888.2553/11–951: Telegram

No. 128
The Acting Secretary of State to the Secretary of State, at Paris1

top secret

2837. Eyes only Secy, Harriman, Perkins, Linder. Fol is Dept’s evaluation present Iran situation, together with recommendations. If you concur it is intended that recommendations will be cleared with Secs of Defense and Interior and put to the Pres for his approval.

Present breakdown US endeavor obtain UK–Iran agreement upon basis for settlement oil controversy has produced situation which Dept feels must be faced squarely if major catastrophe in Iran is to be averted. If Mosadeq leaves Wash with no basis of settlement and without proposal to him which might lead to resumption of negots it is believed highly unlikely that any subsequent action cld bring about negots between his Govt and Brit. Mosadeq has himself stated this. Mutual distrust between him and Brit is such that only through US good offices, and possibly in US where Mosadeq is protected from influence of Tehran polit pressures and violence, does any possibility exist.

If Mosadeq shld feel that his last chance of negotiating with Brit has been lost he will, in his Press Club speech scheduled Nov 14 and in other statements both here and in Iran, inevitably launch into strong attacks against Brit. According to our and Henderson’s evaluation (Tehran’s 1748 of Nov 9 rptd Paris as 372) bitter denunciation of Brit, coupled with his SC victory, will at least for moment increase his popularity in Iran and prolong his ability to stay in power until time when econ collapse is probable or inevitable. Even if Mosadeq shld be replaced by Qavam, whose strength appears to have increased in Mosadeq’s absence, it is unlikely that Qavam cld, in face of present anti-Brit sentiment which Mosadeq wld continue to stimulate, make satisfactory oil agreement in short period of time remaining before collapse occurs.

Brit view appears to be that with collapse of Mosadeq Govt there is strong possibility of successor who will make reasonable oil agreement, and that this is sufficient to justify inherent risks of this course which they themselves must recognize. We cannot avoid conclusion that, notwithstanding Brit statements to us that they consider maintenance of Iran independence paramount objective [Page 276] our joint pol in that country, they are prepared to gamble very heavily upon loss of Iran rather than negotiate with Mosadeq. While fully recognizing importance of maintaining highest possible level Brit prestige in ME, and recognizing importance to US–UK relations of rendering to Brit all possible support, we must consider how far we are prepared to go in risking loss of Iran by remaining aloof while Brit continue to pursue tactics which might well lead to catastrophe.

If IranGov is led to believe that Brit will negotiate only on basis which wld be unacceptable to vast majority of Iran people, no Iran leader cld undertake responsibility for yielding to Brit demands, regardless of econ consequences in country. In absence of outside econ assistance or of possibility of some sales of oil, there wld be only two alternatives: either to face econ collapse and probability takeover by Commies, or to turn to Sov Union and satellites for financial assistance and for help in running oil industry and disposing of its products. Thus, regardless of what IranGov is in power, only ways in which loss of Iran can be averted appear to be (a) agreement with Brit, (b) arrangements for Iran sale of oil in absence of such agreement, or (c) outside econ assistance. If there are no hopes left to IranGov that any of these forthcoming, they might well turn to Sovs in very near future. While we believe Mosadeq anxious avoid such course, and is himself sincere anticommunist, his inherent recklessness might well lead him to do so if alternative appears to him to be capitulation to Brit. We must consider as a matter of urgency course we will take in the attainment of fundamental objective of saving Iran. Of above alternative we wld not wish resort to (b) for reasons stated Deptel 2704 Nov 5.3 Believe we shld not approve but indeed shld discourage Amer cos purchasing oil which has been acquired by IranGov through unilateral action and the legal status of which is questionable. Purchases by groups not under control of US and UK Govts and cos wld possibly be adequate to assure Irans sufficient income to support IranGov and economy. We are therefore left alternatives of attempting to persuade Brit to negotiate with Iran and/or of ourselves rendering econ assistance to Iran on sufficient scale to permit continued operation of govt and maintenance of economy on minimum basis until oil revenues can be resumed. These are not unrelated alternatives since it is recognized that Brit wld deeply resent our extending assistance which wld have effect of reducing econ pressures now on Iran, and indication that US wld extend such assistance wld have important effect on Brit decision as to whether or not they will resume negots. Moreover, extension of US assistance on scale required [Page 277] wld induce cumulative pressure by Amer public and Congress against Brit to reach agreement with Irans even though all Brit principles mentioned Paris Embtel 2743, Nov 9,4 may not be achieved.

