888.2553/3–1352: Telegram

No. 167
The Ambassador in Iran (Henderson) to the Department of State1


3513. 1. Fol conversation with Mosadeq on other subjects this morning, he said he wld like talk with me again re oil problem. He had been informed thru reliable sources that:

Amer oil interests were opposed to agrmt between Iran and Bank and were doing utmost block it;
Brit Govt also really unsympathetic to agrmt and was following policies which wld prevent its consummation.

[Page 367]

2. I told him in my opinion his sources unreliable. At risk being indiscreet, I had good reason know Brit Govt genuinely desired that negots shld continue to successful conclusion. In various Brit business circles, there might be elements who wld prefer that Iran oil fields remain inoperative unless they were under management Brit firm but I convinced such die-hards were in minority and not influencing policy Brit Govt. I also had what I considered good reason believe responsible leaders US oil industry anxious for agrmt between Bank and Iran because they feared that in absence such agrmt Iran wld fall in state of chaos. These businessmen believe it wld be unfortunate for US and for their own investments if country in strategical position of Iran shld collapse. There were undoubtedly some narrow-minded oil officials and other businessmen in US who were so opposed idea organization like Bank undertaking operate business enterprise that they wld prefer Iran go bankrupt rather than for Bank operate its oil industry. This kind thinking, however, did not dominate US business world. I wld not be frank, however, if I did not tell him that there was strong sentiment throughout whole business world that it wld be unfortunate for Bank enter into agrmt with Iran of character which might encourage govts other countries to break their internatl business agrmts. There was gen belief that if Iran wld obtain important advantages from its so-called “nationalization” law, chain reaction might set in which wld undermine whole structure internatl investments with disastrous consequences both to investing countries and to countries needing fon investment. I did not believe, however, Bank was being particularly influenced at this time by this quite legit concern on part business world. My impression was its inability to make certain concessions to Iran was not due to pressure from finan and business circles, but to practical commercial considerations. It cld not, for instance, make concessions re selling price Iran oil if such concessions wld result in establishment prices which internatl oil wld not pay. Mosadeq said he cld understand commercial factors involved in price problem.

3. I said in my opinion practical considerations also governed Bank’s attitude re employment Brit technicians. Inescapable fact there was extreme shortage oil experts. Bank therefore unwilling undertake operating huge complicated enterprise like Iran oil industry if it cld not be free to choose technicians regardless nationality. Naturally, it wld not employ technicians whom it has reason believe might intervene in Iran internal affairs. Furthermore, it wld be contrary to very concept of Bank, an internatl organ, for it agree exclude persons from its employment on grounds nationality. Mosadeq said he understood Bank’s difficulties. We shld also understand his position. He wld swear again that he wld never as [Page 368] PriMin enter into any agrmt which wld permit employment single Brit oil technician Iran. Bank reps cld continue carry on negots for some twenty days until new Majlis met but so long as they contd to refuse to agree exclude Brit technicians, negots wld make no progress. He wld resign when new Majlis convened. Perhaps successor govt wld be willing enter into agrmt which wld permit return Brit oil technicians. He wld refuse remain on as PriMin if it shld become clear at that time that no agrmt with Bank possible unless that agrmt wld mean return Brit technicians. On one hand he cld not agree to return of these technicians and on other hand he preferred resign as PriMin rather than to block agrmt. He wld therefore step aside and let someone else take responsibility Iran’s future.

4. I told PriMin I convinced bank cld not enter into any agrmt providing for exclusion employment Brit Natls as oil experts. In view what he had just said I thought it wld be difficult come to agrmt; nevertheless in order save time it might be possible during period between now and mtg new Majlis for reps bank in Iran work out agrmt complete in every respect except possible provision re techincians. If agrmt shld be reached on every other point it might be easier for new Majlis decide what course to adopt re Brit technicians. PriMin said without agrmt of technicians no mtg of minds possible on other points. He willing make concessions re differences such as price, terms of management in return for concessions on part bank re technicians. He wld not yield one inch on other points, however, unless he given reason believe bank wld yield on Brit technicians. Negots therefore wld be fruitless if bank unwilling change its attitude re Brit technicians or unless Majlis wld take responsibility for altering Iran attitude this point.

5. I said Prud’homme and his associates, men of affairs. It wld not be considerate for Iran Govt to keep them here for 20 days in what seemed to be useless negots. Mosadeq agreed. He said he thought it might be good idea for them leave Iran before Noruz holidays and return shortly after Easter. By that time new Majlis wld have convened and wld be prepared consider problem technicians. He added before departure Prud’homme might make announcement to gen effect his mission, after further exploration views Iran Govt, was proceed US for consultation with its principals and planned return to resume negots in Apr. He did not wish it to appear negots had broken down. Morale Iran people already very low; he did not know what wld happen if it wld sink much further.

6. When I returned to Emb from conv with Mosadeq, I found Prud’homme and other mbrs mission awaiting me. I outlined my conv with Mosadeq. They said his statement to me fitted in to [Page 369] extent with their experience during last two days in negots. They had already been advised informally that it wld serve little purpose for them remain Iran during New Years holidays. They were planning tentatively return US early next week. I understanding they are telegraphing direct to bank in this respect.

7. I left Mosadeq feeling he was sincere in insisting he wld refuse continue as PriMin after Majlis met if bank now willing enter into agrmt which wld exclude Brit oil experts. I cannot be absolutely certain, however, that he may not change mind when time comes for him to carry out his intentions.

  1. Transmitted in two sections; repeated to London.