ECONOMIC SITUATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83-00423R001600690001-8
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 2
• Document Creation Date: November 9, 2016
• Document Release Date: February 4, 1999
• Sequence Number: 1
• Publication Date: August 18, 1954
• Content Type: REPORT

FORM NO
DEC 19,51 . 51-4B
25X1A6a
Economic Situation
999/09/10: CIA-RDP8WA11 R00160069101-8
ITED BY LAW. THE REPRODUCTION OF THIS REPORT IS PROHIBITP.D
THIS IS UNEVALUATED INFORMATION
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1. True oil income is expected to start soon, but not immediately, first year it will not be an important sum. The US.Embassy insists
much of it would
have to go to pay for the ordinary budget now covered by US ghanh
the first year, something more the second, and possibly enough e, herding paytle
for some of the many projects they have in mind under their Seven-Year Plan pay
Administration--a sort of Works Progress Administration to implement the indus-
trialization of the country based on Overseas Consultants, Inc. studies of some
four years ago. So US grants may continue and so will Point Four which will put
pressure on Iranians to pull their own load by using oil income for the ordinary
budget and take the load off the US.
2. There is therefore inside the Iranian Government pressure on the one hand to
start work on as many projects as possible--the people expect it after 2--
of fasting economically without oil income, the years
politicians least big projects, and implement some to keep inofavor with the pnnlunce On
the other hand are the wiser heads that say first, set up a sensible machinery
to handle the allocation of this oil income, coordinate efforts and give priority
ratings. There is in view organizing an Industrial Development Bank as Turkey
recently organized successfully to help finance the larger projects.. Also, of
changing the law to permit legally to divert some of the oil income for the ordinary
budget, now illegal but done through circumvension; this will then fix the amount
above which income will go exclusively to Seven-Year Plan
projects. law to permit foreign capital to come in and leave andtake out dividendslare
contemplated. Some of the eight Ministers are in favor of these prudent steps;
behind the scenes, however, is always the temptation to spend money as fast as
available from oil income or from loans or long credits advanced to Iran, ao as
to get their bit before their tenure of office ceases. At the moment j Aug 517,25X1X6
CENTRAL INTELLIGENCE AGENCY
PLACE ACQUIRED
(BY SOURCE)
DATE ACQUIRED
(BY SOURCE)
DATE (OF INFO.)
U. S. ficials Only
CGNF` IAL
This report is for the us
Agencies ' terl_ nh
ARMY NAVY AIR
FBI
Director of the Office of
6&M
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CON NTIAL/US of iLS ONLY
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the talk is that the present Prime Minister's main job is finished--getting an
oil accord--and a new one will soon be named by the Shah. But there is also
the opposite force in favor of the present Prime Minister--if he has done a good
job with the oil accord, why not continue him in office and get the country's
economic condition bettered considerably. Hence the great amount of confusion
and hesitancy in getting contracts signed.
3. The Government anticipates increased foreign exchange income and has gone ahead
on that assumption by raising the value of the Rial from 86 to 82 to the dollar.
That is, the dollar is worth less now than before 1 August 9547. Further
appreciation of the rial is expected. It already has improved since the oil
crisis time from 120 to 100, to 92, to 86, and now to 82 rials per dollar.
25X1 X6 Politicall the present overnment is stable. A tremendous celebration is on
the way 011p to show solidarity for the Shah on the anniversary
of the "public uprising" to throw Mossadeq out and support the present Prime
Minister whom the Shah named to replace Mossadeq. Still, everyone talks of
the continued pressure of East and West on Iran. The USSR is ever obnoxious.
There is always the tremendous poverty of the many vs the wealth of the few in
the ruling class. No telling when the USSR may exploit this situation and
create the circumstances to produce lack of confidence among businessmen here;
nor is there any certainty that oil income will be constant, nor for a known
number of years.
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5. Right now many projects held up for 2- years are being dusted off.
Building is gong on feverishly. Roads are needed, and many asphalt road contracts
are in the mill; so are dams, etc. So with limited income in sight for at least
three years, the Government officials are insisting on and getting long terms
for paying for current purchases. This stretches the amount they can commit now
while they are still in office. The UK has given long terms on almost US$10
million of rails and cross-ties. France, through a French Government guarantee,
has offered some US$6 million in credits. Details of what to buy and for how
long are being worked out. Germany, defeated and poor a few years ago, offers
credit; just sold 500 buses on five-year terms. Of course, for U~ businessmen
this strikes at our weakest spot. There are no bank facilities in the US to
discount five-year paper except Export-Import Bank. But it deals only when
approached by foreign government*financing. These are for the full amount
previously expected by Iran in loans from Export-Import Bank. So the onus is
on us to find ways and means to finance long-term paper.
25X1 A2
( Occasionally, US manufacturers may get consideration on their own
application, but rarely without direct intervention of foreign
government which must directly or indirectly guarantee loan.)
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