Foreign Relations of the United States, 1958–1960, Near East Region; Iraq; Iran; Arabian Peninsula, Volume XII

257. National Security Council Report⁰

NSC 5821/1

Washington, November 15, 1958.

REFERENCES

• A. NSC 5703/1
• B. NSC Action No. 1998
• C. SNIE 34–58
• D. NSC 5821
• E. NSC Action No. 2006¹

The National Security Council, the Secretary of the Treasury, and the Director, Bureau of the Budget, at the 386th NSC Meeting on November 13, 1958, adopted the statement of policy contained in NSC 5821, prepared by the NSC Planning Board pursuant to NSC Action No. 1998–b.

The President has this date approved the statement of policy in NSC 5821, as adopted by the Council and enclosed herewith as NSC 5821/1; directs its implementation by all appropriate Executive departments and agencies of the U.S. Government; and designates the Operations Coordinating Board as the coordinating agency.

Also enclosed, for the information of the Council, is a Financial Appendix.

The enclosed statement of policy, as adopted and approved, supersedes NSC 5703/1.

James S. Lay, Jr.²
Executive Secretary

[Here follows a table of contents.]

[Enclosure]

STATEMENT OF U.S. POLICY TOWARD IRAN

General Considerations

Introduction

1. Iran’s strategic location between the USSR and the Persian Gulf and its great oil reserves make it critically important to the United States that Iran’s friendship, independence and territorial integrity be maintained. Since 1953, Iran has been regarded in the area as a symbol of U.S. influence, and its reversion to neutralism or its subjection to Soviet control would represent major psychological setbacks, with repercussions for U.S. prestige throughout the Middle East and Asia.

2. The chief threats to U.S. interests in Iran lie in Iran’s vulnerability to Soviet pressure and influence and the widespread dissatisfaction of many Iranians with domestic conditions. The latter is more immediately pressing.

Internal Strengths and Weaknesses

3. The key problem is the extent to which the largely personal regime of the Shah of Iran, with which the United States is now closely identified, can cope successfully with Iran’s growing internal problems. Current dissatisfaction is based in part on awakening popular expectations for reform of Iran’s archaic social, economic and political structure and a concomitant disillusionment with the Shah’s limited efforts to date to move in this direction with resolution and speed. Because of the Shah’s personal direction of governmental affairs, criticism is to an increasing degree directed toward him. Failure of the Shah to progress toward required socio-economic reforms will thus create additional opportunities for Soviet influence and undermine the U.S. position and prestige in Iran.

4. Principal support for the Shah comes from large landholders and their conservative business associates, the top ranks of the government bureaucracy, and senior military officers. The Shah has made a particular effort to maintain and intensify the loyalty of the armed forces, especially the Army, which he regards as a main source of stability and strength. The dependability of the Army’s support of the Shah, however, remains somewhat uncertain. Despite the undoubted loyalty of many ranking officers, the Army includes many younger officers who find almost intolerable the widespread incompetence and corruption of their superiors.

5. The growing educated middle classes constitute the basic opposition to the Shah. Increasing numbers in these groups find Iran’s antiquated feudal structure and the privileges of the ruling classes anachronistic in a modern world. The business activities, general irresponsibility, and in some cases outright corruption of some members of the royal family, civil service, and high military command, have further contributed to growing popular discontent. While this dissatisfaction has not yet coalesced into a vigorous, coherent opposition to the Shah’s regime, it is increasingly close to the surface and could lead to violence or attempted coups.

6. The Shah himself typifies both the strengths and weaknesses of the present regime. His genuine desire to lead his country to prosperity and stability has conflicted with his own sense of insecurity and fear, leading to vacillation over necessary reforms. The Iraqi coup has increased the anxiety of the Shah and other leaders and apparently convinced the Shah that he must take long overdue action toward basic reforms. He has already taken some steps in this direction.

7. However, there is a real question as to whether the Shah can or will take sufficiently dramatic and effective steps to insure his position and syphon off the growing discontent. To do so he must move forward in each of three fields: (a) gradual elimination of corruption, (b) social and economic reforms, and (c) modification of his present dictatorial role to allow some scope for the expression of opposition sentiment. He is unlikely to take sufficiently drastic action in all three of these fields if left to his own devices. But unless he does act, there may be an attempt by disaffected military and/or civilian elements to force him back into the role of a constitutional monarch. Eventually, if there are no substantial reforms of the Iranian political, economic, and social structure, the monarchy is likely to be overthrown.

