97. Position Paper Prepared in the Bureau of Near Eastern, South Asian, and African Affairs1


  • The Iranian Situation

The Problem:

To determine the policy to be followed by the United States following the recent events in Iran.


During the course of the last two months the political position of Prime Minister Mosadeq of Iran gradually declined as a result of the growing financial crisis arising out of the protracted loss of oil revenues. It became clear to Prime Minister Mosadeq recently, following his reappointment upon the convening of the Parliament, that drastic financial measures would have to be taken if Iran were to avoid bankruptcy. Having been unable to sell Iran’s oil or to obtain budgetary aid from the United States, he had no remedy but to seek internal palliatives such as relaxing the rigid note cover requirements, expanding the currency issue and enforcing tax collections. Apparently knowing that each separate measure would mean a bitter Parliamentary fight, he requested sweeping economic powers for a period of six months to, he said, enable him to balance the budget without any oil revenues.

It became clear rather rapidly that the Prime Minister did not have the political support in the Parliament necessary to obtain these powers and the enabling legislation faced almost certain defeat. While the motives behind his subsequent actions are conjectural to some extent, it seems probable that he then decided to manufacture an issue totally separate from the economic powers question which could place the responsibility for his fall on the Shah rather than on his own policies. He accordingly went to the Shah on July 17 to present his new cabinet. In his cabinet list he reserved for himself the Portfolio of Minister of War which would have given him control over Iran’s armed forces, traditionally a prerogative of the Shah. As was to be expected, the Shah cate[Page 290]gorically refused Mosadeq’s request. Mosadeq thereupon resigned immediately and hoped that the Majlis would, when asked for a vote of inclination, again vote for him since the issue was now one between the Prime Minister and the Shah rather than the Prime Minister and the Parliament. The Parliament, however, with 33 pro-Mosadeq deputies abstaining, gave its vote of inclination to former Prime Minister Ahmad Qavam who was accordingly appointed by the Shah.

Qavam during the first day of his brief tenure of office proceeded vigorously and with commendable courage. There were a few disorders and the Prime Minister announced that the orders of the government must be rigorously followed. He also announced that he intended reaching an oil agreement with the British. With this announcement the nationalist forces of Prime Minister Mosadeq, agitated by the fanatical religious leader, Kashani, who appealed to the Army not to obey orders, and other National Front leaders enjoying Parliamentary immunity, began a campaign of violence against Qavam. If Qavam had been able to receive authority from the Shah at once to proceed against all disturbing elements, there were indications that he probably could have coped with the situation.

Qavam requested the Shah to dissolve the Parliament and give him full authority to arrest whomever he felt necessary to assure the maintenance of law and order. At this point the Shah began to hesitate. Long afraid of Qavam’s designs against the dynasty, the Shah was unquestionably afraid to give him sweeping powers.2 He also probably feared nationalist violence against himself personally should he permit Qavam to proceed in a ruthless manner against all nationalist elements. Whatever his motives, he did not give Qavam the required authority and the latter was unable to maintain order. Widescale rioting broke out in which a considerable number of people were killed and injured and which at points reached the proportions of a civil war. Qavam, as early as July 19, submitted his resignation to the Shah since he did not have in his opinion sufficient powers to cope with the situation. The Shah refused to accept the resignation but Qavam, assuming the attitude that he had resigned, remained at his house and did nothing.

On July 21, despite every effort on the part of moderate Iranian elements to persuade the Shah to act and despite the advice of the American Ambassador and the British Chargé, the Shah refused to give Qavam the powers he sought. Qavam accordingly again submitted his resignation and this time it was accepted. Qavam had no other course in the final analysis since he had learned that the Shah not only would not give him the requested powers but was intriguing with nationalist elements at the very moment Qavam was asking for these powers.

