Activities in Iran in the 1960s:
Documents from the US government

Washington, December 11, 1964.

/1/Source: Washington National Records Center, RG 330, OASD/ISA Files: FRC 68 A 306, 121 Iran--11 Dec 64. Confidential. A stamped notation on the source text indicates that Solbert saw it.

Dear Peter:

The Country Team in Iran has requested us to clarify for the Department of Defense the possibility of using P.L. 480, Title I, 104(c) funds to finance the local currency costs of MAP projects in Iran. The recent Title I agreements with Iran provide that the proceeds be used for loans to support Iran's economic development. No provision has been made to extend grants for defense purposes. Moreover, because of Iran's long term favorable balance of payments position, it is unlikely that further Title I agreements will be concluded. In the future, sales of surplus commodities to Iran will be for dollars under Title IV and not for local currency. In summary, there are no funds available for military purposes under present agreements and future availability is highly improbable.

The Department of Defense will also recall that in the Spring of 1962, the Shah was informed of the United States decision to terminate budgetary support for the Iranian defense establishment. An allocation of P.L. 480 local currency proceeds for defense purposes would represent another form of budgetary support and a reversal of policy which, in our judgment, would not be warranted in view of Iran's improved economic position./2/

/2/A handwritten notation on the source text reads: "General Strickland--No action called for by us, I take it. PS."

Sincerely yours,

Bill

61. Special Report Prepared in the Central Intelligence Agency/1/

SC No. 00649/64CWashington, December 11, 1964.

/1/Source: Johnson Library, National Security File, Country File, Iran, Vol. I, Memos & Miscellaneous, 1/64-12/65. Secret; No Foreign Dissem. Prepared in the CIA's Office of Current Intelligence. Attached to a December 14 memorandum from McCone to the President that reads: "Your questions concerning the current situation in Iran prompt me to submit the attached special report, 'Reform in Iran: Progress and Prospects.' This represents the Central Intelligence Agency's most recent appraisal of the situation and reflects in detail points I made briefly in our conversation Saturday [December 12] morning."

REFORM IN IRAN: PROGRESS AND PROSPECTS

For over two years the Shah has been trying to effect fundamental economic and political reforms in Iran, with the primary aim of building a broad popular base for his regime. The most dramatic changes are occurring in the traditional system of land tenure, as villages are taken from individual owners and distributed among the peasants. The program, as expected, is alienating the Shah's supporters among the wealthy classes, whose influence in the country's administration has not lessened significantly. Moreover, the Shah has not yet achieved his desired mass political support; peasants still lack effective instruments to register their approval of his program, and the urban population is skeptical of his motives. Disruptions brought on by the reforms meanwhile threaten an economic crisis and a possible reversal of what he terms his "White Revolution."

[Here follows the body of the paper.]

62. Action Memorandum From the Assistant Secretary of State for Near Eastern and South Asian Affairs (Talbot) to Secretary of State Rusk/1/

Washington, December 19, 1964.

/1/Source: Department of State, Central Files, POL 15-1 IRAN. Confidential. Drafted by Tiger and cleared by Acting Legal Adviser Leonard C. Meeker and Jernegan.

SUBJECT
Serious Problem with Iran re the Gudarzian Case

Discussion

Foreign Minister Aram has requested urgently that you receive him again to discuss the Gudarzian case, which he mentioned to you when he met with you on December 5. I feel strongly that, despite your heavy schedule, you should receive him again while he is in Washington December 21 and 22. There are two major reasons why such a meeting is required at this time:

1. This affair has incensed the Shah more than any previous incident in U.S.-Iranian relations during the past ten years. He cannot understand how the USG could allow a "known crook" such as Gudarzian first to testify falsely before a Congressional committee regarding corruption in United States aid to Iran, as he did to the McClellen Committee in the summer and fall of 1963, and now obviously to abuse the New York court system for the purpose of harassing the royal family and disturbing U.S.-Iranian relations. Worst of all, the Shah has gained the impression from Aram's reporting from New York that there is insufficient high-level U.S.G. interest in bringing Gudarzian to book, as indicated in Tehran's telegram 659. (Tab D)/2/

/2/All of the tabs were attached but not printed.

