Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X

788.5 MSP/2–554: Telegram

No. 419
The Ambassador in Iran (Henderson) to the Department of State¹

secret
priority

Tehran, February 5, 1954—5 p.m.

1719. Deptel 1650, Embtel 1568,² Tousfo 845, Tousfo A–634.³

1. Both Embassy and OMI deeply regret learn from Deptel 1650 February 2 that Washington has found that only $6 million could be made available for additional emergency assistance Iran during remainder current fiscal year although we not surprised since we have realized that such aid as has already been extended to Iran has placed great strain on available appropriations. However analysis your paragraph 4 indication $9 million available from aid dollars in note cover plus $6 million new aid would meet $15 million required appears based on misunderstanding our assumptions reflected Embtels 1568 and Tousfo 845. We and Iran Government already counting on use rials derived from sale aid dollars now in note cover at rate 83.7 rials per dollar (see joint planning table forwarded Tousfo A–634).

2. We somewhat encouraged by paragraph 5 reference telegram indicating that State and FOA will constantly review question availabilities versus commitments and that by about May agencies will be in better position evaluate various contingency needs NEA areas. We now revising estimates to show probable effects addition $6 million in place of $15 million requested. Major uncertainties continue make forecasts hazardous. Will keep you currently informed.

3. We earnestly recommend that additional $6 million be extended as grant and not as loan. Despite our repeated injunctions to Iran Government that it should not expect emergency aid from US in addition to that already extended Shah and members government as well as political circles backing government had been placing reliance upon continued US support until Iran would be in position carry on effectively without such support. Announcement that Iran can be assured of only $6 million additional aid even though progress direction oil settlement much slower than had been originally anticipated almost sure therefore in spite our best efforts create impression on Iran Government and public that US determination see Iran through difficult crisis in which it still finds itself is beginning to weaken. If we should propose that this $6 million be in form loan rather than grant this impression would be greatly strengthened. We can argue that US Government not able advance funds in excess amounts appropriated. It would be somewhat more difficult to explain why attitude US Government toward Iran has changed to such extent that whereas we previously willing give aid in form grant we now prepared offer such funds as are available only as loan. Furthermore loan must be approved by Majlis. We doubt if Iran Government would be willing ask Majlis approval of US loan so small as $6 million. If it should do so feelings of disappointment might run so high in Majlis that government would be compelled to resign.

4. Suggest that we be authorized inform Iran Government that although US would like assist Iran carry on until such time as revenues begin to accrue from oil it finds to its regret it has available for additional aid to Iran only $6 million from funds appropriated by the Congress. US Government hopes however that Iran Government with additional $6 million augmented by such further funds as it might realize from aid dollars in note reserve and other sources will be able to carry on until oil settlement is achieved.⁴

5. Believe modest publicity only should be given decision re additional $6 million. In fact would be preferable if publicity could come for most part from Iran Government itself.⁵

6. Any information which might give me US attitude re Export Import Bank loan would be helpful. Matter has not been raised of late by Iran Government and I do not intend discuss it unless pressed. I assume Ambassador Entezam and Nemazee will initiate discussions on arrival Washington later in month.⁶

Henderson

1. Passed to FOA and Treasury.
2. Dated Feb. 2 and Jan. 16, neither printed. (788.5 MSP/1–1654)
3. Neither found in Department of State files.
4. On Feb. 11 the Department informed the Embassy that it agreed with the Embassy recommendation that $6 million should be a grant rather than a loan, and that the Iranians could be informed along the lines suggested in paragraph 4 of telegram 1719 from Tehran. The Department also sought to reassure the Embassy that the Department intended to continue to evaluate Iran’s needs and to measure them against availabilities. (Telegram 1706; 788.5 MSP/2–554)
5. On Feb. 13 the Department informed the Embassy in Tehran that it agreed with the Embassy’s recommendation in paragraph 5 of telegram 1719. (Telegram 1721; 788.5 MSP/2–554)
6. Chargé Rountree reported on Feb. 15 that he and Warne had met with the Foreign Minister and Finance Minister and had advised along the lines suggested in paragraph 4 of telegram 1719 from Tehran and authorized in telegram 1706 to Tehran regarding the $6 million grant. The two Iranian officials appeared genuinely appreciative, although, Rountree said, it was clear that they had hoped for a larger amount. (Telegram 1772; 788.5 MSP/2–1554)