Foreign Relations of the United States, 1961–1963, Volume XVII, Near East, 1961–1962

130. Memorandum From the Assistant Director of the Bureau of the Budget (Hansen) to the Assistant Secretary of State for Near Eastern and South Asian Affairs (Talbot)⁰

Washington, October 18, 1961.

SUBJECT

• Comments on Task Force report: Iran (October 9, 1961)¹

As I promised at our last Task Force meeting, the following are comments on the draft report.

General Issues:

1. U.S. Position vis-à-vis the Shah. The draft paper, and much of the Task Force discussion of it, raises a serious question whether we are in fact receding from the Task Force conclusion of last May that “we, ourselves, can no longer afford to rely so heavily on the Shah.” The position taken at that time, which was considered by the NSC and the President in adopting the new policy recommended by the Task Force, was based on a realistic appraisal of the Shah’s inability or unwillingness to provide the leadership required for progress which is crucial to U.S. interests in Iran. At best he will only acquiesce—under pressure—to rapid and fundamental reform; and his strategy for maintaining his power and the base on which the power rests will undoubtedly remain in conflict with objectives that the U.S. must seek in Iran over time.

It has been recognized by all members of the Task Force, throughout our work beginning in May, that the Shah is still the center of power in the present Iranian regime. It was also understood that the Shah did not especially like Amini and that U.S. efforts to bolster Amini and his program would have to swim upstream insofar as the Shah was concerned. It was with this understanding of the problem that the Task Force, and the U.S. Government under the new policy, determined that the outlook in Iran required us to “take vigorous action to assist [Amini]² in stabilizing the situation and then in building a new political synthesis through a broad program of moderate reform,” and that “In so doing, we must discreetly help to protect him against … the Shah’s traditional predilection for undercutting prime ministers as potential threats to his own power.”

Much has happened since May. The U.S. has taken some vigorous actions which have helped Amini to stabilize the situation. Whether the downward trend has actually been permanently halted or reversed is another question which I would like to comment on below. But if we adopt the apparently prevailing assumption that there has in fact been a reversal, the thrust of our policy toward Iran would require that we then proceed with “vigorous action … in building a new political synthesis.”

It is clear to me from all discussions that everyone concerned is dedicated to accomplishing this task at the earliest time and by all means that appear feasible. It is clearly a difficult task. But I am basically concerned that the overriding emphasis of the October 9 paper on the obstacles to action arising from attitudes of the Shah, tend seriously to shift our focus from the recently-declared need for action in achieving significant progress through the Amini program, back to the previous preoccupation with the dangers of displeasing the Shah.

Long experience in dealing with the Shah and his historical manner of directing the dialogue toward every type of real and imagined problem except the lack of development and reform, suggests that we are unlikely to achieve our objectives in Iran unless our own internal policy considerations stay focused sharply on the question of what we can and must do rather than what we cannot do. We must still look, of course, to our Ambassador and his country team for judicious adaptation of the necessary actions to the situation as it evolves on the ground in Iran. No one can fail to recognize that their job is an especially difficult and delicate one in Iran, which cannot always proceed with the same degree of clarity and directness which should characterize the basic policy guidance from which they work. Recognizing the severe difficulties we face in dealing with the problems in Iran, the thrust of our own policy statements should focus heavily on our striving to make what is possible correspond to what is desired, rather than vice versa.

It is in this light that I am uneasy about the heavy emphasis of the current paper on the primacy of the Shah in determining our approach to Iran.

2. Characterization of Present Situation. The October 9 report does not clearly characterize for the President our current assessment of the situation in Iran. However, it implies that there has been a reversal of the downward trend of political and economic developments which prompted the first Task Force report. It is difficult to discern such a reversal or the beginning of any real upward trend in the current situation which merits an additional tranche of emergency economic aid without additional actions called for on the part of the Iranian Government.

I believe that any report to the President should be quite explicit on our current assessment of the situation. Bob Komer and I suggested in our paper of October 3³ that it be characterized roughly as follows:

a. Serious economic disruption was avoided during the spring and summer by prompt U.S. action to obtain additional financial resources for Iran. However, it appears that we are not yet out of the woods on this score as Iran faces new difficulties in the fall and coming winter.

b. Extreme deterioration of the political situation has been stemmed by the Amini regime, and possibilities of a right-wing coup as well as a National Front takeover have been successfully averted, unless new economic crises give the whole picture another turn for the worse.

c. Amini, contrary to expectations, does not now show the bright promise of rapidly and dramatically launching programs which will mobilize the forces necessary to achieve decisive economic recovery and the clear beginnings of a new political synthesis.

d. There are, however, possibilities for improvement in both the economic and political situations; these will probably require: (1) more energetic and deliberate actions on the part of the Amini regime, and, as a means thereto, (2) a more active program of advice, assistance and overt activity by the U.S. in Iran.

