788.00/12–1450: Telegram
The Chargé in Iran (Richards) to the Secretary of State
1339. Eyes only Ambassador Grady, GTI. We believe consideration several aspects present political and economic situation Iran, particularly developments since your departure, may be helpful connection your conversations in Department. What follows is staff study and addressed to you personally for whatever use you may care make of it:
First as to political developments:
Intrigues against Razmara increasing. Sources of opposition now seem include (a) Shah and court, (b) old guard, (c) Majlis and (d) British oil interests. Rumors of early fall Razmara Government persist. We do not believe Cabinet change is imminent. However it seems clear elements in opposition are greasing skids in hope of Razmara’s eventual removal.
Shah undoubtedly important factor in foregoing. Razmara seems never to have had his wholehearted support. On contrary there is evidence [Page 631] of continual sniping at him on part Shah and court and there certainly has been no let-up in recent weeks. Shah’s apparent objective has been deprive Razmara of sources potential strength which might make him menace to dynasty. Due traditional influence of Shah, no PriMin has been nor can be effective or even last long without Shah’s support.
Old guard influence continues increase. For example, Razmara has informed me today Esfahanak [Esfandak?] Point IV project would have to be transferred to another village because of pressure from nearby land owners, some of whom are Majlis deputies, who insisted they too should benefit directly from similar projects.
Majlis is another difficult problem. Since your departure PriMin became involved in open dissension with Majlis. Peace was restored through face-saving formula, although PriMin’s stated intention discipline Majlis failed completely. Majlis is just as recalcitrant as ever. 21 major bills presented by Razmara now stymied by Majlis inaction.
Razmara has relied mainly upon three things maintain his position: (a) Soviet trade treaty, (b) settlement oil question, and (c) US aid.
Some of popularity which he gained as result Soviet trade agreement now shows signs being lost as (1) people starting ask why treaty continues largely unimplemented and (2) apprehension beginning be expressed over possible increase Soviet influence largely as result of treaty.
Solution oil question as distant as ever. Oil commission has recommended rejection supplementary agreement and all quarters anticipate Majlis will act accordingly.1
Exim Bank loan now seems destined for rough treatment in Majlis. Shah’s Reuter interview not helpful this regard.2
We are also concerned over possible effects Korean reverses upon future trend political thought here. Fear of third world war and feeling they could not count on immediate US military support tends make them wary of open allegiance with US and might well lead to adoption even softer policy towards Soviets.
While we do not believe Razmara’s fall is imminent, yet there are signs that powerful forces are working for that end. Razmara is ambitious and may not yield gracefully. If real show-down occurs it is not entirely impossible Razmara might, in absence any other immediate tangible support, even look to Russia indirectly to help him retain power. Certainly from Soviet viewpoint he is most cooperative PriMin in recent years.
[Page 632]Second, as to economic developments:
Re financial situation and relation to US aid, Carr3 has just completed preliminary statistical study (being forwarded by despatch) leading to following tentative conclusions: (a) View annual budget deficit possibly over 1 billion rials and balance of payments deficit over 4 million pounds, country facing serious financial difficulties to which, in absence oil settlement, inflation apparently only out. Strain of rials financing over period of time of continued aid program in this case would accentuate inflationary pressures. (b) Even if supplemental oil agreement accepted and all additional sterling sold to meet rial needs, rial financing of such aid program would possibly still require additional rials and result in some inflation, (c) Therefore, in absence balanced budget or at least substantial deficit reduction (of which no prospect in sight), US aid may require considerably more generous oil settlement than offered by present supplemental agreement. (d) US economic aid in Iran, without full and positive British support, likely end in frustration.
Conclusions:
- 1.
- We have necessarily, for lack alternative, tied our hopes to Razmara. It is therefore disturbing that there are so few political forces working in his favor at moment.
- 2.
- Country seems headed for serious budgetary difficulties.
- 3.
- It is increasingly evident that US policies in Iran (political and economic) can be carried out only if we have positive and wholehearted support of British. Only prospect obtaining such collaboration is understanding arrived at London or Washington at highest level.
- 4.
- We believe Shah is key to present situation and as long as he sulks over what he considers meagerness military and economic aid and continues undercutting Razmara, needed vitalization of national spirit and restoration faith in government will be frustrated.
We all hope this résumé will be helpful to you in portraying changing situation facing you here.