2. Since you saw Aram on December 5 there has been a new development that has further outraged the Shah and other Iranian officials. Gudarzian's attorneys on December 11 entered an action in the New York courts charging that an Iranian lawyer, Khosro Eghbal, came to this country to remove assets of Princess Fatemeh and was served with a summons which he evaded by leaving the country on the advice of Donald Wehmeyer (L/NEA) and Ambassador Foroughi. Court orders were issued calling upon Wehmeyer and the Ambassador (who however has not been served) to show cause why they should not be held in contempt of court. The charges against Wehmeyer and the Ambassador are groundless, but the Shah has gained the impression that Iranian immunity in this country has been breached by the court's action in entertaining a charge against his Ambassador. This court action was publicized in the New York Times of December 12 and is described further in Tehran's telegram 666, (Tab E) and in the Department's telegram 505, (Tab F).

Our foreign policy interests in this problem are substantial. The Shah has just rammed through the Iranian Parliament, at our insistence and with considerable risk to his domestic position, a highly unpopular measure extending immunities and privileges to American military personnel in Iran. He has also responded in very forthcoming manner so far to our suggestions that he take a hand in the affair of Robert Bredin, an American engineer who has been sentenced by an Iranian court to three years for the presumed murder of his wife, in the face of evidence clearly indicating death from other causes. We have ahead of us some possibly delicate representations on the subject of a new oil agreement with the Consortium, negotiations for which are now deadlocked. We will also shortly be wanting to raise the subject of Iran's participation in the supply of military units and equipment to South Viet Nam. We must anticipate difficulties in these endeavors and in all other aspects of our relations so long as the Shah can feel that he has been obliging in meeting all of our requests whereas we do not lift a finger to keep his family from being harassed unjustly in our courts or his Ambassador from being falsely accused, all by one he considers a proven scoundrel whom we do not even expose through publicity channels.

We have, of course, been for months taking measures designed to curb Gudarzian's activities within the limits of our relationship to a state court system. These were described to Aram in some detail by the Department's Deputy Legal Adviser on December 10, as covered in the Department's telegram 486, (Tab G). When Ambassador Foroughi called on me on December 18 to deliver a note of protest about the latest court action and the entire Gudarzian affair (Tab H), Len Meeker and I assured him in strongest terms of this Government's distress over the affair and our determination at high levels to bring Gudarzian to justice. We also persuaded Foroughi to help us in dispelling the false notion in Tehran that he had actually been served with a subpoena and that Iranian diplomatic immunity here had thereby been breached. I am entertaining Aram at a small luncheon on December 21 and Governor Harriman is scheduled to lunch privately with Aram on December 22. While these meetings will provide further opportunity for expressions of concern and determination, I am certain that nothing less than a direct expression of this kind from you to Aram will suffice to begin repairing the damage.

At a meeting with Aram, you could explain to him that you found, upon looking into the matter after your December 5 meeting, that the Gudarzian affair had been occupying a great deal of attention in various Government Departments for some months. Most recently these included further detailed contacts by Federal Government officials with New York State legal officials.

You could tell Aram that we too are outraged by the latest court action and are determined to take every measure within our power to put a stop to this evident abuse of our state courts by bringing the evidence of possible violations of law forcefully to the attention of the proper authorities. If you agree to send the letters to the Governor of New York, the Secretary of the Treasury, and the Acting Attorney General which are attached as Tabs A, B and C respectively, you could cite these as evidence of our determination to see this matter through. (I do not recommend that you give him copies.) You could also tell Aram that we expect developments in the near future to result in press coverage that will help counteract the embarrassment caused to the royal family and to Ambassador Foroughi by press coverage of the judicial proceedings to date.

