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

293. National Security Council Report⁰

NSC 6010

Washington, July 6, 1960.

SUBJECT

• U.S. Policy Toward Iran

REFERENCES

• A. NSC 5821/1
• B. OCB Report on NSC 5821/1, dated December 11, 1959
• C. NSC Action No. 2170
• D. Memo for NSC from Executive Secretary, same subject, dated March 16, 1960
• E. NSC Action No. 2215
• F. NIE 34–60
• G. NSC 6010
• H. Memo for NSC from Executive Secretary, same subject, dated June 27, 1960
• I. NSC Action No. 2256¹

The National Security Council, Mr. Fred C. Scribner, Jr., for the Secretary of the Treasury, and Mr. Elmer B. Staats for the Director, Bureau of the Budget, at the 449th NSC Meeting on June 30, 1960 (NSC Action No. 2256–a and–b):

a. Discussed the draft statement of policy on the subject contained in NSC 6010; in the light of the views of the Joint Chiefs of Staff thereon, transmitted by the reference memorandum of June 27, 1960.

b. Adopted the statement of policy in NSC 6010.

The President, on this date, approved NSC 6010 for implementation by all appropriate Executive departments and agencies of the U.S. Government, and referred it to the Operations Coordinating Board as the coordinating agency.

James S. Lay, Jr.
Executive Secretary

[Here follows a table of contents.]

[Enclosure]

STATEMENT OF U.S. POLICY TOWARD IRAN

General Considerations

Introduction

1. Iran’s strategic location between the USSR and the Persian Gulf and its great oil reserves make it critically important to the United States that Iran’s friendship, independence and territorial integrity be maintained. Since 1953, Iran has been regarded in the area as a symbol of U.S. influence, and its reversion to neutralism or its subjection to Soviet control would represent major psychological setbacks/with repercussions for U.S. prestige throughout the Middle East and Asia.

2. Serious threats to U.S. interests in Iran arise from Iran’s vulnerability to Soviet pressure and influence and the widespread dissatisfaction of many Iranians with domestic conditions. The growing inflation and financial difficulties pose new threats to the country’s stability. The internal situation has continued to deteriorate and the possibility of internal upheaval cannot be dismissed.

Internal Strengths and Weaknesses

3. The key problem is the extent to which the largely personal regime of the Shah of Iran, with which the United States is now closely identified, can cope successfully with Iran’s growing internal problems. Current dissatisfaction is based in part on awakening popular expectations for reform of Iran’s archaic social, economic and political structure and a concomitant disillusionment with the Shah’s limited efforts to date to move in this direction with resolution and speed. Because of the Shah’s personal direction of governmental affairs, much criticism continues to be directed toward him. Failure of the Shah to progress toward required socio-economic reforms is creating additional opportunities for Soviet subversion and is adversely affecting the achievement of U.S. objectives in Iran.

4. Principal support for the Shah comes from large landholders and their conservative business associates, the top ranks of the government bureaucracy, and senior military officers. The Shah has made a particular effort to maintain and intensify the loyalty of the armed forces, especially the Army, which he regards as a main source of stability and strength. The dependability of the Army’s support of the Shah, however, remains somewhat uncertain. Despite the loyalty of many ranking officers, the Army includes many younger officers who find almost intolerable the widespread incompetence and corruption of their superiors.

5. The growing educated middle classes constitute the basic opposition to the Shah. Increasing numbers in these groups find Iran’s antiquated feudal structure and the privileges of the ruling classes anachronistic in a modern world. The business activities, general irresponsibility, and in some cases outright corruption of some members of the royal family, civil service, and high military command, have further contributed to growing popular discontent. While this dissatisfaction has not yet coalesced into a vigorous, coherent opposition to the Shah’s regime, it continues to be close to the surface and could lead to violence or attempted coups.

