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

278. Memorandum From the Assistant Secretary of State for Near Eastern and South Asian Affairs (Jones) to Acting Secretary of State Dillon⁰

Washington, September 22, 1959.

SUBJECT

• Aid to Iran: Projects Which Might Have the Maximum Political Impact

Discussion

At the Secretary’s staff meeting on September 16, 1959,¹ you suggested that, in view of Soviet pressures on Iran and the concomitant danger that Iran might accept the Soviet line on neutralism, we examine carefully our military and economic aid programs to Iran. You also said that you would be glad to chair a meeting of interested agencies after we had developed some proposals for your consideration.

As you know, the heart of the problem involves the Shah’s dissatisfaction with the extent of U.S. aid and our posture toward CENTO. Because of his consistently self-induced uncertainties regarding our support for him and for his country, highlighted now by the Khrushchev visit, he may be susceptible to neutralist-minded advisers. The Soviets have played deftly upon the Shah’s fears and uncertainties, most notably in the extraordinary conversation between the Iranian Ambassador in Moscow and Premier Khrushchev and Foreign Minister Gromyko, an analysis of which is attached (Tab B).² Soviet Ambassador Pegov has now returned to Tehran, presumably to follow up the Khrushchev conversation. Indian Prime Minister Nehru, who arrives in Tehran for a visit on September 18, may also encourage a neutral policy.

This already difficult situation is compounded by our Embassy’s assessment that there should be a stretch-out of our military program and a diminution of our economic aid in order to avoid a potential politico-economic crisis, marked at present by growing inflationary pressures. The Embassy comments further that while serious risks are entailed in this course of action, these risks might be minimized by expeditious action on smaller projects which have great appeal for the Shah and others.³

Since we do not have to decide finally at this time on the larger issues of military and economic aid levels for Iran, we should examine immediately what could be done to meet the Embassy’s recommendation regarding smaller projects. There is attached a memorandum (Tab A)⁴ setting forth various military and economic projects which could be considered at a meeting with Defense, ICA and DLF.

Recommendations⁵

1. That you chair an early meeting of Defense, ICA and DLF representatives to discuss the proposals contained in the attached memorandum.

2. That you authorize us to use the attached memorandum as a basis for discussion with interested agencies so that the various proposals can be studied before the meeting.

0. Source: Department of State, Central Files, 788.5–MSP/9–2259. Secret. Drafted by Mouser with the concurrence of Wilson (for the recommendations only).
1. During this staff meeting Dillon expressed the view “that Iran was the most serious single problem we face” and that “Allen Dulles was extremely worried about the possibility of a Soviet-Iranian ‘deal’.” Henderson felt that the United States had never given Iran a “real” security commitment. (Ibid., Secretary’s Staff Meetings: Lot 63 D 75)
2. The analysis was not attached. It concludes that Khrushchev’s intention is “to impose on Iran a policy more favorable to the USSR by a combination of threats, psychological pressure and beguiling offers.” (Ibid., NEA/GTI Files: Lot 61 D 407, Iran–USSR Relations, July–Sept. 1959)
3. See Document 275.
4. A 4-page memorandum listing and describing specific proposed military and economic projects was attached, but is not printed.
5. Dillon approved both these recommendations on September 22. According to a memorandum from Lewis Jones to Mouser, September 18, Dillon’s comment after reading a draft of the attached paper was, “This is a good moderate program and I am in favor of all the things you suggest.” (Department of State, Central Files, 788.5–MSP/9–1859)