8. If there were a revolt leading to internal disunity, or chaos, the Tudeh Party, largely ineffectual at present, would find a golden opportunity to add to disorder and perhaps to participate in a successor regime. The Kurdish and Arab minorities, while not a threat if internal stability is maintained, would probably seize upon any prolonged period of internal disorder as an opportunity to realize their submerged desires for autonomy or independence in the case of the Kurds, and for reunion with their brethren in the case of the Arabs.

9. Despite the weaknesses of the Shah’s regime, the absence of any constructive, pro-Western alternative at present makes U.S. support of the regime the best hope of furthering U.S. interests in Iran. No matter how well-intentioned certain potential opposition leaders appear to be, they as yet lack the assets of the Shah and have no compensatory popular support. Moreover, a successor regime, despite any momentary popularity, would soon find itself faced with the same difficult and complex problems as those which now confront the Shah and his government.

10. Thus the problem confronting the United States is how best to influence the Shah to move constructively. A problem confronting the Shah, however, is the extent to which his regime can move in the direction of satisfying popular demands without alienating conservative elements on which traditional support of the regime rests. Even though the Shah has become more anxious since the Iraqi coup and has implied his interest in U.S. advice, he has been in the past notoriously sensitive to criticism and impatient with U.S. efforts to convince him of the need for reform. Moreover, the Shah probably believes that if pressed too hard by the United States to take measures not to his liking, he could always revert to a. neutralist foreign policy and accept Soviet aid. Hence U.S. pressure, if carried too far, might prove counterproductive. On the other hand, unless tactfully prodded by the United States where necessary, the Shah is unlikely to move sufficiently far or fast in time to forestall an internal upset. Thus the United States must maintain a delicate balance between pressure and persuasion.

11. Moreover, if it becomes apparent that the Shah is unlikely to be able to cope with Iran’s internal problems, and strong opposition develops, the United States cannot afford to be identified exclusively with a crumbling regime. Accordingly, it may become necessary for the United States to dissociate itself to the extent feasible from the Shah’s regime, and increase contacts with potential successors, recognizing that such dissociation would probably insure the Shah’s downfall and that any successor regime might be less pro-Western in its outlook.

Present International Orientation

12. The present regime is disposed to be friendly toward the West and looks particularly to the United States for guidance and assistance. For example, Iran has taken a consistently pro-Western position in international forums. This pro-Western orientation is based primarily on motivations of self-interest on the part of Iranian leaders who see in it both security and material assistance for their country. A considerable body of Iranian opinion would, nevertheless, prefer Iran’s traditional course of neutrality between the major power blocs. The United Kingdom retains a considerable measure of influence in Iran despite deep distrust of British motives attributable to past interference in Iranian affairs.

13. During the past three years the Soviet Union has adopted a largely correct and “friendly” attitude in its dealings with Iran. Cultural exchanges have been inaugurated and a number of agreements covering the common border and trade and transit arrangements have been concluded. The Shah and other leaders, however, have been cool to Soviet overturns. It is unlikely that they would accept major Soviet aid unless they were convinced that the United States and the West had forsaken Iran.

14. Although not directly involved in intra-Arab rivalries, or Arab-Israeli hostilities, Iran is deeply disturbed by pan-Arabism, both as a direct threat to its security and as a possible barrier to Iranian aspirations in the Persian Gulf area. Iran claims Bahrein and considers itself the logical heir to present British influence in the area. Iran is currently engaged in a campaign to woo the Persian Gulf Sheikhs, most of whom enjoy special treaty relationships with the United Kingdom. A potential conflict with Iraq looms over the use of the Shatt-el-Arab, a water artery leading to Iran’s principal Persian Gulf ports.

15. Iran’s relations with other Middle Eastern countries are generally good, especially with Turkey and Pakistan, her Baghdad Pact allies. Relations with Afghanistan, despite ethnic, linguistic and historical ties, are marred by Iran’s deep concern over Soviet penetration efforts in Afghanistan and a long-standing dispute over the waters of the Helmand River. Iran is cool toward India because of the latter’s somewhat heavy-handed attempts to convince Iran of the benefits of neutralism.