6. The Shah himself typifies both the strengths and weaknesses of the present regime. His genuine desire to lead his country to prosperity and stability has conflicted with his own sense of insecurity and fear, leading to vacillation over necessary reforms. The Iraqi coup increased the anxiety of the Shah and other leaders and apparently convinced the Shah that he must take long overdue action toward basic reforms. He has already taken some steps in this direction. Recent events in Korea and Turkey have undoubtedly added to the present concern of the Shah and other government leaders. While there are many differences between the Iranian situation and those prevailing in Korea and Turkey and earlier in Pakistan, prior to the changes of government in those countries, existing internal pressures for reform have unquestionably been heightened in Iran. An unpredictable juxtaposition of events could afford dissident elements an opportunity to precipitate a crisis in Iran.

7. However, there is a real question as to whether the Shah can or will take sufficiently dramatic and effective steps to insure his position and syphon off the growing discontent. To do so he must move forward in each of three fields: (a) gradual elimination of corruption, (b) social and economic reforms, and (c) modification of his present dictatorial role to allow some scope for the expression of opposition sentiment. He is unlikely to take sufficiently drastic action in all three of these fields if left to his own devices. But unless he does act, there may be an attempt by disaffected military and/or civilian elements to force him back into the role of a constitutional monarch. Eventually, if there are no substantial reforms of the Iranian political, economic, and social structure, the monarchy is likely to be overthrown.

8. If there were a revolt leading to internal disunity, or chaos, the Tudeh Party, largely ineffectual at present, would find a golden opportunity to add to disorder and perhaps to participate in a successor regime. The Kurdish and Arab minorities, while not a threat if internal stability is maintained, would probably seize upon any prolonged period of internal disorder as an opportunity, in the case of the Kurds to realize their submerged desires for autonomy or independence.

9. Despite the weaknesses of the Shah’s regime, the absence of any constructive, pro-Western alternative at present makes U.S. support of the regime the best hope of furthering U.S. interests in Iran. No matter how well-intentioned certain potential opposition leaders appear to be, they as yet lack the assets of the Shah and have no compensatory popular support. Moreover, a successor regime, despite any momentary popularity, would soon find itself faced with the same difficult and complex problems as those which now confront the Shah and his government.

10. Thus the problem confronting the United States is how best to influence the Shah to move constructively. A problem confronting the Shah, however, is the extent to which his regime can move in the direction of satisfying popular demands without alienating conservative elements on which traditional support of the regime rests. Even though the Shah has become more anxious since the Iraqi coup and the events in Korea and Turkey and has implied his interest in U.S. advice, he has been in the past notoriously sensitive to criticism and impatient with U.S. efforts to convince him of the need for reform. Moreover, the Shah probably believes that if pressed too hard by the United States to take measures not to his liking, he could always revert to a neutralist foreign policy and accept Soviet aid. Hence U.S. pressure, if carried too far, might prove counterproductive. On the other hand, unless tactfully prodded by the United States where necessary, the Shah is unlikely to move sufficiently far or fast in time to forestall an internal upset. Thus the United States must maintain a delicate balance between pressure and persuasion.

11. Moreover, if it becomes apparent that the Shah is unlikely to be able to cope with Iran’s internal problems, and strong opposition develops, the United States cannot afford to be identified exclusively with a crumbling regime. Accordingly, it may become necessary for the United States to dissociate itself to the extent feasible from the Shah’s regime, and increase contacts with potential successors, recognizing that such dissociation would probably ensure the Shah’s downfall and that any successor regime might be less pro-Western in its outlook.

Present International Orientation

12. The present regime is disposed to be friendly toward the West and looks particularly to the United States for guidance and assistance. For example, Iran has taken a consistently pro-Western position in international forums. This pro-Western orientation is based primarily on motivations of self-interest on the part of Iranian leaders who see in it both security and material assistance for their country. A considerable body of Iranian opinion would, nevertheless, prefer Iran’s traditional course of neutrality between the major power blocs. The United Kingdom retains a considerable measure of influence in Iran despite deep distrust of British motives attributable to past interference in Iranian affairs.

