EIGHTH CENTO MINISTERIAL COUNCIL SESSION TEHRAN, APRIL 28-30, 1960 POLITICO-ECONOMIC SITUATION OF IRAN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86B00269R000400060002-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 14, 2016
• Document Release Date: April 7, 2003
• Sequence Number: 2
• Publication Date: April 15, 1960
• Content Type: PAPER

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'4E11 B-11/2
Aprel 15, 1960
?ECI3ET
EIGHTH CENTO MINISTE
POLITICO-ECONOMIC SITUATION OF IRAN
---Tasjs ugm_a_sand P r
Executive Registry
I. SUMMARY
Despite widespread dissatisfaction for varying and conflicting reasons
and frequent reports of plots and counterplote, there is no hard evidence
that there is any group in Iran with the present capability of overthrowing
the Shah's government. There are some signs of progress in the reform field
but such progress is slow in coming and even slower in its impact upon the
general populace, which is inclined to look at things in a eery personal
sense. The controversial land reform bill has aroused both hostility among
the conservative elements and some skepticism in urbane, edueated groups.
The 5bah and other Iranian leaders continue to be concerned over Soviet
pressures on Iran, the ramifications for Iran of the forthcoming Summit
Conference, the U.S. role in CENTO, the magnitude of US. military and
economic assistance and U.S. press criticism of Iran.
POLITICAL SITUATION
A. The SbahlAjtaliglael
The Shah continues to control almost every aspect of governmental
affairs in his country. His mood varies from one of deep gloom over the
state of Iran's relations with the Soviet Union and with the 'LS., to one
of firmness with regard to Soviet pressures and satisfaction over Iran's
alignment with the West. He has taken some steps to rectify centuries-old
abuses, but most reform is more apparent than real, at least so far as the
general populace is concerned. There are continuing reports of plots by
dissident groups, but all of these seem to be of manageable proportions.
The Shah speaks openly of the removal of hundreds of corrupt officials, but
even if true, these removals have not been directed at the most notorious
members of the Shah's entourage and family. Whether the Shah could do more
than he has done is a moot paint. Most observery are inclined to believe
that he could despite certain political risks. The conduct of the coming
parliamentary elections may permit a better evaluation. Some freedom of
choice would probably buttress the Shah's position.
B.The ya.kmtla,e2A.J..tion
It is difficult to gauge the depth of opposition to the Shah
because of its diverse nature. Iranians take a highly individualietie view
of developments and normally react favoraaly or otherwise on the basis of
how each event affects themselves and their families. Generally speaking,
dissatisfaction is most widespread among the growing middle classes who,
because of their better education, are able to grasp more fully the in-
equities in Iranian life. One dissatisfied person may object to the lack
of democratic freedoms in Iran; another may criticize the Shah for not being
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stronger and and in effect more authoritarian; yet another dislikes the govern-
ment because he does not have a prominent role in it. The most important
factor in the equation is the attitude of the military forces, particularly
junior officers. The Shah has moved directly to counter dissatisfaction
here by the removal of senior incompetent officers and concomitant pro-
motions, but the army is so clique-ridden that it is difficult to assess
the overall impact of such moves. On the basis of available evidence, there
has been no coalescence of opposition forces, either military or civilian,
which would portend at present a successful coup.
C. The Reform Program
After the Iraqi coup of July 1958 the Shah announced dramatically
a reform program 'which, if carried through, would permeate every aspect of
Iranian life. He moved quickly and energetically to reform the Gendarmerie
which is the rural police force. The effect has been most salutary. He
has also removed certain officials, civilian and military, but the reasons
for these removals remain largely obscure to the public which is inclined
to view them as simply part of the ever-Shifting pattern in Iranian official
life. Legislation directed against corruption and influence peddling in
government has been passed, but implementation is uncertain. The Shah's
owl land reform program continues and a countrywide land reform bill is
presently being considered by the Parliament. The problem here is not land
redistribution as such so much as providing services to new landholders to
supplant those traditionally obtained from feudal landlords. The most
dramatic step the Shah could take in a political sense would be to remove
some of the notoriously corrupt members of his family or his immediate
entourage. To date, he has been unwilling to take this step.
III. ECONOMIC SITUATION
A. Th LlomentP ram
Although Iranians grumble almost constantly at the lack of pro-
gress on the economic development front, many competent foreign observers
believe that Iran has embarked upon a sound program which will present
concrete results in the future. The difficulty stems primarily from the
highly personalized view taken by the average Iranian. To him the develop-
ment program is not a success until he has benefited personally-from it.