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With the resignation of Qavam, the rioting mobs turned into victorious celebrants and it became entirely clear that mob violence had triumphed over law and order. It was learned that the Shah intended as soon as Qavam resigned to appoint a Prime Minister somewhere between the two camps, one acceptable to both nationalist and moderate elements. However, even if he so intended, before he had a chance to do so the Parliament reconvened and by an overwhelming vote gave its inclination once again to Dr. Mosadeq. The Shah immediately signed the royal decree appointing Mosadeq Prime Minister.


While no predictions can of course be made as to the course that Mosadeq will now follow, several factors should be mentioned:

1. No attempt was made to conceal Communist association with the nationalist rioters. The shouts and slogans of the demonstrators were anti-Western and closely resembled the usual Communist jargon.

2. Mosadeq is clearly in a stronger position now than at any time since the nationalization of Iran’s oil in April 1951. The Hague Court decision that it does not have jurisdiction in the oil controversy, coinciding with Mosadeq’s return to power, will further strengthen his position.

3. The Shah has been discredited.

4. The opposition to Mosadeq can be expected, for some time at least, to remain thoroughly intimidated and afraid to assert itself.

5. There is no immediate prospect for a settlement of the oil controversy with the British and in the absence of such settlement there would appear to be little hope of the early resumption of substantial oil revenues.

6. Dr. Mosadeq can unquestionably get the economic powers he had previously requested and it can therefore be expected that Iran will be able to ease its financial crisis probably until early next year.

The mere association of the Communists with the nationalists in the rioting should not necessarily be interpreted to mean that Mosadeq will follow a more lenient attitude towards the Communists than he has in the past and, indeed, there were indications during the riots that the responsible nationalist leaders were alarmed at the entry of the Communists into the picture. It is not believed, therefore, that Mosadeq can be accused at the present moment of softness towards alliance with communism.3 The course of events during the last few days in Iran demonstrated fairly clearly the force of nationalist feeling in Iran. While [Page 292] it is admittedly true that the mobs were deliberately stirred up by such unscrupulous persons as Kashani and that there was Communist participation, there can be no question but that deep national feeling was aroused by the appointment of Qavam and his announced intention of dealing with the British. In view of this, it is unlikely that any Iranian leaders can for a long time to come make any substantial deviation from the Mosadeq policies.

The position of the United States in the wake of these developments is not easy to determine. It is possible that everthing may revert to the status quo ante and that we may be able to continue to deal with Mosadeq about as we did previously. It is possible, however, that the depth of anti-foreign feeling that has been stirred up is so great that he will find himself obliged to take further anti-Western measures. A favorite slogan of the rioters of the past few days was that the American military advisers to Iran must be expelled. Should Dr. Mosadeq find himself obliged as a sop to nationalist feeling to remove the American Military Missions from the picture, the United States might be forced to change its policies in Iran. There are a number of ways in which he could proceed against our Military Missions which would call for varying reactions on our part. If Dr. Mosadeq should simply approach our Ambassador and say that the presence of the two Missions on contract to the Iranian Government (Armish and Genmish) was no longer politically possible and that he would like to terminate their contracts quietly and by mutual agreement, the United States might be able to live with such an arrangement. Under these circumstances our military aid would continue and the Military Assistance Advisory Group (MAAG) would remain in Iran.4

On the other hand should Dr. Mosadeq make a dramatic gesture and announce that he was “kicking the Americans out” and terminating military aid, it is difficult to see how the United States under the Mutual Security concept could continue any aid to Iran. Should this occur it might be necessary either at the time or at the end of the fiscal year to terminate our present Point Four Program. It is sincerely hoped that this can be avoided since what might be interpreted as complete abandonment of Iran could have most unfortunate repercussions in that country.

