888.10/2–1651: Telegram
No. 3
The Secretary of
State to the Consulate General at
Istanbul1
priority
397. From Secretary, action Grady, info McGhee.2 I have discussed ur recent tels with Pres who has given full consideration to ur recommendation of increasing Eximbank loan to $100 million. In full awareness critical nature of Iran situation, Pres does not concur in ur recommendation and suggests going ahead with $25 million Eximbank loan.3
In Dept’s view, present and projected measures US aid to Iran constitute realistic program designed achieve US objectives. We are convinced that econ advantage to Iran and polit benefit to US wld [Page 7] be inconsequential if loan is consummated without clear indication Iran-Gov willing accept (a) clear-cut and direct obligation contract loan and (b) adequate US technical supervision over expenditure loan funds.
We believe record is clear. Eximbank has cooperated fully and has shown sympathetic understanding peculiarities Iran situation. Further, Bank reiterates willingness consummate transaction with greatest simplicity and clarity consistent with foregoing conditions. On other hand, Irans have procrastinated and blocked our attempts to help them through Eximbank loan. Their recent tactics seem to justify opinion they are attempting use failure of Eximbank loan to materialize as lever to obtain wider concessions from US.
On ur return to Iran I suggest you point out to Razmara and possibly Shah that USGov cannot grant loan without minimum conditions outlined above. Breakdown in negotiations wld have serious repercussions here. If Iran rejects loan Amer public will demand explanation and we wld have to explain rejection due to Iran action including refusal of PriMin seek authority of Majlis to contract loan. Razmara and Shah surely will understand that such action will prejudice any possibility of other forms of assistance which Iran may seek from US.
I appreciate fully difficulties of presenting the above position at current stage of negots. However, I am satisfied that main hope in present circumstances for progress with Iran depends on convincing Shah, Razmara and Majlis that US aid to Iran is an integral and important part of well-thought-out program for strengthening free world. Wld you therefore pls exert every effort to make Razmara and Shah realize that our ability to assist Iran depends in great degree upon mutual coop. We hope therefore that they will take such action as may be necessary proceed with Eximbank negots.
- Drafted by Dorsz, cleared by Thorp, and signed by Secretary Acheson. Repeated to Tehran.↩
- Ambassador Grady and Assistant Secretary McGhee were in Istanbul for a meeting of the chiefs of U.S. diplomatic missions in the Middle East, Feb. 14–21; for documentation on this meeting, see Foreign Relations, 1951, vol. v, pp. 49 ff.↩
- On Jan. 30, McGhee sent a memorandum to Secretary Acheson and Deputy Under Secretary Matthews reviewing the Iranian situation and stating his belief that a $100 million loan to Iran would not be justified. (888.10/1–3051) On Feb. 8 McGhee transmitted another memorandum to Secretary Acheson reviewing U.S. efforts to help Iran. (888.10/2–851) On Feb. 9 Secretary Acheson told Lucius D. Battle that “he had discussed at the Cabinet that day the proposed loan to Iran. He said that the feeling of the Cabinet seems to be clearly in favor of the recommendations of the [two McGhee] papers.” (Memorandum by Battle, Feb. 12; 888.10/2–1251) The two memoranda by McGhee were also transmitted to President Truman, who on Feb. 15 told Secretary Acheson that “at the Cabinet meeting he had clearly indicated his view, which was that of the rest of the Cabinet also,” that the United States should proceed in accordance with the first McGhee memorandum. (Memorandum of conversation with the President, Feb. 15; 888.10/2–1551)↩