891.6363/10–744: Telegram
The Ambassador in Iran (Morris) to the Secretary of State
[Received 3:20 p.m.]
737. My 698 of September 21, 701 of September 22 and 728 of October 2. I have recently discussed with the Prime Minister, British Ambassador, Minister of Finance and others closest to the situation the matter of the Kavtaradze delegation and its interest in petroleum. The position at present appears to be as follows: The Russians have dropped any talk about reviving a concession on the terms of the old Kavirkhourian arrangement. Instead they talk of exploitation at the end of the 5-year exploration period without defining on what terms. The Russians are pressing for answer and the Prime Minister says that he expects to arrive at a decision within the next 4 or 5 days. Iranian Cabinet is thinking of attempting to withdraw from its embarrassment vis-à-vis the Russians by proposing to exploit all of Iran’s petroleum resources by the formation of Iranian development companies. This of course would be only a weak bluff on paper if attempted. I told the Minister of Finance that nothing could be gained by this maneuver.
My general impression is that in the end the Government here will yield to the Russian demand unless it knows that the Russian request meets the opposition of the British and American Governments in principle and that those Governments are prepared to state their objections directly to the Russians. The British Ambassador is of the personal opinion that the Russian demand for a state concession in [Page 455] the territory of an independent friendly Government is unacceptable under international practice. He is particularly fearful that if such a concession is obtained the Russians will use it as a precedent for similar demands in Bulgaria, Yugoslavia and possibly Greece to extend their influence over any type of wealth possessed by those countries.
I think the Department will wish to give careful and immediate attention to this phase with a view to possible representations directly to the Russian Government either singly or conjointly with the British Government. If higher policy precludes action of this nature it might be well to encourage the Iranian Government to postpone for 6 months or a year the granting of any concessions.
Any instructions as to action or policy by this Embassy I feel should be sent promptly to be of any utility.
From a source close to the Russian Embassy here I learned that Kavtaradze has sounded out the local Government on the granting of a free port somewhere in the Persian Gulf.
I have not yet ascertained the Persian reaction.