Eisenhower Library, Eisenhower papers, Whitman file
No. 465
Memorandum of Discussion at the 199th
Meeting of the National Security Council, Washington, May 27,
19541
eyes only
Present at the 199th meeting of the Council were the President of the United States, presiding; the Vice President of the United States; the Secretary of State; the Acting Secretary of Defense; the Director, Foreign Operations Administration; and the Director, Office of Defense Mobilization. Also present were the Secretary of the Treasury; the Attorney General (for Items 1 through 6); the Director, Bureau of the Budget; the Chairman, Atomic Energy Commission (for Items 5 and 8); Assistants Attorney General Barnes and Rankin; Mr. Herbert Hoover, Jr., Department of State (for Item 2); the Chairman, Joint Chiefs of Staff; the Director of Central Intelligence; Mr. Robert Cutler, Special Assistant to the President; the Deputy Assistant to the President; Mr. Robert Amory, Jr., Central [Page 1009] Intelligence Agency; the White House Staff Secretary; Mr. Bryce Harlow, Administrative Assistant to the President; the Executive Secretary, NSC; and the Deputy Executive Secretary, NSC.
There follows a summary of the discussion at the meeting and the chief points taken.
[Here follows discussion of item 1, the Saudi Arabian-British territorial dispute over the Buraimi oasis.]
2. United States Policy Toward Iran (NSC 5402, paragraph 15; Memos for NSC for Executive Secretary, same subject, dated May 25, 1954)2
After Mr. Cutler briefed the Council on its four prior actions on this problem, and referred to the various memoranda relating thereto, he called on Mr. Herbert Hoover, Jr., to make his oral report.3
Mr. Hoover stated at the outset his belief that there was about a 75–25 chance of reaching an oil settlement. The 25% of doubt arose largely from general pessimism, which attaches to anyone who is obliged to deal with the Iranians. He next proceeded to give a brief history of the negotiations to date, ending with a statement on the very great difficulty of the problem, and pointing out that this was perhaps the largest commercial deal ever put together, with assets which might be worth over a billon dollars.
Mr. Hoover then stated that as of recent date three sets of negotiations were going on simultaneously in Iran. The first dealt with the creation of the consortium; the second with the problem of compensation for the Anglo-Iranian Oil Company; and the third with the problem of convertibility of sterling into EPU (soft) currencies and dollars. These three together would comprise a package deal. The present status was as follows: The consortium negotiating teams and the other two teams were involved in their negotiations in Iran up until a week ago. A recess had now been declared, during which the consortium teams would be getting together with their several governments. Accordingly, in the next two weeks we should have to reach a number of vital decisions. However, Mr. [Page 1010] Hoover perceived no insuperable obstacles. One of the major problems was that the British had insisted up to now that the operating company in Iran be incorporated in the United Kingdom. This was a condition which it was impossible for the Iranians to accept. There was more to it than the mere formality of incorporation, since the issue actually amounted to management control of the new enterprise.
Secretary Dulles inquired whether an agreement had been reached as to who would constitute the top management of the enterprise. Mr. Hoover replied that although this question had never actually been raised in the negotiations, the Anglo-Iranian Oil Company was desperately trying to secure for itself control of the management of the new company. The Americans, on the other hand, were pushing for Shell to provide the top management. The French were lining up behind the British proposal.
Mr. Allen Dulles expressed the belief that Iran would be willing to accept Dutch management control as provided by Shell. Mr. Hoover concurred, but could express no opinion as to how the issue would be resolved.
Mr. Hoover then pointed out that whatever deal we managed to make in London would be bound to have one very distasteful feature for the Iranians—namely, that management control would have to be in the hands of non-Iranians. This was essential for purely internal reasons. The Iranians were incapable themselves of providing efficient management control. As a result, the United States would be obliged to continue to provide economic aid to the Zahedi government until such time as oil revenues again began to flow. On the other hand, we will have to make up our minds in fairly short order and have a showdown with the Iranians on whether they will or will not agree to a reasonable settlement. We cannot subsidize them indefinitely by our economic assistance.
