348. Telegram From the Embassy in Iran to the Department of State1

1141. Embassy has sought below to give its general appraisal of Iranian situation at present and to project this estimate into 1954. This survey has been concurred in by CAS and Armed Services attachés.

1. Zahedi Government, as legally designated regime of Shah, apparently will be able to stay for some time, despite opposition criticism, if Shah does not permit it to be undermined and if he at same time allows government to proceed with effective measures designed to quell that opposition. Nationalist political forces remain disrupted and no popularly recognized Nationalist political leader other than Mosadeq seems available, and he in jail. Armed Services have for many years been decisive political instrument in country although this fact obscured under Mosadeq regime because of Shah’s unwillingness employ them contrary to Mosadeq’s wishes. Constitutional issue which divided Mosadeq and Shah resolved in favor latter, because former was not able maintain control over armed forces.

2. Zahedi attempting abide by constitution without full powers Dr. Mosadeq possessed although confronted with serious conditions as aftermath Mosadeq rule. In view of his constitutional and legal shackles from which he apparently not willing free himself by extra legal actions, his regime not likely to effect significant social and economic reforms in country during 1954. Government continues campaign against Tudeh, does not hesitate impose quasi press censorship and insists criticism has some limits. Criticism any regime endemic in Iran and present government getting its share which will be related to its future effectiveness.

3. Prime internal political problem clearly continued good relations between Shah and Prime Minister. Shah may be expected, in traditional Persian manner, not to place complete trust in Zahedi or to back him unqualifiedly. Current Mosadeq trial having some adverse public effect upon government and being handled under authority Shah. On other hand, Shah and Zahedi agree that because disruptions parliamentary development under Mosadeq next Majlis elections should be fully controlled and slate candidates mutually agreed upon. Both affirm new deputies should come from areas where elected and both assert they will be able by mutual compromise to arrive at acceptable single list.

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4. In next year it not believed political activity of various Iranian social groups will change materially. Activities peasants and tribes, aside from possible intrigues of Qashqais, may not be considered as of decisive significance. Worker agitation for better wages and problem unemployment may have to be met partially by government. Activities of merchant class, particularly those benefiting from Mosadeq’s previous inflationary policies, will have to be channeled in direction of recognition benefits to be derived from improved economic conditions flowing from an oil agreement. Familiar problem will remain of educated Iranians frustrated in securing suitable jobs because of Iranian economic and political conditions. It believed best government can do during coming year is to keep popular frustrations from mounting, maintain anti-Tudeh campaign, and permit improved conditions stemming from an oil settlement and resumption substantial Iranian oil exports to have their effect.

5. Without an oil agreement of some kind or, failing this, continued American financial aid, it seems impractical to think any non-Communist regime, no matter how authoritarian, can survive. Public sentiment may be mobilized in behalf oil agreement or at least neutralized if it considers such arrangement protects Iranian rights. Although this broad concept, it will be necessary for Zahedi regime to publicize fully it has safeguarded Iran’s interests in making settlement. Tudeh Party has been seriously scotched by strong government actions taken but its essential leadership and organization intact. In event no oil settlement or foreign financial aid, Tudeh Party in alliance with malcontent Nationalists could become in 1954 once again serious threat to continued independence of Iran.

6. Any regime fully determined to impose an oil settlement without regard public reaction undoubtedly with army support could secure temporary Iranian acquiescence but consent could be expected to be brief. However it believed that Zahedi regime, despite its faults for which certain remedial action can be taken, offers best available means to achieve an oil settlement which under present volatile Iranian conditions could have likeliest prospect of durability.

As well, it believed that Shah recognizes Zahedi in better position to reach oil agreement than any potential Prime Minister now that Mosadeq can no longer be considered. However, Shah might at some stage wish replace Zahedi by another also opposed to extreme Nationalists. Abrupt dismissal of Zahedi would be likely strengthen forces opposed to an oil settlement as could undermine any oil arrangement already made. Questions whether Zahedi is to remain in power and whether Shah permits him sufficient leeway for constructive action may be answered in part by ability United States and United Kingdom fully to cooperate in Iran.

  1. Source: National Archives, RG 59, Central Files 1950–1954, 788.00/11–1953. Secret; Security Information. Repeated to London and pouched to Meshed, Tabriz, and Isfahan. Received at 1:17 p.m. The telegram is printed with redactions in Foreign Relations, 1952–1954, vol. X, Iran, 1951–1954, pp. 840–842 (Document 389).