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[Page 920]

367. Information Report Prepared in the Central Intelligence Agency1

CS–40139

SUBJECT

  • Corruption in the Zahedi Government

SOURCE

  • Paragraphs 1–3: [2 lines not declassified]
  • Paragraph 4: [1 line not declassified]
  • Appraisal of Content: [less than 1 line not declassified]

1. The Shah believes that the popularity and power of the Zahedi Government is at a low ebb as the result of widespread corruption. This situation is further aggravated by activities of the Tudeh Party, which has exaggerated the extent of the corruption, thus contributing greatly to the growing storm of popular dissatisfaction with the present Government. The Shah stated that this situation must be stopped and expressed the opinion that the Government can be held in office only so long as he lends it his strongest support.2

2. Despite the conviction that the swelling flood of rumors concerning corruption in the Zahedi Government is strengthening the communist hand in Iran and weakening the Shah’s own position, the Shah decided to continue giving “strong” support to the present Government. His decision was based on the fear that any show of friction between the Shah and the Government might have an adverse effect on the oil negotiations.3

3. After reaching this decision, the Shah called in the entire Cabinet on 2 June and administered a firm rebuke, calling for immediate reforms and stern action to control corruption at all levels.

4. The Shah received Ardeshir Zahedi in audience on 3 June, following the latter’s return from Europe on 2 June. When Ardeshir emerged from the audience, he was in tears and remarked bitterly, [Page 921]“Why wasn’t I told how bad things are? I could have been here to help. My father is a good man: His Majesty knows that he is a good man.”4

  1. Source Central Intelligence Agency, DDI Files, Job 80–00810A, Box 43, Folder 53, CS Information Reports 40130–40139. Secret
  2. Field Comment: It is likely that, unless Zahedi launches his own effective anti-corruption campaign, the chances of survival of his Government following conclusion of the oil negotiations are practically nil. [Footnote is in the original.]
  3. Field Comment: The Shah’s decision to continue to support the Zahedi Government was confirmed by an Iranian source in close personal contact with the Royal Court for the past 21 years. However, unconfirmed reports indicate that the Shah is intriguing within and actively penetrating the civil bureaucracy which traditionally has been the Prime Minister’s province. [Footnote is in the original.]
  4. Source Comment: It is obvious that the Shah delivered a strong lecture concerning corruption. This is the most dangerous issue in Iran at the moment and one in which the Shah is extremely interested. [Footnote is in the original.]