All the Presidents' Bankers (59 page)

The Shah Seeks Asylum

Over in the Middle East, other matters had reached a boiling point. Following months of agitated demands that he abdicate power and leave Iran, the Shah finally fled to Egypt on January 16, 1979.
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On January 31, Ayatollah Ruhollah Khomeini, who had been ejected by the Shah and exiled from Iraq since October 3, 1978, flew by a charter plane from France to Iran. He returned on February 1 to adoring crowds, ending Pahlavi’s thirty-seven-year reign. Iran broke off diplomatic relations with Egypt on April 30 and canceled $9 billion in armament contracts with the United States.

Where would the Shah live now that he was deposed? McCloy approached Brzezinski regarding asylum. And the Shah’s twin sister, Princess Ashraf, begged Rockefeller to persuade Carter to permit the Shah to enter the United States—or at least help him find a haven elsewhere. Rockefeller discussed the issue while dining with Henry Kissinger and Happy Rockefeller, his brother Nelson’s widow. The Shah had been a friend of theirs too.
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McCloy was displeased with the Carter administration’s reluctance to offer the Shah asylum. All the work and relationship building he had done in the region would be for naught if the administration refused to support the Shah in his hour of need. Like Rockefeller, McCloy considered the Pahlavi regime an ally of the United States, a force for stability in the region that should not be cold-shouldered—not to mention a piggy bank for profits linked to the Middle East.

McCloy, Rockefeller, Kissinger, and Rockefeller’s personal assistant, Joseph Reed, decided to create a “special project team” that would be headed by Rockefeller to seek US asylum for the Shah.
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The team addressed the Shah’s travel arrangements while lobbying Carter to permit entry. On March 27, Carter received notice of the Shah’s plans. The Shah was traveling to the Bahamas, which he regarded as a temporary stop on the way to Mexico.
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More critical to global economic conditions than the Shah’s location, though, was the fact that OPEC had decided to raise the price of market crude by 9 percent, to $14.54 per barrel. The increase added a staggering $12 billion to world oil import bills.
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It wreaked further havoc on the non-oil-producing countries, especially within the third world, where the costs of debt and commodities were rising perilously at the same time. It also weakened the US economy further—which put its banks at risk. But despite this tangle of events, US bankers guiltlessly and voraciously continued extending credit to the third world and baited the Middle East over the Shah.

Finally, Kissinger persuaded the foreign minister of the Bahamas to grant the Shah a temporary visa. Once the Shah was situated in a beachfront villa, Robert Armao, a PR man who had been hired by Princess Ashraf to improve the Shah’s image in the United States (and who had worked for Vice President Nelson Rockefeller), met with him to make him comfortable.

