In early April 1979 none of us could anticipate either the length or the nature of the Shah’s exile, or, indeed, where he would eventually find a permanent refuge. Henry and I assumed, based on what administration officials told us, that, after a relatively short sojourn in the Bahamas, the President would allow the Shah to enter the United States.
That, alas, did not happen. It soon became apparent that the Bahamas’ prime minister, Linden Pindling, and his associates were much more interested in making money from the Shah than in providing him with privacy and security. Pindling insisted, for instance, that the Shah’s party stay on Paradise Island, the tourist area just outside Nassau in which Pindling had a personal interest. Both Armao and Joseph reported that the Shah was worried about rumors of “roving hit squads” sent by the Ayatollah; and he was incensed that Pindling and his cronies seemed to be bleeding him for every dime he had. The Shah’s treatment in the Bahamas was so disgraceful that after a few weeks we began looking for alternatives.
AN ICY WHITE HOUSE MEETING
Just after the Shah arrived in Nassau, I made my one and only direct effort to persuade President Carter to admit him into the United States. The Shah, Joseph reported to me, was “deeply wounded by the personal disloyalty of Carter.” A month or so earlier I had scheduled a meeting with the President for April 9 to discuss the Westway project in New York City. I decided to use the opportunity to inform the President about the concerns that a number of foreign leaders had recently expressed to me about our treatment of the Shah. I prepared a one-page brief, which I handed to the President at the end of our Oval Office meeting. My paper noted in part:
During the past several months, I have had an opportunity to visit more than twenty countries in Asia, Africa, Europe and the Middle East. Many of the countries I visited are relatively small and not of primary significance to United States objectives, but nevertheless, tend to consider themselves friends of the United States.
With virtually no exceptions, the heads of state and other government leaders I saw expressed concern about United States foreign policy which they perceive to be vacillating and lacking in an understandable global approach. In this regard, the uneven application of laudable human rights objectives were frequently alluded to. As a result of events in China and Taiwan, and the implications they perceive for Taiwan and the Shah, they have questions about the dependability of the United States as a friend.
I suggested it would be useful for the President to invite the leaders of these countries to Washington in order to reassure them that they could continue to count on our support. Carter reacted coolly, indicating only that he would discuss the matter with his advisors.
Before leaving I also urged the President to permit the Shah to enter the country. I told him that if there were threats to our Tehran embassy, we should take the necessary precautions, but it seemed to me that a great power should not submit to blackmail. The President was clearly irritated, and after I finished, he stiffly brought our meeting to an end.
With conditions worsening in the Bahamas and the American option firmly closed, at least temporarily, both Henry and I looked elsewhere for a country that would accept the Shah and to which he would willingly go. There were not many names on the list, but one possibility was Austria. In late April at a meeting of the Bilderberg group in Vienna, I spoke with Chancellor Bruno Kreisky, who seemed sympathetic to the Shah’s plight. “As a Jew,” he told me, “I know what it is to be a refugee.” I left Vienna believing Kreisky would admit the Shah. We maintained contact with him, but a formal invitation was never issued.
Henry Kissinger had more luck. The two of us had met with Mexico’s president, José Lopez Portillo, a number of times in the late 1970s and had established a good relationship with him. Henry persuaded Lopez Portillo to override the objections of his foreign minister, who felt it wasn’t Mexico’s role to bail out the United States, and issue visas to the Shah and his family, who arrived in Cuernavaca on June 10, 1979. The Mexican government was considerate, and the Shah found his new surroundings quite pleasant.
TURNING DOWN THE PRESIDENT AGAIN
With the Shah safely settled in Mexico, I had hopes that the need for my direct involvement on his behalf had ended. Therefore, while Henry continued to publicly criticize the Carter administration for its overall management of the Iranian crisis and other aspects of its foreign policy, and Jack McCloy bombarded Cyrus Vance with letters demanding the Shah’s admission to the United States, I did nothing else, publicly or privately, to influence the administration’s thinking on this matter.
Despite President Carter’s irritation with me for trying to persuade him to allow the Shah’s entry into the United States, he seemingly did not hold that against me. My relations with him and other senior members of his administration remained good—so good, in fact, that on July 19 the President called me out of a Chase board meeting to ask me to replace Mike Blumenthal as Secretary of the Treasury. I went to Washington the following day to discuss the matter with him, but we quickly realized our views on managing the nation’s financial affairs were too far apart to bridge easily. The President appointed William Miller, then chairman of the Federal Reserve Board, to the Treasury post.
To my surprise, a few days later Miller called on the President’s behalf to ask if I would consider replacing him as chairman of the Fed! It was an offer I considered seriously, but in the end I declined it as well. I would have been responsible for implementing a set of draconian policies to wring inflation from the economy and stabilize the dollar. As a wealthy Republican with a well-known name, and a banker to boot, it would have been extremely difficult for me to make the case for tight monetary policy and sell it to a skeptical Congress and an angry public. I spoke with my friend Andre Meyer, and he agreed that the obstacles were too daunting to overcome. I reported my decision to Bill Miller and strongly recommended Paul Volcker, then the president of the New York Federal Reserve Bank, for the job.
