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

4349. As result instructions rec’d by Brit Emb which lists questions in different order from Deptel 2441 May 2,2 we have agreed here to follow Brit sequence and phraseology of questions.

Before answering questions set, both Embs wish to emphasize that Iranian situation remains highly uncertain and that it impossible to assess its course beyond most immediate future. In considering interplay of internal Iranian forces and their possible shift with events and time, we believe that policies of US, UK and USSR toward Iran are at least as important as internal forces, which in turn react to these foreign influences. With these observations in mind, there follows estimate of Iranian situation by two Embassies:

1) Does Mosadeq still have the power to rally public opinion and dominate any combination of opposition elements?

There no doubt that Mosadeq still has power to keep himself in office. His prestige has decreased and may go on decreasing; he no longer has political invulnerability which he enjoyed up to few months ago. His prestige relatively high, however, particularly in provinces. At same time so long as he controls Radio Tehran and one or two newspapers, as well as Government patronage and day-to-day administration of country, it difficult to see how he can easily be overthrown. As we have so often pointed out, opposition is uncoordinated and Shah, who might be rallying point of opposition, is weak and vacillating. Mosadeq’s latest letter to Majlis clearly indicates that he intends strengthen his grip on political life of country, if necessary by ruthless exercise his political power. These methods will continue be effective so long as Natl Front remains united and opposition remains divided. At moment there no sign any effective combination of opposition elements.

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2) (a) What is present economic and financial situation?

(b) Does Mosadeq or any Iranian Govt have courage or ability to make full use of country’s resources?

(c) Is financial and economic collapse inevitable and if so is it matter of weeks or longer period?

(a) This has already been dealt with in latest reports prepared by Economic/Commercial Counselor in consultation with US/Brit Emb.3

(b) It not believed Mosadeq or any Iranian Govt, short of dictatorship, cld obtain reduction of Govt expenditures or increase of tax revenue to extent sufficient to make substantial contribution toward balancing budget. However, it not unlikely Govt cld obtain Majlis [text missing] on for limited use of remaining gold reserve behind currency and for expansion of currency required for financing Govt deficit. Thus, while in our opinion Govt cld not make full use of all country’s resources, it cld obtain sufficient funds to meet its needs for considerable time.

(c) Ultimate financial and economic collapse is believed to be inevitable in absence restoration oil income. Such collapse might be matter of months unless Majlis authorization obtained for use currency gold reserve and/or currency expansion to support Bank Melli loan to Govt. With such authorization Govt might carry on thru Iranian year 1331 (until Mar 1953).

3) In event of collapse of central Govt, what is most likely political development?

We do not believe that collapse of central Govt imminent despite slow drift toward anarchy. Nevertheless, unity of Natl Front under strain and it showing certain indecision. Iran’s problems in varied fields becoming so serious that Mosadeq Govt or its possible successors probably will be obliged to think in terms of authoritarian govt. This govt may be a) present Govt or revised Natl Front regime, b) one derived from non-communist opposition groups, c) one frankly controlled by communists or military junta.

(a) We do not believe that oil problem can be solved so long as Mosadeq remains Primin. In absence solution and Western financial aid he [Page 231]may at some point make overtures to USSR. He may try include Tudehists in his cabinet in hope obtaining Soviet economic aid and convincing West that his threats to “turn toward Russia” have reality. If Natl Front, with or without Mosadeq’s ostensible leadership, shld degenerate in this fashion, way might be prepared for govt controlled by communists and installation of regime which wld disregard or overthrow Shah. On other hand, revised Natl Front Govt conceivable without Mosadeq which wld remain loyal to Shah and which wld try strike balance between Free World and Soviet Union. Such regime might be willing seek solution oil problem and if it succeeds, can survive.

(b) Opposition combination replacing Mosadeq cld assume office thru exercise by Shah of his constitutional powers in some form. This regime wld require full support of Shah and army to exercise authoritarian methods in running country and in proceeding against its opponents. Such regime, which might be strong civilian coalition or military junta, cld try strike balance between Russia and West or turn openly to West for support, while seeking in either case solve oil problem.

