26. Memorandum of Conversation0


This meeting was held in Ambassador Harriman’s office at 11:00 a.m. on March 27. It was attended by:

  • Ambassador Harriman
  • G. Lewis Jones (NEA)
  • Phillips Talbot (NEA Consultant)
  • John W. Bowling (Iranian Desk Officer, GTI)
  • L. Dean Brown (EUR)
  • George C. McGhee (S/P)
  • Evan M. Wilson (S/P)

Ambassador Harriman said that he had been greatly impressed by the progress which he had noted in Tehran after an absence of about ten years. The people looked better, the governmental administration was improved although there is still corruption, and the Iranians were doing better planning. The Shah was convinced that Iran’s future lay only with the West and that it could not adopt a neutral position like Afghanistan without eventual Communist take-over. The major economic problem at the moment was due to lack of control of program expenditures. The private sector had gone ahead more rapidly than expected which produced a foreign exchange deficit. Some $40 million of cash support was needed to tide them over until their Third Plan starts, otherwise the development program would have to be cut back.

In reply to a question from Mr. McGhee, Ambassador Harriman said that he had not felt that there was an immediate prospect of a crisis [Page 55]in Iran. There are, however, a number of serious internal problems which require political, social and economic reforms. We cannot compel the Shah to undertake these reforms but Mr. Harriman believes that if we exert our influence progress can be made.

Ambassador Harriman thought that we should make up our minds as to the kind of aid, economic and military, that we will supply to Iran and then sit down and discuss these plans frankly with the Shah.1 Clearly we would not be able to give the Shah everything he wants but if we can give him reasonable confidence in our nuclear support and some modern equipment even with reduced forces, he could be reasonably satisfied. We should be able to convince him that he should concentrate more on his economic and social problems. Even if we are going to cut our military aid or defense support, we should tell the Shah so frankly. The Shah believes Iran should have a larger share of the world oil market, particularly as compared to Kuwait.

Ambassador Harriman expressed confidence that Iran has the resources and manpower to break through the modernization barrier. The Shah is more mature and confident than he was ten years ago but he feels left alone and needs encouragement. He does not have many good people around him whom he can trust. Ayub’s recent visit to Tehran had an excellent effect on the Shah.

With respect to a possible reduction of tensions between Iran and the Soviet Union, Mr. Harriman thought that we should not oppose it so long as it does not go too far. A pledge of no foreign missile bases would be acceptable but the Shah said he would not make a commitment not to have any foreign bases on Iranian soil nor would he sign a non-aggression pact with the USSR. The latter would result in Iran’s being forced out of CENTO.

Mr. Harriman thought we should work closely with the Iranian planners and should encourage them in such fields as land reforms, improved tax collection and stamping out corruption, and also in establishing the right kind of effective fiscal controls. Under-employment is a problem which should be dealt with and the encouragement of reforms should be handled firmly but not aggressively. When Ambassador Julius Holmes arrives in Washington, Mr. Harriman would like to discuss these problems with him.

  1. Source: Department of State, PPS Files: Lot 67 D 548, Chronological File Jan-Apr 1961. Secret. The source text bears no drafting information.
  2. On March 19, Harriman had offered these comments on Iran: “Shah is at the moment our only hope of stability with pro-West policy. Neutrality in Iran would mean Communist takeover.” Harriman expressed his belief that the “Shah should be supported, dealt with frankly, and not treated as an unwanted stepchild. But he must be encouraged and pressed in social progress in all fields, much of which he himself favors, and development of democratic institutions which he said he planned to do on local level and more cautiously on national.” (Telegram 1584 from Karachi; ibid., Central Files, 123-Harriman, W. Averell)