THE political affairs of men and nations have always been profoundly affected by water. This has been conspicuously true of the waters of those great rivers that flow from their mountain sources through the vast plains and highlands lying to the north of the Persian Gulf, into which these rivers empty.

More than five thousand years ago it was the skillful use of the great rivers in what is today known as the Khuzestan region of western Iran that provided much of the sinews of military strength and political skills making possible, first, the Elamite kingdom so familiar to readers of the Old Testament, and, later, the Persian Empire, the first world government. Because they nourished the governmental centers and the granary of an empire that at one time ruled the civilized world, from Greece to India, the rivers of the Khuzestan region have left their influence upon political events and thought, from that day to this; their heritage lives on, too, in the art and the humanistic values, the language and the poetry of the whole Western world.

The Persian Empire of ancient days declined; the extensive system of water conservation in the Khuzestan region was impaired or destroyed, by invasion or neglect; the green plains and wooded uplands, once the seat of plenty and power, became what Lord Curzon described as "a desert over which the eye may roam unrested for miles." The great irrigation works gone, the abundant waters of the rivers of Khuzestan flowed uncontrolled and largely unused to the sea; periodic floods inundated vast areas, infecting more and more land with the poison of salinity. Khuzestan became a region of poverty, disease and despair.

Then, after centuries of obscurity, Khuzestan emerged early in this century as one of the world's richest oil fields and a principal supplier of petroleum to Europe. These mineral riches, however, did not restore the basic strength of this strategic region. For the rivers continued to flow unused to the sea and the land remained barren; despite the riches of oil, the condition of life of all but a small fraction of the people remained as it had for centuries--at a very low ebb.

The restoration of a green and flourishing Khuzestan region, employing present-day advances in the technology of water control and land improvement, has been a cherished goal of modern Persia. Three and a half years ago, upon the initiative of Iranian leadership, a program of action to achieve this transformation of Khuzestan was begun in an atmosphere of urgency and singleness of purpose. Today a start in this long-range effort is well under way; the physical changes have begun.

The basic development policy and process, including the decision to assign unusually broad responsibilities for its execution to an American private company, had its origin in the imagination, the sense of history and the judgment of Iranian leadership. A clear exposition of the concept is contained in an address by the Shah of Iran, delivered before the National Press Club in Washington on July 2, 1958:

. . . The manipulation of water, providing it where there is none and controlling it where it is being wasted, is one of our primary concerns. The re-discovery of water may prove a more meaningful factor in the future growth of Iran's mainland than the voyaging of outer space. . . .

Development of the fertile province of Khuzestan, the largest fertile valley in Iran, . . . irrigated by the Karun river and its tributaries which flow into the Persian Gulf, has been given priority. The project covers a series of dams and flood control works, and the program is based on the coördinated exploitation of all the resources of the region by principles of coöperation between public and private groups and agencies, on the lines of the Tennessee Valley. This symbolizes the threshold of a new era and a unique expansion of industrial development in the Middle East.

In February 1956, Mr. Gordon R. Clapp and I, as the principal officers of the Development and Resources Corporation,[i] were asked by the Imperial Government to appraise the potentialities of the Khuzestan region. After a study of the available data, we made an intensive first-hand inspection of the region, accompanied by a group of Iranian and U.N. technicians.

We presented our conclusions to Mr. A. H. Ebtehaj, then the Managing Director of Iran's Plan Organization, a public agency responsible for a nation-wide economic development program known as "The Seven Year Plan," and financed chiefly from oil revenues.[ii] In general our observations confirmed the views held by Persian leaders regarding the feasibility of a restoration of Khuzestan and its development as a major economic asset of the whole country. It was--and is--our conviction that the region's natural resources of large rivers, extensive plains and valleys, climate favorable to plant growth, good rail and highway transport and ports, and enormous quantities of natural gas and petroleum provided an unusually favorable setting for a major economic development, with water control and utilization as the keystone of the arch.

Upon Plan Organization's request, Development and Resources Corporation contracted to assume responsibility to Iran for the preparation of a long-range program for the restoration of Khuzestan and the full development of the region's resources; we also assumed over-all responsibility for the execution of that program.


There are several characteristics of method, management and philosophy of this development program that seem to have principal relevance at a time when economic development has become a central issue of international relations.