(c) Dissatisfaction among tribal elements resulting in large-scale outbreaks difficult for armed forces to control cld be signal for communist effort to seize control of Tehran and of north with covert Soviet support. Resultant regime cld be outright communist dictatorship or military non-communist junta cld be set up to meet threat.

We think that order of likelihood of above occurring is (a), (b) and (c). We consider most probable development to be that Mosadeq will remain in power until after World Court decision in June. Thereafter probability increases of his being replaced by revised Natl Front Govt. However, if Mosadeq takes active steps to approach the Russians, such as actually going to Moscow or appointing Tudeh ministers, or if Shah becomes convinced that Natl Front has weakened to such extent that he can take action at only slight risk to himself, possibility of (b) wld be increased.

4) What alternative govts, if any, are in sight? Are they likely to receive support of Shah to point where he wld use strong measures, including military rule?

This question has been largely covered under 3) above. No alternative Govts as yet visible, nor has Shah as yet indicated his preferences in this respect. Opponents of Natl Front claim that if there were joint Anglo-American approach to Shah for removal of Mosadeq and installation of alternative regime, this wld oblige Shah to act. We doubt whether such step wld be effective unless considerable pressure were exerted to convince Shah of great dangers of inaction and concrete advantages to Iran and to himself to be derived from his intervention. We believe that Shah might be willing use Armed Forces to support weak [Page 232]Primin who wld not be likely become rival. However, under conditions developing in Iran, we believe weak Govt, despite military support, wld be short lived. Shah is notoriously reluctant accord full support to strong Primin, but he might reluctantly agree to do so if convinced this necessary to prevent collapse of Iran or complete discrediting monarchy.

5) When Iranians (other than members of Tudeh Party) speak of turning to Soviet Union, how real is risk and what form of Soviet assistance is anticipated to ease present situation?

While there undoubtedly blackmail features in talk of turning towards Soviet Union, this not inconsistent with traditional Iranian policy of playing one great power off against another and belief that by such means country can continue maintain precarious independence. We both believe it quite probable that Mosadeq, if driven into corner, will turn to Moscow more as gesture of defiance than in any hope of getting real assistance. We do not think volatile elements of population and of Natl Front willing to realize, as do thoughtful Iranians, that country can obtain little practical help from Soviet Union, and that in any case price might be Iranian independence. Before responsible Iranians aware danger, irretrievable steps may have been taken which might place Iran virtually in hands USSR.

Henderson
  1. Source: National Archives, RG 84, Tehran Embassy Files, 1950–1952, classified general records, Box 29. Secret; Security Information. Drafted by Melbourne and Henderson. Repeated to London. The telegram is the Embassy copy as approved and has no time of transmission.
  2. In telegram 2441 to Tehran, May 2, the Department requested that the Embassy conduct a joint analysis with the British Embassy of the situation in Iran. Specifically, the Department, as well as the Foreign Office, requested the Embassies’ appraisals of Mosadeq’s staying power, the general economic and financial situation, whether Mosadeq could implement necessary, though unpopular policies, whether any successor to Mosadeq stood on the horizon, whether there was a risk of Iran turning toward Russia, and, finally, whether there existed a risk of financial collapse in Iran. Telegram 2441 is ibid., RG 59, Central Files 1950–1954, 888.2553/5–252.
  3. An apparent reference to two surveys of Iran’s economic and financial condition at the close of the Iranian year 1330, prepared individually by the American and British Embassies in Tehran, under the direction of U.S. Counselor for Economic Affairs Robert Carr, and attached to despatch 1187 from Tehran, May 7. Both estimates, especially the American one, described the Iranian economy as healthy and resilient, primarily because of a healthy agricultural sector, positive trade balances owing to the Korean war induced economic boom, and the accumulated level of imported stocks. Nevertheless, the government’s financial position was nearing exhaustion and, without the reinstatement of considerable oil revenue, would provide the source for economic deterioration in the coming months. These two surveys are ibid., 888.10/5–752.