Recommendations

1. That you sign the letters to the Governor of New York, the Secretary of the Treasury and the Acting Attorney General, attached as Tabs A, B and C, respectively. I should like to deliver the letter to the Acting Attorney General myself to give him some of the flavor of the whole case and enlist his personal interest and support.

2. That you receive the Iranian Foreign Minister on Monday or Tuesday, December 21 or 22 and discuss the Gudarzian case with him along the foregoing lines./3/

/3/On December 21 Secretary Rusk initialed his approval of Talbot's recommendations and agreed to a meeting with the Iranian Foreign Minister at 3 p.m. on December 22. Telegram 511 to Tehran, December 22, reported that at the meeting Aram pressed for more effort to convict Gudarzian on criminal charges. The Secretary told the Foreign Minister that the Department was in touch with New York authorities and other U.S. Government agencies and was stepping up its efforts in connection with criminal charges against Gudarzian. (Ibid.)

63. Briefing Memorandum From the Director of the Office of South Asian Affairs (Cameron) to Secretary of State Rusk/1/

Washington, January 6, 1965.

/1/Source: Department of State, Central Files, POL IRAN-U.S. Confidential. Drafted by Tiger and John G. Oliver in FSE; cleared in draft by the Office of International Resources' Chief of Fuels and Energy Division Andrew F. Ensor in the Bureau of Economic Affairs and William D. Wolle (NEA/NE). A handwritten note on the source text reads, "S saw."

SUBJECT
Your Appointment with the Foreign Minister of Iran, Thursday, January 7, 12:00 Noon

Foreign Minister Aram (see attached biographic sketch)/2/ is calling, on instruction from his Government, to discuss problems being encountered in the final stages of negotiation for a revised oil agreement with the Iranian Oil Consortium. He will very likely request United States Government intercession with American companies participating in the Consortium to modify certain terms of the offer.

/2/Attached but not printed. Secretary Rusk met with Foreign Minister Aram at 12:25 p.m. on January 7. No memorandum of conversation of their meeting has been found.

When Iranian officials approached us, here and in Tehran, during the past month to use our influence with the American companies, we have reminded them that our influence is not sufficient to force the companies to abandon a position which they consider important in their operations abroad. While this remains true, our present difficulties with the Shah over the Gudarzian affair would suggest a somewhat more forthcoming approach to Mr. Aram on this occasion. I recommend that, while reminding him again of the limits of our influence, you offer the Department's services in contacting American companies, advising them in detail of the Iranian position, and reporting back to the Iranian officials on the results of these approaches.

Mr. Jernegan will accompany Mr. Aram in his call on you, as will Mr. Ensor (E/FSE) and Mr. Tiger (NEA/GTI).

Background

The proposed agreement, which has been offered by the operating companies to all of the Middle Eastern producing countries participating in OPEC (Organization of Petroleum Exporting Countries), involves an agreement to treat royalty payments as an item of operating expenses rather than as part of the country's 50 percent share of profits. This would net the producing countries substantially higher revenues. The companies agreed to make the offer retroactive for the calendar year 1964 if the producing countries would accept it by December 31, 1964. This deadline has now been extended to January 26, 1965. As of December 31, the offer had been accepted by Saudi Arabia, in principle, and by Kuwait, subject to parliamentary ratification.

On December 31 Iran finally accepted the fiscal provisions of the offer, but it is still balking at other conditions, namely those involving a quit-claim and arbitration procedures. The Consortium wants a quit-claim (waiver) of all additional monetary demands by Iran for the years preceding the new agreement, whereas Iran wants such a waiver limited to questions involving the level of posted prices. As regards arbitration, Iran contends that the current proposal provides the Consortium with a unilateral right to demand arbitration in the event of an alleged breach of the agreement, but denies a similar right to Iran. Iran further claims that there are adequate arbitration mechanisms in its existing agreement and demands special consideration for having helped the companies work out arbitration arrangements with the Arab countries, where no such mechanisms had existed. This special consideration, in the Iranian mind, should take the form of exempting Iran from the arbitration provisions worked out for Arab producing countries.

