Foreign Relations of the United States, 1961–1963, Volume XVII, Near East, 1961–1962

90. Paper Prepared for the Iran Task Force⁰

Washington, undated.

STATUS REPORT—THE SITUATION IN IRAN

For Meeting of the Iran Task Force of August 2, 1961¹

General

The Amini Government continues to be threatened by strong but relatively inchoate extremist pressures, and, despite the emergency measures taken by the United States in May and June to assist Amini in overcoming his serious economic and financial problems,² it is clear that further United States assistance is required if the general economic situation does not deteriorate to a point where economic hardship could serve as point of crystallization for a political opposition, probably of the Left, which could pose grave dangers to Free World interests in Iran. The present shape of these economic and financial problems will be the subject for discussion at the Task Force meeting; some details are still open to question as of August 1, and this status report will therefore not go into detail on subjects which will be discussed at the meeting.

Political

The Amini government continues to maintain itself in power and the Shah continues to support it, although he is unwilling to give up his traditional tight personal control of matters affecting the armed forces. The danger of overt rightist action against the government has receded, but the National Front and other Nationalist opposition groups have intensified their earlier semi-hostile attitude, and the possibility of Amini’s effecting a reconciliation with moderate leaders of the middle class opposition has decreased. The National Front is being sternly but not brutally repressed by Amini, while it continues to attempt to stimulate mass demonstrations. Amini and the Shah are firmly resisting neutralist pressures from right and left; communist radio propaganda is actively inciting revolt and condemning Amini as a servant of the Shah and the United States. Amini continues his preparations and actions aimed at corruption, bureaucratic inefficiency, and social injustices, but has not been able to capture the imagination of large sectors of the population while at the same time adjusting to the political and legal realities of the situation. The political situation remains critical; we continue to bolster Amini and persuade the Shah to continue his support.

Economic

An Iranian delegation is presenting to the IBRD the first draft of the Third Economic Development Plan (scheduled to begin in September, 1962). The Plan is generally well-conceived, although much detail remains to be filled in; it offers favorable possibilities as the base of a Consortium approach to long-term development in Iran. We are giving all possible encouragement and assistance in the development of this Plan, and are preparing to re-orient our direct technical and economic assistance programs to fit in with the Plan.

The same delegation has discussed in detail the financing gap in the present Second Plan; this gap has been identified as being in the neighborHood of $45 million needed in the form of development loans. We will within a few days be required to make decisions as to the methods by which we can, together with the Federal Republic of Germany, provide the necessary financing. Curtailment of this Plan would throw the Third Plan out of balance, damage the Iranian government politically, and probably result in the cancellation of large Iranian contracts with American concerns.

The Iranian government’s budget for the fiscal year, which must, for political reasons, include large sums for teachers’ pay raises, is out of balance. It appears inevitable that the Iranian government will soon request a considerable budget grant from the United States in order to avoid breaching its economic stabilization agreement with the IMF and losing drawing rights under that agreement. We have up to now reserved a sum of $5 million for this type of assistance should it be necessary.

Iran’s efforts to fight inflation and scale down its economic commitments have resulted in a growing economic depression which affects both the business community and the urban proletariat. The threat of mass urban unemployment is looming larger; we are working on projects involving surplus agricultural commodities which may to some extent ameliorate the resulting dangerous political tensions.

Military

Although we have informed the Shah specifically that he cannot expect increases in our military assistance program, he is again pressing our Ambassador for greater assistance in the form of advanced equipment and weapons, and has asked us to “restudy” his military problems and our military assistance program. The inter-agency Military Planning Review now under way may well reach conclusions which will result in the Shah’s dissatisfaction being intensified, since there seems little justification for an increase in our MAP to Iran in view of the current political and economic conditions there. We may in future be faced by the Shah with repetitions of his earlier veiled threats to turn to neutralism unless our military aid is greatly increased. Preliminary studies indicate that there is little hope for assuaging the Shah’s military ambitions by giving him assurances or by informing him of detailed plans to come to his assistance in case of attack.

Status of Specific Recommendations as Approved by the President³

1. “That the U.S. make a major effort to back the new Government in Iran as the best instrument in sight for promoting orderly political, economic and social evolution in Iran, and for averting serious and damaging political developments.”

This general recommendation has been the main thrust of our policy toward Iran since the adoption of the Task Force recommendations. All our actions in Iran, economic, political, and military, have been based on this overriding factor.

2. “That to this end the U.S. encourage Amini positively but discreetly in any serious efforts to solve Iran’s immediate political and economic problems and to construct a broad political synthesis. This encouragement should be given in such a manner to avoid so far as possible arousing the Shah’s active opposition. The U.S. should be prepared to tolerate certain seemingly anti-American actions by Amini which do not really damage any major American interest.”

