Foreign Relations of the United States, 1947, The Near East and Africa, Volume V

891.24/11–2247: Telegram

The Acting Secretary of State to the Embassy in Iran

secret

Washington, November 22, 1947—2 p. m.

740. We have completed study possibility complying with recommendation urtel 1056 Oct 30 (Deptel 694 Nov 6¹) and regret necessary conclusion that proposed arms credit arrangement cannot be amended to permit entire repayment in local currency. National Advisory Council, which has full legislative authority to determine terms of foreign credits, follows consistent policy of limiting local currency repayments to amounts which US Govt can reasonably be expected to spend abroad. Only present prospect of spending substantial rial balances in Iran is for Emb building program already begun and first year Fulbright Program now before Budget Bureau for approval. There is no additional property in Iran which Dept at this time considers appropriate for long-term purchase program. Dept does not know availability in Iran of strategic materials in list being forwarded for your comment. Fulbright Act will cover only exchange of persons for educational activities and incidental administrative expenses. Furthermore, Fulbright Act provides that local currencies expendable under Act can be accumulated only from sale surplus property located outside US. Only minor portion of items in scheduled arms purchase program are located abroad. Therefore, considering limitations upon both accumulation and expenditure local currencies, we are confronted with practical impossibility acceding to Qavam’s request.

We agree fully with your recommendation that we should support nations such as Iran which resolutely stand up for their own independence and we are exploring every possibility of demonstrating that attitude. With regard arms purchase program, however, most favorable arrangement presently foreseeable is possibility extending grace period and amortization payments now under consideration.

In an attempt give time further consideration by Qavam and Majlis, we expect favorable action from Army on Dept recommendation that present expiration date Iranian priority be extended two months from Nov 26² (urtel 1091 Nov 10).

We are disturbed, however, by certain points made in your recent tels as follows:

1. Iran Govt’s inability to pay dollars for arms without weakening of Govt financial structure (urtels 1123 Nov 17¹ par 1 and 1091 Nov 10 par 4). This Govt’s offer of arms credit was conceived only as one aspect of policy to assist Iran to present united front against foreign aggression. We do not advocate any action which, while possibly strengthening Iran armed forces, might strain national economy and consequently result in net weakening Iran Govt. Furthermore, as you have explained in past to Iran officials, US Govt does not wish to force arms credit on Iran nor does it wish to advocate any procedure by which reluctant approval of arms credit by Majlis might be obtained. We would particularly regret development of this issue into test of Cabinet strength.

2. Qavam’s hesitation to support arms program because of fear of strengthened army under present leadership (urtel 1129 Nov 18 par 3 and 7 and 1091 Nov 10 par 2).

3. Vacillation of Shah concerning form in which assistance should be rendered by US (urtel 1072 Nov 5 par 4;³ 1123 Nov 17⁴ par 1; 1129 Nov 18 par 7).

4. Use of arms credit issue by Shah as basis for determining extent of his support of Qavam (urtel 1101 Nov 12⁴ and 1129 Nov 18 par 7).

With regard to Point 4, we would welcome your considered opinion regarding possibility that arms credit issue is being used by either side in Shah–Qavam struggle as political football rather than as part of program to unify and preserve internal security of nation. We would also be interested in Emb views, and if possible those of Ebtehaj concerning Iran’s actual ability to utilize credit if approved by Majlis, bearing in mind necessity for advance payment of packing and shipping charges which may total twenty-five million dollars.

Lovett

1. Not printed.
2. The Secretary of the Army agreed to the Department of State’s request in a letter to Mr. Jernegan on November 21 (891.51/11–2147). Telegram 740 was drafted on November 20.
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3. Not printed; it reported on the audience of the members of the Subcommitttee of the Senate Appropriations Committee with the Shah. Paragraph 4 read as follows: “Although several of the Senators declared themselves prepared to support or even sponsor legislation at special session to place Iran on same footing as Greece and Turkey if Iran so desired, Shah (somewhat to their surprise) did not regard this as necessary or even advisable. He did not specify his reasons for this; I am aware that while he himself is prepared for Iran to declare itself openly on the side of the western powers and thinks Iran has in fact gone far in this direction by rejecting the Soviet oil proposals, he is conscious of the fact that many Iranians are still reluctant to abandon country’s historic policy of neutrality as between great power blocs.” (033.1100/11–547)
4. Not printed.
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