888.2553/12–1450: Telegram
The Charge in the United Kingdom (Holmes) to the Secretary of State
3450. 1. Furlonge told us last evening that for present UK simply marking time pending further developments in Majlis re AIOC agreement. [Page 633] He said conversations between Razmara and Northcroft re further concessions which company might make have shown two parties are “poles apart”.
Comment: As in number recent occasions, we have informally urged FonOff exercise ingenuity in trying to find some solution this unsettling problem. Furlonge, however, doubts there is will on Iranian side to settle matter without further major financial concessions, which company apparently not prepared concede, at least at present. Furlonge has also indicated further difficulty is that Razmara keeps changing his mind as to what is required to get agreement through.
2. Furlonge commented most favorably on Razmara’s plan to negotiate trade agreements with Germany, Italy and other countries, which FonOff feels will have beneficial effect on Iranian economy. He felt that prosperous trading community will be strong political bulwark for Razmara and that his efforts to bring about trade revival were highly commendatory and contrasted them especially with more cautious policy of Ebtehaj.
3. Furlonge volunteered that FonOff not disturbed re Razmara’s recent conclusion trade agreement with Soviets and suspension VOA and BBC broadcasts neither of which he felt was any indication Razmara orienting his policy toward Soviets. Re broadcast suspensions, Furlonge felt measure was only transitory and would shortly be relaxed, FonOff consequently taking no action and merely awaiting developments. All in all, Furlonge felt that Razmara had played his hand with Soviets rather well.
4. In general Furlonge felt situation in Iran looking up. There were already indications of increased prosperity which he stated, confirmed his belief that situation in Iran not perhaps as bad as we had hitherto estimated. He therefore questioned whether there was really need for large scale financial assistance. We took opportunity to say that it appeared to us that although increased prosperity undoubtedly would have short-term beneficial effect, nevertheless in long-run, dissatisfaction among lower classes could only be effectively allayed by bringing them greater benefits through development of country. This plus need for psychological reasons to give Iranians indication Western interest had always been motivation behind our loan program. It has, moreover, been cardinal point in our urging early settlement AIOC problem.
Sent Department 3450, repeated information Tehran 68.