141. Editorial Note

On August 6, 1975, The Washington Post published a front-page article entitled “Iran Attacks Price-Gougers,” which noted that after 18 months of high spending, “Iran is reacting to the realization that its economy is under severe strain and that the oil funds are not limitless after all.” To counteract inflation, the government was “closing shops, shutting down profiteers and even jailing millionaire violators.” It was also slashing prices on hundreds of goods, particularly food and other government-subsidized items. In telegram 7657 from Tehran, August 8, the Embassy reported on the new policy aimed at promoting, as the Shah put it, “economic as well as political democracy.” It noted that the government was taking the strongest action in recent years to force down rising prices and address Iranians’ “number one public complaint” against their government. (National Archives, RG 59, Central Foreign Policy Files, D750274–0114)

On August 29, in telegram 8447 from Tehran, the Embassy provided the reaction of the business community to the anti-profiteering drive, observing that it had left businessmen “badly shaken” as some 25,000 alleged price control violators had been detained or sentenced to jail. Since prices had been cut, often without reference to actual costs, the Embassy noted, merchants supposedly had cancelled millions of dollars in imports rather than accept narrowed profit margins, which would ultimately produce shortages. Moreover, the price control authorities reportedly behaved arbitrarily, holding merchants responsible for actions of their subordinates, dictating commodity prices on a whim, and enforcing price controls more stringently on some products than on others. (Ibid., D750299–0653)

After economic officers from the Embassy met with Senior Commerce Undersecretary Memarzadeh, the Embassy reported in telegram [Page 423] 8992, September 11, that the Undersecretary offered contradictory information about whether the government had set a single fixed profit margin for all imported products. Memarzadeh privately admitted that the Iranian Government was “troubled by ‘hesitation’ of businessmen to import more goods and retailers to purchase from wholesalers and importers when profitability unknown factor. (Note: Merchants tell us that certainty of losses is more to the point.)” The Embassy concluded that there was no sign that the Iranian Government would abandon its anti-profiteering drive. (Ibid., D750315–0062)

On September 25, in telegram 9450 from Tehran, the Embassy urged the Departments of State and Commerce to advise interested U.S. businessmen that business activity in Iran had “turned sharply downward, primarily as a result of uncertainties stemming from the government campaign to combat inflation and profiteering through the institution of price controls.” The possibilities of immediate, as opposed to long-range, business were poor, and there was little chance of significant improvement in the coming weeks. (Ibid., D750332–0907) In telegram 9906 from Tehran, October 9, the Embassy reported the Shah’s speech to the Islamic Chiefs of Mission resident in Tehran, in which he emphasized that the anti-profiteering principle would be constantly enforced, and the rules of Islam should be cited to the public “so that they can understand how vigorously Islam condemns profiteering.” Most businessmen to whom U.S. officials spoke, the Embassy noted, insisted that the authorities continued to act arbitrarily and reported that they were losing 10 to 15 percent on every transaction. Despite government pleas, businessmen were declining to reorder when their current stocks ran out. (Ibid., D750351–0720)