“ADMITTED FOR HUMANITARIAN REASONS”
President Carter’s Iranian policy began to unravel during the summer of 1979. The Bazargan government hung on to power, but just barely. His efforts to get Iran’s economy up and running again had shown some success; oil began to flow once again to the tankers waiting patiently to take on their cargoes at Kharg Island. American and European companies, including the Chase, resumed operations in the spring as soon as the disorders produced by the Shah’s departure and the return of the Ayatollah died down. However, the balance of political forces was precarious, and any unexpected event, even a minor one, might undermine the still fragile situation and produce another crisis.
Such an event began to unfold in Cuernavaca during the summer of 1979 when the Shah became ill. Joseph Reed saw him in early August and noticed his watchband was extremely loose, but passed it off as some sort of royal affectation. A month later Joseph found the Shah had lost more weight and was clearly suffering from jaundice; Joseph was told the Shah might have malaria.
Late in September, Bob Armao told Joseph that the Shah’s condition had deteriorated and asked him to contact Dr. Benjamin Kean of New York Hospital, a tropical medicine specialist. Kean flew to Cuernavaca, examined the Shah, and concluded he had obstructive jaundice caused by either gallbladder disease or pancreatic cancer. He wanted to do further tests, but the Shah refused. Joseph informed David Newsom of this development, saying it might be necessary for the Shah to come to the United States for medical treatment. Newsom replied that a “substantial medical case” would have to be made before he would be allowed to enter the country.
The Shah’s condition worsened, and three weeks later, on October 18, Dr. Kean was again summoned to Mexico. At that time the Shah told Kean he had lymphoma and that a team of French doctors had been treating him secretly for a number of years. Only a few people close to the Shah, his wife among them, knew this. Amazingly, no one in the United States in or out of government had any inkling of the Shah’s illness. Kean immediately informed the S
tate Department’s medical officer that the Shah was suffering from a malignant lymphoma complicated by a possible internal blockage that had produced the jaundice. In terms of treatment, Kean said that, given time, a medical team could be assembled to treat the Shah in Mexico, but it would be better for him to go to New York. Kean also called Joseph in New York, and I then instructed Joseph to telephone Newsom and inform him that the severity of the Shah’s medical problems argued in favor of his immediate admission to the United States and that I would be willing to make the arrangements at a hospital in New York.
President Carter and his advisors considered these facts at a meeting on October 20. As Cyrus Vance noted in his memoirs, Hard Choices, “We were faced squarely with a decision in which common decency and humanity had to be weighed against possible harm to our embassy personnel in Tehran.” After careful consideration, President Carter announced that the Shah would be allowed to come to New York for “diagnostics and evaluation on humanitarian grounds.”
Prime Minister Bazargan was personally notified of the Shah’s condition by the U.S. Chargé d’Affaires. While the Iranian leaders warned there would be hostile demonstrations, they felt the American embassy would be safe. The administration also received assurances from President Lopez Portillo that the Shah would be allowed to return to Mexico following his medical treatment in the United States.
The Shah was then informed on October 22 that he could proceed to the United States. However, the U.S. government still took no “official” responsibility for the Shah. When his chartered plane landed in New York early in the morning of October 23, it was met by Bob Armao, who accompanied him to New York Hospital, where Joseph Reed had arranged to have him admitted under the pseudonym “David Newsome,” which the real Newsom didn’t think very amusing when he found out.
THE HOSTAGE CRISIS
The reaction to the Shah’s arrival in New York was muted. A few hundred protestors took up station outside New York Hospital and denounced the Shah, but they were largely ignored. In Iran the reaction was very different. Within days, massive demonstrations erupted all across the country, culminating in the attack on the U.S. embassy and the seizure of more than seventy Americans on November 4. Ominously, the “students” holding the embassy, who claimed they were “following the Imam’s line” on behalf of the Ayatollah Khomeini, demanded the Shah’s extradition to Iran to stand trial for his crimes as the price for the release of the hostages.
The Ayatollah had an “event,” and the more radical phase of the Iranian revolution was about to begin.
Bazargan’s efforts to free the hostages were unavailing, and within two days his government dissolved, replaced by one more in tune with Khomeini’s anti-American and fundamentalist views. Abolhassan Bani-Sadr, the new foreign minister, demanded the Shah’s extradition, the return of all his wealth, and the end of American “meddling” in Iranian affairs, in return for the hostages. The Carter administration rejected these demands and then began ratcheting up the economic pressure on Iran in an effort to force the release of the hostages.
On November 14, Bani-Sadr threatened to withdraw all of Iran’s reserves in American banks, about $9 billion, unless the Shah was immediately extradited to Iran. Within hours of Bani-Sadr’s announcement President Carter froze official Iranian assets and deposits both in the United States and those held in the overseas branches of American banks. At that point Chase had outstanding loans and other claims against the Iranian government of $366 million, but we also held deposits of just over $509 million. We immediately complied with the presidential order; the following day we declared the Iranian government in default of its obligations and offset our loans against their deposits, and paid off all our claims against Iran.
