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47. Memorandum From Henry Villard of the Policy Planning Staff, Department of State, to the Chairman of the Policy Planning Staff (Nitze)1

IRANIAN SITUATION

As I see it the Iranian situation now boils down to the following facts and conclusions:

1. The British have rejected our suggestions in regard to Mossadegh and discussion of the latest Iranian proposals.2 They persist in working for Mossadegh’s downfall and profess to have the Shah’s support of this aim. In this they are employing tactics they have always employed in Iran and which were a principal cause for the drastic nationalization laws. British intrigue is the surest way of increasing Iranian antagonism and preventing any sort of agreement. The economic measures employed against Iran have the same effect; they have resulted in retaliatory action against the remaining AIOC personnel and, by dooming any deals in foreign exchange, the probable closing of British banks in Iran. In other words, the British are steadfastly pursuing a policy which can only aggravate the situation and contains risks of the most serious kind.

2. Even if the British should succeed in overthrowing Mossadegh, it would prove a boomerang. In the eyes of the public Mossadegh would be a martyr to the cause and any successor known to be acceptable to the British could not last long. The Shah cannot be expected to move against Mossadegh. In the first place he lacks guts to do so. In the second place he is aware of the extreme unpopularity of such action. The removal of Mossadegh by the Shah could only result in an attempt [Page 138]to govern the country by armed force. Even this would probably be impossible in view of the unreliability of the Iranian armed forces in the face of angry public opinion. The British pretend to believe that public opinion is not a vital factor in controlling the situation, that only the so-called Teheran intelligentsia really counts, that feeling on the oil question ebbs and flows, and that opposition to the U.K. is only skin deep. This is completely contrary to our information and constitutes, I think, the most fundamental British mistake in their entire inept handling of the problem.

3. My own opinion is that it is no longer possible to reach an agreement which would permit the British to retain any semblance of the authority previously exercised in the Iranian oil industry. I have never believed in the likelihood of such an agreement, but matters have now gone so far that it seems essential to recognize the political objective of the Iranians as distinct from economic considerations. That objective is not to reach a negotiated settlement on the question of profits or management, but to drive out British influence in accordance with a literal interpretation of the Iranians’ communication to the ICJ: “in order to free themselves from the claws of a usurping company which for long years has served as a disturbing influence in economic, social and political fields in Iran.”3 Emotion—not logic—is the controlling factor, and the sooner the British realize they are not wanted in Iran, the sooner can we approach a possible solution.

4. It seems to me that the time has arrived for a show-down with the U.K. if anything is to be salvaged from the situation. I think we should tell the British that because of our deep concern in this crisis we must abandon our efforts to play the role of honest broker and take a strong stand. We should say that we propose that U.S. and other foreign technicians should be admitted to Iran to run the industry; that this would involve the complete removal of British personnel from the scene; and that an attempt should concurrently be made to work out a contract with Iran for the sale of oil to the U.K. This would be a virtual capitulation on the part of the British. But they are finished anyway, as the AIOC personnel will soon have left. On our part we should say that we would undertake to make the Iranians carry out the terms of a suitable sales contract.

It would be a bitter pill for the U.K., and I doubt that they can be made to swallow it, but the stakes are so high that unless we try something of this sort a whole chapter of dangers will presently open up.

Henry S. Villard 4
  1. Source: National Archives, RG 59, Central Files 1950–1954, 888.2553/9–2651. Secret.
  2. See Foreign Relations, 1952–1954, vol. X, Iran, 1951–1954, pp. 162–169 (Documents 8689).
  3. For statements made before the International Court of Justice in regard to the Anglo-Iranian oil dispute, see International Court of Justice, Anglo-Iranian Oil Co. Case (United Kingdom vs. Iran) Pleadings, Oral Arguments, Documents, Leyden. See also Document 76.
  4. Villard initialed above his typed signature.