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339. Memorandum From the Near East and Africa Division, Directorate of Plans to Director of Central Intelligence Dulles1

SUBJECT

  • Certain Aspects of the Present Situation in Iran Which Appear to Require Further Attention by the United States Government; the Significance and Value of an Appropriate Program of Military Assistance

1. While the coup of 16/19 August which restored the Shah to effective power may now definitely be considered as a success, there are indications nevertheless that the position of the Shah and of his government is by no means secure. The Zahedi cabinet which was riding high at the time of the announcement of American economic aid is currently hitting a squall of opposition engendered by disgruntled power seekers (such as Mullah Kashani), Mossadeq supporters including the Tudeh (who are making a desperate and possibly successful effort to maintain their organization in being), and an increasingly larger segment of Bazaar merchants (whose business prospects seem to be threatened by Zahedi’s “reforms”).

2. This opposition is making political capital of:

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a. The government’s tardiness and apparent hesitancy in prosecuting Mossadeq and other nationalists or Tudeh leaders.

b. The government’s difficulty in using U.S. grant aid (problem of converting dollars into rials) and the lack of progress in dealing with economic problems.

c. The uncertainty over the outcome of the oil controversy.

3. In the opinion of CIA local observers, however, none of these problems seem insurmountable:

a. Through U.S. advice and good offices, the Iranian government is being encouraged in taking a firm stand against the opposition and is conducting an intensive drive against the Tudeh.

b. Point IV reported on 13 October that the Iranian treasury problem was being partially solved by an accounting procedure which permits the printing of additional rial currency backed by American dollars.

c. Finally, a well-conducted and subtle propaganda campaign is underway preparing the ground for an attempted settlement of the oil controversy; while at the same time the Hoover mission appears to be making steady headway.

4. These same observers, however, stress that, despite the seriousness of Iran’s economic condition, Iran’s problems today as yesterday are primarily political and psychological. No solution of Iran’s economic or financial difficulties and no solution of the oil controversy, however favorable to Iran, can have any character of permanency or guarantee Iran’s alignment with the West unless the political and psychological aspects of the problem are resolved in a manner favorable to our position and interests. They believe that, despite the present Shah’s well-known weaknesses, the most effective instrument for maintaining Iran’s orientation toward the West over the longer pull is the monarchy. Although the Shah feels that at this time it would be dangerous for him to enter into any formal alliance with the West, the fact remains that the Pahlavis have everything to gain by a close understanding with the West, and everything to lose by going toward Russia, or even by attempting to remain neutral. These observers point out that Reza Shah came to power with the Army and the support of the West, and that the present Shah regained power last August with the aid of Army and with the support of the West. They concluded that in order to consolidate the present regime and render possible a solution of Iran’s problems it is essential to fortify the crown in its only real source of power, i.e., the Army. While this in our opinion will not necessarily lead to a permanent solution of the Iranian problem, it should stabilize the Iranian situation in our favor for some time and thus give the U.S. the opportunity to reassess its policy in the area.

5. We understand that a new U.S. military assistance program to Iran is under consideration. It is our view that to be effective such a program should have as its objective the development of the Iranian Army [Page 811]into a force which, under the leadership of the Shah, can unquestionably dominate the internal situation so as to leave no doubt as to its ability to prevent civil disorder and preserve order and security; and at the same time act as a defensive screen for Iran’s northern frontier. It is not suggested that an attempt should be made to build up the military strength of Iran to the degree which would be necessary to provide the capability of resisting overt military aggression. There should however be sufficient military capacity over and above that required for the maintenance of internal order to provide a border control force capable of dealing with irregular and covert forms of violation of Iran’s territorial integrity.

6. The manner in which this military assistance program is negotiated with Iran will have a very important effect on its value to the United States. We are convinced that for the United States to obtain full benefit from such a program it must appear to the Iranian nation that the Shah has been primarily responsible for its successful negotiation. This will cement the loyalty of the strengthened Army to the one element in Iran (namely the Shah) that we feel is unequivocally committed to the West.

  1. Source: Central Intelligence Agency, DDO Files, Job 79–01228A, Box 11, Folder 14, Iran 1951–1953. Secret; Security Information. There is no drafting information on the memorandum, only the indication that it came from the Near East and Africa Division.