During ten days of discussions in London (December 20-30) there was apparently some progress on the quit-claim problem, but the arbitration provision remains a sticking point. On December 31 the Prime Minister told Ambassador Holmes that the Consortium's offer was "entirely unacceptable," adding that "it would be utterly impossible for his Government to present anything less than equal treatment to the Iranian Parliament." The companies have taken an equally strong position against retaining unique arbitration provisions for Iran. However, as of December 31 it was evident that both sides had some expectation of being able to settle these differences by January 26. The Consortium was to have despatched three high-level representatives from London to Tehran on January 5 to resume negotiations, but no word has yet been received as to their progress./3/

/3/A supplemental briefing memorandum from Jernegan to Rusk on January 6 reported that the Consortium representatives in Tehran were prepared to yield significantly on the arbitration issue, but that their new proposals would still fall short of the completely reciprocal arbitration rights which the Iranians had been seeking. They also pointed out to Holmes that any modification agreed to with Iran would necessitate renegotiation to grant similar concessions to the Arab countries. (Department of State, NEA/IRN Files: Lot 70 D 552, CHRON FILE, IRAN 1965, Memoranda through S/S (Staff Studies))

64. Paper Prepared in the Department of State/1/

Washington, undated.

/1/Source: Department of State, NEA/IRN Files: Lot 69 D 489, Iran 1965, POL 13-6 Religious Groups. Confidential. Prepared by INR. Attached to a January 7 note that reads: "Rec'd from WGM. This is a copy of an internal paper prepared for Mr. Spain's use." WGM is William G. Miller of INR. The paper was sent to Bracken, Howison, Tiger, and Mulligan in NEA/GTI. Another attachment to the paper makes it clear that it was prepared in 1965.

THE SIGNIFICANCE OF KHOMEINI'S OPPOSITION TO THE
IRANIAN GOVERNMENT

The opposition of Ayatollah Maj Ruhollah Seyed Musavi Khomeini, the leading Iranian religious figure, is symptomatic of widespread popular opposition to Government policies. One aspect of these policies has been to destroy the power of the clergy. To attempt to weaken the religious structure of Iranian society, as the Shah appears to be doing, believing this necessary to carry on his campaign to modernize Iran, has proven to be a dangerous course of political action. Popular reactions to this policy are already apparent. As reactionary as the present clergy is, the very nature of religion in Iran is such that it is capable of change and adaptation. Khomeini's opposition represents the reaction of traditional Iranian society. As spokesman for the religious community Khomeini's opposition is, in one sense, political protest; more importantly, it indicates the troubled state of Iranian civilization.

During the past two years there has been a reawakened opposition among the religious community to the regime's policies. This antipathy has been extended in recent months to open criticism of American policy in Iran. Speaking for the religious community, Khomeini has said that American policy is responsible for many of Iran's ills and that it is supporting an unpopular regime for its own purposes to the detriment of the people as a whole as did the Russians and British before them. Given this alienation from the regime and this antipathy to the American role in Iran, and given the widespread support Khomeini's views have among the traditional world of bazaar, village and small city, the reasons for Khomeini's rise to political prominence herald resistance from quarters of the Iranian population that have not been in active opposition before.

Khomeini's education, learning and widespread support within the clergy made him eligible to succeed Ayatollah Borujerdi as the leader of Iranian Islam, a position made vacant by Borujerdi's death in 1961 before Khomeini became a political figure. Khomeini's political abilities became evident in 1963 when he first spoke out against the anti-religious policies of the Government. Khomeini's political stand is not an isolated one; it is a view shared by a significant mass of Iranians.