In our Mission’s contacts with Iranians, official and unofficial, and in the Department’s contacts with Iranian officials in the U.S., no opportunity has been lost to encourage the Prime Minister. Our Ambassador was recently instructed to reiterate our support to Amini. At the same time, in our contacts with the Shah and with the Shah’s henchmen, we have made it clear that we assume that the Shah will support the Prime Minister. Thus far, the Shah has done so; at times with bad grace, as when he recently told our Ambassador that he was Amini’s sole supporter. However, he continues to accord Amini a degree of freedom unmatched by any Prime Minister since Mosadeq and the early months of the Zahedi regime, although he continues, as was expected, to keep a firm personal hand on matters relating to the security forces and foreign affairs. Amini has not, up to the present, been forced to take the “seemingly anti-American actions” envisaged in the Task Force recommendation. Our Consulate in Isfahan has recently suggested that it may be necessary for the U.S. to indicate publicly its specific support for the Prime Minister as a chosen instrument. We have asked our Embassy to comment on this suggestion; we feel that such a move is unnecessary and would be dangerous in the long run.

3. “That the U.S. should not favor any military coup against the Amini Regime.”

The U.S. has not favored any Iranian military coup group. It has gone even further, and, to the extent possible, has informed potential plotters that it does not favor such action, and intends to support the legal government of Prime Minister Amini. It should be noted that at least one major potential coup group appears to be favorably disposed toward the Prime Minister.

4. “That the U.S. reorient its foreign aid program in Iran to put more emphasis on long-range economic development as envisaged in the report of the Presidential Task Force on Foreign Economic Assistance, and in addition:

a. Inform the Government of Iran immediately of our intention to make a cash grant of $15 million payable at an early date, but no later than the beginning of FY 1962.

b. Be prepared to make a $5 million grant of FY 1962 funds to the Government of Iran for general budgetary purposes if, at a later date, the situation in Iran required such action.

c. Modify U.S. executive procedures in order to assure the timely flow of development loan funds.”

Reorientation of the U.S. foreign aid program to Iran must of necessity be based on the new and comprehensive Third Development Plan, scheduled to begin in September, 1962. This Plan, in its first draft, is now being presented to the IBRD for study and suggestions. From a preliminary study, the Plan appears to be fairly well drawn, but there are still many areas which require further study and revision. USOM/Iran is already planning for drastic revisions in its organization and programs to implement the necessary reorientation. It should be noted that the Third Plan is based upon a successful completion of the current Second Plan, which is in financial difficulties. Item (a) of the recommendation has been accomplished. We are holding in reserve the sum earmarked in item (b), but recent data indicate that it may be insufficient to meet the needs of the situation we foresee. It was the implementation of item (c) which enabled us, through action by DLF and the Ex-Im Bank, to give vital assistance to Amini in meeting the June crisis in the implementation of the Second Plan, and we expect that this item will also be necessary in the expediting of further economic assistance in the very near future.

5. “That the Departments of State and Defense, as a means of providing more substantial assurance to Iran and in an attempt to reduce Iranian pressure for military assistance, urgently examine:

a. The feasibility and political-military implications of deploying earmarked U.S. forces to locations that would permit more rapid assistance to Iran in the event of Soviet or Soviet-supported attack;

b. The desirability of informing the Government of Iran more specifically of U.S. unilateral plans for military action in Iran’s support or of any deployments determined to be feasible.”

The Joint Chiefs have examined these suggestions and have prepared a study of them. In general, this study recommends against the possibilities mentioned. State and Defense working level representatives are meeting on this subject next week and will make recommendations to the Chairman of the Task Force. These recommendations will probably be negative in nature. It will be recalled that the Task Force was interested in these ideas primarily as a means of softening the impact on the Shah of U.S. unwillingness to go along with his ambitious military plans. At present, it does not seem likely that this hope can be realized.

6. “That the U.S., while supporting the Monarchy as the symbol of unity and a stabilizing influence in Iran, more actively encourage the Shah to move toward a more constitutional role.”

Thus far we have acted on this recommendation by applauding the Shah for his action in giving authority to Amini and keeping himself out of the limelight to the extent that he has done so during the past few months. To go further and more directly toward the core of the problem at this time would probably be counterproductive in that the Shah’s suspicions and hostility toward both the U.S. and Amini would be roused, and he could well take action to drop the Prime Minister, who must have the Shah’s support at this juncture. Additionally, should the Shah relax his political control over the armed forces at this time, it might touch off a rightist military coup against the Prime Minister. So far, the Shah is doing remarkably well in refraining from interference with the Prime Minister; we intend to postpone further action in implementing this recommendation until such time as Amini enjoys greater political support and the present crisis atmosphere is relaxed.

7. “That the U.S. encourage the formation and growth of broadly based political parties in Iran.”

The Task Force envisaged the establishment of broadly-based political parties as an essential element in the remaking of the presently polarized Iranian society. The establishment of such a group or party appears to be a necessary precondition to relatively free national elections in Iran in which the Prime Minister would have any chance of success against the National Front (which is becoming entirely too broadly based) and against the divided forces of the traditional elite. The Prime Minister has so far been too pre-occupied with immediate political and economic problems to devote much attention to the problems of building a political organization. He did mention to a U.S. official that he realized the need and hoped to begin in the near future. We have asked our Embassy for comments as to the desirability of the formation of a centrist party or Front, and for suggestions as to what the U.S. could appropriately do to stimulate and assist such a development.