Although there were signs earlier in the year that the administering body
for the development program, the Plan Organization, would be changed Invade
-
mentally from an implementing agency to a purely planning organ, this has
not taken place. The new Managing Director of the Plan Organization is
carrying on much as before but without the authority enjoyed by his pre-
decessor, the redoubtable Mr. Ebtehaj.
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B. Economie_Reeematme
There are signs that Iran is facing increasingly difficult in-
flationary and balance-of-payments problems. Cost of living has risen by
about ten per cent over the last year and there was 's. drawdown of foreign
exchange reserves of almost $50 million in the Iranian year ending March
1959. In the year just ended, the drawdown may exceed $55 million. In
essence, the problem arises from the Iranian government's attempt to do
too much too fast in the public sector. A concomitant to this is a large,
rapid and uncontrolled expansion of private credit. While the situation
appears superficially good at present, our missions in Tehran are suffic-
iently disturbed to recommend that the U.S. reduce gradually its military
and economic assistance programs, as the only available means of persuading
the Iranians to adopt sounder economic and financial policies. Recognizing
the considerable political risks involved in such a course of action, U.S.
missions have also recommended that these risks be minimized by a series
of less costly and smaller impact projects. Some projects of this nature
are now underway. Many competent Iranian officials are well aware of these
adverse economic indicators, but they believe that the imposition now of
drastic import and exchange controls might reverse a potentially healthy and
developing economy. Some recommend that government expenditures outside the
development field be curtailed and that private credit restrictions be im-
posed through the establishment of a central banking system. The most use-
ful immediate step would probably lie in IMF consultations, but the central
bank is reluctant to request these until its Governor has been reappointed
to a new term.
IV. EXTERNAL RELATIONS
A. United States-Iranian
United States-Iranian relations, while outwardly very good, have
been strained recently by press criticism of Iran. Being deeply suspicious
of foreign motives by nature, they view US. attitudes toward Iran as being
unclear and imprecise and, therefore, suspect. Despite frequent explanations,
the Iranians remain convinced that the U.S. government could stop unfavorable
stories if it wished to do so.
B. Soviet-Iranian
The Iranians are under no illusions as to the reality of Soviet
intentions toward their country. They do differ as to how their country
should cope with Soviet pressures and subversive activities. Even though
Iran has been exposed since February 1959 to an unceasing and abusive Soviet
propaganda campaign, one school of thought openly supports neutralism and
a rapprochement with the Soviet Union. The Shah and government, representing
the pro-Western forces, maintain staunchly that Iran is irrevocably aligned
with the West, and they have, in fact, stood up firmly in the face of Soviet
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pressures. Inwardly, even pro-Western Iranians have doubts as to the
wisdom of this course of action. They view anxiously the Khrushchev-
Eisenhower exchange and the forthcoming Summit Conference. They wonder
Whether Iran Should not make some gesture toward the Soviet Union in order
to keep in step with Iran's Western friends, particularly the U.S. This
anxiety will probably increase as a result of the proposed Turco-Soviet
exchange of visits.
C. hakIrmitia
Iran has no particular problem with any Arab country other than
Iraq at present. There is, however, no affection between the Iranians and
the Arabs. Iran both fears Arab unity as interpreted by Nasser and sees
it as an obstacle to Iranian aspirations in the Persian Gulf. With respect'
to Iraq, Iran is generally apprehensive. Iran would prefer neither a pro
Nasser nor a pro-communist government in Baghdad. In any event, Iran feels
that it has a real grievance, over Iraq's sovereignty over and unilateral
control of navigation (supported by a 1937 treaty) on the Shatt-el-Arab, :the
river upon which Iran's chief commercial and oil-loading ports are located.
Although tensions have subsided for the moment and Iraq and Iran-plan to
exchange new ambassadors, relations are unlikely to improve substantially.
