225. Telegram From Secretary of State Dulles to the Department of State0

Dulte 7. Eyes only Acting Secretary for President from Secretary.

Dear Mr. President:

I have now been here for twenty-four hours, and it has been quite a hectic day. The situation was even more explosive than I had appreciated before I left Washington with mounting discontent, due not to any single cause but to the interplay of a number of factors. The Shah, who considers himself a military genius, is determined to build up the military forces of Iran and perhaps in this way to gain a dominant position in the Baghdad Pact. He professes to feel that strategic retaliatory power is not sufficient to assure his country’s defense or at any rate that his people will not believe this and that he must have much greater visible power equipped with modern weapons. He is determined to increase the number of divisions and wants from us much more and much better equipment. This of course will throw an increased economic burden upon the country and further unbalance an already unbalanced budget. This threatens both her development program to which most of the oil revenues are dedicated and also threatens inflation.1

The governmental ministers are mostly concerned with the economic problems of the country but are unable to cope with these in the face of the Shah’s military obsessions. Sentiment here has been aggravated by reports of our prospective economic assistance to India and knowledge of our greater military assistance to Turkey and Pakistan. All of this has been building up to quite a climax with hints that unless I gave explicit assurances of far greater military and economic aid the Shah might announce withdrawal of Iran from the Baghdad Pact with a neutralist policy to follow involving cooperation with both the Soviet Union and the Free World in accordance with the Egyptian and Indian pattern.

Last night the Foreign Minister gave a tremendous dinner for me of 160 people including all of the Diplomatic Corps (including the Soviet Ambassador), The Foreign Minister, in his remarks preceding his toast to you, referred to me as a man constantly seeking peace. That gave me [Page 534]in my reply a chance to emphasize the peace theme. I thought this useful in view of the Diplomatic Corps from the Soviet Bloc and neutralist countries.

Today, I met successively with the Foreign Minister, the Prime Minister, Ala (the Minister of Court), and then for a four-hour luncheon conference with the Shah and the three above-mentioned; the Shah concentrated almost wholly on military problems, strategic and tactical, and was very insistent although aside from indicating that neutralism seemed to be profitable, there was nothing in the nature of a threat and withdrawal from the Baghdad Pact was not explicitly mentioned. Irwin of the Defense Department was also present, and we discussed the world-wide problems created by new weapons and also I tried to give some appreciation of the manifold responsibilities devolving upon the United States. More detailed memoranda of conversations2 will be going forward to the State Department, but I think it boils down to this: I indicated that we would be prepared to provide some more modern weapons and also to provide more training for their use. On the economic side I indicated that provided the projects were worthy—and there are plenty of worthy projects here—the Development Loans Fund would I thought sympathetically consider development loans over the next few years, assuming of course the fund was given adequate funds by the Congress. If this were done, it would be practical for the government to divert some of the oil revenues now dedicated to development purposes to meeting budgetary requirements.

The Shah and his wife are planning to go to Japan in May and then to Honolulu and the United States in a private capacity. I suggested that if he did come to the United States it would be helpful if he came to Washington and talked with you and some of the top Pentagon people about the military problems which so engross him. I am sorry to have gotten you in for this, but since the visit would be entirely unofficial it should not involve much entertainment and it was, I think, of very great value in holding the situation stable to flatter the Shah with the prospect of an exchange of views with you on modern military problems.

Tonight the Ambassador gives a dinner for me3 and then tomorrow morning we leave for Ankara and the Baghdad Pact Conference.

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Incidentally, Noon, the Prime Minister and Foreign Minister of Pakistan, stopped here en route to Ankara and spent all last evening with the Shah. I saw Noon briefly this morning. He is greatly worried about the possibility of Iran quitting the Baghdad Pact which would of course be a grievous political blow. It is, however, my judgment after the events above recorded that we need not anticipate any such drastic action provided we take the military and economic measures which I believe to be reasonable and well within our capability.4

Faithfully Yours,

Foster

  1. Source: Department of State, Central Files, 788.5–MSP/1–2558. Secret; Eyes Only.
  2. Dulles, accompanied by Chapin, Rountree, Irwin, and Reinhardt, met with the Shah who was accompanied by Eqbal, Ardalan, and Ala at 12:15 p.m. on January 25. Dulles is apparently basing this assessment at least in part on that meeting. (Memorandum of conversation by Chapin, January 25; ibid., NEA/GTI Files: Lot 60 D 533, Iran, Secretary’s Visit to Iran, 1958)
  3. Accounts of Dulles’ meetings with Ardalan, Eqbal, and Ala, all January 25, are ibid. On January 25, from 7:50 to 8:20 p.m., Dulles also met with Iran’s Managing Director, Plan Organization, Ebtehaj with whom the Secretary discussed Iran’s economic development. (Ibid.)
  4. After refusing to commit the United States to an actual dollar amount of Development Loan Fund and/or Exim Bank funding for Iran during the course of his discussions on January 25, Dulles told Eqbal during dinner that $40 million would be the “general order of magnitude” for U.S. loans for Iranian development projects. (Secto 15 from Tehran, January 26; ibid., Conference Files: Lot 63 D 123, CF 969)
  5. In Tedul 20 to Ankara, January 27, President Eisenhower informed Dulles that he was willing to talk with the Shah during his unofficial visit to the United States. (Ibid., Central Files, 396.1–AN/1–2758)