will strengthen its diplomatic, consular, and informational personnel in Iran in an effort (1) to obtain more accurate information on conditions in that country and (2) to make clear to broad segments of the Iranian people the issues at stake in the “Cold War”.

B. Anglo-Iranian Oil Company

In response to the desire of the Iranian Government for the United States to use its good offices, the Department’s position has been that this is a matter between the Iranian Government and the AIOC into which the United States Government could not properly inject itself although it is extremely anxious that a solution be found.

While the foregoing should continue to represent the Department’s position, the London taite should be used to emphasize the Department’s concern over the general Iranian economic situation and its hope that the United Kingdom will energetically pursue the matter to bring about a settlement of this long standing dispute.

iv. recommendations

A. The General Situation

It is recommended that the above problems be discussed with the British delegation (there is no need to discuss Iran with the French) and in the event that the proposals outlined above have been approved at the time of the conversations, that British comments thereon and support therefor be solicited on a strictly confidential basis. The British could be especially helpful in seconding the United States requests for the reforms mentioned in III A 2 above and in convincing the still appreciable circle of Iranians who look to the British for leadership of the need for such reforms.

Should the proposals not have been approved, it is suggested that the Iranian situation merely be reviewed with the British and that both sides explore what measures, in principle, could help ease the situation.

B. The Anglo-Iranian Oil Company

It is recommended that in discussing the serious economic situation in Iran that the United States delegates take occasion to point out the need for a prompt ratification of the AIOC concession agreement by the Majlis and to express the hope that the United Kingdom will do everything in its power to bring the matter to a speedy conclusion.

1. Lot M–88 is a consolidated master collection of the records of conferences of Heads of State, Council of Foreign Ministers and ancilliary bodies, North Atlantic Council, other meetings of the Secretary of State with the Foreign Ministers of European powers, and materials on the Austrian and German peace settlements for the years 1943–1955 prepared by the Department of State Records Service Center.
2. The substance of this paper was widely cleared within the Department of State through the medium of the Under Secretary’s Meeting; see the memorandum for the file on the Under Secretary’s Meeting of April 26, 1950, p. 518.
3. For documentation on the meetings of the Foreign Ministers of the United States, the United Kingdom, and France, at London, May 1950, including discussion on Iran with the British delegation, see vol. iii, pp. 828 ff.