888.2553–AIOC/8–1550: Telegram
The Ambassador in Iran (Grady) to the Embassy in the United Kingdom 1
priority
16. (1) Your continued efforts re AIOC outlined Embtels 792 and 8392 appreciated here since I feel no substantial progress can be made [Page 582] on total Iranian problem until this settled. I trust your conversation with Bevin will get things moving.3
(2) I have several observations on recent messages. It seems to me responsibility AIOC to its 18 percent private stockholders not appreciably different from responsibility to government stockholder. Lawyers should be able devise formula insulating company against minority stockholders suit in event loss results from non-ratification. Even more fundamental is fact that private stockholders, as well as UK Government will lose total investment if continued failure to reach agreement results collapse of country or confiscatory action by Iranians.
(3) I understand how impression that our approach AIOC problem one-sided could be gained if our efforts judged solely by outgoing telegrams, but should be realized these telegrams necessarily deal primarily with one side of problem. Our arguments here to Iranians are other side. Just how London Embassy knows what we have said to Razmara on this matter or on what is basis its impression that we have “encouraged his intransigency”, I cannot understand.
(4) Razmara not our primary problem here. He is intelligent, reasonable person who realizes oil settlement must be made if he is to proceed with his development program. Real problem is irrational, nationalistic Majlis which has stand-off attitude toward Razmara. In fact, after giving him vote confidence has denied him legislation on government decentralization and other matters he regards as important. He thought introduction AIOC supplemental agreement into Majlis sure to cause incendiary speeches and ultimate defeat. His tactics are to strengthen his government in eyes of people by material improvements before winter, perhaps have new elections and send supplemental agreement Majlis only after he has strength put it through. Essential element of tactics is giving Razmara means to make material improvements (balancing budget, starting development projects, et cetera).
(5) I can think of no better tactics. To lump Razmara and Majlis as “Iranians” and hope that need for funds will eventually force acceptance as [an?] agreement is, I think, a mistake. This tactic more likely lead to deeper trouble. Our best chance is help Razmara get strength to settle matter.
(6) I welcome UK interest seeing that any sterling loan be properly used by Iranians. We all share aim that oil payments be used for development, but development cannot:-be undertaken while budget seriously out of balance. Loan or payment of total sum would permit balancing budget and development expenditures, but small loans will probably have to go primarily for balancing budget.
[Page 583](7) I do not agree that an addenda on certain points like Iranianization of employees, desired by Razmara and necessary for him in resubmitting supplemental agreement, need in any sense involve or necessitate a renegotiation of the whole supplemental agreement.
Sent priority London 16; repeated info Department 395.