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357. Letter From the Ambassador to Iran (Henderson) to the Special Assistant for Intelligence, Department of State (Armstrong)1

Dear Mr. Armstrong:

With reference to your letter of November 27, 1953,2 the Embassy, CAS, and the Service Attachés have studied National Intelligence Estimate 102, entitled “Probable Developments in Iran through 1954,3 and find themselves in general agreement with the approach and conclusions reflected in this document. We might, however, comment on certain points:

There are, of course, several paragraphs throughout the document which have now been out-dated by developments in Iran since they were written. For example, with regard to paragraph 11, the decision to hold early elections has already been taken by the Shah and Zahedi, and there is no present reason to believe that the elections will not be held with reasonable orderliness and a new Majlis and Senate constituted in the very near future. In connection with paragraph 19, diplomatic relations between the UK and Iran have been resumed prior to any tangible progress toward an oil settlement. Also, with regard to paragraph 25, the first stage of the Mosadeq trial has been completed, with his conviction and a three-year sentence which has now been appealed to a higher court. In this connection, I should point out that the [Page 896]execution of Mosadeq never has been seriously considered, due to his age.

The foregoing developments do not, however affect appreciably the conclusions drawn in the Estimate. We believe these conclusions to be sound in general, although the description and indicated life expectancy of the Zahedi Government might be somewhat modified.

At the present time, and given conditions envisaged some months ahead, no adequate replacement for the Prime Minister has appeared on the horizon to challenge Zahedi. It seems unlikely to us that in the absence of unforeseen developments the Shah would attempt to replace the Prime Minister until at least several months after the organization of the new 18th Majlis. Furthermore, it should not be ruled out that foreign influence not entirely predictable at this time will have an important bearing on the durability of the Zahedi regime and the Shah’s attitude toward it. In this connection, it should be noted that the Government is comprised of representatives of the traditional ruling group of Iran who have been amenable to foreign, notably British, influence. Unless there are sharply unexpected developments such as the Prime Minister’s assassination, the area for possible British and American influence upon the general direction of Iranian affairs, including the retention in office of the Zahedi Government, should not be minimized.

With reference to the solution of the oil problem, it seems to us that the factors involved might be spelled out more fully. The chances for an early and satisfactory settlement depend upon British as well as Iranian attitudes. From our examination of the situation, we think that the Zahedi Government is truly anxious for a settlement and is capable of gaining support in the country which would offer honor and advantages to both parties. It appears that the British are equally interested in reaching a settlement at this time. We believe that it is vital to American policy interests that an oil arrangement be satisfactorily concluded in 1954. Otherwise, we will be faced with the alternatives of subsidizing Iran indefinitely or of running the grave risk that a pro-communist government will eventually come to power, no matter how authoritarian any government without oil revenues might be.

Paragraph 6 of the conclusions in the Estimate recognizes this possibility; however, the relationship between this conclusion and the second portion of paragraph two is not clear. In our judgment, failure to reach an oil agreement in the course of the next several months, together with refusal of the United States to continue financial aid to Iran, will involve psychological as well as economic problems which would reach grave proportions during the period covered by the Estimate. While it might theoretically be possible for the Government to cope with the immediate fiscal and budgetary problems by resorting to def[Page 897]icit financing and other unorthodox means, it is not at all certain that the Zahedi Government or any moderate Government could survive the political repercussions of this development. In other words, we believe that the continuation of a moderate Government in Iran throughout 1954 might well depend upon either an oil settlement or continuation of American financial assistance.

There are certain small points which might also be made. With further reference to paragraph 25, we believe it unlikely that Mosadeq will be a future nationalist leader in his own right, although he could have potential as a “front man” in a coalition controlled by others. With regard to paragraph 27, we understand that the list of candidates for the Majlis elections, approved by the Shah and Zahedi, exclude Ayatollah Kashani, Maki and Baqai. The chances that they will be elected to the Majlis are, therefore, not strong. We believe that General Zahedi particularly has no idea of working with this group, and that the only way any may enter the legislature is with the connivance of the Shah, for example in appointing them to the Senate.

On the important points covered by the paper with regard to the security forces and the potentiality of the Tudeh Party in 1954, we are in general agreement.

Sincerely,

Loy W. Henderson4
  1. Source: National Archives, RG 84, Tehran Embassy Files, 1953–1955, classified general files, Box 10. Secret. Drafted by Melbourne.
  2. Not found.
  3. Document 347.
  4. Printed from a copy that bears Henderson’s typed signature.