First is the breadth of the responsibility delegated by a sovereign nation to a private American company, a company having no official links nor financial dependence upon the United States Government, nor upon the United Nations. But neither the owners of the American company nor its contractors acquire any "concession" or proprietary or financial interest in the resources developed; compensation in all cases is limited to payment for the managerial or technical services rendered.

The scope of this responsibility is carefully defined, by agreement. On the side of Iran, Plan Organization must review and approve specific projects before Development and Resources may begin any project such as a water control dam or a sugar cane development. After that approval, however, it is up to us to get the job done, through our own employees or through contracting organizations selected by us. The American company acts only as agent of Iran, of course; but it draws contracts directly with construction concerns, manufacturers of equipment, service organizations, and is responsible for supervising their work. Similarly, the disbursements of funds in payment for services or equipment under such contracts are made by us out of funds supplied the Company each six months, in advance, by Plan Organization. Twice a year the proposed program-budget is reviewed by Plan Organization, and approved or modified. The accounts are audited by a firm of independent accountants whose report each six months is submitted to Plan Organization. Finally, each party may terminate the entire arrangement upon short notice.

The chief reason advanced for proposing and continuing this unusual arrangement was Iran's strong sense of urgency to get things done as promptly as possible. The speed of physical and managerial progress thus far attained can be attributed largely to the focusing of responsibility and the flexibility the arrangement provides.

A second major point about the undertaking is that as a matter of basic policy we have brought together an international group to help carry out the task for which we have over-all responsibility; the number of such major international companies or independent consulting groups under contract to us is now about 40. Thus, an Italian firm built a big transmission line, and another Italian company rebuilt the electric distribution facilities in the city of Ahwaz; an American firm built a tunnel-road down the face of a canyon to the site of the first dam; a Dutch firm with extensive experience in reclamation and land development has made the detailed field study of the first irrigation scheme and will design the physical facilities; a group of international technicians of the U.N.'s Food and Agricultural Organization are at work on soil-fertility studies and related field investigations; an American foundation is training village workers in the use of fertilizers; planning of housing was a task contracted to an American firm with world-wide experience. In the design of the first water-control dam, known as the Dez Project, we called upon a distinguished Italian expert in high-arch dams; a Milan concern produced the design itself under the supervision of an international panel of consulting engineers, and some of the model testing was carried on in a southern university of the United States; the initial electrical equipment for the Dez Dam is now being manufactured in West Germany, in Japan and in Canada; aerial mapping for Khuzestan was carried out by a British firm; under our general supervision, a sugar cane plantation project was put in the joint charge of a Los Angeles engineering firm and a Hawaiian cane sugar company; the sugar mill and refinery are being manufactured by a Dutch concern; petrochemical design and market development for plastics has been assigned to a leading Italian chemical company.

While this list is not exhaustive, it indicates to what extent the undertaking has been made truly international. Of course, Iranians themselves are engaged in every aspect of the enterprise, from technical and managerial posts to the operation of trucks, while the staff of Plan Organization and some of the Iranian ministries are hard at work on many essential aspects of this comprehensive activity.

A third characteristic is that the program is conceived and carried out on the basis of the inter-action of each part upon all the other parts, rather than as a miscellaneous collection of separate projects only vaguely related to each other. The reason for inviting Americans with a background in T.V.A. to undertake the development of the Khuzestan region was so that the concept of "unified development of a natural region," central to the T.V.A. idea, might be applied to Iran; in the preparation of a program and the management of our responsibilities in carrying it out, this concept of unity has been the guiding principle.

In this Khuzestan program, Iran has set out to achieve something she regards as fundamental for her future. Her primary concern has not been to seek to persuade Americans or any other foreigners, West or East, that this program serves their political, military or commercial interests. Yet the simple fact that this major development is going on in Iran makes it important to anyone interested in, or concerned with, international affairs. Iran today occupies a unique position: a country with close ties of religion and geography with the Arab states and yet herself not Arab; with cultural and economic and military links with the West, and yet an integral part of the Middle East; a nation with vast oil resources upon which Europe so largely depends; with ports on the warm waters of the Persian Gulf toward which Russia has been driving since the days of Peter the Great; a long common frontier with the Soviet Union and with Iraq and Afghanistan. These and other circumstances make Iran among the most important areas in the world today. Hence success or failure of her development program is necessarily a matter of the highest interest.


What are the elements composing this integrated development program? The key to the full utilization of the resources of the Khuzestan is, of course, the same as it was in centuries past: the utilization of the waters.

