218. Memorandum From Secretary of State Rusk to President Kennedy0
SUBJECT
- Report on United States Strategy for Iran (Reply to NSAM 228)
In accordance with NSAM 228, I have reviewed our policies and programs for Iran in the light of recent changes in the situation in Iran.
A. Changes in Iran affecting policy and actions:
- 1.
- The Shah, with greater confidence on the security side, turned to energetic solutions of the country’s worst politico-economic problems.
- 2.
- The Shah plunged into a greatly accelerated land distribution program and promised additional benefits to urban workers.
- 3.
- The Shah abandoned his traditional power base in favor of dependence on a combination of the military, peasantry, and urban lower middle class.
- 4.
- The Iranian government weakened its concept of a broad national politico-economic approach based on the institutions and practices of centralized, rational economic planning and financial controls.
- 5.
- Economic activity, and particularly private investment, slowed into a recession.
- 6.
- The Iranians have adjusted to the termination of dollar grant assistance and have shown commendable self-reliance in trying to work out their own affairs.
B. Estimate of future course of events in Iran:
- 1.
- Progress will be made on improving the capability of Iran’s armed forces while reducing force levels.
- 2.
- Planning and implementation of a broadly conceived, integrated economic development program will be limited by lack of effective government direction and by the shortage of administrative talent.
- 3.
- The pace and direction of the land distribution program and follow-up on land reform measures will be confused and erratic but more moderate tactics will probably be introduced as it moves forward.
- 4.
- Agricultural production and/or the supply of food in urban centers will probably decline during the next two or three years.
- 5.
- Potential domestic and foreign investors will be cautious in embarking on new ventures and economic growth will be slow.
- 6.
- The hostility of the urban educated groups, the dispossessed landlords and the mullahs toward the Shah and his program will continue, but it is not likely that these forces will coalesce in a way which would cause the Shah to fall. The military will remain loyal to him.
- 7.
- Unless he is assassinated, the Shah will remain as Chief of State and the ultimate repository of power in Iran. Under his direction Iran will continue its pro-Western posture and close alliance with the U.S.
C. Recommendations:
I believe our present broad policy of support and encouragement of the Shah and his reform program is correct. I believe, however, that it can be sharpened and made more effective by emphasizing the following points and taking the following specific steps:
- 1.
- Give timely and appropriate support to the major elements of the Shah’s reform program.
- 2.
- Expand our PL-480 programs to make up for anticipated agricultural production shortfalls and/or increased consumption on the farm.
- 3.
- Use the proceeds of our PL-480 programs to increase the lending resources of the Agricultural Bank and to support other aspects of the land reform program.
- 4.
- Encourage the Government of Iran to loosen up its conservative fiscal policies by promoting increased levels of public and private investment in order to correct the recession.
- 5.
- Support the Third Plan and in so doing encourage more reforms in budgetary controls and practices and the administrative streamlining that will contribute to the Plan’s success.
- 6.
- Continue to monitor measures being taken by Iran to carry out the multi-year MAP agreement reached with the Shah.
- 7.
- Devise the most practical procedure for review with the GOI of the over-all resource allocation to keep an appropriate balance between defense and development expenditures that will insure the long-term stability of the country.
A more elaborate examination of the issues involved and the basis for the foregoing conclusions and recommendations is enclosed.1 Representatives of the Department of Defense, the Agency for International Development, and the Central Intelligence Agency have collaborated in this review, and concur in the findings and recommendations.