Meatball for the Shah

Awash in surplus oil profits, Iran is swiftly becoming the world's most acquisitive power. No purchase seems too big nor risk too great for Shah Mohammed Reza Pahlavi as he pursues his oft proclaimed goal of transforming his ancient kingdom into one of the globe's most important nations. Last week reports surfaced that the Shah once again was stalking where most bankers fear to tread. According to aviation-industry experts, Iran's banks are preparing to grant a loan, thought to be as much as $250 million, to ailing Pan American World Airways, the de facto U.S. flagship air carrier. The loan could save Pan Am from a confrontation with creditors that might have ended in the airline's bankruptcy.

The Pan Am loan is only one in a growing number of bold business ventures by the Shah. Last year Iran bought a 25% chunk of the steel-producing division of West Germany's Krupp concern for $100 million, and Iranian banks participated in a $200 million loan to the Grumman Corp. Last week the Shah also unveiled a grandiose $5 billion project for the modernizing of Tehran, his capital.

The Shah's loan to Pan Am would come just in time. The airline lost an estimated $75 million in 1974 and $165 million in the five years before that. This year's prospects offer little cheer for the airline. Jet fuel costs are still at record highs, the recession is cutting into tourist travel, and payments are constantly coming due on the company's huge debt.

Last October the airline painfully negotiated a $125 million revolving credit with a consortium of 36 U.S. banks. The credit expires this autumn, and it was widely expected that Pan Am would have trouble renewing it without some form of government guarantee or operating subsidy. But such federal underwriting would surely run into considerable resistance in Congress; Wisconsin's Democratic Senator William Proxmire has already voiced opposition to making Pan Am "the nation's largest welfare recipient." Pan Am's financial troubles have also impeded its search for a merger partner.

For all that, the Shah finds appealing a huge investment in the airline. The reason: in return for its massive loans, Iran could draw on Pan Am's technological and marketing skills to help fulfill the Shah's dream of making his Iran Air a major force in international transportation. In fact, Iran last week bought six Boeing jumbo jets from Trans World Airlines and plans to acquire three Anglo-French supersonic Concordes. As a sweetener for granting the loan, Iran would also get a chance to buy the controlling interest that it has been seeking in Pan Am's profitable Intercontinental Hotel chain.

Worldwide Prestige. Most of all, perhaps, the Shah is attracted to Pan Am by the worldwide prestige he will enjoy from his association with the airline. In many nations, the "blue meatball"--as airline executives refer to Pan Am's familiar globelike insignia--is regarded as a symbol of American technology and economic power.

For that very reason, Washington may be unhappy about Pan Am's forging such a close association with foreigners. Still, most observers feel that neither the White House nor the Civil Aeronautics Board will block the deal. This could change if Iran decides to seek some equity in the firm; in any event, it cannot be more than 25%--the limit set by law on foreign ownership of U.S. airlines. In some ways Washington may be secretly delighted with the Shah's offer of cash. Because of it, American bankers will probably renew their lines of credit to Pan Am when they come due; without the Shah's money, the likely alternative to a Pan Am bankruptcy would have been a hefty $10 million-per-month Government subsidy.

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