Rockefeller organized Project Alpha to address the Shah’s plight.
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Frequent strategy meetings about his US entry were held at One Chase Plaza,
Chase Manhattan Bank’s headquarters. For months, Project Alpha pressed the Carter administration to provide sanctuary for the Shah (code-named the Eagle). Rockefeller personally visited the White House on April 9, 1979, to persuade Carter to take the Shah in. As Carter wrote in his diary, “David Rockefeller . . . came in to spend time with me. . . . The main purpose of this visit, apparently, is to try and let the Shah come into our country. Rockefeller, Kissinger and Brzezinski seem to be adopting this as a joint project.”
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Ten days later, Secretary of State Vance informed Carter, “A campaign remains in progress to change our position with respect to the Shah’s admission to the U.S. John McCloy . . . is continuing to call influential people throughout the country. We understand that McCloy’s effort continues to be stimulated by Henry Kissinger and by the efforts of [Iranian ambassador to the United States] Ardeshir Zahedi.”
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Both Vance and Carter wanted the Shah to go anywhere but the United States. Their view was further strengthened by Khomeini’s verbal attacks on American influence and the withdrawal of two-thirds of the Iranian guard force from the US embassy compound, as he declared April 1, 1979, “the first day of God’s Government.”
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In April, Vance confirmed that he had received a new evaluation from Tehran confirming the State Department’s assessment that the safety of officials and unofficial Americans would be jeopardized if the Shah came to the US.
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And yet Rockefeller’s team succeeded in obtaining the State Department’s support for the Shah’s family to enter the United States. On May 2, 1979, Vance informed Carter that “we have decided we can tell the Shah his children would be welcome to pursue their studies here.”
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Two weeks later, Rockefeller’s office informed the State Department that the Shah’s three younger children and mother-in-law would move to Connecticut within the next few weeks.
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The Shah and the rest of his family entered Cuernavaca, Mexico, on June 10, 1979. By that time, Princess Ashraf was having difficulty placing his three younger children in New York–area schools. Rockefeller informed David Newsom, undersecretary of state for political affairs, that he surmised this was because the schools were afraid of the security risk involved.
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Despite the Shah-related disagreements, Carter and Rockefeller maintained good relations. A month after the Shah arrived in Mexico, Carter interviewed Rockefeller for a job in his administration: Treasury secretary. Rockefeller rejected the potential offer, perhaps because he didn’t welcome the idea of “an interview” or because the tense economic and foreign policy
atmosphere made it unpalatable, or perhaps he simply felt that it had a narrower girth of power compared to his hybrid post as Chase chairman and US diplomat.

Rockefeller and October 1979

Three months after the Shah arrived in Mexico, his health took a sharp turn downward. On October 1, 1979, Rockefeller informed the State Department that the Shah was ill and that he had sent his personal physician to examine him.
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Vance warned Carter, “If the Shah’s condition is serious, we might be asked to admit him to the US for treatment.” But that presented a major conundrum.

Local hostility in Iran toward the Shah was intense. In addition, said Vance, “the augmented influence of the clerics might mean an even worse reaction than would have been the case a few month ago if we were to admit the Shah, even for humanitarian purposes.”
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The Carter team had no doubt that admitting the Shah was playing with fire. On the morning of October 18, Vance sent a secret report to Carter regarding the Shah’s condition that said, “David Rockefeller’s assistant, Joe Reed, informed Dave Newsom on October 17 that the Shah’s . . . illness was initially thought to be infectious hepatitis, but a significant deterioration . . . with cancer not being excluded [had occurred].”

Rockefeller “clearly wanted” to bring the Shah to Memorial Sloan-Kettering Cancer Center in New York City for a medical examination and treatment. Vance added, “Rockefeller’s medical adviser—an eminent Columbia Medical School professor who treated the Shah two weeks ago—is traveling to Mexico on October 18 to see the Shah and will make a joint recommendation with the State Department Medical Director.” As a matter of more careful diplomacy, Vance concluded, “If we decide to permit the Shah to come to the United States for treatment, we would want to inform the Iranians that we were doing so for humanitarian purposes and to leave open any question of future residence.”
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That meant there was a possibility that the United States might decide to admit the Shah for other purposes.

The next day, in the margin of Vance’s report, Carter scribbled a fateful “OK.”
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Deputy Secretary of State Warren Christopher informed Carter that Dr. Benjamin Kean, a tropical disease specialist at Cornell Medical School, had seen the Shah and suggested examination in the United States. Rockefeller requested the United States admit the Shah to Sloan-Kettering for diagnosis and treatment. The State Department’s physician concurred.
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Christopher informed Carter that the Shah, “through David Rockefeller,” “has expressed his gratitude to you.”
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Thus, Rockefeller and McCloy succeeded in gaining US entry for the Shah. The Shah arrived in New York by charter plane the morning of October 23. The Iranian government reacted with moderation when the news came that the Shah would be visiting the United States for medical reasons. In a secret October 24 memo, Vance informed Carter that he had received word from the US embassy in Tehran that “the past two days have been calm.”
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Still, in response to the embassy’s request, Vance agreed to augment security forces guarding the compound. A demonstration from Tehran University was scheduled to pass the embassy that Friday.
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All was not exactly calm.