16. Iran has felt over-extended by its formal alignment with the pro-Western Baghdad Pact, which involved the abandonment of traditional neutrality without the greatly increased military aid which the Shah and military leaders anticipated. Although the Iranians accepted the American Doctrine on the Middle East, they did not believe it met their security aspirations. Long distrustful of Iraq as a firm ally in the Baghdad Pact, Iran took the lead, before the Iraqi revolt, in proposing a new mutual defense pact, based on a federation between Iran and Pakistan, and an “Aryan Union” including Iran, Pakistan, Afghanistan and Turkey.

17. There now appears no real prospect that the federation of Iran and Pakistan, or the “Aryan Union” as envisaged by the Shah, will materialize in the immediate future. Afghanistan has expressed its disapproval, Turkey does not take the proposal seriously, and Pakistan, while interested, is absorbed with internal problems. Furthermore, there are many practical difficulties to integrating these countries on any but a “paper” basis.

Economic Problems and U.S. Aid

18. Essential Elements. Iran’s current economic and financial position should be essentially sound. Receipts from petroleum operations (estimated at $260 million in FY 1959) are such that, given sound fiscal and financial policies and a reasonably efficient administration, the country could maintain both a modest military effort and a satisfactory rapid rate of economic development. In 1955 the Shah appealed to the United States to provide economic assistance to his country until oil revenues reached substantial proportions, indicating that by 1957 or 1958 his country would no longer require economic assistance. Since that time oil production has been fully restored, and the current level of petroleum receipts is greater than the total level of government expenditures in the year 1955. As oil revenue has increased, however, Iranian Government expenditures have been allowed to double since 1955, Plan Organization development expenditures have risen from $20 million to approximately $180 million per year, defense expenditures have almost trebled, and ordinary non-defense expenditures have increased by about one-third. The Shah has repeated his request, asking that U.S. aid be continued for a few more years until petroleum income reached an even higher level. The Shah has made no serious effort to bring about the thoroughgoing overhaul of the tax system and tax administration which the situation requires, nor had he enforced more than minor steps in the direction of reducing graft and corruption within the government, or in holding government expenditures in check. On the contrary, he seems to expect the United States to meet whatever budgetary deficits may develop.

19. Although economic development expenditures are currently running at the rate of $180 million per year, and are increasing, the development program has not achieved the desired political impact, because of a tendency to emphasize long-term projects, disorganization and corruption, delays resulting from administrative inefficiency, the Iranian propensity to view achievements in very personal terms, and, until recently, a failure to take steps to publicize results. The Seven-Year Plan Organization, which is improving with U.S. technical assistance, administers the development program and has laid our plans which would require sums substantially in excess of the amounts likely to be available from domestic resources. The Organization hopes to meet this shortfall through foreign loans, particularly from the United States and the International Bank.

20. Under present conditions in Iran there are limited prospects for substantial private foreign investment except in petroleum, even though a foreign investment law has been passed and an investment guaranty agreement concluded with the United States. New petroleum concessions have been granted, however.

Military Problems and U.S. Aid

21. The Role of the Military. Militarily, Iran is dangerously and directly exposed to Soviet expansion. The Army is only capable of maintaining internal security and offering very limited resistance to aggression by a major power. The Air Force and Navy are weak and ineffective. If the combat effectiveness of the Iranian armed forces is improved and the forces partially redeployed in accordance with U.S. strategic concepts, they could make an increased contribution to Middle East security by providing, with outside support, a delaying capability against Soviet forces, initially from positions in the Elburz Mountains along Iran’s northern frontier. Failure to achieve forces of this minimum capability could result in the Shah’s gradual reversion to a policy of neutrality.

22. The January and July 1958 Commitments. In January 1958, the United States offered additional military assistance in support of the Iranian army. In brief, this offer involved: (a) an expression of U.S. willingness to discuss an accelerated technical training program for the Iranian army; (b) assurance that the United States would accelerate the delivery of military equipment within approved programs; (c) additional equipment—17 M47 tanks, 133,000 rifles, and 16 8-inch howitzers. The additional military assistance cost involved is about $14 million. On July 19, 1958, the United States indicated to the Shah its agreement that, in the light of developments in Iraq, Iranian armed forces as now supported should be brought up to agreed operational strength and to a high level of operational efficiency.³ Accordingly, the United States agreed to accelerate deliveries of a wide range of equipment for present Iranian forces, to provide additional training assistance on a selected but intensified basis, and, as Iran becomes capable of providing adequately trained manpower, to consider the desirability of activating additional units as well as the possibility of assisting in the equipping of such units. The United States, recognizing that any strengthening of Iran’s military power as well as its efforts to achieve economic development will result in strains on the Iranian economy, also indicated that it was prepared to give sympathetic and prompt consideration, within available means, to Iranian needs for economic assistance as they may develop. Although pleased with this commitment, the Shah is basically dissatisfied with the U.S.-recommended levels for the Iranian armed forces and insists upon force levels which are clearly beyond Iran’s capability to support. The Shah has failed thus far to appreciate the unfavorable political impact which his preoccupation with military matters creates. Discontent is based in part on a feeling that the Shah neglects economic and social reform through his concentration on military matters. The United States is confronted with a major problem in attempting both to dissuade the Shah from embarking upon excessive military programs and, at the same time, to encourage Iran’s participation in the Baghdad Pact through assistance to the Iranian armed forces.