D. Afklam=kmattu
The Iranians are genuinely concerned about the extent of Soviet
penetration into Afghanistan. In addition, they use this to buttress their
arguments for contingency planning against indirect aggression and a command
structure in the CENTO framework. Irano-Afghan relations have suffered for
many years as a result of a controversy over the use of the waters of the
Helmand River Which runs for most of its course through Afghanistan but
Which empties into Iran. Both sides have misinterpreted a 1951 Neutral Com-
mission report as an arbitral award rather than the factual study which
it is. As a result, the Afghans insist that the Neutral Commission report
be the only negotiating document while the Iranians are equally emphatic
in their refusal to negotiate upon the basis of the report. This contro-
versy has now come to a head because of Afghan plans to build a diversion
dam in the lower Helmand valley near its delta in Iran. There is an im-
plication that if the U.S. does not help on this project, the Afghans will
turn to the Russians. The U.S. has offered to help with the financing of
a survey of both countries needs in the lower Helmand valley, but only if
they reach some prior understanding. Afghan Prime Minister nand recently
visited Tehran and Iranian Prime Minister Eqbal will soon visit Kabul, but
no solution appears in sight.
E. Other
Iran enjoys close and friendly relations with its fellow GERM
members, Turkey, Pakistan and Great Britain, though there is a deep and
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-5-
abiding suspicion of the latter because of past relationships. Germany,
Japan and Italy are active commercially in Iran but their influence is
not great. France retains only cultural ties. Iran recognizes Nationalist
China and has virtually no contact with Red China. Indian-Iranian re-
lations have been marred in the past by Indian blandishments on the joys
of neutralism, Prime Minister Nehru, however, did not take this line
during his last visit to Tehran, probably because of his own problems with
the communist bloc. Other relationships are relatively unimportant.
S/S-R0 - Raymond L. Perkins
Room 5005N5, Ext. 562
Drafted by; GTI Ar. Aouser
Cleared by: GTI - Ar. Hope
SOA - Ar. Poullada
NE - Ar. Lakeland
SOY - r. leysteen
NR Ar. Gannett
NEA - Ar. Jones
C Ar. Achilles
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MINT
EIGHTH =TO tiENLSTIMAY., COUNCIL LEMON
?Than A
Position Paper
DeULOPMENTS
(To be raised only at foreign initiative)
Anticipated Porei Position:
TEH D-11/2
April 15, 1960
1. UK-UAR diplanatin relations were resumed on December 2, 1959 and the
British appear ready to seek a nod= vivendi with President Nasser and Arab
nationalism. Hovever? the continue suspect Nasser's notives in
Iraq and to interpret renewed UAR propaganda attacks against Jordan as connoting
UAR designs against Jordanian integrity. The UK is inclined to believe that
the US may be extending the UAR a greater degree of support than is currently
warranted and may over-estimate the extent to which UAR-Weetama cooperation
is feasible. The British nevertheless have made clear that they recogeize
the desirability of the US doing what it can with President Nasser.
2. The Terks mistrust UAR activities in the Arab world and continue to
believe that President Nasser is following a policy of unbridled aggraadisenent.
Iranian suspicion of the UAR is less strong, and the atmosphere of VAR-
Iranian relations is thus less strained.
3. President Nestmes state visit to Pakistan, April 10-16, has served to
meek a further improvement in relations between those two countries as
desired by the Pakistanis. President Nasser's pehlic reception in Pakistan
was friendly but not enthusiastic and his private contacts are believed to
have been cordial.
Recommended U.S. Position:
The United States assumes that President Nasser still seeks a position of
primary political leadership amaag the Arab countries. Recurrent UAR propa-
ganda attacks against Arab neighbors, notably Iraq and Jordan, appear to he
designed to this end. President Nasser seams to recognize the desirability
of devoting an increasing amount of attention to UAR domestic affairs. He
appears satisfied that Soviet assistance can be accepted without seriously
impairing the neutral posture or! the UAR and is continuing to oppose Cceennist
influence in the Near East. In, this connection it is worth recalling that
the UAR aati-Communist campaign began after, no; before, the Soviet offer to
construct the first stage of the Aswan High Den.
The us does not consider that broad understanding with Reeser is possible.
We do continue to feel, however, that a measure of Western cooperation,
involving no major new commitments is helpful (a) to assure the maintenance of
the UAR anti-Communist posture; and (b) to demonstrate that there is a Western
alternative to complete UAR dependence oaths Communist Bloc. In this epirit?
we are continuing a modest technical assistance program as well as surplus
agricultural sales for which clear economic and humanitarian, as yell as political,
justification exists.
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S S-RO; Raymond L. Perkins
Room 5005 N$, Ext. 5262
Drafted by: NEA/NE - Mr. Brewer
Cleared by: GTI - Mr. Mouser (draft)
BNA - Ar. Moffett (draft)
SOA ft% Adatus (draft)
- Mr. Aeyer
NR - Mr. Gannett
NEA Ar. Hart
C Ar. Achilles
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