127. Report by the Chairman of the Iran Task Force (Talbot)0
Washington, October 14,
1961.
REPORT BY CHAIRMAN OF IRAN TASK FORCE
Mr. Bundy’s memorandum of August 7,
1961,1 reflected the President’s concern as to whether the
United States was doing all that it could or should in pursuit of the
policies laid down in the original Task Force report on Iran. Since receipt
of this memorandum, the Task Force has met a number of times. Ambassador
Holmes has returned for
consultation to participate actively in the Task Force’s work. There has
been a full and free exchange of opinions and analyses, not only of the
present situation but of possible courses of action.
It has emerged from the Task Force’s deliberations that there is no
significant divergence of opinion as regards United States objectives
vis-à-vis Iran. To prevent Soviet domination of Iran must be our immediate
and overriding objective. This requires the continuance in power of a
pro-Western regime, for the ultimate alternative is a weak neutralist
government which could not withstand Soviet pressures and maintain Iran’s
independence. Maintenance of the pro-Western regime has been achieved and is
not immediately endangered. Prime Minister Amini has succeeded in overcoming a near-crisis situation
and thus continuing Iran’s pro-Western policy. He has, however, been unable
fully to pursue his program of vigorous reform measures designed to lead to
a more permanent resolution of the political weaknesses of Iran.
He has had to take into account the necessity of retaining the confidence and
support of his somewhat reluctant monarch. He has been faced with political
pressures from the fanatical Mosadeqist opposition,
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and the sniping of ambitious and discontented
conservative leaders. The implementation of the economic stabilization
program has intensified these difficulties by infringing the interests of
various special groups. The basic inadequacy of the administrative tools
available to him, which can be improved only slowly, have further limited
his freedom to action.
The first Task Force report stressed that the United States must actively and
vigorously, albeit discreetly, press for political, economic, social and
institutional reforms in Iran which will provide the indispensable
foundation for true and lasting political-economic development. It is
generally agreed that the Third Development Plan scheduled to begin in
September 1962 must be the primary vehicle to initiate the fundamental
political and economic progress needed in Iran. It is equally agreed that
the intervening period will be one of critical importance in laying the
necessary foundation for the implementation of this third Five-Year
Plan.
I have found a consensus within the Task Force that additional United States
resources will be required to enable the Amini Government, or a like-minded successor, to surmount
the political and economic difficulties which it will face between now and
the initiation of the Third Development Plan.
We have agreed with the Agency for International Development on the general
levels of United States financial resources required for this purpose, and
action is going forward to make them available through appropriate means and
at the necessary times. The Ambassador, with the advice and assistance of
the Country Team, has worked out a Military Assistance Plan for FY 1962–67 which he believes to be militarily
and economically consonant with basic United States interests and through
which we can hope to maintain our influence with the Shah and hence be in a
position to attain our objectives. The plan is currently being studied by
State and Defense in the context of a review of our over-all MAP policies.
A great deal of the Task Force’s efforts have been devoted to discussing
alternative means to ensure that the introduction of these resources best
accomplishes United States objectives, not only our immediate aim of
maintaining a pro-Western government but our longer-term goal of laying the
political and economic groundwork for the successful implementation of the
Third Plan. Basically, two schools of thought emerge: One advocates an
openly activist role for the United States; this would involve the tying of
United States aid to formal and perhaps public commitments on the part of
Iran to perform certain actions designed to correct specific deficiencies
and weaknesses in the political and economic fabric of Iranian society. The
countervailing view holds that the same objectives, given the complexities
and fragility of
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Iranian society,
would be better accomplished by the private and discreet exercise of United
States influence and pressure.
As Chairman of the Task Force, I have carefully considered all of the
arguments presented by the members of the Task Force, and have carefully
weighed the potential implications of each against the realities of the
Iranian scene as presented by our Ambassador, the other members of the
Country Team, and our own Iranian experts. I have consulted closely with the
Secretary and my other colleagues in the Department. I have concluded that
the risks to the maintenance of a pro-Western regime in Iran posed by
insisting upon formal and overt United States conditions for the giving of
aid are greater than we could prudently accept. Either approach is fully
consistent, in my opinion, with the philosophy of the new aid program.
However, the first, by seeking the long-term objective through too direct an
approach, runs too great a risk of upsetting the delicate balance which
Prime Minister Amini has succeeded in
creating and maintaining. Given the framework within which the Iranian
Government must operate, counter-pressures would be produced which could
easily result in the loss of Iran to the West.