The religious community and the values they hold play an important part in Iranian society. Because the ulema have expressed disapproval of some of the Shah's goals and condemned almost all of the Shah's methods, the Shah has decided to carry out his plans to change the Iranian social structure without their support or assistance. He has branded the clergy "black reactionaries" who are opposed to reform. He has gone so far as to exile their leader Khomeini for anti-regime speeches and for alleged anti-reform attitudes.

There is no question that Khomeini has opposed certain features of the Shah's program. He has condemned completely the Shah's autocratic methods. There is little question, too, that he is reactionary and provincial in outlook, no matter how learned. Paradoxically, there are few leaders in Iran who by training would be better able to formulate for the devout a religious justification for modernization. Khomeini is recognized as the leading philosophical exponent of ijtehad, the Shia doctrine whereby change can be adapted to an Islamic framework. But it is important to recognize that Khomeini does not speak only for himself. He represents the point of view of traditional Iranian society.

Part of the conflict between the regime on the one hand and the religiously-oriented masses on the other is over the pace and means of carrying out reforms. The clergy has under great pressure grudgingly recognized that reforms in Iranian society must be made. Khomeini says he is not opposed to land distribution and that land distribution is consistent with Islam if just compensation is made. He has opposed, for example, the emancipation of women under present circumstances stating that emancipation without education is meaningless. In almost every instance the principle of a particular reform has been accepted; the challenge has come over methodology. The clergy by its training and philosophical outlook is tradition-bound. The basic changes implicit in some of the Shah's reforms, such as land distribution, require adaptations that will markedly alter the whole religious structure. "What will the position of the ulema be without the waqf?" is the kind of question that has deep philosophical and religious implications for the ulema and Iran as a whole. That there has been opposition on the part of the ulema is inevitable. But within the traditional structure, the power of the ulema might have been used to justify and institutionalize the changes taking place.

Had the Shah consulted with the leaders of the religious community, considered their ideas, and had he given the ulema a limited constructive role to play, opposition to his reforms from the religious would have been considerably lessened. This was former Prime Minister Ali Amini's belief and still is his position. However, these are "might have been's." What is now clear is that Khomeini's exile has aroused dormant nationalist feelings. The Shah and the United States have been branded as both anti-nationalist and anti-religious. This new attitude has tarnished our formerly favorable image, poses a threat to our interests in Iran, and will certainly make our task there far more difficult.

65. Memorandum From the Deputy Director of the Office of Greek, Turkish, and Iranian Affairs (Howison) to the Assistant Secretary of State for Near Eastern and South Asian Affairs (Talbot)/1/

Washington, January 18, 1965.

/1/Source: Department of State, NEA/IRN Files: Lot 69 D 426, AID Iran 1965, AID-1, General Policy, Plans, Coordination. Confidential. Drafted by Mulligan (NEA/GTI). A handwritten note on the memorandum reads: "GTI--A good paper. T."

SUBJECT
Your Appointment with Howard Parsons, AID Mission Director for Iran 10:30 a.m. Tuesday, January 19, 1965

In your meeting with Mr. Parsons you may wish to draw on the following talking points.

1. Our security interests are too compelling for us to allow favorable indications of Iran's increasing self-reliance to obscure its continuing vulnerability and basic weaknesses or to conclude too early that U.S. objectives can be achieved without significant participation in Iranian affairs. Iran is in transition, deeply engaged in the process of difficult adjustment to the initiation of basic reforms and the effort to achieve rapid modernization. Although progress in this respect is encouraging it is not yet self-sustaining and does not insure continued internal stability.

2. Our leverage in the past has stemmed in large measure from the inputs of our economic, technical and military assistance. These modes of assistance on a large scale have contributed significantly to the forward movement experienced during the past decade and secured our entree into key administrative, economic and military avenues. Fortunately, there is considerable acceptance among the present ruling society of the value of Iran's ties with the West and increasing agreement with the stress which we have placed on orderly modernization and socio-economic development. Under a continuance of present circumstances therefore we need not look forward to a drastic loss of influence as our material sources of leverage disappear.

