292. Telegram From the Department of State to the Embassy in Iran0

24. For Ambassador from Under Secretary. We were very pleased with recently concluded talks with members Iranian delegation.1 Their presentation marked significant step forward. Their attitudes were constructive and their responses generally well informed. Meetings were characterized throughout by friendliness and candor. Our general strategy during these talks was to strike proper balance between encouragement of this group and firmness in dealing with Iranian problem; to draw them out with regard to intentions and relevant factual background; and to give them clear impression that some form of U.S. financial assistance would be made available after further discussions in Tehran following their IMF consultations. We believe that IMF drawing, our undertaking mutually to terminate trade agreement (subject to Presidential approval), and time schedule generally agreed upon for dealing further with their resources shortage, represented useful outcome and constructive basis for our future support of their stabilization efforts.

We took general line that we regard stabilization program presented here as initial statement to be developed more fully during forthcoming IMF discussions. Our principal comments dealt with possibility of allocation of Iranian resources in favor of Plan Org and of institutional changes, primarily in budget-making field, needed to mount successful stabilization program. Said we assume a more detailed program would emerge as a result of IMF consultations which we would take account of in our future discussions of U.S. financial assistance. Said we hope consultations will clarify extent to which problem is in fact balance of payments [Page 680] problem rather than resources shortage and urged they avail themselves fully of Fund facilities in meeting balance of payments aspects.

We noted that Black of IBRD had expressed an interest in helping Iran in present situation and that he would be sympathetic to Plan Org expenditure increase to an 87 billion rial level. He could only agree to such an increase however provided the Iranians for their part carried out their commitment to have full and detailed discussions with the IBRD regarding the steel mill and Latyan dam projects. We suggested it would obviously be in Iran’s interest to maintain friendly relations with IBRD.

Unless you perceive objections, suggest you seek audience soonest with Shah, draw upon foregoing as appropriate and congratulate him on performance his delegation and on his having undertaken meaningful stabilization program.2 Believe this will have desirable effect of strengthening hand of Hedayat and reform group.

We are particularly grateful to you for making Taylor3 available. He participated actively and constructively in all meetings. Upon his return he can fill you in on the details. Memos of conversation follow.

  1. Source: Department of State, Central Files, 888.00/7–160. Confidential. Drafted by Owen Jones; cleared in draft by Peyton Kerr, Office of International Finance and Development Affairs, Bureau of Economic Affairs; Kennedy of NEA; and Baxter of U/MSC; and with Eximbank, DLF, and Treasury.
  2. The Government of Iran accepted an invitation by the United States to send a Ministerial Delegation to Washington to present Iran’s views on economic stabilization measures. Talks were held with an advanced working party in Washington on June 23. Accounts of those meetings are in memoranda of conversation, Washington, June 23, ibid., 788.5–MSP/6–2360 and 611.8841/6–2360. The delegation met with Assistant Secretary Jones on June 27 for a general discussion. (Memorandum of conversation, June 27; ibid., NEA/GTI Files: Lot 64 D 493, Memoranda of Conversation, 1960) The delegation met with officials of E and NEA on June 29. (Memorandum of conversation, June 29; ibid.) The delegation met with the Acting Secretary of Commerce on June 30. (Memorandum of conversation, June 30; ibid.) On July 1, the delegation joined Under Secretary Dillon for a final discussion. (Memorandum of conversation, July 1; ibid., Central Files, 888.00–Seven Year/7–1160)
  3. In telegram 24 from Tehran, July 3, Wailes reported that he met the Shah and emphasized the main points of telegram 24 to Tehran. (Ibid., 888.00/7–360)
  4. Maurice F.W. Taylor, Counselor for Economic Affairs at the Embassy in Tehran.