The Shah
Page 36
During this period, American officials tried to convince the Shah, directly in private conversations and indirectly when he was visiting other places like Japan, that “domestic political and economical health [were] highest values to the defense of Iran.”13 This was America’s way of resolving a paradigmatic difference of vision with the Shah. For him, the main threat to Iran was external, while U.S. analysts believed the threat to have domestic roots. As early as August 1958, CIA Director Allen Dulles told a meeting of the National Security Council, “we take a gloomy view of the Shah’s future unless he can be persuaded to undertake some dramatic actions.”14 The 1958 coup in Iraq, followed by another in Turkey in 1960—two of Iran’s allies in the Baghdad Pact—frightened the Shah and exacerbated American anxieties. In fact, after the Turkish coup, the National Security Council concluded that the Shah was now in more trouble “than anytime since Mossadeq”15 and that the main danger came from the possibility of a military coup, much like what had happened in Turkey. The British were equally alarmed about the internal situation in Iran, but as a rule they concerned themselves more with trade than with democracy promotion. In fact, according to Selden Chapin, the U.S. ambassador in Iran, the British were not “completely helpful” on this score. British officials, Chapin believed, “regret to some degree their past power and prestige,” and not only did they not help the American government but “from time to time” gave the Shah the idea that “Iran was not getting from US the degree of military assistance it deserved.”16
The failed coup attempt by General Gharani in 1958 was, not surprisingly, an early warning to the Shah about the domestic threats to his rule. Lest he fail to get the right lesson from that attempted coup, on September 8, 1958, the new U.S. ambassador, Edward Wailes, met the Shah and told him about the domestic dangers that he still faced. He told the Shah about the “embassy’s views on underground movement and unrest in Iran.” The Shah, according to Wailes, was “impressed” with the work of U.S. intelligence and became receptive to American suggestions of “preventive measures such as anti-corruption campaign and ‘fireside chats’ to the people.”17 What the Shah probably did not know at the time was that in the late fifties and early sixties, “the CIA maintained roughly half a dozen paid agents in the [Communist] Tudeh Party and somewhat fewer in the National Front, among them several well-known leaders of the two organizations.”18
Not long after the Shah’s meeting with Wailes, the pliant Majlis passed the law infamously known as “Whence Your Fortune Law?” inquiring into the fortunes of the military and political elite of the country. Although by 1960 the government had announced that it had “fired, suspended, jailed, or brought before the court 4247 officials,” the common perception was that “they were small fry” and that no effort was made to punish “the real sources of corruption . . . reaching into the royal family.”19
Less than a month after Wailes’s suggestion of “fireside chats,” the Shah gave his first press conference. He also asked his trusted advisor and friend Assadollah Alam to try and open a dialogue with some of the moderate members of the opposition. Khalil Maleki, the well-known social democrat was amongst opposition leaders who participated in these meetings. Alam and Maleki met secretly for several months, and in the course of one of these meetings, Maleki gave Alam a draft of a party program he had prepared. Upon reading it, Alam suggested that Maleki should meet with the Shah. “His Imperial Majesty is deep-down a social democrat himself,” Alam told Maleki.20
Maleki agreed to have such a discussion, and before long, he met with the Shah. They had met once before, in the weeks before August 1953. At that time, during a three-hour meeting, the Shah had tried to convince Maleki that Mossadeq’s continued rule would only lead to a victory for the Tudeh Party. Maleki was not convinced. Now, six years later, they were meeting under different circumstances. In 1953, the Shah had felt besieged; in 1959, he had, he believed, been vindicated. The Shah wanted Maleki to act as a go-between with the opposition, but nothing came of the two men’s meeting or of Maleki’s proposed mediating efforts.
The Shah also began to crack down on the increasingly brazen financial activities of his family. By mid-1958, the American and British Embassies in Tehran had become concerned not only about the financial activities of the Shah’s siblings, but about those of the Shah himself. The family of Queen Soraya had also become a source of occasional embarrassment. The two embassies joined forces and tried to come up with an estimate of the Shah’s fortune and a profile of his economic activities. The picture they drew was not pretty. According to the British Embassy, the “royal appetite for business and for intervention in development schemes” had grown so much that there were “few branches of economic activity into which the long arms of the Shah and his friends and family” did not reach. The Shah’s direct and “personal interests alone now extend publicly into the fields of banking, publishing, wholesale and retail trading, shipping, construction work, new industries, hotels, agricultural development and even housing. The Bank Omran which is 100 percent owned by the Shah . . . has recently taken a forty nine percent participation in two new companies for irrigation works and for boatbuilding and repairing on the Caspian Sea.”21
By then it was estimated that the Shah also owned thirteen hotels; four more were under construction. Moreover, the Shah was said to be a partner in a fertilizer plant, a cement factory, a grain silo, and a beet sugar refinery.22 His interest in the cement factory, for example grew out of a bridge game during which the Shah’s childhood friend and bridge partner Majid A’lam talked of his attempt to launch a cement factory and said that he and his partners were short of capital. The Shah asked how much they needed, and when he was told that they needed about a million tooman ($150,000 in the rate of exchange at the time), the Shah immediately offered the needed capital and joined as a silent partner.23 When occasions like this arise in the future, he told A’lam, let me know. Needless to say, partnership with the Shah, in fact, with any member of the royal family, opened many bureaucratic doors, and thus was much coveted by many industrialists, investors, and trading companies.
