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220. Memorandum of Conversation1

SUBJECT

  • Certain Decisions on the Iranian Problem

PARTICIPANTS

  • G—Mr. Matthews
  • S/P—Mr. Bowie
  • E—Messrs. Waugh and Schaetzel
  • BNA—Mr. Raynor
  • NEA—Mr. Jernegan
  • Ambassador Henderson
  • GTI—Messrs. Richards and Stutesman

At 4:00 p.m. June 19, the above noted persons gathered in Mr. Matthews’ office to discuss a memorandum from Mr. Jernegan to Mr. Matthews dated June 15,2 listing nine problems related to Iran which required consideration in order to clarify the Department’s position.

Mr. Jernegan opened the discussion by stating that these problems should be viewed in the light of three alternative approaches: 1) an assumption that Mosadeq is going to stay in power; 2) an assumption that it is not to the advantage of the U.S. to take any measures which would assist Mosadeq to remain in power; 3) an assumption that the situation in Iran has changed drastically and a non-communist successor to Mosadeq has arisen. The problems raised in Mr. Jernegan’s memorandum of June 15 were then studied in order.

A) What reply, if any, is to be given Dr. Mosadeq’s request that President Eisenhower act as an arbitrator in the oil dispute?

It was agreed that no reply should be given Dr. Mosadeq on this matter, unless he raises the question again.

B) What guidance should be given Walter Levy who has suggested that he send, as a private citizen, a suggestion to Dr. Mosadeq of a figure which would be a basis for a lump sum settlement of the compensation question in the oil dispute?

It was agreed that the U.S. Government would avoid any unwanted interference in the oil dispute and would urge Mr. Levy, at least for the present, to postpone any trip to Iran or communication with Dr. Mosadeq on the subject of a lump sum settlement.

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C) What reply should TCA make to the National Iranian Oil Company’s request to have 100 employees trained in the U.S.?

It was agreed that no reply should be given the Iranians on this matter for the present. If they press us for a reply, however, they may be informed that we have the matter under study.

D) What reply should President Eisenhower make to Dr. Mosadeq’s letter of May 28 requesting increased U.S. aid to Iran?

It was agreed that a reply should be drafted for the President to send Dr. Mosadeq politely refusing his request for immediate increased economic aid but not burning any bridges in case at some later date we might wish to make budgetary and economic aid available to an Iranian Government.

In the discussion of this matter it was agreed that it would be unfortunate at this time to give Mosadeq any ammunition which would strengthen his political position. In view of the unlikelihood that Mosadeq will ever come to a reasonable settlement of the oil dispute with the British, it seems that keeping Mosadeq afloat will serve only to perpetuate the present frustrating situation. Ambassador Henderson stated that the chances of getting a successor better than Mosadeq are better now than the chances of getting someone worse. However he emphasized most firmly that we must be prepared to give any non-communist successor to Mosadeq immediate budgetary and economic support in substantial quantities. Without that, we would surely lose Iran.

E) What reply will be made to Mr. Stassen who has instructed DMS to open conversations with the Department on the basis of his understanding that U.S. economic aid to Iran is to be increased by approximately $15,000,000 in FY ’54?

It was agreed that confidential conversations could be held with DMS to prepare a position, on a contingency basis, to give budgetary and economic support to a non-communist successor to Mosadeq if one should arise.

F) Should the Department remove policy objections to the Export-Import Bank’s consideration of a $25,000,000 loan to Iran for agricultural and road-building machinery?

It was agreed that this matter would not be raised with the Export-Import Bank for the present.

G) What funds can the U.S. Government use to subsidize an American airline in affiliation with Iranian Airways?

It was agreed that it is in our national interest to support the affiliation of an American airline with Iranian Airways and that we may so inform Mr. Nelson, President of Transocean Airlines who is interested [Page 597]in making such an arrangement. However, it was agreed that he should be asked not to consummate any agreement for the moment.

As to the source of funds to subsidize Transocean Airlines affiliation with Iranian Airways, Mr. Matthews stated that efforts to find such funds could be made on the basis that it is the Department’s position that it is in our national interest to make such a subsidization and other agencies of the Government can be so informed.

H) What action, if any, should the U.S. Government take to increase Iran’s diplomatic and commercial relations with West Germany?

It was agreed, barring some objection by GER, that the Bonn Government should be encouraged to establish diplomatic and commercial offices in Iran.

I) Should efforts be made to strengthen Iran’s military establishment with the objective of increasing its political importance and position in the national economy?

It was agreed that, so long as there would be no substantial increase in the cost of military aid to Iran, we could request the views of DMS, Defense, and the Embassy and Military Missions in Iran upon measures which might be taken to broaden present objectives for our military aid program in Iran, probably involving some increased flexibility in the types of aid and expenditures presently envisaged.

During the meeting an additional question was raised which had not appeared on Mr. Jernegan’s memorandum of June 15.

Should MSA purchase asphalt from Iran at a 50% discount from prevailing market prices for use in Indo-China?

It was agreed that under present circumstances MSA should not make such purchases.

  1. Source: National Archives, RG 59, Central Files 1950–1954, 888.2553/6–1953. Secret; Security Information. Drafted by Stutesman on June 20 and approved by Jernegan and Richards.
  2. Document 218.