The American investors played a major role in stimulating the banking system and, most importantly, in creating the Industrial and Mining
Development Bank of Iran (IMDBI) in 1959. The IMDBI supplemented the existing 'Revolution Loan Fund' (RLF) as a principal source of credit extension to the private sector. It drew capital from a variety of domestic and foreign, private and official sources. Of its "... initial capital of $42.4 million, equity amounted to $5.3 million, divided in the proportion of sixty-forty between domestic and foreign, notably US
24
investors". Following its establishment, the Bank was very important in advancing private industry and in providing financial, technical and advisory assistance to the private investors. During
the second half of the 1950s, while American investors provided a large part of foreign investment, private investment more than tripled and
25
imports of capital goods increased six-fold. A number of key economic projects went to American firms and th-is was an extension of the fact that they were financed largely by US aid and investment. The other foreign firms, which either helped the American firms (or were commissioned by them) or entered private contracts with Iran, were mainly West German, French and British. By the early 1960s, US direct
private investment in Iran was estimated in excess of $200 million.26 At the same time, the United States was Iran's leading trade partner with the balance of trade well in favour of the former. In 1963, for example, Iran's imports from the United States amounted to $103.7
million and its exports to the US reached $40.4 million.27 This rapid entrenchment of the American position in the Iranian economic
planning and economic operations was re-enforced by the concurrent US involvement in building up the country's armed and security forces, which acted as yet another paramount mechanism, governing Iran's dependence on the United States.
American Military Aid
The armed forces had traditionally been instrumental in consolidating the power base of monarchy in Iran. The Iranian kings in the past had used it as the most obvious means available to manipulate and govern the behaviour of their subjects. in this respect, as was discussed in Chapter II, Reza Shah scored highly. The military, traditionally and constitutionally, had been controlled and commanded directly by the
monarchy. It had, therefore, been trained to obey only the monarchy and operate under the command of only that authority. This, however, was not the case for some of the Qajar kings, who, as a result, eventually lost
2 8
their throne. When Mohammed Reza succeeded his father, one thing to which he paid most attention was the defeated, but not entirely demoralised, Iranian armed forces which he took special care to
reorganise and expand. For this purpose, he attracted the support of an American military advisory mission in 1942, which led to the development of the United States Military Mission with the Imperial Iranian Army
Iran adopted a tough stance against communism Washington provided Teir.an with two parcels of aid to help in improving the efficiency and capability
of its armed forces: $25 million credit to strengthen ARMISH; and a
. 29
$16.6 million grant for arms purchases.
It was the loyalty to the Shah of a major section of these ariaed forces that eventually helped General Zahedi and the CIA in leading thue
royalist forces to victory against Mossadeq. Following the latter's
fall Iran was placed under military rule, which lasted until 1957. The armed forces under the direct command of the Shah formed his major domestic power base and assumed a special role in helping him to
consolidate his rule. This necessitated the expansion and modernisctiion
of the armed forces, particularly against the domestic opposition.
The American ambassador, John C. Wiley, had already stressed in 1950 thiat: "Iran needs an army capable primarily of maintaining order within the country, an army capable of putting down any insurrection — no matter
where or by whom inspired or abetted".30 As a result, Washington
extended massive military aid in arms, training and expertise to the
Shah's regime in the following years. The total US military grant-in— aid
to the regime during 1953-1963, the period of the Mutual Security Act, 31
amounted to $535.4 million. This was the largest military grant
that Washington had offered to a non-NATO country. During the saire
period the number of American personnel present in Iran, as M. Zonis 32 put it before a Congressional Sub-committee, exceeded 10,000.
American aid and personnel played a decisive role in helping the Shah's; regime, between 1953 and 1960, to reorganise and expand its army fram about 100,000 men to 190,000 and build up a modern airforce and nav/ wi.th
33
8,000 and 4,000 trained personnel respectively. Between 1950 and
In the meantime, at least three US military groups entrenched their operations in Iran: ARMISH, which was mentioned earlier; MAAG — the Military Assistance Advisory Group; and GENMISH — the United States Military Mission with the Imperial Iranian Gendarmerie. ARMISH was officially assigned to advise and assist the Iranian Minister of War, the Supreme Commander's Staff and the Commanders and Staffs of the Army, Navy and Air Force in matters concerning plans, organisation, administration and training. MAAG was essentially to execute the
objectives and ensure the effective implementation of the Mutual Defence Assistance programme in Iran. GENMISH was to advise and assist the Interior Minister in improving the organisation and operations of the
35