Foreign Relations of the United States, 1950, The Near East, South Asia, and Africa, Volume V

888.10/10–3150: Telegram

The Secretary of State to the Embassy in Iran ¹

secret

Washington, November 18, 1950—3 p. m.

867. Dept has given careful consideration to opinions expressed in Tehran’s 998 Oct 31, 1015 Nov 3,² and London’s 2564 Nov 3³ and has the fol comments and suggestions:

1. It is entirely clear Brit feel very strongly about giving assurances sterling convertibility to service loan, and no useful purpose will be served by further discussion with them at this time. US Govt proceeding arrangements for Eximbank loan without Brit assistance in thought Iran will be able capture sufficient dols from exports to service Eximbank credits.

2. Continued firm UK attitude re AIOC supplemental agreement indicates possibility of basic difference opinion not only re (a) inherent dangers of Iran sit, but (b) responsibility of US and UK to exhaust all possibilities of creating in Iran strong stable govt and prosperous econ as best insurance against communist inroads, (c) strength of NE demands for increased share of profits, and (d) methods best suited to achieve our objectives.

3. Dept believes Brit are still concerned over UK econ and fin sit and that this factor, together with commercial considerations, leads them to place different emphasis than we do on polit and strategic necessities in Iran. Therefore believe that having in mind overall UK fin and econ position and likelihood of increasing econ burden from accelerated defense effort, evidence does not warrant conclusion UK policy as such directed at sabotaging our efforts to strengthen Iran.

4. Our present effort must be difficult twofold task of attempting seek parallel although not identical UK–US approach Iran problem which will further our aims in Iran without undermining Brit position and at same time taking every appropriate action disabuse Iran’s impression basic pol cleavage exists.

Briefly basic US position on Iran is:

(A) Iran directly exposed to internal and external communist aggression must be strengthened economically, must have stable polit situation which can only come through relatively strong central Govt supported openly by both US and UK, and must have confidence west interested in its independence and territorial integrity.

(B) Absence other western powers able or willing to furnish needed assistance prompts US render mil and econ assistance within limits Iran’s capacity to absorb and our ability in light worldwide commitments provide. This action taken in behalf western world to prove west doing everything possible support continued freedom in Iran.

(C) AIOC dispute continues create polit instability and retard Iran’s econ development. Since its prolongation jeopardizes objectives we and Brit desire to obtain in Iran, US has repeatedly expressed its view to UK, not with intention of intervening in Iran-AIOC dispute but with view to convincing UK seriousness of question and of necess AIOC increasing liberality. AIOC apparently still convinced it can get agreement through parliament without making additional offers and recent appointment Forouhar who is known to be most friendly to UK as Fin Min will probably stiffen their thinking in this direction. Dept does not believe it likely agreement will go through in present form and is convinced that even if it does, bitterness of such nature may be engendered that conclusion of agreement may not only have no polit benefits but may even damage long-range UK interests in Iran.

Dept has made clear its views that Near East producing states no longer isolated from knowledge of greater royalties elsewhere and that in view great value Near East oil resources foreign cos can and must if necess be prepared pay more to hold concessions. In this connection we will endeavor keep UK informed on developments in Saudi Arabia which portend important financial concessions considerably in excess of AIOC Supplemental Agreement. New Saudi income tax if applicable wld alone increase Aramco payments 50 to 100% (details being forwarded by air pouch). FYI Brit Emb informed of Aramco development without ref to AIOC. Dept of opinion once Irans learn details of Saudi Arabian situation, they will probably not accept present agreement even on basis non-financial requests AIOC is now refusing. Dept also fears however, supplemental agreement if ratified with or without such sweetening might not last long in view anticipated Saudi Arabian developments.

(D) US and UK must work together in Iran but we must be in basic agreement our objectives if there is to be any hope successful outcome. UK efforts assist Iran have been and will be most welcome although some recent suggestions have in Dept’s opinion been rather unrealistic.

Acheson

1. Sent also to London.
2. Not printed; in it Grady reported that Razmara believed he could get the AIOC supplemental agreement ratified if he got “some real concessions”, but was “absolutely positive” he could not get ratification as the agreement stood. (888.2553–AIOC/11–250)

3. Not printed; in it Douglas estimated that the negative British reply on convertibility was motivated fundamentally by the “open-endedness” of the proposed commitment. The British also saw Iran’s economic situation differently from the United States and did not appreciate the pyschological aspects of aid to the country. Douglas further stated the “Embassy does not concur in thesis that UK bent on sabotaging our efforts to strengthen Iran in order to preserve UK’s own supremacy and control.” (888.10/11–350)

   On November 9 Grady responded to telegram 2564 as follows:

   “The highly charitable attitude in the interpretation of British motives by our London conferees though most edifying and inspiring is, in my opinion, possibly somewhat misplaced. The record is pretty clear.

   I strongly urge: (1) that a complete report on this matter be placed in the hands of the ECA officials who are now considering grants for next year to the countries of Europe and Asia; (2) that we seek as soon as practicable the dissolution of the sterling block. … Iran’s royalties by every right belong to her to use as she chooses, not to serve the purposes of British economic policy. Neither can the British nor we assume to dictate through the use of the conversion club the internal economic policy of a sovereign state like Iran. We can give advice, but we cannot dictate.” (Telegram 1070, not printed; 888.10/11–950)