352. Memorandum of a Conversation Between Shah Mohammad Reza Pahlavi and Secetary of State Dulles, Governor-General’s Residence, Karachi, March 9, 1956, 9–10 a.m.1

I expressed my appreciation of the courageous action of the Shah in committing his nation to the Baghdad Pact, and doing so entirely on his own responsibility without prior bargaining with any other countries. The Shah explained in some detail why he had taken this action, emphasizing that he believed that it would be more effective and his country would be in a stronger position if he could honestly say he had done so entirely free of any foreign influence and without any bargaining with, or promises from, others.

I said that I thought it was that kind of courage which usually paid off in the long run. I recalled Czechoslovakia’s unwillingness to take a risk in the Munich period, and said I thought that if they had had the courage to act alone, they would in fact have won allies, but that when an endangered people were not willing themselves to take risks unless they could first get distant people to take risks, they did not give a good impression of their own patriotism.

The Shah then went on to say that this policy was his policy—that he could never change—and that while circumstances might change so as to discredit his policy, he himself would never change it. It was his irrevocable commitment to stand against Russia and never to give in. He had taken this position at the time of the trouble about Azerbaijan. He recalled that George Allen was our Ambassador at the time. He believed that this action deserved, and should receive, strong support from the West and particularly from the United States as the leader of the anti-Communist forces. He pointed to the strategic importance of Iran and his view that it was the most critical spot in the world today.

I explained that there were a good many countries in the world which regarded themselves as the most critical spot. I said I had been told that by Pakistan and now I was going to India where Nehru would undoubtedly say the same thing and then on through my trip where at each place the demands would be tremendous on the ground that their support was necessary to prevent a critical break-through of Communism. I said this trip only covered a small part of the world, [Page 809] but that wherever I went, I found a similar point of view. I said if all these things were added up, the total would be of astronomical proportions.

I said that the American people and the Congress were in my opinion enlightened to a remarkable degree. Never before had a country done so much for long-range objectives. I explained however that the American people generally did not appreciate the significance of the Middle East and South Asia. I hastily sketched the American foreign policy in terms of the piece of paper annexed hereto,2 pointing out that the first American foreign policy had been in defense of the hemisphere and was expressed by the phrase “the Monroe Doctrine”. Then we had come to realize the importance of there being friendly nations on the other side of the Atlantic, and in defense of that concept we had taken part in the First and Second World Wars. Then, particularly as our population shifted toward the West, we had taken a similar view with respect to friendly countries on the west of the Pacific Ocean. However, the Middle East and South Asia as a vital area for the United States represented a fourth foreign policy, the development for which American and congressional opinion was perhaps not yet fully prepared. I said that it must be realized that in a country with representative political processes it was not enough for the Executive to decide on what was the national interest and then extract the money from the people. I said that could be done in Russia where a decision of the Kremlin could automatically be reflected in turning the screw down a bit tighter on the Russian people. They had no choice as to whether or not to contribute to “foreign aid”. In the United States it was a process of education. The people themselves had to vote away their money, and it was, I thought, very remarkable that they had done so to the extent that they had. There were, however, limits. It was particularly difficult during a political year to get Congress when it wanted to cut taxes to refrain from doing so and perhaps unbalance our budget in order to help some foreign people to balance their budget and not to pay taxes.

We discussed the tax problem. The Shah said it was extremely difficult to increase the indirect taxes which were quickly reflected in the cost of living and which could produce inflation. It was hard to collect direct taxes.

I said I recognized that only a very high sense of civic responsibility made it possible to have an adequate system of direct taxes. I said that in much of the world paying taxes was a bargaining process such as an ordinary deal in the market place where it was smart to try to make a deal which would benefit the individual at the expense of the government. It took time to educate people to the fact that paying full [Page 810] taxes was a civic duty, but I said that every effort needed to be made along this line. I agreed that taxes on the cost of consumers’ goods was the worst form of taxation.