3. However, apart from military matters, where we may expect some years more of close dependence on U.S. advance and support, we shall be drawn less closely into the government's future decision making process and shall probably adopt more nearly the role of trusted ally rather than that of responsible senior partner.

4. We should exercise the influence and capabilities which derive from our technical and economic assistance programs to lessen the impact of our preponderantly military loan assistance and diminish our vulnerability to the charge that the United States is pursuing a militaristic policy in Iran with little concern for the economic and social betterment of the Iranian people.

5. Although the administration of Iranian economic affairs has improved, we shall want to continue to exercise our available influence to persuade the Iranians to maximize their increasing resource allocations for development and to take the difficult political decisions involved in such critical areas as overhauling the tax system and improving public administration.

6. We should endeavor to maintain flexibility in our aid policy so as to assist in preventing the dissipation of important economic advances, as well as to safeguard our own national interest by developing for U.S. industry an appropriate share of the growing market for capital goods which we have helped to create through our soft loans and other assist-ance of the past. This is essential not only because of our balance of payments problem but also as a further means of preserving American influence and our presence in key undertakings in the Iranian economy.

7. In the transitional period ahead, with Iran counting heavily upon the success of a land reform program which initially, at least, is adding to a now chronic shortfall of wheat production, our PL-480 programs should assume greater significance. In order to derive maximum benefit from this type of assistance, both as a marketing aid for the United States and as an instrument of foreign policy, we shall have to work hard at both ends in streamlining the bureaucratic procedures associated with PL-480.

66. Memorandum From the Deputy Director of the Office of Greek, Turkish, and Iranian Affairs (Howison) to the Assistant Secretary of State for Near Eastern and South Asian Affairs (Talbot)/1/

Washington, January 21, 1965.

/1/Source: Department of State, NEA/IRN Files: Lot 69 D 484, Iran 1965, POL 23-8, Demonstrations, Riots. Confidential. Drafted by Howison. A notation on the source text indicates that it was seen by Rusk.

SUBJECT
Attempt on Life of Iranian Prime Minister

At 10:00 a.m. (2:30 a.m. EST) Prime Minister Mansur was shot and seriously wounded by a young man reportedly carrying a Koran and a picture of Khomeini as the Prime Minister arrived at the Parliament to present the new oil agreements. We tentatively infer that the assassin may have been a conservative supporter of Ayatollah Khomeini, who was exiled to Turkey for anti-regime activity at the time of ratification of our Status Bill. Although Khomeini's motivation is primarily opposition to secularist reforms, he thus succeeded in getting official endorsement of his nationalist (in this case, anti-American) pose. The attempt on the Prime Minister's life, if the assassin's sympathy for Khomeini is publicly established, has unfortunate implications of opposition to Iran's relationship with the United States.

Though the event will tend to weaken the regime, it would require genius in mishandling the situation for it to precipitate the kind of chaos which has followed modern assassinations (successful) in Iran. The Shah is in personal charge of the situation, having returned immediately from the ski resort above Tehran.

The wire services have noted that the assassin is young, but have not labelled him a religious fanatic yet. They have clearly labelled Mansur a progressive reformist. The wire reports leave room for the almost certainly unjustified inference that the assassin opposed the oil agreements.

67. Memorandum From the Director of the Bureau of Intelligence and Research (Hughes) to Secretary of State Rusk/1/

Washington, January 28, 1965.

/1/Source: Johnson Library, National Security File, Robert W. Komer Files, Iran, 1965-March 1966. Secret; No Foreign Dissem.

