99. Telegram From the Department of State to the Embassy in the United Kingdom1

585. Tehran tels 387 July 252 and 390 July 263 rptd London as 136 and 138 have been considered here together with texts of two Brit msgs referred to by Henderson which give further details of Mosadeq proposals. Request you inform FonOff our views are as fols:

As a result of the events of the last week, it appears to us that Mosadeq is clearly in a stronger position vis-à-vis the Shah, the Majlis and the public now than at any time since the nationalization of Iran oil in Apr 1951. The Hague Court decision coinciding with Mosadeq’s return to power will further strengthen his public position. His position with respect to more radical elements within the National Front, including Kashani, and with the Tudeh may, however, be weaker than before.

It appears that our worst fears as to the weakness of the Shah have been confirmed, that the Shah has been discredited and that it is highly unlikely that any other constructive polit elements will attempt to exercise power in Iran after what has happened to Qavam and that if they did, it is highly unlikely that they cld succeed. We therefore believe that if Mosadeq were to lose power, there is far greater risk that he wld be succeeded by a group further to the Left than by a more constructive group.

Under these circumstances, it appears to us that there are three possible courses of development which we can look forward to in Iran:

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(a) The first wld be a settlement of the oil question somewhat along the lines outlined by Mosadeq in his most recent approach to Middleton;

(b) A gradual breakdown of the boycott on Iran oil shipments with the quantities of oil purchased by independents around the world gradually increasing and with the NIOC gradually obtaining increasing technical assistance from various engineering consulting firms. (While this course of development might eventually result in Iran being persuaded that it cld neither sell or produce sufficient oil to satisfy its financial requirements without a long term purchase arrangement with AIOC and without more definite provisions for management and engineering advice, such an eventual outcome wld probably take a long time to develop); and

(c) a continuation of present trends without any easing of the oil deadlock. It is hard to foresee how this wld end up but it wld appear that the risk of a further trend to the Left and the eventual loss of Iran wld be very great indeed.

In the light of this analysis we believe it wld be a great mistake to reject Mosadeq’s overture. It seems to us plain that course (a) above is unfortunately the best; that course (c) is quite unacceptable to the West; and therefore that, if course (a) cannot be developed, course (b) becomes almost inevitable in spite of the disadvantages inherent in it.

  1. Source: National Archives, RG 59, Central Files 1950–1954, 888.2553/7–2652. Secret; Security Information; NIACT. Drafted by Byroade, cleared in draft by Acheson and Nitze, and approved by Byroade. Repeated to Tehran. Telegram 585 is also printed in Foreign Relations, 1952–1954, vol. X, Iran, 1951–1954, pp. 415–416 (Document 188).
  2. In telegram 387 from Tehran, July 25, Henderson reported that Middleton had shown him the texts of two telegrams he intended to send to London describing his latest conversations with Mosadeq. Mosadeq had suggested that in return for economic and financial aid, he would accept proposals for an arbitration of the compensation issue. Henderson emphasized to Middleton his view that the British Government should not reject this overture of Mosadeq’s without first consulting with the U.S. Government. He pointed out that Mosadeq’s proposal “represents what might well be the last chance under current conditions in Iran for Brit salvage settlement of oil problem which wld offer prospect compensation and use AIOC as distribution agency for such Iran oil as might be produced.” (National Archives, RG 59, Central Files 1950–1954, 888.2553/7–2552)
  3. In telegram 390 from Tehran, July 26, Henderson reported on his instructions to Embassy staff to refrain from any suggestion that U.S. might take an active role in mediating the oil dispute, particularly as Mosadeq had approached British representatives himself. (Ibid., 888.2553/7–2652)