891.6363/8–1647: Telegram
The Ambassador in the Soviet Union (Smith) to the Secretary of State
2659. Tehran’s 82 August 14, sent Department 752 and London 88. On latest Soviet-Iranian oil development I must express very different views from Allen with whom I am usually in full accord.
As seen from Moscow, it seems to me that far from being “serious diplomatic blunder” Soviet approach to Iranian oil concession question puts them in a strong position before world opinion and provides [Page 934] a case which they may exploit either in directions of gaining advantageous concession for themselves in northern Iran or of seriously weakening British position in south. We must not have any illusions that Soviet authorities will be in any way embarrassed by their previous propaganda castigating AIOC capitalistic exploitation. The Kremlin knows that few people outside Iran will remember these charges in any detail, if in fact, they ever heard them at all. Furthermore, as we have seen many times in the past on issues of greater importance, Soviet Government is able to make a complete reversal of policy with the greatest ease and facility.
Similarly, they will not be concerned by the inapplicability of certain commercial terms of AIOC concession. On the contrary, they will be confident that if they are able to force matter to actual negotiations, situation will be “soft” enough to enable them to secure such modifications as are desired, and in any event they are quite capable, as has already been demonstrated, of exploiting a commercial enterprise in the best capitalistic tradition.
The Soviet Ambassador has just returned to Tehran from consultation in Moscow. The nature and tone of his approach to Qavam convinces me that a high level decision for a strong policy in Iran has been reached here and that all Soviet organs will be expected to exert every possible effort to carry it through. How far the Kremlin is prepared to go will, of course, depend on situation on other fronts, but we must certainly be on guard for every contingency.1