Modern technology makes possible a fundamental physical rearrangement of the water régime of Khuzestan. The first step in this fundamental change has begun--the beginning of the building of a dam on the Dez river, major tributary of the Karun. The Dez Dam is designed as the first of a series of 14 multi-purpose water-control structures, all inter-related, on the five major streams of the region. To complete the full series a generation or more may be required. But on the Dez the start has been made, and is well under way. Several thousand men--Iranian, American, Dutch and Italian--are presently at work at the Dez Dam site and in the areas to be irrigated with its impounded waters and energized with the electricity that falling water will be producing by late 1962.

The site of the Dez Dam is a very narrow canyon that rises almost vertically for more than 1,300 feet from the bed of the stream. A concrete dam, 620 feet in height, will eventually store about the same amount of water at maximum volume as the T.V.A. system's largest tributary reservoir, Norris Lake. In the Dez area, which embraces 159 villages and 130,000 people--experienced farmers for the most part--this amount of stored water will permit year-round farming on 375,000 acres of good land, with at least a fourfold increase in food and fibre production. The dam will also provide a substantial degree of control over floods on the lower Dez and Karun rivers, and improve navigation conditions on both the lower Karun and the Shatt-al-Arab river from the oil refinery center of Abadan to the sea.

By relatively short canals, part of the stored water of the Dez will be poured into another river, the nearby Karkheh, and thus bring relief to the Dasht-E-Mishan area which lies on the border between Iran and Iraq. There, water is now so desperately short that the land is a desert; in summer there is not even drinking water. Putting water into the Karkheh river so it can be used to meet the needs of the land and the people of Dasht-E-Mishan is considered by Iranian leaders as a matter of the highest human and policy importance.

The Dez Dam's water control will also make it possible to produce large amounts of electrical energy, which is in very short supply in this region. The cost of producing electricity will be low because of the exceptional character of this narrow canyon. The power, in stages, will be fed by transmission lines to the major towns of Khuzestan, and later to rural communities.

To meet a part of the immediate demand, a high-tension transmission line has been built, the first such in Iran. It runs from Abadan to Ahwaz, a distance of 72 miles, and is now supplying electricity from a previously unfinished steam-electric generator at the Abadan refinery. Concurrently, the electric distribution system of Ahwaz is being rebuilt to meet the rapidly expanding use of electricity, now that at long last it is available. These activities are being conducted by a Khuzestan Energy Authority, whose directors are all Iranian citizens, although for the time being operation and management are in the hands of the American Company until Iranians, now in training, are able to assume full responsibility.

The whole series of dams projected in the long-range program will together be capable of producing 6,000,000 kilowatts, four times as much as the St. Lawrence development, and irrigate 2,500,000 acres of the better land in the region. Khuzestan will be able to export power to other regions--indeed become the "power house" of a modernized Iran; its increases in agricultural production will have a major effect on the food supply of the whole country.

The construction road to the lip of the canyon, the construction village and the tunnel-road from the top of the canyon down the almost perpendicular canyon wall to the bed of the stream have been completed. The dam is scheduled to be finished in 1962 and, with initial transmission and power facilities for 130,000 kilowatts, is estimated to cost $58,600,000.

The capital requirements of the Khuzestan undertaking are substantial, and this is only one part of the nation-wide Plan Organization program. Where will the money come from for an extensive development of so large a country, with so many urgent needs?

Compared with many of the less developed countries, Iran has considerable capital, especially from oil revenues. But there is a need for far, far greater funds than there are funds available. And so Iran, like the United States in its earlier development of basic facilities and capital equipment, has turned to external borrowing to meet part of the gap between current income and these large capital demands. One instance is a loan agreement made in May 1959 with the World Bank for a $72,000,000 road program; other loan applications by Iran, including one for port development and the Dez Project, are now under study by the Bank; some funds have been loaned Iran by the United States Development Loan Fund during 1959. There will continue to be a financial gap for a decade or more, until increased productivity resulting from public and private investment has closed the gap between urgent need and capital resources.


For many centuries Khuzestan was known as "the land of the sugar cane;" now the cane is no more. There is a high symbolic as well as economic and agricultural importance in the restoration of what was once one of the glories of Persia, and in recent years Iranian experts have been testing many new strains of sugar cane. The restoration of this crop, which requires large amounts of water, is one of the objectives of the integrated plan. A large pilot operation (about 25,000 acres) has been initiated; cane plots and plantings have been made; a contract has been awarded for the erection of a sugar mill and a sugar refinery; the first harvest of the new cane and production of sugar are scheduled for 1961.

