888.2553/11–651: Telegram

No. 122
The Ambassador in Iran (Henderson) to the Secretary of State, at Paris1


23. Fol is joint appraisal of certain aspects of Iran situation today, prepared by US and UK Embs.2

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1. We assume that the immediate, usual and overriding US–UK objective in Iran is to prevent that country from falling into Communist hands.

Comment: If our assumption is correct, the pursuit of this objective shld be the main effort by US and UK Govt in Iran. It shld appear that attempts to maintain fon prestige and commercial interest, such as risking of profits from the Iran oil industry or maintaining 50–50 profit-sharing level in international oil concessions, might jeopardize the long term attainment of this main US–UK objective; such commercial interest wld, therefore, be secondary. It must be remembered that new element has been inserted in the Middle East situation. Sov propaganda and Communist organizations are seeking to capture the leadership of nationalist movements.

2. If the main US–UK objective is to be achieved it is essential that there shld be an honest and efficient govt in Iran with positive program of reform which wld weaken the appeal of Tudeh.

3. Such govt must have funds; and the best source of income is from the country’s vast oil resources.

Comment: The total income to the Iran Govt from the oil industry, under the recent AIOC arrangement, was over 40 percent of the total govt budgetary revenues.

4. We believe that an oil concession, similar in concept to the 1933 AIOC agreement, cannot endure in Iran.

Comment: Iran nationalism is recognized as force with which any govt will have to contend. We consider it impossible in the face of this force to eliminate from Iran the concept of nationalization or for any fon company to operate an oil concession in Iran.

5. It may be possible for fon agent to run the Abadan oil refinery for management fee without arousing any great nationalist antagonism. If this agent shld be of US or UK nationality it wld encounter great difficulties owing to admittedly irrational Iran suspicions and antagonisms. (In the US Emb view, these difficulties wld be almost insurmountable.) The Brit Emb is not convinced that Brit operating organization wld necessarily fail to win Iran acquiescence.

Comment: The emotional side of Iran nationalism will continue to represent an opportunity for extremist elements to win political strength. These emotions can be controlled, to some extent, by firm govt, since, in main, Irans respect forceful authority and may be expected to support efforts to run their oil industry. However, any agreement which allows any fon agent seemingly to disregard the basic concept of oil nationalization will be most precarious and will render any Iran Govt which recognizes its validity dangerously and continuously vulnerable to nationalist agitation. It is unnecessary to emphasize that no agreement with Iran can be expected to last unless it provides solid basis for mutual self-interest and goodwill.

6. Both the US and UK Govts have financial interests which must receive serious consideration in any discussions of the oil dispute with Iran.

Comment: Iran oil is vital factor in the Brit balance of payments. Its loss wld weaken the whole sterling position and might well affect the Brit rearmament effort. To this extent it is also matter [Page 262] of concern to the US. US taxpayers might find themselves compelled to replace Brit exchange losses and at the same time to pump money into Iran to replace the loss of oil revenues.

7. Conclusion: We realize the material stake which both the US and UK have in reaching practicable oil agreement with Iran (Para 6). Our basic assumed strategic objective (1) can, however, be attained by an arrangement which wld keep the Iran oil industry operative, bringing revenue to the Iran Govt and sterling oil products to the West, even at possible expense of secondary objectives.3

  1. Repeated to the Department and London; the source text is the copy repeated to the Department as telegram 1708.
  2. A more detailed and extensive appraisal of the Iranian situation was transmitted on Nov. 20 in telegram 1869. (888.2553/11–2051)
  3. On Nov. 7 Henderson reported that he and Middleton and their staffs had been discussing Iran and that his impression was that they both saw things in the same light subject to two differences. The British believed that Iranian nationalism was artifically stimulated rather than deep-seated; and they also believed there was a strong possibility that the Majlis or the Shah would oust Mosadeq if he returned from Washington without an agreement, while Henderson felt that Mosadeq would survive and might turn to the Communists for support. (Telegram 1730; 888.2553/11–751)