The Shah, according to the joint British and American Embassy report, was also active in commerce. He owned the Mah Trading Company, which imported “primarily from the UK and is currently involved in municipal electrification schemes in competition with the Plan Organization.” The same company acted as the middleman in “such diverse schemes as the construction of a one million pound bridge over the River Karun (by a British firm) and a preliminary survey of the possibilities of uranium extraction (also by a British firm.)”24 Another deal had the Shah involved in the production of pharmaceuticals in conjunction with a Japanese firm while “in the world of shipping, the National Iranian Shipping company is controlled by the Shah through his nominee and principal agent Maybod [Mehbod].”25
It was in the same years that Mehbod (sometimes rendered as Maybod) often acted as a middleman in major oil deals and openly asked for a commission, letting it be known that he was in fact working in conjunction with the Shah. The American Embassy complained to the Shah that U.S. companies were “puzzled as to Mehbod’s status,” particularly since they considered him “ignorant of oil business, irresponsible, opportunistic and corrupt to the extent that he openly asks for bribes to be passed on to higher levels.” The Shah responded that Mehbod had denied all these allegations and that “in the absence of proof the Shah is reluctant to take any action.” The Shah then added that Mehbod was a good businessman “with energy, industry, imagination and commercial contacts,” emphasizing at the same time that no one should feel compelled to pay any bribe to him.26
As can be expected, the embassy’s conclusion was not favorable to the Shah. An example of Mehbod’s mode of operation was seen in the AGIP Mineraria oil concession deal in which the British Embassy was “given the plainest of evidence . . . that [Mehbod expected] a very large bribe . . . from the British firm,” leading the embassy to conclude that “the Royal hands are most proba
bly not clean.”27
All in all, the total value of the companies owned by the Shah at the time was estimated to be worth close to $157 million.28 The figure did not include any cash or securities the Shah might have had outside Iran. A few years later, in 1965, Mehdi Samii, a trusted advisor to the Shah, by chance heard from one of the Shah’s American bankers that “your monarch has more than one hundred twenty million dollars in his different accounts.”29 The issue of his wealth had dogged the Shah from the day he ascended the throne in 1941. Though at the time he had promised to return to the nation all illicit fortunes gathered by his father, he made only token gestures of philanthropy and kept much of the inherited fortune. Now, with increasingly damaging rumors about royal family corruption, the Shah decided to place all of his companies, including the Omran Bank, in the nonprofit Pahlavi Foundation.
In a document signed on October 4, 1961, the Shah laid out in some detail the goals of the endowment. One of the first glaring aspects of the text is its many overt religious allusions. It begins with a Qu’ranic verse, and the first reason given for creating the foundation is “our total and deep faith and strong belief in God’s good graces.” The endowment document stipulates five overall goals for its funds and one of them is “religious matters.” The other four stipulated goals, too, are strewn with either religious expenditures or religious justifications for the stipulated goals.30 More than 2,000 villages the Shah had inherited from his father were also gradually either given gratis or sold at greatly discounted prices to the peasants who had worked on them.
Before long, the Pahlavi Foundation grew into a global empire, and although it was ostensibly an independent nonprofit foundation, the Shah used it as his personal fief. Even after the 1979 revolution, his family believed it should be given control of the Pahlavi Foundation’s properties in the United States—a high-rise on New York’s Fifth Avenue bought for $30 million in the mid-1960s with a small down payment and a loan guaranteed by the National Bank of Iran, and a big property in New Orleans31—arguing that they were never more than a trust set up by the Shah for his and his family’s use. The royal family was particularly dismayed by the decision of Ja’far Sharif-Emami, one of the executors of the foundation, to turn over the rights to the Pahlavi Foundation to the Islamic government in Iran (which immediately renamed it the Alavi Foundation, after Ali, the first Imam of Shiism). In early 2009, the work of the foundation in the United States caused considerable alarm amongst American officials implementing the financial embargo against Iran. Eventually, as economic pressures on Iran increased, the assets and headquarters of the Alavi Foundation were taken over by the FBI.
In fact, even at the time of its creation, the Shah’s attempt to channel his economic activities through the work of the Pahlavi Foundation was met with skepticism, particularly when it was learned that some of the Shah’s most trusted officials were placed at its head. As a result, not only did the Shah’s financial activities continue to be “the subject of rumor and gossip,” but more crucially, as the British Embassy observed, his example was “followed throughout the hierarchy of power” in Iran.
