377. Letter From the Counselor of the Embassy in Iran (Stevens) to the Officer in
Charge of Iranian Affairs (Hannah)1
Tehran, January 14,
1957.
Dear Norm: Enclosed is a summary of a
conversation which [less than 1 line of source text
not declassified] had with HIM on January 5.
I understand that in the past summaries of this kind have not been
provided either to the Embassy or to the Department. We have now agreed
that in the future the Embassy will receive such summaries and [less than 1 line of source text not declassified]
pass copies of the original report to the Department. If this system
does not operate satisfactorily please let me know and we will provide
you copies from here.
Sincerely yours,
[Page 869]
[Enclosure]
2
- 1.
- In a 2 hour session with the Shah on January 5 the following
political-economic information was obtained:
- A.
- Ahmad Mehbod, designated by the
Prime Minister as “Co-negotiator”, with NIOC Chief, for
foreign contracts to develop offshore oil, has “no
authority to sign anything.” U.S. oil firms should deal
with NIOC. However, the only deal acceptable to Iran is
(and “soon will be written into law”):
- (1)
- NIOC must have 50% stock in any operating
company.
- (2)
- Foreign company will be required to advance
all costs of exploration.
- (3)
- NIOC will pay for 50% ownership from its half
of profits after production begins.
- (4)
- Foreign company must pay Iranian income tax on
its 50% of profits.
- B.
- Qum oil “must remain in Iranian hands.” U.S. technical
and financial help is needed to develop the field,
construct a pipeline to Alexandretta, Turkey, and
install port facilities cost estimated by the Shah at
“450–500 million.”
- C.
- Iran has “no air force,” and “although we have long,
vulnerable coast line to control, we have only two
gunboats.” Vehemently: “We must have a navy. We hope to
obtain it from the U.S. but if it is not available there
we must have it from whatever source available.”
- D.
- In answer to the recent Iranian invitation to a
proposed Mid-East conference, Nasr declined saying
he could not confer with a nation which occupied “an
Arab island”; Saud did not “formally” decline but
passed word it would not appear proper for him to meet
with leaders of armed forces which expelled his troops
from El Arabi Island.3
- E.
- In transiting Iran enroute to Washington, Nehru sent the Shah only
Christmas greeting (“apparently he doesn’t know I am
Moslem”).
- F.
- During his Moscow visit the Shah never promised the
Soviets that “no foreign military bases will be built in
Iran.” Although he was aware of the West’s “lack of
interest” in such bases, he always responded to Russian
urging with only the following words: “Iran will not be
used as a spring board for launching aggression against
the Soviet Union.”
- G.
- The Shah still feels that Iran is “not ready” for the
establishment of formal political parties. He is aware
that several small groups are convening “but they are
unimportant.”
- H.
- The Shah is irritated by rumors that the U.S. is
sympathetic to, and in touch with, NRM leaders. He is
constantly striving to “broaden political base,” and all
useful, loyal former followers of Mossadeq have been taken
into the government (specifically Iran party members in
the Plan Organization) but he is highly critical of
Allayer Saleh, “who wears
Mossadeq
likeness on his label.”
- I.
- Re “Taylor
Report”3—the Shah is
obviously cool; stated that “committee is studying this,
and I think the Minister of Finance favors it slightly.”
However, the Shah continued by saying it was his
understanding that only a few “highly organized nations
such as America, England and Scandinavia collected any
such tax. How do you expect us to? Anyway it will take
four or five years to make the required land surveys.”
From this, the Shah launched into a revealing discourse
on “unfairness” of penalizing the present generation and
allowing the future ones to realize all blessings from
“vast” oil income. He indicated that he is giving
serious thought to widespread borrowing now to finance
development and meet budgetary needs, with future
generations repaying from expected rising oil
revenues.
- 2.
- The Shah repeated his old pledge that he is fully committed to
the West and “can never change.”
- 3.
- In the discussion of Mehbod, [less than 1 line of source text not
declassified] pointed out (at Embassy request) that
U.S. firms are puzzled as to Mehbod status;
viewed him as “ignorant of oil business, irresponsible,
opportunist and corrupt to extent he is openly asking for bribes
to be passed on to higher levels.” The Shah said that
Mehbod had denied these allegations
and, in the absence of proof, the Shah is reluctant to take any
action, but U.S. firms should be assured that they need pay
nobody anything. He said he felt Mehbod
“useful” because of his “energy, industry, imagination and
commercial contacts.”
- 4.
- During the conversation, the Shah expressed optimism (probably
reflected from Mehbod) that several U.S.
firms would accept proposal outlined in Para 1 A above. He added
that an Italian firm already had accepted, ([less than 1 line of source text not declassified]
note: Embassy Economic Counselor subsequently revealed that the
Italians turned the proposal down; Americans highly unlikely to
consider. He added that he felt the Shah was not getting the
true picture through Mehbod.)
- 5.
- At the conclusion of the meeting, the Shah [less than 1 line of source text not declassified]
urged: “Please keep me advised on any oil developments. This is
most important to us.” (The Ambassador and the Economic
Counselor, told of this—as well as other subjects
reported—approved [less than 1 line of source
text not declassified] acting as channel to the Shah to
expose false claims he is apparently receiving about progress
toward anticipated “deals” for new oil areas.)
