888.2553/2–1952: Telegram

No. 162
The Ambassador in Iran (Henderson) to the Department of State1

top secret

3179. Garner has just described at some length most recent conversations with Irans including last night’s long discussion on price question.

In discussing price, Irans are still under spell of Hassibi and unwilling view matter at all realistically. When pressed to make counterproposal Irans said their price $1.40 a barrel for crude and US Gulf price less 25 percent discount for products. We understand Irans calculations of US Gulf price, however, does not coincide with those usually accepted. While as one member of Iran negotiators remarked in aside to Garner “prices this high represent oriental bargaining”, Irans attitude such as to leave little hope they wld agree to reasonable figure during Garner’s stay here.

Although Emb agrees Hassibi is disruptive influence in all oil negots and is able to befuddle other Irans by his apparent profound knowledge of facts and figures of oil industry, we do not believe Irans wld be able accept bank offer on price as it stands even were Hassibi removed from picture. Profound emotional current runs through Iran thinking on this as on other aspects of problem and we are convinced there must be some gesture made to Irans in connection [Page 359] with refinery before they will agree on price. Garner has not given Irans any indication he has any flexibility on this point but he has indicated to us that he believes something cld be done and we understand he will pursue this point with Brit. He has also withheld as later bargaining instrument possibility Irans may be able to sell 10 percent crude A/O products at posted prices outside that sold to AIOC.

No further progress made on question return Brit technicians. Several Irans not sympathetic to Mosadeq and with little influence on him have expressed belief that if top positions filled by neutrals there wld be little public reaction to return numbers subordinate Brit personnel. I personally am inclined to doubt this although I believe it might be possible reintroduce some Brit technicians in gradual stages over period of months. While Garner believes that it might presumably be possible for bank to operate on such basis, he takes view there is no assurance that this wld be the case and bank wld be assuming unwarranted risk in committing itself to run such a vast and complicated industry without knowing in advance it will be able to recruit whomever it needs.

Memo of understanding discussed by Cab this afternoon and Garner is at moment with Mosadeq supposedly for purpose of signing it. Irans informed him this noon that they had made a few “minor” changes and if this is case Garner says he will sign it. If, however, as is possible they have made substantive changes, it will probably have to be renegotiated.

Joint press release still not ready. As prepared by Garner and Irans in advance of receipt London’s (174, Feb 18) it included in somewhat different language most if not all points made by Brit.

  1. Also sent to London for Linder and Nitze as telegram 704 and unnumbered to Lisbon for the Secretary of State.