373. Memorandum From the Secretary of State to the Director of the International Cooperation Administration (Hollister)1


  • FY 1957 Aid to Iran

In response to your memorandum of November 23, 1956,2 there are urgent political reasons for immediately announcing an FY 1957 level of aid to Iran in the magnitude of $45 million. It is important that we do this because of the critical situation now prevailing in the Middle East, because we are unable at this time to join the Baghdad Pact, and because of Iran’s urgent pleas for military and economic support of an order that would justify her recent abandonment of traditional neutrality by joining the Baghdad Pact. In view of Soviet exploitation of the Middle East situation in order to penetrate that area, it is particularly important that we give strong support to Iran in its dangerously exposed position.

I believe the $45 million figure should be announced now to obtain maximum political effect. It should then be handled in a manner to provide a basis for developing with the Iranians a meaningful program for the utilization of these funds. The Iranians should be [Page 860] informed that the Mission is authorized, but not directed, to work out with the Iranian Government a program not to exceed $45 million, based on mutually agreed projects. Thus, the level of aid announced would be a maximum figure, the full utilization of which would be dependent on the extent to which valid projects are developed by the Iranian Government and our mission and are approved by the United States Government.

In general, I believe the following criteria might be useful in guiding the Iranians toward the preparation of a program:

No general grant budgetary aid unless urgently required by some as yet unforeseen major development.
The allocation of a portion of the dollar funds for the financing of consumer goods imports to generate local currency for the support of the technical assistance and military construction programs.
The allocation of a significant portion of the dollar funds to imports of capital goods on a project basis and the allocation of appropriate amounts of generated local currency for related local currency costs and essential training.
The allocation of a significant portion of both dollars and generated local currency funds for practical economic projects having a regional significance in, for example, the fields of rail, highway and radio communications. Such projects would tend to strengthen the Northern Tier area and might be coordinated with, but not replace, projects which may eventually be undertaken under the aegis of the Baghdad Pact.

I do not believe that we can afford to delay or temporize on this matter. Iran, along with its Baghdad Pact neighbors, constitutes one of the best political assets the United States has in the area at this time. Iran is a vital and exposed part of the Middle East and must be dealt with, not solely on the basis of its own internal requirements within its own narrow frontiers, but on the basis of the requirements of United States interests in a most dangerously threatened area of the world.

John Foster Dulles3
  1. Source: Department of State, Central Files, 788.5–MSP/12–756. Confidential. Drafted by Hannah and Jones and cleared by G, U/MSA, E, and S/P. A memorandum from Rountree to Dulles, December 1, recommending that this letter be sent to Hollister is Ibid., GTI Files: Lot 59 D 654, Iran 1956 Memoranda.
  2. Document 371.
  3. Printed from a copy that bears this stamped signature.