13. After a period during which Irano-Soviet relations were outwardly correct, the Soviet Union began again in February 1959 to attack the Shah and the Iranian government in abusive and hostile terms. Subversive efforts have been intensified. Soviet attacks on Iran stem from the breakdown of talks on a non-aggression pact which was followed by the conclusion of the Irano-American Bilateral Agreement of Cooperation. Although the USSR may have believed that the propaganda campaign might cause early overthrow of the Shah’s government, the desired results have not been achieved. The Iranian Government has been seriously nettled by the propaganda barrage, but it has been unwilling to date to yield to Soviet pressures. The Shah has let it be known to the USSR that he would sign an agreement not to permit long-range foreign missile bases on Iranian soil in peacetime; he has refused the Soviet demand that he agree to exclude all missiles, including short-range tactical missiles.

14. Iran is deeply disturbed by pan-Arabism, both as a direct threat to its security and as a possible barrier to Iranian aspirations in the Persian Gulf area. Iran claims Bahrein and considers itself the logical heir to present British influence in the area. Iran is currently engaged in a campaign to woo the Persian Gulf Sheikhs, most of whom enjoy special treaty relationships with the United Kingdom. In recent months there have been increased tensions between Iran and Iraq over the use of and border delineation along the Shatt-el-Arab, a water artery leading to Iran’s principal Persian Gulf ports.

15. Iran’s relations with other Middle Eastern countries are generally good, especially with Turkey and Pakistan, her CENTO allies. Relations with Afghanistan, despite ethnic, linguistic and historical ties, are marred by Iran’s deep concern over Soviet penetration efforts in Afghanistan and a long-standing dispute over the waters of the Helmand River. Iran is cool toward India because of the latter’s somewhat heavy-handed attempts to convince Iran of the benefits of neutralism.

16. Iran has felt over-extended by its formal alignment with the pro-Western CENTO, which involved the abandonment of traditional neutrality without the greatly increased military aid which the Shah and military leaders anticipated. Although the Iranians accepted the American Doctrine on the Middle East, they did not believe it met their security aspirations.

17. There now appears no real prospect that the federation of Iran and Pakistan, or the “Aryan Union” (including Iran, Pakistan, Afghanistan and Turkey) as envisaged by the Shah, will materialize in the immediate future. Furthermore, there are many practical difficulties to integrating these countries on any but a “paper” basis. However, in the event that the character of CENTO should change, these proposals may come forward again.

Economic Problems and U.S. Aid

18. Essential Elements. Iran is currently faced with the economic and financial consequences of a steady expansion of public expenditures and private credit over the seven-year period since the fall of the Mosadeq regime. Military, welfare and economic development expenditures have risen more rapidly than has income from petroleum operations (which reached $260 million in 1959), other government revenues and foreign official financing. In the last two years private credit has also expanded sharply. As a result, prices rose about 10 per cent last year and foreign exchange reserves have fallen $110 million in the last two years. External debt has increased and Iran faces relatively heavy debt payments in the next few years. Nevertheless, if Iran were to adopt and to carry out sound fiscal and financial policies and to achieve reasonable efficiency in government administration, the country’s economic prospects would still be excellent and both a modest military effort and a reasonable rate of economic development could be maintained. The Iranians continue to profess an awareness of the need for improvement in economic planning and fiscal administration. They have attempted to establish better tax collection and credit controls and have obtained technical advice from U.S. and international sources. Although the problem is reported to be under active consideration, the Iranians have yet to develop a comprehensive stabilization program to deal successfully with their present difficulties. The United States has tailored its economic assistance to the Iranians so as to avoid encouraging expansion of Iranian programs beyond the country’s absorbative capacity. However, the financing provided from other foreign sources, including suppliers’ credits for economic development, has not been similarly tailored.