It is in the context of this assessment of the situation that a report on action taken and proposals for future steps by the U.S. should, in my opinion, be presented to the President.

3. General approach of the U.S. in the immediate future. The proposal which Bob Komer and I have made reflects in essence a judgment that a change in the tactics of providing further economic aid would be consistent with the requirements in Iran and with the thrust of our existing policy.

Given the apparent need of the Amini government for assistance (financial and political) in overcoming some of its critical weaknesses, we have asserted that it would be desirable to place the next tranche of economic assistance on a basis which will give the maximum push to the fundamental economic actions which must be pursued soon. This would mean bringing other sources of aid into the picture at this stage and placing some open and explicit conditions of an economic nature on whatever assistance we provide. It means also a stepped-up effort in the political field. We urge, in essence, a package action program which would require vigorous U.S. leadership to succeed.

The revision of the Stabilization Program is viewed as a prime vehicle for economic aspects of this “package” approach.

The proposal to dramatize this approach—to make it overt—and to make it multi-national was intended to underscore the seriousness which we wanted the Iranian Government and other countries to attach to U.S. expressions of interest and to the assistance rendered. We are concerned about the possibility of falling back to a “bail-out” approach, which might buy a few more months of time in a manner which sacrifices a crucial opportunity for pushing ahead on the fundamental problems.

The high-level team visit to Iran is not necessarily indispensable to this new approach. While it was our impression from the information at our disposal that such a course might be desirable, there is no real reason why the necessary actions cannot be taken under the leadership of Ambassador Holmes and the country team. The important thing, in our view, is to develop and vigorously pursue a program of joint action in which the efforts of the U.S., Iran and other parties concerned come to grips with the basic problems underlying the recurring crises.

As was mentioned in the last Task Force meeting, the country team is clearly expected to initiate proposals for policy action and to evaluate the risks of alternative actions. The decision, however, as to the degree of risk to take is a function of evaluation and determination by the Chairman of the Task Force, and ultimately by the President. Therefore, an action program which calls for imposing conditions on the Iranian Government as a requisite to additional financial assistance, and the promulgation and urging of a political action program involving some uncertainties as to efficacy and risks vis-à-vis the Shah, could appropriately be recommended by the Task Force on the basis of a real need for such action.

Specific Comments:

The characterization of the action program underway, while it reflects progress, indicates that this action will be continued on the basis of “persistent discreet political and economic advice with the minimum economic assistance essential to enable the Government to survive and move forward.”

No one can argue convincingly against using discretion in the manner in which we seek to achieve our basic objectives in Iran—it is like arguing against sin. On the other hand, discretion need not rule out placing some difficult but legitimate conditions on continued economic assistance; and it need not rule out coupling these actions with explicit advice and overt assistance in the political area to the extent this is acceptable to the Amini regime, which must still be characterized as the “best, even the last, opportunity for a moderate evolution in Iran.”

The action strategy proposed should not merely consist, as pages 11 and 12 of the draft report indicate, of a middle ground between hypothetical extreme situations. The extremes to be avoided, as they are described on these pages, appear to me to be “straw men.” (This applies particularly to the last full paragraph, which so substantially over-characterizes what has been proposed that it loses most of its value as a part of the analysis.)

Therefore, with regard to the Immediate Requirements part of the paper, I would suggest a substitution of this with the economic and political action programs in our memorandum of October 3, deleting, however, the proposal to send a special AID/IBRD/IMF team to Iran and substituting therefor a proposal that the country team, in concert with an IMF team and in coordination with the IBRD, institute the program delineated under that paragraph.

I would further revise the recommendations to provide $40 millon of grant and loan aid to include a proposal to the effect that the Iranian Government be urged to explore (with U.S Government support) the possibility of further interim assistance from the West Germans, the UK, and the oil companies preparatory to the inauguration of the Third Plan.

The above comments would call for a significant recasting of the draft report (which I hope will occur whether or not you accept all of the specific proposals we have set forth or embrace the reorientation to country team activities that we propose).

Kenneth R. Hansen

0. Source: Department of State, Central Files, 611.88/10–1861. Secret.
1. Reference is to a draft of the Task Force report circulated at the Task Force meeting on October 9. A copy is ibid.,NEA/GTI Files: Lot 66 D 173, Task Force on Iran. The final Task Force report, dated October 14 and approved by Secretary Rusk but not sent to the President is printed as Document 127.
2. Brackets in the source text.
3. The paper, a memorandum for the Chairman of the Task Force on Iran, entitled “New Action Program for Iran” and dated October 3, is attached to a note from Komer to Talbot dated October 4 that identifies Komer and Hansen as the paper’s authors. (Department of State,NEA/GTI Files: Lot 66 D 173, Task Force on Iran)