Foreign Relations of the United States, 1955–1957, Near East Region; Iran; Iraq, Volume XII

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

Washington, October 4, 1956.

SUBJECT

• Ambassador Amini’s Call at 4 p.m. October 4. Proposed IBRD Loan to Iranian Plan Organization

Discussion:

Ambassador Amini intends to raise the question of the $75 million loan requested of the IBRD by Mr. Ebtehaj (Director, Plan Organization) and the related question of Mr. Ebtehaj’s request that the Export-Import Bank waive the negative pledge which it has from the Iranian Government. This negative pledge stipulates that no other foreign credit will receive priority over the $53 million line of credit extended by the Export-Import Bank.

In addition to the $53 million line of credit ($19 million of which has been utilized), the United States Government has a $23.5 million loan to Iran covering surplus property sales and $42.0 million of ICA loans. The ICA loans have exactly the same negative pledge clause as does the Export-Import Bank credit.

The IBRD is prepared to grant a $75 million loan to the Plan Organization providing there is the positive pledge of revenues as originally proposed by Mr. Ebtehaj. The IBRD does not require a waiver of the Export-Import Bank negative pledge as a condition of the loan. No Iranian parliamentary approval is required for a positive pledge of the Plan Organization revenues. If, however, the IBRD does grant the $75 million loan, the Iranian Government would be required to make a positive pledge to the Export-Import Bank.

Mr. Ebtehaj is now reluctant to give a positive pledge to the Export-Import Bank because such a pledge presumably will require Iranian parliamentary approval. He apparently fears that a request for such approval, growing out of the IBRD loan to the Plan Organization, might pave the way for parliamentary interference in Plan Organization financing. He has consequently requested the Export-Import Bank to waive its negative pledge. The Bank has refused to do so.

The IBRD recently learned that Mr. Ebtehaj has been negotiating for a $50 million loan from a group of Belgian, Dutch, French and German banks. We understand Mr. Ebtehaj has agreed to drop these negotiations as a condition to receiving the entire $75 million loan requested of the IBRD.

[1 paragraph (3 lines of source text) not declassified]

Recommendations:

It is recommended that, in view of the policy implications of subordinating United States credits generally to those of the IBRD and in view of IBRD’s continued optimism that a formula can be worked out:

1. We support the Export-Import Bank’s refusal to waive the negative pledge.

2. We encourage Mr. Ebtehaj to continue his negotiations with the IBRD.

Mr. O. T. Jones will accompany Ambassador Amini. Mr. Jones is Director of the Office of Greek, Turkish and Iranian Affairs.²

1. Source: Department of State, Central Files, 888.10/10–456. Secret. Drafted by Smith and Jones and cleared with U/MSA, E, and ICA.
2. A memorandum of conversation by Jones, October 4, describes the discussion between Hoover and Amini. It reads in part as follows:

   “Mr. Hoover assured the Ambassador that he would dig into the problem at once. He gave the Ambassador no encouragement, however. He pointed out that the Export-Import Bank was a semi-autonomous agency and that the Department did not ordinarily concern itself with specific problems of a technical nature in Export-Import Bank operations.” (Ibid.)