In my opinion, the correct course for the United States to follow under the
present circumstance is to move towards its goals by combining vigorous but
discreet political and economic advice with the minimum economic assistance
essential to enable the Amini
Government, or a like-minded successor, to survive and to move forward. The
judicious and vigorous application of encouragement, support and pressure
through multiple channels can be effectively directed to influencing those
areas where progress is realizable at any given moment rather than relying
on formal assurances or promises which may prove to be empty. In this
context, United States or international assistance will be utilized to
stimulate self-help moves on the part of the Iranian regime. Influence
exerted in this way can be far more effective than open threats that we will
cut off aid to Iran.
As Iran moves towards the implementation of the Third Plan, we will wish to
draw in multilateral influences which can be brought to bear through an
international consortium of lenders. We hope by then there will have been
enough progress to permit the more overt exercise of outside influence,
perhaps to the point of establishing some public contract arrangement with
the Iranian Government in return for the major international assistance
which will then become necessary. In the interim, our influence in the
direction of helping Iran move from the present delicate stage to a position
of readiness to enter upon the Third Plan can best be brought to bear
quietly. Now we must act unilaterally and discreetly.
Ambassador Holmes fully concurs in
this course of action, and believes that the additional instruments of
pressure and influence which
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we
have worked out with the AID, and which he
has requested in the field of Military Assistance, will be the best means to
make further progress toward our objectives.
Set forth as Annex “A” are the basic elements of the action program which the
Ambassador has pursued in consequence of the Iran Task Force recommendations
of May, and which he proposes to intensify during the period between now and
the end of the Second Development Plan. In doing so he proposes specifically
to address himself to the goals set forth in Annex “B”.
This memorandum is in response to Mr. Bundy’s memorandum of August 7, 1961.
Annex A
ACTION PROGRAM UNDERWAY
Pursuant to the Iran Task Force Recommendations approved by the President
on May 16, 1961,2 and under
the direction of Ambassador Holmes, the following progress has been made as a result
of the continual encouragement, support, and pressure exerted by the
United States Government through all its various instruments:
1. Reversal of Trend Toward
Disunification
The new government has survived all the early challenges to its power. It
has halted a twenty-year trend to disunification and is actively laying
the groundwork for meaningful political, social, and economic advance.
The guidance, support and pressure of the United States have been an
indispensable element in these developments. What remains is to reverse
long-term divisive trends and lay the foundations for a new political
synthesis.
2. Movement of Shah Toward
Constitutional Role
Although the Shah continues to exercise direct control over defense, he
has come to share with the Prime Minister control over foreign
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affairs, the internal security
functions of the Ministry of Interior and the secret police, and in all
other fields of policy-making and administration has gone along with the
Prime Minister. The Prime Minister exercises more freedom of action than
has any of his predecessors since Mosadeq, although he has frequently
admitted to the Ambassador that the Shah sometimes acquiesces only with
reluctance. Largely as a result of United States representations the
Shah has withdrawn publicly and privately from the politically exposed
position which he has occupied for many years.
3. Expansion of Base of Political
Support
When Amini took office, he was
threatened with isolation and early collapse through the loss of the
Shah’s support, as well as the opposition of the military and urban mob.
Amini is not a charismatic
leader, but he has not only gained the support of the Shah, but has
averted the danger of a military coup and has earned the cautious
cooperation of the conservative and landowning elites. Although the
Prime Minister is under continuous attack from some ambitious
conservative leaders and some prominent business men who have been hurt
by austerity programs, there is little unity in this opposition.
4. Fragmentation of National
Front
In spite of the antipathy of the Imperial Court and the Army toward
groups sympathetic to the ideas of former Prime Minister Mosadeq, with
our encouragement the Prime Minister has made repeated personal efforts
to enlist the support, or at least the toleration, of this embittered
opposition grouping. However, the Mosadeqist leadership is still
unwilling to settle for anything less than a controlling voice in the
government, implying almost certainly a neutralist foreign policy, the
exile of the Shah, and the denunciation of the 1954 Consortium Oil
Agreement. In the light of this attitude, Amini has firmly but gently prevented this group from
extending its organization or from organizing public demonstrations. It
is still hostile and dangerous, particularly among students, but its top
leaders have admitted that it is increasingly subject to internal
quarrels, that its loose organization is falling apart, and that it has
been unable to come up with concrete political or economic programs.
