888.2553/2–652: Telegram

No. 154
The Secretary of State to the Embassy in the United Kingdom 1

secret
priority

3726. Brit Emb relayed fol msg Feb 1 from Eden to Secy:

“Mr. Eden recalls that Mr. Acheson agreed during talks at time of PriMin’s visit2 that Internatl Bank’s plan for interim arrangement on Persian oil shld be fully tried out. Mr. Eden hopes Mr. Acheson will agree to Bank’s reps flying to Tehran at once in order put their plan to Persians. He suggests State Dept’s alternative ideas cld be discussed subsequently. He feels it essential that Bank’s reps shld lose no time in putting their plan to Persians.”

Pls transmit fol reply from Secy to Eden: [Page 345]

“I appreciate ur msg of Feb 1. I know that we are equally anxious that the fullest possible advantage be taken of the opportunity which the Internatl Bank has to put forth proposals to the IranGov for settlement of the oil controversy, at least on an interim basis. I therefore concur fully with ur view that the Bank’s reps shld proceed to Tehran as soon as possible to resume their discussions with PriMin Mosadeq.

The Internatl Bank provides the only presently apparent channel for accomplishing an agreement with the IranGov, and I know that you will agree that it shld be given the best possible chance of success. I am most concerned over the possibility that the Bank delegation may proceed with a proposal which will not have sufficient flexibility. Reps of the Dept of State are having continuing discussions with Mr. Gass of AIOC and members of BritEmb in Wash, the details of which I am sure have been brought to ur attn. They have expressed to these Brit reps the view that the Internatl Bank delegation shld be in a position to discuss possible alternatives to or modifications in the proposal which the Bank has already formulated and with which I know you are familiar.

While other features of the Bank’s proposal appear to be sound and conducive to successful negot, it is believed that the position re management is likely to render the plan unacceptable to the Irans unless some modifications can be discussed. I cannot help but believe that if the Bank must inflexibly maintain its position on this question it will in all probability cease to be a useful instrument and the likelihood of an early settlement will thus be reduced. This in turn wld seriously aggravate the already critical situation in Iran and wld increase the chances of the loss of that country to the free world.

The Dept’s reps have therefore suggested to their Brit colleagues that serious consideration be given to the possibility of permitting a greater degree of flexibility in the offer which the Bank’s reps will place before Dr. Mosadeq. This wld not necessarily involve a prior commitment of the BritGov, but the Bank’s negotiators shld be in a position to explore all possibilities of a satisfactory solution. This shld not only permit continued negots but shld also prevent an aggravation of the situation such as wld mark an outright rejection by Iran of the present proposal.

It has also been suggested to the Brit reps that, in the event no progress can be made on an interim solution, the Bank be authorized to explore the possibility of a single purchase of the existing stocks at Abadan at a 50 percent discount. It shld be possible to develop arrangements for such a purchase which wld not prejudice AIOC’s legal position. The purchase might provide the time necessary to develop another approach involving a long-term settlement.

It wld be helpful if our respective reps cld begin to exchange ideas on a possible long-term solution to cover the contingency that a satisfactory interim settlement is not negotiable.

In any event we shall attempt through our ambassador in Tehran to impress upon Mosadeq the importance we attach to a successful outcome of the negots with the Bank’s reps.”

[Page 346]

For Tehran only: Substance Dept’s conversations with Brit referred to above will be subj later tel.3

Acheson
  1. Repeated to Tehran. Drafted by Rountree and Ferguson and signed by Secretary Acheson.
  2. See footnote 3, Document 140.
  3. Reference is to telegram 1623 to Tehran, not printed. (888.2553/2–152)