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21. Progress Report Prepared for the National Security Council1

SUBJECT

  • First Progress Report on NSC 107, “The Position of the United States with Respect to Iran”2

NSC 1073 was approved as Governmental policy on March 14. It is requested that this Progress Report, as of April 24 be circulated to the members of the Council for their information.

I. The General Situation

Since the preparation of NSC 107 the situation in Iran has progressively deteriorated. The assassination of Prime Minister Razmara by a religious fanatic was followed immediately by the vote of the Parliament in favor of nationalization of the Anglo-Iranian Oil Company, the assassination of one of Razmara’s cabinet ministers, widespread demonstrations and disorders, and by a serious and crippling strike in the southern oil fields and the Abadan refinery. The Communist (Tudeh) Party is exploiting the situation, particularly the oil strikes, to the utmost. While much of what has appeared in the American press has been exaggerated, the situation in Iran is very serious.

The Iranian Government, headed by Prime Minister Hossein Ala, appointed to succeed Razmara, has acted throughout the crisis with commendable firmness. At the time of his appointment, Prime Minister Ala was looked upon both in Iran and abroad as an honest and patriotic man but weak. In the six weeks he has been in office, however, he has demonstrated considerable strength and is presently giving Iran admirable leadership. He has recently obtained an almost unanimous vote of confidence from Parliament.

The Shah, while giving his Prime Minister full support, has not exercised all of the leadership and guidance which would be desirable at present. This, however, is due at least partially to ill health. He is suffering from chronic appendicitis and is considering leaving the country for an operation for this and possibly other ailments.

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Action Taken

In line with the policy statement contained in NSC 107, the United States has:

1. Informed the Shah and Prime Minister Ala that they have the full support of the United States Government.

2. Urged the British Government to take similar action.

3. Inaugurated special political measures as provided for in NSC 107.

4. Cautioned the British Government against taking any “strong” measures such as manipulation into office of a dictatorial Prime Minister who would attempt to nullify the popular nationalization resolution, or the threat to use or actual use of force in the southern oil fields or refinery.

5. Taken every opportunity to strengthen the American position in Iran by good will gestures such as sending to Iran the equipment and technicians to combat a threatened locust plague.

Action Contemplated

The Department of State has under urgent consideration, for recommendation to the President, plans for supporting the present Iranian Government, particularly the Shah, on a more substantial, urgent and dramatic scale than has been possible in the past.

II. The Oil Question

Both houses of the Iranian Parliament six weeks ago voted in favor of nationalization of Iran’s petroleum industry and requested the Oil Commission of the lower house to prepare a report within two months on the best manner of implementing the resolution. The Commission is now considering the question. The idea of nationalization has become imbedded in the Iranian people and a great deal of emotionalism and excitement has been stirred up over the question.

It is the opinion of all American observers in Iran and of the Department of State that any arrangement which may be worked out between the Anglo-Iranian Oil Company and the Iranian Government must, at least in principle, recognize nationalization. This position was taken by the Department’s representatives in a series of meetings with the British held in Washington to discuss the problem. The British delegation did not share this view, although it realized that the feeling for nationalization in Iran was very strong. The British first proposed making the Iranians an offer of an equal share of the Company’s profits and immediate steps to include Iranians in the direction of the Company. The Company would, under this proposal, become progressively “Iranized” until, upon the end of the concession in 1993, it would be to[Page 78]tally Iranian. The United States representatives took the position that this offer would be totally unacceptable to the Iranians and that the United States could not therefore support it.

The British then put forward an amended proposal including the two provisions outlined above and, in addition, (a) the creation of a “nationalized” company, owned and operated by Iranians, for the internal marketing and distribution of AIOC products within Iran; and (b) the creation of a new firm registered in the United Kingdom with Iranian nationals on the board of directors but without Iranian ownership, which would hold the assets in Iran of the AIOC and would operate the concession in its present general form. The United States representatives studied this proposal and informed the British that they believed it still unacceptable to the Iranians and urged that further efforts be made to find a formula that would square with the principle of nationalization without serious detriment to effective British control. As examples of what might be done in this connection, it was suggested that an Iranian entity could be set up in which the sub-soil rights to Iran’s oil would be vested and with which the affiliates of AIOC could deal. Another possibility, it was suggested, might be organization of a joint Iranian-British company having complete control of raw material and production. Under either arrangement the remainder of the British proposal might remain substantially unchanged.

The British to date have not indicated that they are prepared to make any further concessions, and may intend approaching the Iranian Prime Minister quietly and informally with their present proposal. They have, however, assured the United States they will make every effort to be reasonable. The present American position is that while it cannot support the present proposal and thus place itself in the danger of ostensibly opposing the forces of nationalization, it will make every effort to avoid giving the impression that it opposes it and, should the British go further in accepting the principle of nationalization, the United States will render appropriate, although quiet, support.

The period under review saw Iran in ferment and a most delicate situation was created. The situation however, as of the date of this report, was not as serious as most press reports had pictured and prompt and vigorous implementation of the policies set forth in NSC 107 offer the United States the best hope of stabilizing the situation and strengthening Iran’s alignment with the free world.

James E. Webb 4
  1. Source: National Archives, RG 273, Records of the National Security Council, Official Minutes 1947–1961, Box 13, 91st Meeting. Top Secret. The report was sent by memorandum from Webb to Lay.
  2. Pursuant to NSC Action No. 454e. [Footnote is in the original.]
  3. Document 6.
  4. Printed from a copy that bears Webb’s typed signature with an indication he signed the original.