SUBJECT
The Significance of the Assassination of Prime Minister Hasan Ali Mansur

The Character of Regime Will Remain Unchanged. The death of Prime Minister Hasan Ali Mansur on January 26, five days after he was shot by Mohamad Bokharai, a twenty-year-old ironmonger's assistant, will not alter the character of the regime. Amir Abbas Hoveyda, Minister of Finance in the Mansur Cabinet, was named Prime Minister by the Shah. Hoveyda's appointment may cause difficulties because he is believed to be a member of the Bahai sect, which is deeply disliked by many Iranian Muslims. The Cabinet remains essentially the same as Mansur's, except for the appointment of SAVAK Chief (the Iranian Security Organization) General Hasan Pakravan as Minister of Information. Shortly after Mansur's death, the Shah, in a fiery speech, denounced "black reactionaries" and reaffirmed his support for the reform program formerly directed by Mansur.

Assassination Was Fanatic Expression of Widespread Discontent./2/ There is no evidence that the assassin and his accomplices, all members of a small religious society called Maktab Towhid, were part of a larger movement. On the contrary, the assassination seems to have been planned without outside help. Anger caused by the exile to Turkey by the regime of the leading Iranian religious figure, Ayatollah Ruhollah Haj Musavi Khomeini, seems to have in part motivated Bokharai to shoot Mansur, but there was no known connection between the Maktab Tow-hid and the movement headed by Khomeini. There are hundreds of small religious groups like Maktab Towhid that could cause religiously motivated violence of the sort that has just taken place. The security measures taken by the regime have prevented the formation of broadly based political or religious opposition movements. At the same time, fragmentation of the opposition and formation of small conspiratorial groups make effective surveillance difficult. The fact that SAVAK was unaware of the activities of Maktab Towhid is a case in point. There is considerable discontent in Iran because of continued repression of opposition groups, exile of Ayatollah Khomeini, unpopular measures passed by the government such as the recent Status of Forces Bill, and the increase in the cost of basic fuels.

/2/A February 10 memorandum from Bracken to Talbot noted that GTI considered the use of the phrase "widespread discontent" in the January 28 INR briefing paper unfortunate, allowing as it did for the inference that "discontent" arose directly or solely from misgovernment and/or repressive government. On the contrary, GTI judged that political dissidence in Iran was at a relatively low point, viewed against the experience of the previous 50 years, and it saw the patterns of discontent in Iran as stemming predominantly from the rate of social change that had been taking place. (Department of State, NEA/IRN Files: Lot 69 D 489, Iran 1965, POL 23-8, Demonstrations, Riots)

Problems Facing the Regime. The appointment of someone as Prime Minister reputed to be a Bahai may arouse additional religious antagonism. There are, however, signs that Mansur's assassination has increased the regime's awareness of the necessity to resolve the differences between the Shah and the religious opposition groups. The circumstances under which an accommodation could be made would require some loosening of political control and a greater measure of participation in government by groups presently in opposition./3/

/3/In telegram 793 from Tehran, January 27, Holmes reported that the appointment of Hoveyda to succeed Mansur would ensure continuity of government policies and practices. He also noted that the Shah's television broadcast had blamed Mansur's assassination on an unholy alliance between Communists and reactionaries, but that the Embassy had no evidence of such an alliance. What evidence it did have pointed to a relatively small group of fanatics motivated by religious and perhaps other factors. (Ibid., Central Files, POL 15-1 IRAN)

68. Telegram From the Embassy in Iran to the Department of State/1/

Tehran, February 15, 1965, 2 p.m.

/1/Source: Department of State, Central Files, DEF 19-3 U.S.-IRAN. Secret. Repeated to DOD and CINCSTRIKE/CINCMEAFSA.

854. In recent conversations with Eckhardt and me Shah has asked for annual review of military equipment program and acquisitions as provided for in Memorandum of Understanding of July 4, 1964. Shah referred to anticipated increases in oil revenues and indicated his desire to consider purchase of additional military equipment, including high performance fighter aircraft, armored reconnaissance vehicles, increase in war reserve ammunition from 30 to 60 days, and second Hawk battalion.

