307. Telegram From the Embassy in Iran to the Department of State0
1041. I combined first calls on Foreign Minister and Prime Minister with presentation Howard Cottam June 23.
In contrast with the general attitude of his predecessor, Aram gave the impression of being a full participating member of the cabinet, interested in budgetary and fiscal problems and explained drastic steps being taken by government to cut budget and put public finances in order. While saying that this was matter Prime Minister would discuss with me, he made plea for budgetary help to cope with present situation. I made appropriate reply to his representation. I was somewhat surprised that he did not raise question of radio station or 2,000 special police force which he had previously done with Rockwell.
When I met Prime Minister he immediately launched into explanation of action taken within recent past to reduce budgetary deficit and bring order into fiscal picture. He said that some but not all Ministries [Page 749] would be cut 15 per cent below last year. In response to my inquiry he said that Ministry of Education would have the same amount as last year and that the Ministry of Agriculture would be cut 15 per cent in its administrative expenses and that the cost of land reform would be transferred to development budget. He said that for the purpose of controlling expenditures the budget would be divided into four parts: (1) hard core fixed expenditures such as salaries, and foreign obligations; (2) those expenditures for which there was reasonable expectation that funds would be available; (3) disbursement which would be authorized in the event an increase in revenues over last year would permit; and (4) development budget.
PriMin was unable to furnish me figures as to what the final budgetary deficit might be, saying that the figures were being worked over by Samii, Under Secretary of Finance, as chairman of pruning committee. In response to a question Amini said he would have final figures by June 30. Specific statements made were that those development projects which had hitherto been in ordinary budget and not in Plan Org would be transferred to the Plan Org budget and that in compensation Plan Org would receive 60 per cent of oil revenues instead of 55 per cent. Recalling that NIOC share of oil revenues had been reduced last year from the previous allotment of $20 million to $15 million, the PriMin said that he had an agreement with NIOC to reduce its budget this year to $10 million.
Amini said that he was making every effort to cut down military budget indicating that he had found a new willingness on the part of the Shah to be cooperative in this respect, but they found great difficulty in finding items which could be reduced. He added that from Iranian resources he expected to give the military budget the same amount as last year and this would leave a shortage represented by the $15 million defense support which we had contributed. He then made a strong plea for continuance of this assistance for the current year going into a rather long attempt at justification based on internal-external security, political stability, etc. To this I made a very firm and explicit reply, reminding the PriMin that I had officially told him as well as the Shah many months ago when preparation of the current budget was beginning, that they must not count on any budgetary support from the U.S. in the future. I again went over the reasons why we had adopted this policy and stated flatly that there were no funds available for this purpose. Although Amini was very clearly aware of our position, he was making a desperate try in a belief, possibly shared by the Shah, that if we could be convinced of the critical character of the existing situation, that it was worth a try to get us to do one more rescue mission. I was as emphatic as I could be in disabusing him of any hope in this connection. I also pointedly reminded Amini of the assurances he had given me, at the time our [Page 750] emergency aid was given last year, concerning the establishment of a Budget Bureau, a consolidated budget, tax reform, etc.1
The PriMin said that in the military budget there were items for the purchase of ambulances and spare parts which he hoped might be supplied from U.S. sources and he asked me to direct General Hayden to examine these items with the Ministry of War. I decided it was not appropriate at this juncture to tell the PriMin that as far as ambulances and spare parts were concerned, the MAP program envisaged replacements. I told him I thought it was entirely inappropriate for Hayden to become involved in determining the amount of the military budget; that once the Ministry of War knew the amount of its appropriation, that it would then be appropriate for the U.S. military advisor to be consulted on the best use of these funds from a strictly military point of view.
It was abundantly clear that representations made by Rockwell expressing our concern about the budget and lack of fiscal order and discipline had been hoisted in and that the PriMin was making great effort to convince Cottam and me that he was tackling the problem with vigor and determination. We shall not be able to judge results until final figures are known.
After some discussion PriMin declared that vigorous methods would be used to improve tax collection during current fiscal year and that rates would be raised for the next fiscal year and stated that austerity, improvement of administration, and improvement in the economy of the country constitute a five-year program concurrently with the third development plan. I made inquiry as to the Shah’s attitude toward the measures contemplated now and for the future. Amini replied that he felt portion of the Shah’s agreement [sic] and that as soon as the budget is ready for publication, he is going to ask the Shah to make a statement to the nation that this is the direction the country will follow for the next five years. The PriMin said that he wanted the country to understand that this was the direction in which its salvation lies and that this program will be sabotaged regardless of who is PriMin. He wanted it to be the nation’s program and not Amini’s program. There was no suggestion here that Amini has any intention of leaving the government but rather that he wanted a public reaffirmation of the Shah’s support of the program which the latter had given in November.
Although he was not precise, Amini said that he plans to strengthen the Plan Org, particularly to reform or eliminate its High Council. He also said that he had had Farmanfarmaian in during the morning and that he was confident the latter would soon return to duty.
[Page 751]Although Amini appeared tired and harassed, I found him little different than when I had my last conversation with him in early April. It may be that events will prove that he is a “spent force” but it is very evident that he does not think so. I shall not be able to give a considerate assessment of the situation here until I have had an opportunity to explore it further and until I have had a conversation with the Shah which I am requesting for early next week. I shall probably not be able to offer any recommendations as to what we should do here until after final budget figures are available for study.