The problem was, of course, not limited to the Shah. As the 1958 report makes clear, other members of the royal family and some friends of the Shah found ingenious, sometimes-illicit, ways to enrich themselves. The Shah’s sister Ashraf and his then–brothers-in-law, Chafig, an Egyptian married to Ashraf, and Vincent Hillyer, an American married to his sister Fateme, “profited singularly” from their positions. Even the Shah’s older sister, Shams, who enjoyed a far better reputation at the time, was not only said to be a silent partner of big industrial conglomerates, but had been busy constructing her own Xanadu on the outskirts of Tehran. The palace soon became known for its many eccentricities—like gold-thread bedcovers and amenities for Shams’s burgeoning menagerie—dozens of dogs, cats, birds, and even a monkey.32 Her husband claims she paid for the palace by selling some lands that had been given to her by her mother. In reality, one way she and the other members of the royal family—with the exception of the Queen Mother—defrayed the cost of their buildings was by simply refusing to pay the contractors for their work. The Shah himself was inclined to pay for the services rendered by his contractors, but the man who managed his personal accounts, Ja’far Behbahaniyan, was rather reticent about paying the Shah’s debts.33
On the eve of the Islamic Revolution, for example, Shams owed one contractor, Hamid Ghadimi, millions of toomans for work his company had done for her. The only compensation for the unpaid work of the royal family contractors was the promise of help in securing other lucrative contracts, or simply the aura that came with being the royal family’s contractor or architect.34
According to foreign diplomats working in Tehran, the Shah’s promise to limit the activities of his family did little to dispel the popular notion of corruption at the highest level of the government. Moreover, although he made token gestures to limit his family’s activities in times of extreme political pressure, the Shah in fact considered these activities altogether legitimate. Even after the revolution, when David Frost pushed him in his final interview on the allegations of his own and his family’s massive corruption—“20 billion dollars diverted” in Frost’s words—the Shah coyly dismissed the question of his own wealth by offering to sell it all to a legitimate offer for a billion dollars, adding that those who claimed he had taken $20 billon obviously didn’t “know what figures represent.” As for his family, he denied any wrongdoing on their behalf and repeated the claim that they had a legitimate right to enter into business. And when he was asked about specific allegations of corruption on the part of General Mohammad Khatam, his brother-in-law, who had been investigated by congressional committees in Washington, the Shah claimed he was unaware of what these supposedly wayward relatives were doing.
In reality, the Shah knew full well the stories about these allegations. When Khatam died in 1975, the Shah ordered the creation of a secret commission to inquire into the General’s fortune, which, even before the investigation, the Shah had estimated to exceed $100 million. Assadolah Alam, who has written about this episode in his Daily Journals, adds that though in his own mind the $100 million figure seemed exaggerated, “His Imperial Majesty never says anything without deep contemplation and ample information.”35
In ordering the investigation, the Shah also made it clear that should it turn out that the fortune had been accumulated illicitly, “it must be all confiscated and turned over to the government.”36 What is ironic is the fact that the Shah put Alam, hardly a man known for his financial probity, in charge of the investigation.
But in 1958, the British government had a direct, frustrating experience with the Shah’s financial meddling. A big British company had won a multimillion-dollar contract for the extension of Iran’s telephone system, only to have it given at the last minute to a German company. In his memoirs, Sir Denis Wright writes of “expressing Her Majesty Government’s dissatisfaction over the award of the big telephone contract to the German, knowing that but for the Shah’s intervention, it would have come to us.” The Shah, according to Wright, “simulated surprise, saying that he had been definitely told that we favored the Germans getting it and he had therefore instructed the Minister of Post, Telegraph and Telephone accordingly.”37
The British knew that the Shah’s sudden diversion of the contract to the Germans was in fact the result of “his current interest in . . . the wife of the local Siemens agent.” But in those days, the Shah, according to Denis Wright, still “feared to run foul of the British.” He sent Wright a message through Shapour Reporter, the alleged head of MI6 in Iran, “that he was very worried about what I had said about the telephone contract,” and that he will “use his influence to put future business our way,” and “hoped that I would ease his mind when I next saw him by letting him know ‘that little misunderstanding is over’ .” A few days later, in the course of a reception for the visiting Turkish President, Wright “whispered the comfort
ing words” to the Shah.38 No wonder then that the British Embassy in Iran at the time concluded, “Iran would be the country of the future in the Middle East, if it were not for the Iranian ruling class.”39
The Shah’s efforts to ameliorate American concerns about the future of his regime were not limited to his role in the passage of the law about illicit fortunes and his decree limiting the business activities of the royal family. The Shah’s most important step was to ask the Majlis to pass “a controversial land reform bill.”40 Though pressure for such a policy was at the time clearly coming from the Eisenhower administration, the fact was that the Shah himself had been talking about the necessity of land reform ever since ascending the throne. He was also responding to the reality that in the years after the war, several groups in the opposition, particularly the Tudeh Party, had made land reform an essential part of their party platform. It was a sign of the Shah’s damaged image, and of the opposition’s power to shape public opinion, that in spite of the fact that the Shah had a long history of his own words and deeds in favor of land reform, the lingering notion that found currency in the public imagination at the time was that he had been “ordered” by the Americans to undertake land reform.