Office of the Historian

888.2553/3–2354: Telegram

No. 444
The Ambassador in the United Kingdom (Aldrich) to the Department of State1

secret
priority
London, March 23, 1954—1 a.m.

4104. Limit distribution. From Hoover.

1.
Meeting noon March 23 at Foreign Office included Eden, Caccia and Denis Wright for HMG and Ambassador Aldrich, Butterworth and myself for US Government. Ambassador read prepared statement expanded along lines outlined Deptel 4885. Eden seemed surprised and upset, apparently expecting different approach. Discussion lasted over one hour, each side maintaining positions as originally outlined. Virtually all aspects of situation set forth with no indication of finding mutually satisfactory solution. Before adjourning Eden observed that matter particularly difficult for HMG, as Fraser had only agreed accept companies offer of one billion dollars on HMG assurance that his demand for 280 million additional compensation forthcoming. Group agreed meet again 5:30 p.m.
2.

Same group reconvened as scheduled, and Ambassador read proposal we had prepared as possible alternative for discussion purposes only, making clear it not yet submitted to Department and must be considered most tentative. Language followed closely as possible HMG memo March 18 included Embtel 4024 to Department, repeated Tehran 176.

“It is proposed that an understanding on following lines should be considered on US and UK sides:

  • “a. That apart from consideration between members of consortium in respect of future there would be sum payable by Iranian Government to AIOC in respect of internal distribution facilities. Kermanshah refinery and Naft-I–Shah field and for damages arising directly or indirectly out of events of 1951 up to coming into force of consortium agreement.
  • “b. That this sum should form an integral part of any final settlement with Iran Government.

  • “c. That assuming Persian Government will agree to commercial arrangement with consortium (on a 50–50 basis) a net sum taking into consideration of claims and counterclaims is to be determined by negotiation or failing that by arbitration within following limits:

    “Maximum: $280 million total net payment by Iranian Government to AIOC.

    “Minimum: No net damage claims after counterclaims but payment for internal distribution facilities, Kermanshah refinery and Naft-I–Shah field on an engineering evaluation basis.

  • “d. Payment of whatever sum is determined will be made over period of 20 years.

“Foregoing proposals do not refer to value of assets (apart from those mentioned at end of subparagraph c) nationalized by Persian Government or to future profits since it is assumed that these will be adequately covered by conclusion of acceptable commercial arrangement referred to above.”

3.
Caccia later suggested following additional paragraph which did not appear alter substance:

“e. Consequently US Government and HMG agree:

  • “(i) That as a part of forthcoming negotiations in Tehran, AIOC shall put forward a claim on basis of paragraph c above;
  • “(ii) That HMG shall support this claim;
  • “(iii) That although US Government will not commit itself to a figure, it will give Persian Government to understand that settlement of this kind is justifiable.”

4.
After extended discussion, Eden stated this formula might prove acceptable compromise, but foresaw some difficulties, not least of which was his ability sell it to Fraser. Nevertheless, he appeared think it was fair arrangement.
5.
Considerable time devoted to consideration negotiating procedure in Tehran if this proposal adopted, it being our fear that if large claims were presented initially by AIOC it would seriously jeopardize ability negotiate satisfactory commercial agreement with Iranian Government. We stated flatly that unless such type agreement reached, US companies and Shell would not participate in final solution due repercussions on their operations elsewhere. It our impression that HMG still not clear on problems of negotiating procedure which must be most carefully planned in advance of arrival in Iran.
6.
Finally, we made specific condition of our submitting above alternative proposal to Department, that it would be agreed by all parties that AIOC would take no action of any sort which would jeopardize ability of negotiators to reach satisfactory commercial agreement in Iran, including initial large or unreasonable demands for compensation.
7.
Views of Department and Ambassador Henderson re alternative approach would be appreciated urgently as possible. Suggest inclusion of conditions or assurances along lines paragraph 6 if proposal otherwise considered satisfactory.
Aldrich
  1. Repeated to Tehran and Paris.↩