27. Telegram From the Embassy in Iran to the Department of State 1

1090. For the Secy from the Amb. The fol summary statement on the Shah and his current concerns may be helpful in connection with the preparations for his forthcoming visit. As I shall not be present, I am submitting this statement, which represents the views of the Country Team, and recommend that it be also submitted to the Pres.

[Page 58]

When the Shah was last in Wash in April 1962, he was in a depressed and insecure mood and needed to be reassured that we thought he was on the right track with his reform program, that we admired his steadfastness in the face of Sov threats and blandishments, and that he had our continuing political and military support. He has changed a good deal since that time. Now he is in a buoyant mood, convinced (with some justification) that his internal program is a success, that his regime is secure, and that he has managed the foreign affairs of his country wisely. But he is gravely disturbed by recent trends in the Arab world. He still requires reassurance that we are with him, that we admire him, and that we understand his current concerns.

In foreign affairs, the Shah continues to stand squarely with the free world and considers his country the only stable ally we have between Suez and the Sea of Japan. Although he has “normalized” his relations with the Sov Union, he continues staunchly anti-Communist and in fact is sometimes inclined to suspect us of going too far in the direction of a detente. Last year he was acutely worried by talk of a possible non-aggression pact between NATO and the Warsaw Pact countries and felt that this could force him into an unwanted accommodation with the Sov Union; but we managed to convince him that those worries were unfounded.

Today his principal concern in foreign and military affairs is with Arab (and especially Nasser’s) designs on the oil-rich Iranian province of Khuzistan which is inhabited by about one million Iranian Arabs. He recognizes that the UAR does not at present have the capability to make serious trouble for him in Khuzistan, but he sees a long-term trend of British withdrawal from the Persian Gulf area and has been especially disturbed by the recent political and military agreements between the UAR and Iraq. At present he is more concerned with the Arab threat than with the threat of Sov expansionism. Persistently misreading our policy, he is inclined to feel—as many of our allies do—that we are too friendly toward neutralists like Nasser, whom he likes to picture as a Sov tool.

On the internal scene, the Shah’s control of his country is, if anything, still tighter than it was two years ago. He has recently called in a new team of younger people to run his govt, and that new Cabinet (under Hasan Ali Mansur) is pushing forward with a number of much-needed reforms, including civil service reform, a much-needed new approach to budgeting, and a general overhaul of the administrative machinery. There are also indications that the Mansur govt is managing to gain the confidence of the business community and thus to bring about a much-needed recovery of the private sector. The Shah is probably unwilling to face the fact that in the cities, and particularly among the intelligentsia, his regime has yet to generate enthusiastic support. He [Page 59] continues unable to delegate authority and is probably convinced that past American advice to that effect was proved wrong by events.

Perennially, our problem with the Shah has been to keep his military program in balance with his vitally important programs for social and economic reform. Our five-year program of military assistance, agreed in 1962, has been highly successful in maintaining this balance. Recently he has become concerned with the replacement of items (especially the M–47 tank, but also the F–86 and C–47 aircraft), which will soon become unsupportable, and wanted to discuss what will happen after expiration of the five-year program. In repeated and intensive discussions with him, we have tried here during the past weeks to bring his current requests down to the level where they are reasonable both from the military and from the economic-political points of view, and it now appears that we have had some measure of success; but there is no doubt that the recent UAR-Iraq agreement has made him view the replacement program with even greater urgency. Especially the tank problem is now his central military preoccupation.

Iran’s attitude toward U.S. military aid is changing as the country’s financial position is improving. A reasonable transition of our MAP from grant aid to a mixture of U.S. grant assistance, extension of credit, and sales for cash—within the limits of a new, jointly arrived, reasonable program—is now the crucial requirement of our continued close relations with Iran.

It would be desirable that the conversation between the President and the Shah not dwell exclusively on military matters. The Shah regards himself as a world statesman and will be flattered by a discussion of world affairs. It would also be useful to remind the Shah in the course of the conversation that, while we will continue to help him in meeting his military problems, we consider his economic and social development programs of fundamental importance for the long-term stability of his country. While much has been done, a great deal more still remains to be done. Since the Shah is currently inclined to be overly optimistic about Iran’s future oil income, the President might make the desired point by discussing the problem all national leaders have in allocating scarce resources and by expressing the thought that estimates of future resources are often over-optimistic and that there is no end to the competition between conflicting requirements, so that there is always need for a careful establishment of priorities.

The Shah is a genuine friend of the U.S. He has turned to us for advice on most important problems and cooperates with us in many fields, including some highly classified ones that are of great importance to us. His popular image abroad and at home has improved since he launched his reform program. His current preoccupation with military problems in the Persian Gulf has some justification. We hope that he will feel that [Page 60] he has gained the personal understanding of the President for those problems and particularly that the President understands the need for certain more modern types of equipment for his armed forces, within the framework of a new agreed, long-term program that is being worked out.2

  1. Source: Department of State, Central Files, POL 7 IRAN. Secret; Limdis.
  2. In telegram 906, June 4, Rusk thanked the Ambassador for his telegram, saying that it had proved invaluable in preparing for the Shah’s visit, and that it had been submitted to the President as Holmes had recommended. (Ibid.)