19. Although economic development expenditures are currently substantial, the development program has not achieved the desired political impact, because of a tendency to emphasize long-term projects, disorganization and corruption, delays resulting from administrative inefficiency, the Iranian propensity to view achievements in very personal terms, and, until recently, a failure to take steps to publicize results. The Seven-Year Plan Organization, which is improving with U.S. technical assistance, administers the development program and has laid out plans which would require sums substantially in excess of the amounts likely to be available from domestic resources. The Organization hopes to meet this shortfall through foreign loans, particularly from the United States and the International Bank.

20. Private foreign investment in Iran has, so far, been overwhelmingly concentrated in the petroleum industry. Since the enactment of a foreign investment law and conclusion of an investment guarantee agreement with the United States, modest beginnings have been made in other fields such as vehicle assembly and tire plants. Further opportunities for private investment may lie in the petrochemical industry, which might use presently wasted natural gas, and in food processing.

Military Problems and U.S. Aid

21. The Role of the Military. Militarily, Iran is dangerously and directly exposed to Soviet expansion. The Army is only capable of maintaining internal security and offering very limited resistance to aggression by a major power. The Air Force and Navy are weak and ineffective. If the combat effectiveness of the Iranian armed forces is improved and the forces partially redeployed in accordance with U.S. strategic concepts, they could make an increased contribution to Middle East security by providing, with outside support, a delaying capability against Soviet forces, initially from positions in the Elburz Mountains along Iran’s northern frontier.

22. Commitments. In January 1958, the United States, to indicate its continuing interest in the area, offered additional military assistance in support of the Iranian armed forces at a cost of approximately $14 million. On July 19, 1958, the United States indicated to the Shah its agreement that in the light of developments in Iraq, Iranian armed forces should be brought up to agreed operational strength and to a high level operational efficiency. U.S. deliveries of a wide range of equipment and additional training assistance were accelerated. The United States also indicated that it was prepared to give sympathetic and prompt considerations to Iranian needs for economic assistance. The Shah was pleased with this commitment, but was dissatisfied with U.S. recommended levels for the Iranian armed forces.

23. On January 12, 1960, the Shah forwarded to the President a list of military requirements with which to modernize his armed forces. After study, it was determined that the provision of such equipment would cost in the neighborhood of $600 million; the present and projected level of U.S. military assistance is sound and represents as much as can be effectively absorbed by the Iranian armed forces; and any appreciable increase would adversely affect other military assistance programs. The Shah has been given no new commitment but has been assured that we will bear in mind his desire for modernization in developing future programs.

24. The Shah’s preoccupation with military matters, as well as his neglect of adequate economic and social reform through his concentration on such matters, has created difficulties for the United States as well as considerable urban discontent. The United States is confronted with a continuing major problem in attempting both to dissuade the Shah from embarking upon excessive military programs and, at the same time, to encourage Iran’s participation in CENTO through assistance to the Iranian armed forces.

Impact of U.S. Policies and Programs

25. U.S. policies and programs are the determining factor in the Shah’s orientation toward the West. Indicative of the importance accorded U.S. policy as a factor in Iran’s internal political situation are the persistent efforts of various opposition groups to solicit U.S. support. Concrete U.S. aid has thus far offset the political impact of Soviet aid offers. U.S. political and financial assistance are thus important, if not essential, pillars supporting the Shah in his present paramount position. U.S. military aid is important both as a means of maintaining internal security and as a measure of U.S. support for Iran’s participation in CENTO. Economic aid and the technical assistance program are evidences of U.S. interest in the welfare of the general populace.

26. However, without internal reform, neither U.S. military nor economic aid is likely to suffice to maintain a stable, pro-Western Iran.

[Here follow the Objectives and Policy Guidance sections of the paper which, aside from a few minor editorial revisions, were unchanged from NSC 5821/1; see Document 257. Following those is the Financial Appendix from NSC 5821/1.]

0. Source: Department of State, S/S–NSC Files: Lot 63 D 351, NSC 6010. Top Secret. Copies were sent to the Secretary of the Treasury, the Director of the Bureau of the Budget, the Chairman of the JCS, and the Director of Central Intelligence.
1. See footnotes 1–4 and 6, Document 291.