On October 26, Christopher informed Carter, “Rockefeller’s staff has told us that the Shah’s lymphoma is a Class III malignancy. This condition gives him a 50/50 chance to survive the next 18 months; if he does so, he could then live for several more years. Meanwhile, the Shah’s recuperation from his operation will require another two to three weeks’ hospitalization.”
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Four days later, at Rockefeller’s request, Brzezinski addressed Chase’s international advisory committee on world affairs and the Iran situation.
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The next day, one million people demonstrated through the streets of Tehran.

On November 4, Islamic students swarmed the US embassy in Tehran, seizing sixty-two Americans. They demanded the Shah’s immediate extradition to Iran. More critical to the US bankers, ten days later, the new Iranian foreign and economics minister, Bani-Sadr, threatened to withdraw $9 billion in Iranians funds from US banks unless the Shah was extradited.

The bankers who had dealings with Iran were now at the center of a hostage crisis that had been unleashed by Rockefeller and his crew. The crisis metastasized because of a relationship between powerful men over money and position, and it would unfold along those exact same lines—though this element of the crisis would not be the one the public would see plastered across newspaper headlines or TV screens. And yet to the US government the issues concerning money and loans would turn out to be as important as the issue of freeing the hostages.

For Washington, freeing the hostages became the top priority. On November 9, the White House began formulating plans for the return of American personnel: “In addition to the 62 official American and at least 5 third-country nationals held on the compound, there are three at the Foreign Ministry and an additional six Americans at a separate location in Tehran,” noted an internal report.

The US government, believing at first that the matter could be quickly resolved, carefully mapped out a return route for the hostages from Istanbul through Frankfurt, which was to be followed by an “appropriate reception on arrival” at Andrews Air Force Base with the president in attendance.
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But it was not to be.

The 2012 Oscar-winning film
Argo
illuminated the pressure surrounding the six US workers who found refuge in a Canadian safe house in Tehran for a few months until they escaped. But the bulk of the hostage crisis played out between Carter’s White House and the banks involved with Iran’s loans and deposits. There were no grand “savior spies,” no Ben Affleck to the rescue—only bankers and politicians and a race against time.

The Chase Hostage Wrinkle

Chase provoked the already tense situation because of an interest payment, something that otherwise would have been just another financial transaction between a US bank and a foreign customer. The same day that the hostages were seized, the Iranian central bank (Bank Markazi) notified Chase, as was standard protocol, that a $4 million interest payment on its $500 million loan would be forthcoming, despite the unfolding hostage situation. A syndicate of eleven banks led by Chase had issued the loan in 1977. Chase’s portion was $50 million, the largest of Iran’s debts to the bank.

On November 9, Chase chose to ignore the interest payment notification. Five days later, Carter issued an executive order that froze all Iranian “assets and deposits in US banks and their overseas branches.”
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The events that followed nearly unleashed another major international crisis.

Rockefeller maintained that no one at Chase ever persuaded Carter to freeze Iranian assets, and that the amounts were not significant anyway. Chase held $366 million in Iranian loans and $509 million in deposits.

Carter didn’t blame Rockefeller for his decision to seize Iranian assets. Yet the decision was instigated by the hostage situation, which had been catalyzed by the news that the Shah would stay in the United States longer than a few days. This event followed months of pressure from Rockefeller’s network. It was the implications of Chase’s actions rather than the size of its Iranian assets or loans that mattered.

Citing the freeze, Chase refused to accept the $4 million interest payment on the loan on November 15, the date it was due. As a result, Chase declared the Iranian government in default on the
entire
loan without consulting any of the other banks that had been involved in the syndicate. On November 23,
Chase informed Bank Markazi that it had seized its accounts and used the monies in them to offset its debts.
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The action was akin to Chase taking over a mortgage borrower’s home after one missed payment.