Impact of U.S. Policies and Programs

23. U.S. policies and programs are the determining factor in the Shah’s orientation toward the West. Indicative of the importance accorded U.S. policy as a factor in Iran’s internal political situation are the persistent efforts of various opposition groups to solicit U.S. support. Concrete U.S. aid has thus far offset the political impact of Soviet aid offers. U.S. political and financial assistance are thus important, if not essential, pillars supporting the Shah in his present paramount position. U.S. military aid is important both as a means of maintaining internal security and as a measure of U.S. support for Iran’s participation in the Baghdad Pact. Economic aid and the technical assistance program are evidences of U.S. interest in the welfare of the general populace.

24. However, without internal reform, neither U.S. military nor economic aid is likely to suffice to maintain a stable, pro-Western Iran.

Objectives

25. An Iran free from Soviet domination, with the capability and determination to cooperate actively with Free World governments, to maintain security and to contribute to collective defense arrangements.

26. Political, social and economic development in Iran which will promote a strong, stable government, popularly supported and resistant to Communist influence and subversion.

27. Continued availability of Iranian oil to the Free World on reasonable terms.

Policy Guidance

28. Recognizing that a stable progressive regime under the pro-Western Shah of Iran would best serve U.S. interests, make a sustained effort to induce, and, where appropriate, press the Shah to institute promptly, meaningful political, social and economic reforms designed to increase popular support for his regime, including:

a. Progressive steps aimed toward:

(1) The delegation of specific administrative responsibilities to competent subordinates, so that government efficiency will be increased and the monarchy preserved as a symbol of national unity and continuity.

(2) Liberalization of legislative and judicial practices to afford an opportunity of expression for opposition elements.

(3) The elimination of graft, corruption and conflict of interest in government circles and within the Shah’s own family.

(4) Improvement of the economic development program so that the benefits will accrue primarily to the masses or the Iranian people.

(5) Publicizing government achievements and achieving the closest possible contact with the people.

b. The appointment of honest and competent government leaders.

c. The adoption of administrative and financial reforms designed to distribute more equitably the burden of taxation while, at the same time, providing additional revenue.

d. Adoption of economic and social reforms, such as land reform and revision of landlord-peasant relationships, which will improve Iran’s economic progress as well as reduce popular discontent.

29. Seek to convince the Shah that, unless he moves forcefully in the above directions, the monarchy itself will be imperiled. Seek also to convince the Shah that his interests and those of the United States are parallel, and that we are seeking to strengthen his regime rather than undermine it.

30. Nevertheless, be prepared to take measures to reduce U.S. identification with the Shah should it become apparent that the Shah will not undertake major reforms and should the likelihood of his overthrow increase.

31. In view of the possibility that the Shah may be unable to forestall the overthrow of his regime or to prevent his relegation to the position of a figurehead:

a. Develop appropriate contacts with any emerging non-Communist opposition groups.

b. Be prepared, should a new government come to power, rapidly to assess its likely stability and orientation, with a view to supporting it to the extent justified by this assessment.

32. Recognizing that the proposed federation of Iran and Pakistan would involve serious difficulties at this time, but that active discouragement of the concept might be counter-productive, maintain a noncommittal attitude toward any efforts to enlist our support of such union.

33. To the extent feasible, promote a rapprochement between Iran and Iraq, by stressing the mutual benefits thereof and promote friendly relations between Iran and other Arab states. To this end, influence Iran not to press its claims to Bahrein.

