The Ambassador in Iran (Henderson) to the Department of State1
3377. For Rountree for Garner IBRD from Prud’homme.
“Arrived yesterday. Met Mosadeq today with only Clark, Lipkowitz, Talleghani present. Reviewed London discussions and suggested possible new slants including small refinery fee, possibility distribution to both parties from escrow after escrow reaches minimum required AMH, possibility Brit wld give bank some discretion on rate of hiring technicians though on stated assumptions that no discrimination and that bank wld not undertake operation without Brit. After touching lightly on all other major points, including undesirability refined products price basis, Iran price formula too high, and unwillingness bank get involved again in argument on operating for Irans acct, informed Mosadeq that you wld be reporting to bank directors and we wld need your instrs before bank’s position cld be firmly fixed. This is tactic to keep negots from freezing up. We are guided in this by your desire keep negots going. We concluded by saying that fairly wide distance still separates Iran and Brit and that as of today agrmt cannot be said to exist.
“Suggested Irans might logically ask more precision as to width of gap on different questions, and that we wld be glad go into each point in more detail in further mtgs. Mosadeq quiet and perhaps discouraged. He remarked that not much progress seems to have [Page 366] been made but said wld like negots continue until either agrmt or final impasse. Asked us meet Parliamentary Oil Comm tomorrow, without him, and arrange with comm for further mtgs, ‘5 or 6 mtgs if nec’. He mentioned prob of preparing budget for coming Majlis and that no oil agrmt wld mean sharp cuts causing unrest which perhaps widespread.
“Mar 3 FonOff handed me memo (see Embtel 3378, Mar 5).2 Re para (a) that memo think this is poor idea and we do not intend budge from bank’s previous position. Re para (b) believe first sentence means no exclusion to be expressed or implied.
“Last sentence means bank freedom to engage techs gradually. However in penultimate sentence Brit have put words in our mouth to which we might not agree in every circumstance. Bank’s position is not to accept resp without nec techs and only ones readily available are Brit. Refer to Rieber for most recent views on avail techs from other sources.
“Para (c) is unrealistic since we had previously discussed price. Possibly they mean by-products prices. Asking Middleton have co mail you memo Mar 3 on points discussed with them in London, which yields little or nothing.
“My comment on London talks is that co, supported by HMG, cannot contemplate losing operational control either interim or long term, that Irans sense this and will balk. Believe we shld soon put time limit on negot present mission after clarifying points at issue and pass ball to Irans to take next initiative.”