888.10/11–1751: Telegram

No. 132
The Acting Secretary of State to the Secretary of State, at Paris1

top secret

Telac 40. Dept is in complete agreement with Secy’s views contained Actel 16 Nov 17,2 has been guided by the principles stated in recent actions and is making future plans accordingly. Dept declined give Mosadeq ltr he requested re MSP assistance and Pres’s ltr stated his request for financial assistance “wld be considered in accordance with our well-known desire to assist the people of Iran”.3 Recent responsible US editorial comment has been against Mosadeq and aid to him on grounds that he has through his intransigence made it impossible find basis for agreement.… On his departure Mosadeq was advised by McGhee to accept Pres’s ltr that “careful consideration” wld be given at face value and not interpret too optimistically in view difficulty explaining to US people and Cong why we shld extend large scale aid to Iran which cld by own actions make possible income of $150-$200 million a year.

We agree that if it becomes necessary render Iran budgetary assistance every effort shld be made avoid Mosadeq’s making polit capital therefrom. On other hand, while it wld be most difficult reach settlement of oil dispute while Mosadeq remains in power, we do not think it impossible and since we may have no alternative, wish avoid closing door completely. Mosadeq appeared to be in negotiating mood in Wash up to point where he became convinced Brit were not willing to negotiate with him. There is some evidence that he and his staff were moved even on question of price. We believe we must be prepared, rather than permit economic collapse in [Page 285] Iran, to go forward with some form of assistance even if Mosadeq is still in power.

Present thinking is that decision budgetary aid shld be made in principle but not finalized for time being pending clarification polit situation in Iran fol Mosadeq’s return. This connection, IranGov’s recent withdrawal some $8.5 million from IMF shld prevent dangerous financial crisis for another month or two.

Since Mosadeq has requested assistance in form of loan agree we shld not render it on grant basis, particularly in view use to which it will be put. Aid of this type wld require a number of firm commitments on part of IranGov, and Majlis approval probably will be necessary regardless of whether it grant or loan.

We are in full agreement with Secy’s views re further negots in Tehran. Dept considering advisability of sending, at appropriate time, technical expert on oil question to assist Henderson on temporary basis. Wld appreciate Henderson’s views this matter.

We also agree any such aid shld be in response appeal by Shah and shld be used to maximum extent possible to support Shah and increase his prestige in eyes Iran people.4

  1. Drafted by Ferguson and Rountree and cleared by Linder, Bonbright, Matthews, and Nitze. Repeated to Tehran and London.
  2. In Actel 16 Secretary Acheson stated his belief that it was “of vital importance” to make clear that any aid by the United States was given to the Shah and Iranian people. The United States should indicate that its concern was for the Shah and his people and not for Mosadeq. Since any further negotiations would probably be handled in Tehran, Acheson also deemed it “important to build Henderson up.” (888.10/11–1751)
  3. Regarding the exchange of letters between Mosadeq and President Truman, Nov. 9 and 15, see footnote 4, Document 126 and supra.
  4. On Nov. 21 Ambassador Henderson reported his full concurrence with the views expressed in this telegram, but stated his belief that sending a technical expert should be delayed until there were specific tasks for him. (Telegram 1897; 888.10/11–2151)