34. Promote sound economic development in Iran by:

a. Encouraging better over-all coordination and national planning of the use of Iran’s increasing oil revenues and other indigenous resources.

b. Encouraging greater emphasis in the allocation of Iranian resources to economically beneficial projects which will rapidly reach and be understood by the masses of the Iranian people.

c. Suggesting action by the Iranian Government to improve the climate for private investment.

d. Encouraging participation in the development of Iranian resources by private organizations and Free World governments interested in Iran.

e. Supporting loans to Iran by international organizations where consistent with relevant U.S. loan policies.

f. Continuing U.S. technical assistance programs.

g. Being prepared to provide U.S. loans for projects which are consistent with relevant U.S. loan policies.

35. Without minimizing the external threat, seek to convince the Shah that the most immediate threat to his regime lies in internal instability rather than external aggression. To this end, bearing in mind, however, the January and July, 1958, commitments (see paragraph 22):

a. Make every effort to persuade the Shah and Iranian military leaders that military forces beyond Iran’s ability to absorb and support, in conjunction with such U.S. aid as can reasonably be expected to be available, would be self-defeating in terms of Iranian and Free World security.

b. Encourage the Shah to stress improving the combat effectiveness of his present forces, rather than increasing them.

36. a. Provide necessary military assistance to assist Iran (1) to maintain and properly deploy armed forces which will be capable of maintaining internal security and, with outside support, fighting delaying actions; and (2) to accomplish the related necessary military construction.

b. Encourage Iran to continue to participate actively and effectively in military cooperation with its neighbors, looking toward the development of more effective forces in the Northern Tier area.

37. Provide other forms of assistance in the event that economic development loans and technical assistance should prove insufficient to fulfill the July 19, 1958, commitment to give sympathetic and prompt consideration, within available means, to Iranian needs for economic assistance.

38. Seek to insure that U.S. assistance to Iran does not result in delays in the implementation of needed reforms referred to in paragraph 28 above.

39. Recognize that the United States has, through the London Declaration of July 28, 1958,⁴ undertaken, pursuant to existing Congressional authorization, to increase U.S. identification with the Baghdad Pact. To this end, continue to exercise a positive role in the Pact association’s affairs, including entering into bilateral arrangements to implement the London Declaration, short of complete adherence.

40. In view of chronic internal disaffection with the government’s policies and external threats to Iran’s independence, continue to communicate U.S. support for a stable, representative progressive government willing to undertake a domestic program of needed social, economic and political reforms while remaining steadfast and aligned with the Free World in the fact of external and hostile Soviet and Arab pressure.

41. In the light of latent Iranian xenophobia, establish through informational and cultural programs the sincerity of U.S. interest in Iran and the validity of U.S. policies as a leader of the Free World.

42. In the event of either an attempt or an actual Communist seizure of power in one or more of the provinces of Iran or in Tehran:

a. Support any non-Communist Iranian government or elements which manifest a desire for U.S. assistance, including military support if necessary and useful, after appropriate Congressional action.

b. Encourage and support the Baghdad Pact Organization or any other appropriate Middle East regional organization in taking action to assist Iran.

c. Attempt to secure additional support from other Free World nations and, if appropriate, from the United Nations.

43. In the event USSR military forces invade Iran, the United States should proceed on the assumption that general war may be imminent, and:

a. Place itself in the best possible position to meet the increased threat of general war.

b. Attempt to arrest the Soviet action and to restore the status quo through diplomatic measures and UN action directed toward obtaining a prompt withdrawal of Soviet forces.

c. Support actions taken by the Baghdad Pact Organization or by Iran’s neighbors to assist in Iran’s defense.

d. Employ the armed forces of the United States as the President deems necessary in accordance with the Joint Resolution to protect the territorial integrity and political independence of Iran.

e. Take other action against the aggressor to the extent and in the manner which would best contribute to the security of the United States.

[Here follows a financial appendix with Department of Defense and International Cooperation Administration comments.]

0. Source: Department of State, S/S–NSC Files: Lot 63 D 351, NSC 5821 Memoranda. Top Secret.
1. See footnotes 1–3 and 6, Document 256.
2. Printed from a copy that bears this typed signature.
3. Iranian armed forces now supported by MAP are as follows: 6 infantry divisions, 6 infantry divisions (reduced strength), 5 infantry brigades; 10 naval vessels; and 4 Air Force squadrons. The “agreed operational strength” would involve bringing these units up to authorized strength (an increase of approximately 37,000 men to 180,000). [Footnote in the source text.]
4. See footnote 1, Document 34.