Consideration of our aid programs raises the whole question of our general approach to the Iranian problem. During the course of the past few years, the United States has on a number of occasions at very high levels made public statements regarding its concern for the continued independence and territorial integrity of Iran. In the case of its [Page 293] military aid and Point Four Programs, it put great pressure on the Mosadeq Government to accept them, thus giving an appearance of great concern to many Iranians. In connection with these aid programs it has been necessary to send a greatly increased number of American officials to Iran. We have repeatedly shown our concern by open intervention in the oil controversy, and in general our line vis-à-vis the Iranians has been one that tended to give the impression that the United States would in the final analysis do anything necessary to save Iran from the Communist menace. While it is of course the United States objective in Iran to prevent the loss of that country to the free world, we should not overplay our hand. Should the Iranians remain convinced that, no matter how irresponsible they may be, the United States is always there to save them, we cannot expect any improvement in our position in the long run and, while it is not advocated that the United States adopt a policy of hostility or even coolness towards the Government of Dr. Mosadeq, it is believed that whenever possible we should design our policies with a view to convince the Iranians that they and they alone are responsible for the future of their country.

As regards the oil controversy, as indicated above there would seem to be no possibility at the moment for any settlement with the British. The Iranians unquestionably will try to sell their oil wherever they can and may be expected to sell small quantities here and there. It is not believed that they will be able to sell enough substantially to improve their financial position or to permit full-scale operation of the Abadan refinery even should they be able to engage sufficient foreign technicians for this purpose. The Department has not received any reaction to date from the British as to the recent happenings in Iran but it can be anticipated that there will be no change in the basic British policy of doing no business with Dr. Mosadeq unless he substantially reverses his well-known policies. The British unquestionably are greatly disappointed over what has happened and may be expected to be very bitter against the Shah. The British have maintained ever since the original accession of Dr. Mosadeq that he could be replaced by a Prime Minister such as Qavam and that the latter could maintain himself in power relatively easily. This thesis will probably have to be abandoned. It is believed essential therefore that the United States immediately discuss the matter further with the British.


1. That the United States attitude towards the Mosadeq Government be correct but not unduly friendly lest the impression be re-created that he enjoys American support.

2. That if Dr. Mosadeq requests the termination of the two Military Missions quietly and by mutual agreement, that this be done while continuing military and Point Four aid.

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3. That for the time being there be no expansion of American aid programs in Iran and that requests such as jet airplanes for the Shah be refused.

4. That if Dr. Mosadeq in a dramatic manner terminates all American military activities in Iran, including aid programs, the United States give consideration to the advisability of ceasing its economic programs under Point Four as well.

5. That the United States divest itself of its intermediary role and make no further approach to the Iranians regarding the oil controversy for the time being although possible future plans for settlement continue to be discussed with the British.

6. That the United States make no active attempt to oppose the sale of oil by Iran.

7. That immediate discussions be begun with the British covering the whole range of Iranian problems.

8. That in its informational media and in its official conduct in Iran the United States insofar as may be possible maintain an attitude of detachment, neither supporting nor opposing the Mosadeq Government.

9. That the United States avoid exhibiting undue public concern over the Iranian situation.

10. That the United States, despite the tactical variations in policy it may have to follow in the light of recent developments in Iran, keep always in mind its basic objective of preserving Iranian independence. To this end the United States must be prepared, should the loss of Iran appear imminent, to alter its policies possibly in a drastic manner to make sure that Iran is not lost.

  1. Source: National Archives, RG 59, Central Files 1950–1954, 788.00/7–2252. Secret; Security Information. Drafted by Ferguson. The paper is attached to a covering memorandum, July 22, from Byroade, through Matthews, to Acheson. It reads: “There is attached for your information, in view of the urgency of the situation, an NEA draft of a new position paper on Iran. This paper has not been cleared with the appropriate Bureaus of the Department but is being transmitted to you so that you may see without delay the direction our thinking is taking.”
  2. This sentence was highlighted, apparently by Acheson.
  3. This sentence was highlighted and a question mark placed in the margin, apparently by Acheson.
  4. This sentence was highlighted and a question mark placed in the margin, apparently by Acheson.