137. Memorandum From the Under Secretary of State for Economic Affairs (Robinson) to Secretary of State Kissinger1

SUBJECT

  • Problems in Launching U.S.–Iran Technical Cooperation

Four sets of problems have been delaying or reducing the program of technical cooperation outlined by the U.S.–Iran Joint Commission last March.2 We clarified the issues during my visit to Tehran on Monday,3 and we are moving here and in Tehran to resolve them and get the program underway.

1. The Government of Iran is going through a budget-cutting exercise which has delayed all decisions to spend public funds on foreign technical services and on most capital projects. This has already led to a sharp reduction in our planned agricultural technical cooperation projects and a shift in that ministry toward preference for hiring individual U.S. technicians rather than U.S.-led teams. It evidently is causing other ministries to take a harder look at the estimated budgets proposed by U.S. departments and agencies in their pending Iran program agreements.

This scaling back on plans reflects the reduction in Iran’s projected oil revenues and belated recognition that many large project commitments have been made without adequate budgetary control. A very large capital development and long-term technical development program is likely to be cleared by the budget exercise. It is fortunate that the GOI is reviewing these programs and setting priorities before, [Page 412]rather than after, our technicians arrive in Iran. Our Embassy has been taking the correct position that we have no interest in pressing U.S. advice on the Iranians; if they decide on a smaller influx of U.S. technicians than the very ambitious one (involving about 400 U.S. technicians plus their families in Iran) originally planned, this is fine with us. All we have asked is early decisions.

2. The insistence of our departments and agencies on collecting full reimbursement from GOI agencies for all their costs in providing technical assistance to Iran has caused some Iranian grumbling and delays in both long-term technical programs and cooperation on capital project planning. This problem has been compounded by half-informed discussion among senior officials.

We have worked out arrangements to relieve some of the sources of contention in this field. AID will provide international travel funds for domestic U.S. agencies during the planning and negotiating phases of developing long-term technical cooperation projects. If State gets the amount of travel funds requested for Joint Commission work, we can issue invitational travel orders for U.S. technicians assisting the GOI on capital project planning.

GOI agencies have accepted the necessity of paying for some USG overhead costs of managing technical cooperation projects, but they are likely to continue questioning some of the details during the negotiation of agency-to-agency agreements.

Finance Minister Ansary and his chief deputy, Mehran, are opposed to paying any costs of short-term USG advice to GOI agencies in the development of plans for capital projects. They argue that these projects are likely to lead to major U.S. exports and consequently the USG should treat its short-term project-development technical assistance as an export-promotion expense. In fact, we have not billed the GOI for any such costs. The Under Secretaries Committee will consider shortly a paper we are developing, which is likely to propose a broadening of U.S. export-promotion authority and funds, perhaps concentrated in the Commerce Department budget, in order to offer project-development services without raising the issue of reimbursement.

3. Housing of U.S. technicians assigned to Joint Commission projects in Iran has proved to be a bigger problem than expected. Rental prices have risen 250 percent in less than a year, and landlords are demanding as much as a year’s advance payment.4 Most furnishings must be imported, with delays of six months reported. The [Page 413]Iranian agencies are accustomed to giving foreign technicians cash housing allowances, but in order to cover fully the cost of housing today these allowances would have to be much higher than the U.S. Embassy is allowed to give its staff. To avoid this disparate treatment of two classes of U.S. Government personnel in Iran, we proposed that the GOI provide the housing, rather than cash allowances, believing it could negotiate better terms and avoid large advance payment demands. The GOI rejected this solution.

In our meetings in Tehran last Monday we developed a promising compromise which will be presented shortly to all the ministries. It will require the U.S. Embassy to lease blocks of housing and handle long-term assignments and maintenance, using lump-sum fund advances to be provided by each GOI agency to each USG agency. Short-term housing will be in hotel space leased by GOI agencies.

4. Other administrative problems, such as local transportation and interpreter services, personal allowances, schooling of dependent children, etc., have complicated negotiation of agency-to-agency agreements. Minister Ansary has agreed to support our proposal to each agency of a standard text setting forth all these administrative obligations.

In summary, the delays occasioned by the GOI budget reappraisal have coincided with delays due to U.S. administrative requirements. By the time the former are resolved, we expect to have removed the administrative obstacles, so that a somewhat scaled-down Joint Commission technical cooperation program can get under way.

  1. Source: Library of Congress, Manuscript Division, Kissinger Papers, Box CL–152, Iran, Chronological Files, 1 June–31 July 1975. Limited Official Use.
  2. See Document 108.
  3. June 30.
  4. The spike in housing prices was one of several targets of the Shah’s anti-profiteering drive of August 1975; see Document 141.