Foreign Relations of the United States, 1958–1960, Near East Region; Iraq; Iran; Arabian Peninsula, Volume XII

258. Memorandum From the Assistant Secretary of State for Near Eastern and South Asian Affairs (Rountree) to the Under Secretary of State for Economic Affairs (Dillon)⁰

Washington, December 3, 1958.

SUBJECT

• Military and Economic Aid for Iran

Discussion:

Ebtehaj has sent a message [less than 1 line of source text not declassified] urging a reassessment of Iranian military and economic aid requirements in the light of Iran’s border problem with Iraq and Afghanistan and of recent Soviet pressures on Iran (Tab A).¹ He suggests that economic aid of the order of $75 to $100 million above existing aid levels would not be an unreasonable price to insure the preservation of Iran for the West. Coincident with this message, the Iranian Prime Minister sounded out Ambassador Wailes concerning $100 million budgetary support for the next Iranian fiscal year beginning March 1959.

These are the most recent of a series of approaches made to us in the last month by various Iranian officials, including the Shah, for military and economic aid. In the past, Iranian campaigns for additional military and economic aid have generally been launched at about this time each year in anticipation of new Iranian budget years beginning in March and Baghdad Pact ministerial meetings held in January. The rather unusual intensity of this year’s campaign may be accounted for by any one or more of the following developments:

A. Sustained pressure from the USSR following the disclosure that the U.S. Government and Iran were negotiating a bilateral pursuant to the London Declaration.

B. Iranian concern over indirect Soviet aggression via Iraq and Afghanistan.

C. Iranian chagrin over the refusal of the U.S. delegate at the Baghdad Pact military committee meeting in Ankara to support more than one of the five divisions given as Iranian requirements in the Khorasan region in northeastern Iran.

D. The refusal of the IRBD to conclude negotiations for loans totaling approximately $75 million without Iranian assurances with respect to the balancing of the Iranian budget, and assurances against further diversions of oil revenues from the development program to the general budget.

E. The delay in implementing the $40 million DLF commitment made by the Secretary in Tehran in January of 1958.

This year’s plea for further military aid turns largely on alleged Iranian fears of local wars inspired by the USSR, involving the Iraqi and Afghanistan frontiers, and drawing upon the alleged buildup of excessive Soviet-acquired military equipment in Afghanistan. No specific amount of military aid has been requested. U.S. support has been sought generally for the four additional Iranian divisions to protect the frontiers with the USSR and Afghanistan in northeastern Iran. This represents a long standing difference between U.S. and Iranian military authorities concerning force requirements for northeastern Iran. In a very recent cable (Tab B), we restated our views on this matter.² Although the Shah took this message philosophically (Tab C),³ we can be certain that he will continue in his efforts. We are also informing the Shah that our intelligence does not support the view that there has been a dangerously excessive military build-up in Afghanistan, or that there is an immediate threat to Iran from Afghanistan.

This year’s plea for additional economic aid became more specific in Ebtehaj’s message [less than 1 line of source text not declassified] and the Prime Minister’s recent talk with Ambassador Wailes (Tab D).⁴ Ebtehaj spoke of $75 to $100 million and the Prime Minister of $100 million. It seems clear that Ebtehaj, as did the Prime Minister, had budgetary support in mind. In order to meet the IBRD problem and to avert a further diversion of oil revenues, defense support for the Iranian budget rather than developmental assistance would be required. It is reasonably clear that the Iranians are talking of requirements for FY 1338 (starting March 1959) and beyond. While we had expected some additional pressure on the Iranian budget as a result of the current program to bring existing Iranian armed units up to full strength, we have been unable to determine thus far the dimensions of the problem. The Embassy’s estimates on this were requested some time ago following your visit to Tehran. In replying to the Prime Minister, Ambassador Wailes said he did not think Washington would even consider a $100 million figure and asked for budgetary and other data to permit us to consider even reduced needs.

In dealing with the Iranians since July 1958 on problems of military and economic aid, we have used as a point of reference the President’s letter of July 19, 1958,⁵ written shortly after the Iraqi coup. This message promised (1) to accelerate training assistance and equipment delivery to bring Iranian armed forces as now supported by the USG up to agreed operational strength and a high level of operational efficiency, (2) to consider, as Iran is able to provide adequately trained manpower, the desirability of activating additional units and the possibility of assisting in the equipping of such units, (3) to give sympathetic and prompt consideration within our available means to Iran’s needs for economic assistance as this may develop. From the outset, the Shah has interpreted this message very liberally.

