230. Memorandum From the President of the Export-Import Bank (Waugh) to the Deputy Under Secretary of State for Economic Affairs (Dillon)0

For your information, we call your attention to the problem that exists in financing in Iran.

The Director of the Plan Organization, Ebtehaj, has consistently “insisted that he could not provide specific projects for financing by DLF and/or Eximbank, but would need to have latitude to use loan funds for general categories of. projects which had been carefully prepared and engineered by outstanding international technicians.”

These technicians, of course, would be of his own choosing. This quotation is from Secretary Dulles’ cable, Secto 15, January 26, 1958.1

We at the Eximbank feel that the U.S. Government should take a firm position with reference to dealing with Mr. Ebtehaj and the Plan Organization, and that position, very frankly, should be that the practices that have been used successfully with more than sixty countries for over two decades should be followed in connection with any financing done by the Eximbank.

In other words, we do not think that the U.S. Government should allow any one individual borrower to dictate terms and conditions under which we lend money that has been collected from our taxpayers.

Over the years, Mr. Ebtehaj has spoken publicly, not once but several times, to the effect that he would not and could not do business with the Export-Import Bank because of the Bank’s regulations. This attitude will create a problem with reference to any financing contemplated for the Bank with the Plan Organization under the proposals made by Mr. Dulles, who, I am sure, was not familiar with the background that has existed for many years.

The only encouraging information we have ever received in this connection was in Ambassador Chapin’s cable 1432 of January 29,2 where he reports that since Secretary Dulles’ visit, Ebtehaj had shown much less obstinacy regarding project loans and oil revenue diversions. We hope the Ambassador’s report that Ebtehaj is a chastened man will extend to his operations with the Eximbank.

You understand we have had over $20 million available for development projects as a result of a $53 million line committed in November [Page 544] of 1954. This commitment was to the Finance Minister and there remains approximately $20 million unused for now some three and one-half years.

We are ready and willing to do business with Iran, as confirmed in my last conversation with Secretary Dulles upon his return, but for obvious reasons must insist that the established policies of the Bank be followed in this instance.

  1. Source: Department of State, Central Files, 888.10/4–458. Confidential. Sent also to James H. Smith, Jr., Director, ICA.
  2. See footnote 3, Document 225.
  3. Not printed. (Department of State, Central Files, 788.5–MSP/1–2958)