5. Reduction of Iranian Military
Establishment
The size and expenditure levels of the Iranian military establishment
have been held constant for the first time in a decade, and the trend
toward increasing size and expense has been halted. For the first time
in more than a decade, more senior officers are being retired than are
being promoted, and a scheduled plan to weed out the incompetent top
officers of the military establishment is well under way.
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6. Maintenance of Pro-West
Posture
In the face of a massive subversive Soviet propaganda campaign and recent
Soviet threats, the Shah and the Prime Minister have continued to stand
firm and to defy the USSR, despite the
absence of strong support for Iran’s present pro-Western alignment from
any important Iranian power element other than the Army. Iran has
behaved sensibly and helpfully in the delicate Kurdish, Kuwaiti, and
Afghan-Pakistan crises.
7. Popularization of
Government
The Prime Minister, unlike his predecessors, and despite the strain on
his physique, is daily mingling with and speaking to groups of laborers,
bazaar merchants, farmers, and students, attempting to convince them of
his interest in their welfare and of the wisdom of the government’s
policies. This technique has probably been the reason for his success in
holding off demands for wage increases, credit, and governmental
expenditures which would otherwise have wrecked the difficult program of
economic stabilization and austerity. Public trials of corrupt high
officials have begun, strictly within the law, and the incidence of
corruption in high levels of the administration has dropped very
sharply. Through the press and radio, the Third Plan frame has been
presented to the public for discussion and comment. A sensible though
modest land distribution program of private estates has begun, and a
major drive against illiteracy has been launched. With the assistance of
PL 480 resources, winter relief
programs for the unemployed are being worked out.
8. Adjustments in the Stabilization
Program
Embassy and USOM have recognized the
need for adjustments in the stabilization program given the current
situation affecting the economy. Joint discussions with GOI officials have identified the elements
of a revised stabilization program including: (a) revision of the credit
ceiling, (b) a tightening of administrative controls in the banking
system, and (c) establishment of priorities in the extension of further
credit. There is informal agreement with IMF representation on both the need for and elements of a
revision of the stabilization program. A letter from the IMF has been sent to the GOI (October 4) offering to consult
formally on a revision of the program and preparatory discussions by
United States representatives in Iran indicate that the GOI will invite further IMF review and consultation.
9. Establishment of Consolidated
Budget and Budget Review Process
Following intensive consultations with United States officials, the Prime
Minister has ordered the establishment of a consolidated budget
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and an improved budget review
process. Plans to this effect have been completed by the Harvard Group
and are now before the Cabinet. Separate interdepartmental working
groups in the Iranian Government are preparing (a) a consolidated budget
call and format for the Iranian fiscal year 1341 (March 1961–March 1963)
which includes both the development and operating budgets of GOI agencies, (b) institutional changes for
improved budget and fiscal controls, (c) forward projections of revenue
prospects, and (d) new tax measures which could be immediately
implemented. United States representatives in Tehran have made it
absolutely clear that Iran must achieve a balanced operating budget for
1341 in order to accommodate to the early planned phase-out of emergency
United States budgetary support.
10. Financial Planning
United States and Iranian officials have reviewed in detail the financial
requirements and resources of the GOI to
meet obligations for current on-going activities. The result of this
review has pared GOI claims for external
assistance for both the operating and development budgets from $130
million to a hard core requirement of $40 million ($15 million for the
1340 budget and $25 million for completion of Second Plan financing).
Provision of this assistance is required if current progress affecting
social and economic reforms is to be sustained.
In this field the United States has also pressed the GOI to review its external debt to
determine whether consolidation and re-negotiation of short-term
creditor claims is possible. We expect to move forward on this issue in
concert with the IMF and the IBRD.
11. Implementation of Measures
Essential to Completing the Second Plan and Launching the Third
Plan
General areas requiring special preparatory action by the GOI in order to effectively mount the Third
Development Plan have been jointly reviewed by Iran and United States
representatives in Tehran. These areas were also reviewed with the
IBRD in Washington during July 1961
by an Iran delegation with United States observer participation. In line
with this exercise more specific prerequisite measures are now in
preparation including: (a) identification of special statutory changes
and authorizations which will be required, (b) analysis of the
components of the Second Plan which will carry over into the Third Plan
period, (c) new project development, including initiation of special
surveys, (d) new institutional devices required to initiate Third Plan
programs, and (e) review of the implementation potential of line
ministries for executing new programs including prerequisite criteria
affecting central program and fiscal control which have to be met prior
to phased transfers of such responsibilities to line ministries. The
Harvard Advisory Group is playing a major role in the implementation of
these measures.