We believe that on the military side we should continue to maintain the position recently outlined to the Shah (Tab B). On the economic side, our Embassy is attempting to determine the dimensions of the problem and has promised an analysis in the very near future. In that context, we have suggested [less than 1 line of source text not declassified] reply to Ebtehaj along the lines of the attached draft (Tab E).

I am also informing the Under Secretary of these developments.

[Tab E] ⁶

Memorandum From the Assistant Secretary of State for Near Eastern and South Asian Affairs (Rountree) [text not declassified]

Washington, undated.

SUBJECT

• Mr. Ebtehaj’s Message [less than 1 line of source text not declassified] November 28, 1958

Thank you for sending me a copy of Mr. Ebtehaj’s message [less than 1 line of source text not declassified] I am therefore setting forth below comments [less than 1 line of source text not declassified].

1. Generally, the problems raised in Mr. Ebtehaj’s message are being given serious and active consideration here in Washington. The military question has already been the subject of a carefully considered communication conveyed to the Shah by Ambassador Wailes on November 27, 1958 (Deptel 1319). Ambassador Wailes has also discussed with the Prime Minister the question of economic aid, as reported in Embtel 1012. There is little further that we can add at this time. It would be helpful if [less than 1 line of source text not declassified] would urge that the Iranian Government provide the Ambassador such budgetary and other data as may be needed for American officials to assess carefully Iran’s economic needs against pressing demands elsewhere in the world on United States resources.

2. The President’s letter of July 19, 1958, to the Shah (referred to by Mr. Ebtehaj) was in response to the changed situation in the area following events in Iraq. In this letter our interest in and support of Iran was reaffirmed. Much had already been done to provide the additional military support provided therein. Within the context of that letter Iran’s economic needs will be sympathetically reviewed.

3. Intelligence available to the United States Government does not indicate any immediate threat to Iran from Afghanistan or the acquisition by Afghanistan from the USSR of military equipment significantly in excess of Afghan requirements.

4. We deeply regret the delay in implementing the $40 million DLF credit and are endeavoring to be as flexible and helpful as possible. The difficulty lies in finding Iranian projects that meet the requirements within which IMF must operate. It will be recalled that the Secretary had from the outset said that the credit would be available against acceptable projects.

0. Source: Department of State, Central Files, 788.5/12–358. Top Secret. Drafted by Owen Jones.
1. Attached but not printed.
2. In telegram 1319 to Tehran, November 25, the Departments of State and Defense instructed Ambassador Wailes—accompanied by General Linquist—to see the Shah and explain to him the difference of opinion over the potential defense of northeastern Iran against Soviet attack by a sizeable ground force. The cable cited “valid military reasons” for the U.S. concept of defending the area with one division, such as, (1) [1 line of text not declassified], (2) the lack of a real military objective at Khorasan warranting a major Soviet threat at Meshed, (3) U.S. estimates that considerably fewer Soviet divisions were likely to deploy this route, (4) husbanding resources for vital areas, (5) logistical problems, (6) the threat of allied air attacks on a Soviet advance through Meshed and parallel Afghan border, and (7) the U.S. conviction that strong Iranian reconnaissance strength in Khorasan supported by one division and air support could adequately deter the enemy. (Department of State, Central Files, 780.5/11–2758)

3. Telegram 1000 from Tehran, November 27, reported on Wailes’ and Linquist’s discussion with the Shah, who listened to the presentation and then pointed out that one division was not large enough to defend the northeast area although he agreed that a direct Soviet attack in this area was not as likely as in the west where Afghanistan with Soviet backing was a “definite menace.”

   General Linquist suggested that the difference of opinion was really the time frame for the buildup of troops in the northeast and the United States would be prepared to look at the question again in the future. Although the Shah took this line of argument “philosophically,” he stated that his idea of a time frame was considerably shorter than Linquist’s. (Ibid)

4. Telegram 1012 from Tehran, November 29. (Ibid., 788.5–MSP/11–2958)
5. See Document 243.
6. Secret.