888.2553/2–2952: Telegram

No. 165
The Ambassador in the United Kingdom (Gifford) to the Department of State1


3766. Garner saw Eden last evening and again at lunch today and has had further discussions with AIOC. Status his understanding with UK at present is:

General. Brit will give bank considerable flexibility next week’s convs with Irans without making definite commitments at this point. If arrangement can be worked out with Iran, Prud’homme will then tell them he will see how much he can sell to Brit.
Technicians. Brit will not insist agreement contain provisions specifying return Brit personnel and Prud’homme will, if necessary, be able to tell Irans Brit not adamant on this point but bank however still must insist its hands not be tied. Brit have indicated they will leave question technicians in Garner’s hands.
Operating auth. Brit agreeable Irans making own statement bank operating on their behalf, possibly in reply to written communications from bank outlining areas of agreement. Garner, however, believes this question is unimportant and will fall into place if other questions are settled.
Price. FonOff and AIOC will discuss with Prud’homme over weekend possibility offering Irans price on basis products rather than crude. Ross of FonOff indicated this noon to Linder and Ferguson in strictest confidence UK probably will make this concession but will ask bank not to mention it to Irans except as last resort. Garner prefers going back to Irans with offer of price based on crude plus some fee for refinery operations in form tax, etc. but doubts Irans will accept this.
Legal position. UK Govt reps admit insistence on maintaining legal rights may have little practical value but hesitate abandon their position without being certain receiving acceptable settlement in exchange. In view this attitude UK not so far willing consider compensation either in connection present convs or as suggested by Middleton.

Garner has urged Brit time opportune for some gesture friendship toward Iran in effort eliminate their suspicions Brit attempting [Page 365] regain former position thru intermediary of bank. He has suggested ltr to Mosadeq from Churchill as appropriate but has not recd particularly enthusiastic reaction from Brit. In general, altho number of specific points still not definitely settled, Garner believes he has recd sufficient flexibility from Brit to leave room for some hope and believes Prud’homme will return Tehran with sufficient latitude find further areas of agreement. He realizes negots on this basis will necessarily be protracted but he does not think this is undesirable since it will give moderate elements in Iran opportunity keep pressure on Mosadeq to reach agreement with bank.

  1. Repeated to Tehran.