To get the maximum value from the great new supply of water from the rivers, fertilizers--now used hardly at all in Iran--will be needed in large quantities. To ascertain the right kinds of fertilizers, chemical and mineral, and the manner of use adapted to particular soil conditions is a responsibility of our company. Already, testing and demonstration has been conducted by farmers on 20,000 different plots under existing farming practices. The increased yields and quality thus far produced have exceeded even rather sanguine expectations of the experts. This is an aspect of Khuzestan's revival which any farmer or landlord can see for himself, and understand.

The responsible leadership of Iran recognizes clearly that these changes in the supply of water for a whole region will require the creation of new Iranian organizations--such as irrigation districts--with ample authority to see to it that the increased water supply will be paid for by those who benefit from it, that there are facilities for education of farmers in the new methods, that relations between landlords and their tenants are adjusted to take into account the new levels of productivity, etc. These are not easy goals, but they are feasible, particularly where the imagination of an entire country is quickened by a historic change, and attention can be focused on the importance of these organizational, economic and educational objectives. It is worth bearing in mind that it was on these very slopes and valleys of the Zagros mountains of Khuzestan--so anthropologists have good reason to believe--that man's earliest successful organizations for the purpose of producing food had their beginnings, many thousands of years ago.

Next to wasted water, the Khuzestan's chief unused natural resource is the natural gas that is burned in the course of bringing oil to the surface. This "flaring" of gas has been going on for 50 years. Natural gas is not only a fuel; it is far more valuable as the raw material for chemical products--such as fertilizers or plastics. The building of a substantial petrochemical industry based on wasted gas is a major Iranian objective. As a first step, we have recommended production of the plastic, Polyvynl chloride (P.V.C.), to supply the already existing private Iranian plastic fabricating plants, and a growing consumer market. The next step is now under way: to interest private Iranian and foreign capital and management in making use of the plant design and the work already done in market development. If this succeeds, it will open the door to what is expected to be a substantial petrochemical industry, in which the production of fertilizers from gas will be an important part.

In each project of the over-all plan for the Khuzestan region, training plays an important part. The American Company believes that the success or failure of its efforts will be measured to a large degree by how soon we can relinquish our responsibilities and turn them over completely to Iranians. Therefore, we regard the process of training and seasoning of Iranians in all aspects of the work as absolutely essential, even though it is often a difficult responsibility given the pressure of time.[iii]


The issue of economic development of less developed countries, which today is so central to the foreign policy of most nations, is not entirely a matter of capital, as one might suppose from many public utterances on the subject. At least of equal importance are the managerial methods of getting results--whether governmental or private--whereby development can move along the path from rhetoric to reality.

There is, of course, no one method of economic development applicable everywhere. What method is the most effective for a particular area depends upon the physical resources, the traditions, the political convictions and the financial and managerial assets of each country. The particular methods being followed in the Khuzestan region of Iran are experimental in that, so far as I know, they have never before been used.

Whether or not these methods are adaptable to other situations, they do provide a specific example relevant to what I suggest is the central question of economic development in the less developed countries: How to get things done that the people of developing countries want and expect--and get them done in time.

[i] A private company founded in July 1955, in association with the New York investment banking house of Lazard Frères & Co., to provide managerial, technical and business services in the development of natural resources.

[ii] Since that time the Prime Minister, Dr. Manouchehr Eghbal, has become Managing Director, with Khosrow Hedayat as Deputy Prime Minister for Plan Organization.

[iii] The contract between Development and Resources Corporation and the construction concern that will build the main portions of the Dez Dam contains the following provisions, which are typical of the Company's contracts: "Contractor will make intensive efforts to select and recruit Iranians for every kind of work in Iran under the Contract, at every stage of the performance of the work. . . . He shall further encourage his managerial and senior administrative staff to give on-the-job training to such Iranians, with a view to their promotion to higher grades of work and their assumption of superior responsibilities."

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  • DAVID E. LILIENTHAL, Chairman and Chief Executive Officer of the Development and Resources Corporation, New York; Chairman of the Tennessee Valley Authority, 1941-46; Chairman of the Atomic Energy Commission, 1946-50; Chairman of Board of Consultants of the State Department on International Control of Atomic Energy, which produced the Acheson-Lilienthal Report; author of "This I Do Believe"
  • More By David E. Lilienthal