He accepted my suggestion that review should begin with comprehensive assessment of GOI's projected revenues and outlays, especially of foreign exchange, over next several years; review to be carried out by economic officials in consultation with Embassy-USAID economic officers. As first step in consultation we have prepared lengthy questionnaire of matters to be addressed and I will pass it to Prime Minister this week.

Details follow by airgram.

Holmes

69. Memorandum From the Executive Secretary of the Department of State (Read) to the President's Special Assistant for National Security Affairs (Bundy)/1/

Washington, February 18, 1965.

/1/Source: Johnson Library, National Security File, Country File, Iran, Vol. I, Memos & Miscellaneous, 1/64-12/65. Confidential.

SUBJECT
Strong Reaction by Shah of Iran to Gudarzian Affair

A major irritant in our relations with Iran for some months has been the affair of Khaibar Gudarzian, an Iranian national who has been misusing the procedures of both our courts and our Congress. In cases now pending in the New York courts the information available to us indicates he is attempting to obtain money from the Shah's brother and sister by means of false allegations, forged documents, and fraudulent claims of service of process. As long ago as May 1963 he began airing false charges of corruption in our aid program in Iran before the McClellan Committee, through the press, and to the Department of Justice. Investigations of practically all of those charges by the Departments of State and Justice have disclosed that the evidence submitted by Gudarzian consists of forgeries and fabrications, but there has thus far been no public refutation by the Executive Branch or by the McClellan Committee.

This Department has taken a number of steps during the past several months to ensure that justice is done and to counteract the harmful publicity Gudarzian's activities have generated. Late in December, Secretary Rusk brought the problem directly to the attention of the Attorney General, the Secretary of the Treasury, and the Governor of New York. Background briefings were given to the press in early January. The Department of Justice has been cooperating, within limits imposed by our federal system and by the separation of executive and judicial powers on its capacity to intervene where private litigation is involved. Competent private counsel is defending the Prince and Princess and there is good prospect that the default judgment previously awarded to Gudarzian will be set aside. The New York Court has ordered that its referee go to Tehran at an early date to hear witnesses who will testify that the Prince and Princess were in Iran on the date they are alleged to have been served with process in New York. A Federal grand jury investigation into Gudarzian's activities was launched in December to determine whether sufficient evidence could be obtained to try him on criminal charges for some of his questionable activities.

Throughout these developments, the Shah has become increasingly frustrated over our inability to halt Gudarzian's machinations once and for all, bring him rapidly to book, and dispel in some dramatic fashion the adverse publicity generated about the royal family and Iran in general. On February 13, the Shah's anger erupted violently in the decision to discharge his excellent Ambassador to Washington who has, in fact, done all any Ambassador could have done. The Shah is clearly over-reacting, and we cannot be sure that he will not take further and even more extreme steps before there is any very decisive resolution of the Gudarzian affair. Our relationship with the Shah must be maintained at a tolerable level as it is a key factor in our efforts to extend the stability and progress shown by Iran in the past decade.

The Department of State is exploring with the Department of Justice whether there might be any extraordinary steps the Department of Justice could take at this point that would quickly extricate the Prince and Princess and end Gudarzian's abuse of our judicial system./2/

/2/A February 22 memorandum from McGeorge Bundy to Attorney General Kennedy reads: "The so-called Gudarzian case is causing great distress and no little annoyance to our good friend, the Shah of Iran. Therefore, the President hopes that the Justice Department will do what it can to help bring about a prompt resolution of this matter, of course with all due regard for our judicial processes. I understand that Secretary Rusk will also be in touch with you with the same plea." (Ibid., Robert W. Komer Files, Iran--Gudarzian Case, 1965)

Benjamin H. Read/3/

/3/Signed for Read in an unidentified hand.

©Copyright 1964, U. S. Department of State