On November 15 I called President Carter and told him the situation had reached the point where private citizens could no longer deal with it. I said the Shah, then undergoing radiation treatment for cancer, recognized the problems he had caused by coming to New York and felt he would be well enough to travel in a few days. I asked the President to send a senior representative to New York to handle the situation. The President refused on the grounds that he did not want to be seen as having forced the Shah to leave the United States because it might be interpreted as yielding to Iranian pressure. Thus, despite the intensifying crisis, the President was still unwilling to take official responsibility for the Shah.
Two weeks later, on November 30, the story took yet another bizarre turn. I was about to deliver a speech in Minneapolis when I received a telephone call from one of Lopez Portillo’s senior assistants informing me that he had decided to withdraw permission for the Shah to remain in Mexico after his visa expired on December 10 because his presence was a threat to his country’s national interests. When I asked why I had been called, he said Lopez Portillo had become exasperated with the Carter administration’s handling of the Iranian crisis and preferred to send the message through me rather than the State Department. I pointed out how awkward this abrupt reversal in Mexico’s position was since the Shah had planned to return to Cuernavaca and had nowhere else to go. He told me the decision was irrevocable and asked me to pass the message along to President Carter, which I did through the White House staff.
Lopez Portillo’s refusal to honor his promise forced President Carter to assume responsibility for the Shah and his movements. Soon after my call to the White House, the President sent his counselor, Lloyd Cutler, to New York. With Cutler’s arrival, I could at long last bow out completely.
The subsequent story of the Shah—his hospitalization in Texas, his mistreatment in Panama, and his return to Egypt where he died in June 1980—is a sad one. Robert Armao remained with him until the very end, but all further arrangements were handled by the Carter White House as part of the effort to free the American hostages.
My last meeting with the Shah was on October 23, 1979, the day he arrived in New York. I entered New York Hospital secretly through a back entrance to avoid the protestors and the press. Farah Diba and Hushang Ansary, his former finance minister, were with him. The Shah and I exchanged only a few words; he was clearly exhausted and looked thin and pale. He was in great pain. He shook my hand and thanked me for the help I had given him over the previous months. I wished him well—there was little else for me to say—and then I left.
THE SHAH IN RETROSPECT
In preparing these memoirs I have reviewed the writings of those in the Carter administration—including both Jimmy Carter and Cy Vance—who made the critical decisions concerning the Shah. Their books cover the course of American foreign policy during those years, often in minute detail, and include their own unceasing efforts to establish a modus vivendi with the new Iranian government, to which they assigned a high priority.
They are less forthcoming, however, about how they dealt with the Shah during his exile. Neither President Carter nor Secretary Vance mention that, having decided to bar his entry, they asked private citizens to deliver the “official” message. They also leave unanswered why, over the course of the next seven months, they refused to provide any official assistance to the Shah or to have any official communication with him, while they indirectly sent word to him on a number of occasions that they hoped to admit him to the United States in the not-too-distant future. The fact is that the Carter administration, for admittedly pragmatic reasons, washed its hands of the Shah while he was still in Morocco but never quite mustered the courage to say so publicly. Instead, they cast him adrift on a hostile sea and relied on a few private citizens to sustain him.
The Shah’s strange odyssey coincided with the suffering of the U.S. hostages in Iran. Their agony would continue for many months and was made even more complicated by the freeze of Iranian assets held by Chase and other American banks. The 444 days of their captivity was a horrible ordeal, as was the ordeal of our nation as we impotently watched our fellow citizens being harassed and humiliated.
But even in hindsight I believe our government should never have sub
mitted to blackmail in the first place. It showed weakness. Not only our hostages but our nation paid a severe price for our cavalier treatment of the Shah. When it comes to principle, nations must stand for something; they must keep their word. We failed to do this with the Shah, who, despite his imperfections as a ruler, deserved more honorable treatment from the most powerful nation on earth. Undoubtedly the new Iranian government would have reacted severely if the Shah had come to the United States in February or March 1979. However, coping with that kind of crisis would have been far less damaging to American prestige and credibility than the abandonment of a friend when he most needed us.
As to his tenure as Iran’s ruler, the Shah was a patriotic nationalist who sincerely wanted to improve the lives of his people. Given the militantly fundamentalist and viciously anti-American regime that followed—a regime with a human rights record far worse than the Shah’s—the interests of the United States would have been better served had the Carter administration acted to keep the Shah in power while working to strengthen the more democratic elements that were beginning to emerge in Iran.
As for my own role in these events, as a banker I had developed ties with Iran that were important to Chase, and after the Shah’s exile I worked diligently to protect our position with the new government. Chase’s relationship with Iran remained stable for most of 1979, literally until the day the embassy was seized in early November. The government did reduce the balances they maintained with us during the second half of 1979, but in reality they had simply returned to their historic level of about $500 million. Carter’s “freeze” of official Iranian assets protected our position, but no one at Chase played a role in convincing the administration to institute it. In early 1981, as part of the comprehensive deal freeing the hostages, Chase (along with all the other American banks involved) received all the monies that were due and suffered no losses.
Memoirs Page 48