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A further
review of progress of required Third Plan measures is already scheduled
with an IBRD team prior to the end of
this calendar year.
12. Contingency Planning for Economic
Distress
Loss of confidence as a result of recent political disturbances had
adversely affected levels of private economic activity with resulting
slack in investment and employment. Part of this adjustment is healthy
in eliminating wasteful speculative activities. However, restoration of
private confidence is an essential element of forward economic and
political progress. Interim measures addressed to this problem and now
underway include: (a) initiation of labor intensive projects in the
rural sector utilizing Food for Peace under a Title II, Section 202
program, (b) continuing joint review and appraisal of unemployment
levels, and (c) interagency development of emergency labor intensive
projects to be implemented in case of need for further special actions.
The proposed revision of stabilization objectives also addresses this
problem.
13. Long-Range Problems
Although the accomplishments of the past five months represent effective
progress, the long-range problems of Iran remain deeply rooted and their
resolution may require generations to achieve fully.
Annex B
GOALS OF UNITED STATES ACTION
Having helped the Amini Government
to avert early dangers, the United States will now press toward the
following long-range goals, the achievement of which will strengthen
Iran against communist pressures.
- 1.
- The maintenance of an Iranian regime friendly to the West.
- (a)
- Maintenance of the Shah’s faith in his own mission and in
the value of his pro-Western and anti-communist
orientation.
- (b)
- Withdrawal of the Shah from an exposed position of public
responsibility for actions of the administration.
- (c)
- Progressive delegation by the Shah to capable Prime
Ministers of authority formerly wielded directly by
him.
- (d)
- Withdrawal of the Shah’s family, private estates, and
entourage from entanglements with private business
activities.
- (e)
- Dilution of the Shah’s extreme distrust of independent
political leaders and of his vulnerability to
sycophancy.
- (f)
- Direction of the Shah’s attention away from technical
military matters and toward important internal social and
economic problems.
- 2.
- Bolstering the Iranian will and ability to resist Soviet
pressures.
- (a)
- Maintenance of a firm and non-provocative attitude toward
the USSR.
- (b)
- Reduction of neutralist sentiment.
- (c)
- Continuation of internal security and increased respect
for minority rights.
- (d)
- Continuation of Iranian membership in CENTO.
- (e)
- Settlement of outstanding disputes with neighboring
non-communist states.
- 3.
- Broadening the political base of the Iranian government, halting
disunifying trends, and developing channels of political
articulation outside the existing elites and would-be elites.
- (a)
- Inclusion of moderates of all types in the policy levels
of the administration.
- (b)
- Recognition of labor as an independent and respectable
political force.
- (c)
- Practical and non-destructive progress toward the
distribution of landed estates to the peasantry, peasant
education, and regulation of the landlord-tenant
relationship.
- (d)
- Governmental appeals for support directly to non-elite
groups.
- (e)
- Massive adult education campaigns.
- (f)
- Strict prosecution of high officials guilty of
corruption.
- (g)
- Improvement of the standards of the civil service and the
judiciary.
- 4.
- Developing the Iranian economy.
- (a)
- Completion of the essential elements of the Second
Plan.
- (b)
- Implementation of a sensible Third Plan, financed by an
international consortium, and directly supported by United
States technical assistance.
- (c)
- Enforcement of the Economic Stabilization Program,
appropriately modified.
- (d)
- Improved control and direction of government finances and
private banking and credit.
- (e)
- Revision of the tax and tax collection apparatus toward
increased revenues and the promotion of social
justice.
- (f)
- Continued reliance on private enterprise as a major part
of the development effort.
- (g)
- Improvement of relations with Western oil interests and
the maximization of oil revenues.
- 5.
- Improving the capability and popular acceptability of the Iranian
military establishment.
- (a)
- Reduction of the size and the local currency costs of the
Iranian military establishment.
- (b)
- Improvement of its morale and efficiency through MAP.
- (c)
- Elimination of surplus and inefficient senior
officers.
- (d)
- Continued and expanded civil action and public relations
programs.
- (e)
- Expansion of vocational training within the armed
forces.
- 6.
- The transformation of the urban middle class into a constructive
force.
- (a)
- Awareness on the part of its leaders that they and the
Shah share the same basic goals.
- (b)
- Willingness to share in responsibility for governmental
policies which they cannot completely control.
- (c)
- Appreciation of the practical difficulties of
government.
- (d)
- Greater awareness of the communist threat.
- (e)
- Dilution of the tendency toward xenophobia.
