FOREIGN RELATIONS, -1949,y VOLUME VI


budget ould have-serious repercussions on its Seven Year:- Plan. for
ecoinomic development;
   (b) Our own Security 'considerations-and thefact that our resoUrCe
Are nof-t unlimited;
  (c) The faetthat Iran isthe only Countrywith a&favorable foreign
exchange program to receive military assistance on a grant basis;
  .(d :The availability of trained personnel capable of handling and
maintaining the more complex varieties of modern military equipment.
  2. Economic Assistance
  The Shah is likely to raise the question of economic assistance to his
government. In this connection, Iran has emiibarked upon a Seven Year
Program involving about $650 million. Financing of this program,
which involves agricultural, irrigation, highway, railway, industrial,
public health, and educational projects, depends primarily on oil
royalties. The IBRD may also be asked for loans up to $250 million
to provide additional funds. Immediate aims of the program-include
raising standards of education and public health,-improving agricul-
tural methods and transportation facilities, and reforming tax
administration.
  Last September, in answer to a specific.Iranian request for an eco-
nomic grant of $147 million, the Department replied that no-authority
existed for a grant, and that it, would be impossible to obtain such
authority from Congress since Iran has a favorable foreign exchange
position (mainly because of an arrangement under which the British
Government freely converts its sterling royalties to dollars) and has
not yet exhausted other sources of financial assistance, i.e., ,the IBRD.
We added that the U.S. would be willing to support an adequatly
documented Iranian application for a loan from the Internationa!
Bank.
   You may want to convey a general idea to the Shah of the part that
the Point Four Program might play in assisting Iran in its Seven
Year Plan,; reiterating the program's emphasis' on technical" rather
than financial assistance and stressing the role that private capital
must assume. You might also say that the first step that Iran could
take in preparing the way for its Point Four participation should be
thei negotiation of-a Treaty of Friendship, Commerce and Navigation
with the United States, which would include suitable clauses .on in.
vestment guarantees.
  3. Extension of the-Truman Doctrine to Include Iran
  'Since preparation of the Background Memorandum, Iranian Am-,
bassador Ala has suggested that, upon the departure of the Shah,.a
joint statement be issued reaffirming the* principles of the Tehran
Declaration on Iran, promising Iran further military and economic


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