Office of the Historian

888.2553/3–2554: Telegram

No. 446
The Ambassador in the United Kingdom (Aldrich) to the Department of State1

secret
niact
London, March 25, 1954—3 p.m.

4150. Limited distribution. From Hoover.

1.
While we preparing answer to Department’s questions in Deptel 42912 (re Embtel’s 4104, 4118 and Tehran’s 1994, 1996, 1997)3 Caccia called and requested conference Butterworth and me soonest possible.
2.
Meeting at noon with Caccia and Foreign Office group, Butterworth and I were shown message already sent British Ambassador Washington this morning March 25 for delivery to Secretary State essentially as follows:
(a)
HMG will itself take over negotiation of AIOC claim against Iranian Government, and will handle matter through their Embassy in Tehran simultaneously with consortium negotiations.
(b)
Limits of negotiation will be between $280 million as maximum and value of facilities (Kermanshah refinery, etc.) as minimum.
(c)
Last paragraph of message reads:

“HMG, in protection of British interests, must have discretion to handle AIOC claim for compensation with Persians as they think fit. In exercising this discretion HMG will, of course, take full account of needs of consortium negotiations as a whole and of understanding proposed by US Ambassador in London.” (Apparently referring to our tentative proposal London Embtel’s 4104 and 4118.)

3.
It is my impression AIOC were not willing accept formula similar to ours involving arbitration as final recourse, and in order avoid impasse, HMG has taken entire matter into own hands. When I asked Caccia what would happen if AIOC refused to accept amount negotiated by HMG, he replied “he will have had his fun and will be through”. Caccia intimated Denis Wright would probably carry on negotiations. Latter scheduled arrive Tehran via KLM March 27.
4.
It my preliminary reaction that HMG proposal is best possible solution under circumstances as HMG would undoubtedly take much broader view of situation than AIOC. As matter practical fact, we probably have no alternative.
5.
Unless Department has strong reasons to contrary, it my recommendation we accept HMG position and cooperate fully as possible in order guide HMG actions in Tehran to greatest extent.
6.
If Department decides on above course, after consultation with Ambassador Henderson, it may wish again impress on British our views along lines that:
(a)
Solution along consortium lines is only feasible course to accomplish US security objectives in Iran.
(b)
While we are cognizant of HMG desire to obtain fair compensation for AIOC from Iran, prosecution of such claim must not be allowed to jeopardize either a sound or durable solution.
(c)
We believe a commercially acceptable arrangement, on fifty-fifty basis, is of paramount importance in minimizing nationalization elsewhere and will have greater ultimate effect on other countries than compensation of type here contemplated.
7.
Would appreciate Department’s repeating to us and Tehran context or summary of discussions and papers exchanged with British Ambassador Washington as only fragmentary parts available through Foreign Office here.

End message from Hoover.

I agree completely with conclusions and recommendations set forth in foregoing message.4

Aldrich
  1. Repeated to Tehran and Paris.↩
  2. Not printed. (888.2553/3–2154)↩
  3. None of the Tehran telegrams is printed. (888.2553/3–2454 and 888.2553/3–2554) For texts of telegrams 4104 and 4118 from London, see Document 444 and supra.↩
  4. In telegram 4969 to London, Mar. 26, the Department expressed the view that the British proposal was acceptable. (888.2553/3–2654)↩