I expressed the thought that perhaps they were devoting too much of their oil revenues to development and not enough for budgetary purposes. I said I understood that only 10% went to the government budget. He said this was not so, but that the amount was 40% and only 60% for economic development.

The talk then moved again toward the international situation. I asked whether he had any implications from Nehru that he wanted to give me. He said nothing in particular except he thought he had perhaps persuaded Nehru of the integrity of their position and that Nehru would be more disposed to respect it and to keep his nose out of their affairs.

I said that I doubted that in the long run a country could defend itself from Communism unless it took a more belligerent attitude toward it and recognized it as something evil. The Shah said that the Indian Government did take a very strong view against the Communist Party in India. I said that was so but I thought they treated it as a political party that they did not like but not as something inherently evil. I said that as a Republican I rated that Party higher than the Democratic Party, but that was something different from treating the opposition party as something evil. The Shah said he felt there was very real fear of the Communist Party at least domestically. I said that Nehru’s foreign policy almost always coincided with the Soviet policy. The Shah conceded that this was so, and said it was hard for him to understand.

The Shah went on to say that he thought the Arab States were playing with fire—that they had not had the experience Iran had had with the Russians—if they had, they would realize the definite danger that they were walking into.

The Shah went on to say that one of the things that was hard to explain was the fact that neutralism, playing both sides, seemed to be a successful game. He said that the Egyptian ambassadors boasted that they were quite successful in blackmailing both sides to their advantage. I said I thought that what the United States was doing was being greatly exaggerated and that in fact there was very little new in the measure of our economic aid to Egypt although now it might be concentrated on the Aswan Dam.

I discussed Yugoslavia—the reasons for our policy there. The Shah conceded that there might be reasons in particular cases for treating a neutralist well, but it was very difficult to explain to his people.

[Page 811]

He said that we were perhaps spending too much in other countries such as Vietnam although he recognized that that was important. He said that was because we had come in too late. He did not want to see us make the same mistake in Iran as it might cost us much more if we did not move now. He said he had cleaned out the Army and crushed the Tudeh Party and Mossadegh was in jail and now was the time to consolidate the pro-Western position.

He mentioned that in this connection, and somewhat apologetically, that he would probably have to go to Moscow but that was not going to change his point of view.

He then ended with an almost emotional plea for United States financial assistance. He said this would not have to be great—“perhaps 75 million dollars a year for the next three years would suffice”. The Shah said that before Iran could be self-sustaining economically, it would be necessary for the oil production and corresponding royalties to go up from the present level of 32 million tons annually to 50 million annually. I said that while we certainly would try to find ways to help, I would have to say that such a dollar figure as he suggested was surely excessive. I then said also that some of our assistance would have to be in the form of loans and not mere grants. The Shah said this would be very awkward for them because they could not make loans without approval of the Majlis and they were going on vacation very soon. I said that I doubted that would be a very persuasive reason for us to give to our own Congress. He then seemed somewhat ambiguously to suggest that loans might be o.k. for economic aid but that military aid should be on a grant basis.

By that time it was 10 o’clock when the Shah and I were slated to leave for the airport, so I got up saying in conclusion that I felt that this had been a very useful talk, that I was confident that good would come of it, and I hoped he understood better our position. Above all I wanted him to realize how much we respected the forthright position that he had taken to defend his country against Russia. The Shah expressed his gratification at the talk.

John Foster Dulles3
  1. Source: Department of State, Central Files, 110.11–DU/3–956. Secret. According to a covering note by Macomber, March 9, the Secretary dictated this memorandum, and a note on the source text indicates that the Secretary later approved it. A copy of this memorandum was distributed in the Department of State as USDel/MC/11, March 9. (Ibid., Secretary’s Memoranda of Conversation: Lot 64 D 199) A summary of this conversation was sent to Washington in Secto 37 from New Delhi, March 9. (Ibid., Central Files, 110.11–DU/3–956)
  2. Not found attached.
  3. Printed from a copy that bears this typed signature.