880.00/7–1550: Telegram

The Secretary of State to the Embassy in Iran
top secret

89. For Ambassador Grady from McGhee. Fol tel sent Henderson,1 New Delhi, July 14, 1950:

“Particularly in view recent events Dept reviewing possible courses action on all fronts to strengthen key areas which may be threatened by or can play important role in present or larger conflict. Specifically are considering possibility extension Far Eastern grant aid programs to include assistance to South Asian and NE countries, by action which conceivably could be presented to Congress before adjournment.

Purpose this cable inform you present tentative thinking here and to elicit ur comments and suggestions prior to action of any kind.

Purpose of aid will be to strengthen orientation of key areas to Western Democracies and assist them build economic and indirectly military strength. Justification to Congress and US public would be based on necessity encourage populations defend independence and build defensive and offensive forces against Commie threats. Limitations available US resources call for careful consideration of priority areas. As ECA presently operating in Greece, Turkey and Southeast Asia, appears necessary now give immediate attention possibility assistance to India, Pakistan, Afghanistan, Ceylon, Iran; and possibly Arab States. Present tentative thinking in NEA Bureau aid of order $250 million annually shld be sought.
View nature problem believe aid might take fol form:
Administered by ECA missions under policy guidance Chiefs Diplomatic Missions, including all US Govt technicians operating in relevant fields.
Assistance to be limited specific projects connected with betterment basic economies: For example power and reclamation, major transport, and agricultural projects. Projects wld be designed bolster weakest points local economies quickly and achieve maximum impact. To provide local currencies needed, where necessary, program could include essential saleable commodities. Proceeds sale to be earmarked for local costs. Aid cannot be extended on balance payments deficit basis or as underwriting or increasing supply of consumable commodities determining standard of living.
Program would be coordinated with and supplementary to other proposals such as Point IV, commonwealth aid and bank loans. Understand difficulties assuring other sources fully tapped before drawing on ECA grant aid.
Not intended relate program to sterling balance problem unless later events demonstrate such course wise and acceptable in countries aided.
Minimum stipulations wld be active participation by ECA mission to assure resources made available are effectively used for intended purposes, and that other available resources are being used to advantage.
In justifying aid to Congress and US public obviously necessary relate to issues of cold war. Indeed important consideration will be indirect effect assistance on building of military potential through contribution to supporting economy and relief govt budgets.
Timing of appropriate contacts abroad to assure that aid will be sought if authorized by Cong is problem. If later so instructed, cld you safely make top level approaches on which we cld determine that aid wld be sought by India [Iran], at same time leaving relations unaffected if we failed secure early affirmative action from Cong.
Your views on these or any other aspects awaited with great interest.”

Wld also appreciate receiving ur telegraphic views not only in relation Iran but, in light your broad experience, in regard program as a whole. [McGhee.]

  1. Loy W. Henderson, Ambassador to India.