788.00/3–2851: Telegram

No. 10
The Secretary of State to the Embassy in Egypt1

top secret

925. For McGhee.2 Fol most recent developments Iran situation.

Brit confirm recent decision reduce allowances local employees which has resulted widespread strikes in at least three cities in oil area. Press reports Admiralty confirmation naval vessels sent Persian Gulf area altho “on routine visit”. Martial law proclaimed several cities in area by IranGov which has sent army reeinforcements to maintain order.

Brit have informed us both here and in Tehran they believe further negots re oil must be at governmental level; AIOC being urged prepare new proposal for presentation to govt; such presentation [Page 27] must await return of Shah from visit Jordan about middle of Apr; .…

. . . . . . .

Dept seriously concerned over these developments, and fears Brit may be fol 1933 pattern in meeting AIOC problem, even in face Iran clamor for nationalization and explosive situation which wld be created by precipitous action. Dept’s views concerning best solution to problem have not been crystallized, and of necessity will be affected by Brit proposals. However, prelim view is that solution must take into acct unanimous Majlis and Senate action3 and must provide at least face-saving device for substantial segment in Iran which has gone on record as demanding nationalization. Dept believes it unrealistic to suppose that Seyid Zia or anyone else chosen as PriMin cld be successful under present conditions in enforcing by constitutional or unconstitutional means completely negative decision re nationalization. Dangers involved in such strong-arm methods wld be very great unless there is clear evidence in advance that PriMin wld have substantial support, which doubtful.

It is recognized, of course, that there are risks in most alternative plans; for example, arrangement whereby operation wld be nationalized under IranGov which wld contact with AIOC as operating co presents problem of precedent which Sovs probably wld press re northern area and upon which IranGov might eventually be compelled to yield.

In view these developments, importance immed coordination UK–US actions, and fact Brit position probably will not be made known to us before discussion with you, you may wish proceed London ahead of schedule.4

Reply urtel 164 March 26 from Amman5 concerning proposed US–UK declaration follows in separate tel.

Emb London, to which this tel rptd, requested immed obtain from FonOff reasons actions in wage reduction and naval visits at this crucial juncture, and restate request we be consulted before any decisions taken which wld have important effect upon situation.6FYI this connection, Dept apprecs likelihood FonOff was not [Page 28] aware plan reduce allowances, altho it is clearly essential in present circumstances FonOff make certain it is informed on such matters.

  1. Drafted by Rountree and cleared by Raynor and the Office of Near Eastern Affairs. Repeated to London and Tehran.
  2. Following the meeting at Istanbul, McGhee traveled to Nuwara Eliya, Ceylon, for a conference of U.S. diplomatic and consular officers in South Asia, Feb. 26–Mar. 3. McGhee then returned to the Middle East for visits to U.S. Missions in that area. For documentation on the meeting in Ceylon, see Foreign Relations, 1951, vol. vi, Part 2, pp. 1650 ff.
  3. On Mar. 20 the Iranian Senate approved the law nationalizing the oil industry.
  4. On Mar. 20 the Embassy in London reported that the Foreign Office hoped McGhee would be able to stop briefly in London on his way back to Washington for general consultations on Iran. (Telegram 5006; 888.2553/3–2051) The same telegram alluded to a similar previous request that has not been identified in Department of State files.
  5. For text, see Foreign Relations, 1951, vol. v, p. 289.
  6. On Mar. 29 the Embassy in London reported that it discussed these questions with the Foreign Office which confidentially admitted that the cruiser Gambia had been dispatched to Aden as a precaution against trouble at Abadan refinery in Iran. The Foreign Office stated that it had not consulted the United States about this move since it had only found out on Mar. 27. As to the wage reduction, the Embassy confirmed that the Foreign Office had not been consulted by the AIOC, but had been told that it was part of the company’s normal procedure. (Telegram 5129; 788.00/3–2951)