8. “That the U.S., in keeping before responsible Iranian officials the risks which may be involved in an Iranian rapprochement with the Soviet Union, avoid giving the impression that the continuance of present tensions between Iran and the USSR is a U.S. goal.”

This Task Force recommendation was intended as a guide for U.S. action at such a time as the U.S. was in a position to influence Iranian government reactions toward the problem of relations with the Soviet Union. The Amini government has proved itself much less receptive than was its predecessor to Soviet enticements, and Soviet propaganda media have selected Amini himself as a prime target for verification and abuse. The Iranian government has therefore taken a very firm diplomatic stand against the USSR, and no opportunity has arisen to make use of the guidance contained in the Recommendation.

9. “That the U.S. continue for the present to support currently existing Iranian military forces up to the approximate level of 200,000 men. In this connection, we should adhere to those aspects of the 1958 Presidential letter to the Shah stressing the operational proficiency of existing forces but deferring consideration of the activation of additional units.”

This stance is reflected in our MAP for FY 1962 as presented to Congress. In addition, we have informed the Shah that the U.S. is not contemplating any assistance program designed to raise significantly the manpower or equipment levels of the Iranian armed forces. The Shah has indicated that he has lowered his sights from the previous goal of 260,000 men to the present level of roughly 200,000. He has not followed through on an earlier “threat” to carry out a major manpower reduction. He has recently renewed to our Ambassador his earlier appeals for more and better equipment, particularly for his Navy and Air Force and has asked that the U.S. restudy his needs. Our own Military Planning Review Committee is now at work on just such a restudy—it is unlikely that the results of the study will be to the Shah’s liking. The Shah has carefully protected the military portion of the Iranian budget in the recent Iranian budgetary review, despite the Prime Minister’s well-known predisposition to reduce military expenditures. There is no doubt that the Shah’s military ambitions are still very important to him, perhaps enough to prompt him to make veiled threats at some time in the future to change Iran’s foreign policy alignment unless his desires are met. It is our present disposition to stand firm should he make such threats.

10. “That the Department of State and Defense comprehensively study the potentialities of advancing U.S. interest through CENTO.”

This study is ready for distribution to interested agencies.⁴ In its present form, it concludes that there is no alternative at present to continued U.S. support for CENTO.

11. “That the U.S. make no present decision whether or how it would react militarily to Soviet attack on Iran, but as a means for identifying the key military and political considerations in reaching such a decision illustrative military plans should be developed for such action on the basis of at least the following alternatives (a) the prompt introduction of U.S. conventional forces in a strength up to two divisions, and (b) the prompt deployment of nuclear striking power so that it could be brought to bear in the Soviet border areas of Iran. The military planning called for by this paragraph, and the joint State/Defense study called for under paragraph 5-a above, should include an assessment of the effect of such deployments or other action on the general war posture of the U.S., weighing such effects against an estimate of the likeliHood that Soviet action against Iran would in fact lead to a general war on many fronts.”

The Joint Chiefs have produced a study. There will be further meetings of State and Defense representatives at the working level, and a recommendation will be made to the Chairman of the Task Force.

0. Source: Department of State, NEA/GTI Files: Lot 66 D 173, Task Force on Iran. Secret. The source text bears no drafting information. The paper was transmitted to members of the Iran Task Force under cover of a memorandum from Peyton Kerr, Acting Chairman of the Task Force, that reads: “Enclosed is a status report on the Task Force recommendations which were approved by the NSC on May 19, 1961. Separate memoranda regarding more specific details of the economic situation will be distributed as soon as possible. Discussion and comment on the attached and the forthcoming economic memoranda will be held following the Task Force meeting with Dr. Farman-Farmayan, Deputy Director of Iran’s Plan Organization, on August 2 at 4:00 p.m. (per my telephone invitation of August 1).”
1. A memorandum, dated August 4, summarizing the proceedings of the August 2 Task Force meeting is ibid. It contains an account of Dr. Farman-Farmayan’s presentation on the economic situation in Iran and a brief description of a discussion among Task Force members of Iran’s political situation that took place following Dr. Farman-Farmayan’s departure from the meeting. A discussion of Iran’s economic situation resulted in the conclusion that the United States would use the $45.5 million figure, or what would be required to complete the Second Plan, in conversations with German officials on economic assistance to Iran. Serious reservations were also expressed regarding the amount of budgetary aid ($36 million) that Iran felt it needed.
2. Documentation on this subject is ibid., Central Files, 788.5–MSP/6–561. See also Supplement, the compilation on Iran.
3. See Document 51.
4. A copy of the paper, entitled “U.S. Policy Toward the Central Treaty Organization,” is in Department of State, PPS Files: Lot 67 D 548, Near & Middle East, 1959–61. It is undated and does not indicate a drafting officer, but a handwritten notation states that it was received on August 2.