Mr. Hoover also expressed the opinion that no oil agreement with Iran would be durable unless it had the unequivocal support of the Shah. He had proved rather slippery, and we had got to nail him down to the agreement. This, in a sense, involved a wholly separate negotiation with the Shah, involving a U.S. offer of military assistance to Iran. Mr. Hoover recommended, however, that the United States withhold any offer of military assistance until the time came to confront the Shah with the necessity of his firm agreement to the settlement. Therefore, Mr. Hoover recommended that when the negotiations resumed in the middle of June, we let them continue their normal course for a month. If by then the Iranians had not agreed to a settlement, the United States should begin to apply heavy pressure.
[Page 1011]The President inquired whether General McClure was doing a good job in Iran. Mr. Hoover replied that from all he had heard, General McClure was doing a first-rate job. The President said he was glad to hear this, since he had personally insisted on General McClure’s staying in Iran when the military authorities would have like to bring him back as having passed the retirement age.
Mr. Cutler then raised with Mr. Hoover the question as to whether any Iranian oil settlement should be bulwarked by a treaty between the United States and Iran. Mr. Hoover said that he thought it would be very difficult to get such a treaty out of the Iranians, since it would be viewed by them as a challenge to their integrity in having agreed to an oil settlement. Of course, he added, it would be desirable to have such a treaty if it could be got.
Mr. Cutler then asked whether, as scheduled for June 1, a further review of U.S. policy in Iran should be considered by the Council. Mr. Hoover believed that from now on, for the next few weeks, the music should be played by ear and no new date set for reexamining the possibility that the United States might unilaterally have to seek a settlement of the oil controversy.
At the conclusion of the discussion, the President expressed his own and the Council’s gratitude for the remarkable job which Mr. Hoover was doing. Mr. Hoover thanked the President, but said that he had used up his store of patience for the next five years. Mr. Hoover also praised the American oil companies for having taken a broadminded and patriotic view during these difficult negotiations. Secretary Dulles added a word of praise for Mr. Hoover’s patience and persistence, and also acknowledged the excellent cooperation which had been provided by the Department of Justice. “Both Herberts”, he said, deserved great gratitude. The President commented that the longer he worked in his present job the more he was impressed with the virtue of patience.
The National Security Council:4
- a.
- Discussed the subject on the basis of an oral report by Mr. Herbert Hoover, Jr., and the enclosures to the reference memoranda relating to the Iranian oil negotiations.
- b.
- Agreed that no further review of U.S. policy (NSC 5402) would be required at this time in view of the present status of the Iranian oil negotiations.
- c.
- Noted statements by the President and the Secretary of State expressing the admiration and gratitude of the President and the National Security Council for the services performed by Mr. Herbert Hoover, Jr.
[Here follows discussion of items 3–11, United States policy toward Guatemala, the increased Chinese Communist threat to the Tachen Islands, the evacuation of selected key indigenous persons from danger areas, the evacuation of United States civilian population abroad prior to hostilities involving regimes hostile to the United States, United States civil aviation policy toward the Soviet Union and its satellites, the proposal for an international moratorium on future tests of nuclear weapons, mobilization planning, Southeast Asia, and significant world developments affecting United States security.]
- Drafted by Gleason on May 28.↩
- For text of NSC 5402, see Document 403. Neither of the two memoranda from Executive Secretary Lay for the National Security Council is printed. Lay, under cover of one memorandum, sent NSC members the oil companies’ notes for discussion which they had presented at their meeting with U.S. Government officials on May 21. (S/S–NSC files, lot 63 D 351, “NSC 5402—Memoranda (175)”) Lay, under cover of the other memorandum, sent NSC members a brief summary of the current situation in the Iranian oil negotiations prepared by the Chairman of the OCB Working Group on NSC 5402. (S/S–NSC files, lot 63 D 351, “NSC 5402—Memoranda (175)”)↩
- On May 19 the Department had informed Hoover that the NSC had proposed that he attend its regular session on May 27 to report on the oil situation. (Telegram 2280; 888.2553/5–1954)↩
- Paragraphs a-c below constitute NSC Action No. 1134. (S/S–NSC (Miscellaneous) files, lot 66 D 95, “Record of Actions by the NSC, 1954”)↩