365. Memorandum From the Assistant Secretary of State for Near Eastern, South Asian, and African Affairs (Rountree) to the Secretary of State 1

SUBJECT

  • Progress Report on Iran dated July 25, 19562

Discussion:

Since July 25, the Iranian Government has cooperated with the U.S. in the Suez negotiations. By so doing the government has extended itself beyond public opinion which tends to sympathize with Nasser. If a settlement of the Suez dispute is long delayed with the Iranian Government continuing to support the Western position, the Government will be weakened internally. A cutback of oil production below the guaranteed minima, or reduced Iranian access to essential imports would gravely weaken the Government and cause loss of confidence in the U.S.

On August 25, an American company operating near Tehran under contract to the National Iranian Oil Company, brought in one of the largest wells ever drilled in the Middle East, gushing 80,000 barrels per day.3 While the size of the field is still unknown, its location in north central Iran suggests that it could eventually alter the Middle East oil pattern, particularly in connection with the possible pipelines through Turkey or as a means of supplying refined products to Turkey and Afghanistan.

Recent developments cast Iran in two contrasting roles. Internationally, Iran is an asset to the West as is reflected by its abandonment of neutrality, the Shah’s excellent performance in Moscow and Iran’s cooperation in the Suez negotiations. Yet, this Report reflects concern over internal political drifting, ineffective use of resources, delayed reforms and continuing reliance on U.S. support to compensate for these weaknesses. While this is not a new problem and while it may be questioned whether these weaknesses are susceptible to treatment from outside sources, the Working Group is attempting to devise courses of action to modify or compensate for them, since it is essential to prevent a reversion to past stagnation which is susceptible to exploitation by the USSR.

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In the long run, however, the ability of the U.S. to influence the course of events in Iran will be at least partially dependent on the resolution of larger questions, such as the determination of U.S. plans for the defense of the Middle East and the extent to which the U.S. is prepared practically to support and develop the northern tier area as a positive factor of strength in the area.

Recommendation:

That you urge the adoption of this report by the NSC at its meeting on September 27.4

  1. Source: Department of State, S/PNSC Files: Lot 61 D 167, Iran, U.S. Policy Towards (NSC 5504). Top Secret. Drafted by Hannah. Rountree was appointed Assistant Secretary of State on July 26 and entered duty on August 30.
  2. See footnote 2, Document 359.
  3. In the future Qum oil field.
  4. Consideration of the Progress Report by the NSC was postponed to the 299th meeting on October 4; see Document 367.