888.2553/2–2352: Telegram

No. 163
The Ambassador in the United Kingdom (Gifford) to the Secretary of State, at Lisbon 1


156. For Secretary from Nitze and Linder. Re your 101,2 Garner yesterday reported to Ministers on course negotiations Iran.3 He [Page 360] felt it wisest to make factual report without suggesting any course of action. It was felt that Ministers wld think about the matter and talk with Garner again next week.

Prud’homme reports that Ministers’ questions indicated they primarily interested in questions of right and wrong between Iranians and company and little in the way of constructive approach as to what might be done in light of realistic appraisal of situation apparent.

From discussions with company, evident they will fight hard against (1) any arrangement which does not provide for prompt return substantial numbers of their personnel, (2) provisions they think commercially unattractive. They have not yet accepted fact that whatever they get is net gain from their present position.

From Garner’s report, evident that major hurdles to successful interim arrangement are following points.

Return of British technicians. Prud’homme doubts anything beyond recognition of principle of non-discrimination, but no more than token British participation possible at this time and even that dubious.
Price. Prud’homme believes key to the question purchase of refined products at a discount from world market prices rather than having refining done at cost plus a fee.
Iranian desire for inclusion of language indicating bank operating “on behalf of Iranians”. British worried about effect such language on Hague Court position. We inclined believe British over emphasize importance Court action assuming ideal consummated. However, we believe Garner and British right that Iranian language shld not be accepted in an interim arrangement.
Garner’s report that Iranians view interim arrangement as being two year deal only at the end of which period they propose to operate property wholly by themselves. British had viewed interim arrangement as giving opportunity for conclusion final and continuing settlement under more favorable conditions.

We have impression British dubious much progress toward satisfactory interim settlement was in fact made. We inclined to view that our original estimate that long term settlement along lines our original suggestion sounder from British standpoint and perhaps more negotiable than interim settlement. Probably necessary, however, to have one more go at interim settlement on basis such increase in negotiating flexibility as British prepared to give, in order to put responsibility for failure of interim negotiations on Iranians rather than British.

We still believe, in spite of intervention Senators, that real political power in hands of National Front and that chances of strong regime more favorable oriented British remote.

We suggest it might be helpful include following points among those made to Eden.

[Page 361]
Let’s get on with realistic consideration of what shld be done next.
We feel initiative in coming up with realistic plan of action shld be on British.
We not impressed with all of arguments re commercial feasability yet advanced by company and believe that to put through program taking account of political realities, government, particularly Foreign Office, may have to exercise strong leadership.
They might seriously explore whether something along lines our long term suggestion might not be possible. We not sure such a program negotiable but important concerted UK–US action we satisfied no reasonable course left unexplored.

In case Eden asks about our position re financial aid, line we have taken here is: (a) that it wld be helpful if we in position to say we cld make temporary but prompt financial aid available, if satisfactory deal is made, to tide Iran over period until oil really flows; (b) that if Iran turns down best deal which we, in light total British position, consider best they can offer, we see no possibility that we cld give financial aid; (c) in event we and British cannot agree on best deal which can be put forward we must reserve our position.

Henderson advised that Middleton showed telegram from Eden to Foreign Office repeated Tehran stating UK must now develop constructive approach “despite our experts”.

Barnes has copies earlier meeting4 with British of which meeting Ministers most important. Nitze returning Washington tonight.

  1. Repeated to the Department as telegram 3663, which is the source text, and to Tehran.
  2. Not found in Department of State files.
  3. The minutes of this meeting are in file 888.2553 AIOC/2–2652.
  4. Reference is to a meeting which Garner held at the British Foreign Office on Feb. 21. The minutes of this meeting are in file 888.2553 AIOC/2–2652.