On other hand, extension of aid would be used as lever against Iran to assure reasonable attitude re settlement. Since US assistance wld be on month to month basis, it wld provide significant basis for influence over pol of IranGov.

If Brit insist on pursuing their present tactics we do not see how US can sit idly by and run risk of losing Iran, when cost of not more than $10 million per month as proposed by Irans is within our means and is small in comparison with $2 billion which has been expended in pol of containment in Greece and Turkey.

Study of Brit principles in Paris Embtel 2743 reveals no important objective consistent with realities of Iran situation which we believe cannot be achieved in some form or another except return of Brit co to Iran. It is difficult to see how this in itself can be sufficiently important principle to Brit, in light of financial and other benefits to their economy and to world which can accrue from arrangements we believe Irans now prepared to accept, to justify Brit taking risk they seem prepared to take of loss of Iran. Strongly believe this is not sufficiently important objective for us to back Brit in this risky course.

In light foregoing evaluation Dept recommends for ur consideration fol course:

That Sec advise Brit of very great importance which we attach to their resumption of negot with Mosadeq and request that they put forward to us while Mosadeq still in Wash specific counter-proposals which we wld take up with Mosadeq for purpose seeking agreement prior to his departure. For success such counterproposals must be within realities of Iran situation and it is hoped wld be along general lines of our suggested basis of settlement except for (a) provision for non-discrimination against Brit technicians in Iran; (b) maximum price which Brit believe they cld afford to pay for oil; and (c) creation of UK–US–Dutch firm to operate Abadan refinery. While Brit may be reluctant put specific points as their own counter-proposals, we wld be prepared endeavor to obtain additional concessions from Mosadeq if we were assured that basis of settlement wld then be acceptable to Brit.
That Sec advise Brit that rather than risk economic collapse of Iran and its possible loss to free world, US proposes if it becomes necessary and at appropriate time to go forward with such econ assistance to Iran on temporary basis as is required to assure continued functioning of IranGov, regardless of what govt is in power so long as it is dedicated to continued independence of Iran. Brit wld be assured, however, that such assistance wld, to greatest extent [Page 278] possible, be used as lever to influence IranGov to assume reasonable attitude re settlement of oil issue. Aid wld be in such quantities as to reduce rather than to relieve consequences of loss of oil revenues.
That Sec advise Brit that US anxious develop and refine full US–UK partnership in ME. Iran is at present only place in area where there is substantial divergence of views between our two govts. While we feel it of paramount importance that settlement with IranGov be reached, we wld be prepared and indeed anxious immed consult with Brit to assure that any such settlement will not be used in other ME countries to exploit situation brought about by exigencies of Iran problem.
That Sec in again urging Brit to make possible resumption of negots with Mosadeq, point out difficulties which wld be involved in their failing to make every conceivable effort to reach settlement. These include such problems as Congressional and public reaction to continuation of supply from US sources of petroleum to meet deficit created by loss of Iran production and extension US financial aid to meet losses imposed upon Brit econ. Realize these factors must be put to Brit most discreetly and in terms which cld not be interpreted as threat.
That Dept immed formulate plans for implementation of such econ assistance to Iran on loan basis to be repaid from oil revenues of IranGov when they have been resumed. Source of such funds, at least initially, might be from $24 million appropriated in MSP for technical and econ assistance to Iran, and additionally from transfers from other programs.

  1. Drafted by McGhee and Rountree and cleared by Matthews, Bohlen, Nitze, Thorp, and Bonbright.
  2. Not printed.
  3. Document 121.
  4. Supra.