888.2553/7–2652: Telegram

No. 188
The Secretary of State to the Embassy in the United Kingdom1


585. Tehran tels 387 July 252 and 390 July 263 rptd London as 136 and 138 have been considered here together with texts of two Brit msgs referred to by Henderson which give further details of Mosadeq proposals. Request you inform FonOff our views are as fols:

As a result of the events of the last week, it appears to us that Mosadeq is clearly in a stronger position vis-à-vis the Shah, the Majlis and the public now than at any time since the nationalization of Iran oil in Apr 1951. The Hague Court decision coinciding the Mosadeq’s return to power will further strengthen his public position. His position with respect to more radical elements within the National Front, including Kashani, and with the Tudeh may, however, be weaker than before.

It appears that our worst fears as to the weakness of the Shah have been confirmed, that the Shah has been discredited and that it is highly unlikely that any other constructive polit elements will attempt to exercise power in Iran after what has happened to Qavam and that if they did, it is highly unlikely that they cld succeed. We therefore believe that if Mosadeq were to lose power, there is far greater risk that he wld be succeeded by a group further to the Left than by a more constructive group.

Under these circumstances, it appears to us that there are three possible courses of development which we can look forward to in Iran: [Page 416]

The first wld be a settlement of the oil question somewhat along the lines outlined by Mosadeq in his most recent approach to Middleton;
A gradual breakdown of the boycott on Iran oil shipments with the quantities of oil purchased by independents around the world gradually increasing and with the NIOC gradually obtaining increasing technical assistance from various engineering consulting firms. (While this course of development might eventually result in Iran being persuaded that it cld neither sell or produce sufficient oil to satisfy its financial requirements without a long term purchase arrangement with AIOC and without more definite provisions for management and engineering advice, such an eventual outcome wld probably take a long time to develop); and
A continuation of present trends without any easing of the oil deadlock. It is hard to foresee how this wld end up but it wld appear that the risk of a further trend to the Left and the eventual loss of Iran wld be very great indeed.

In the light of this analysis we believe it wld be a great mistake to reject Mosadeq’s overture. It seems to us plain that course (a) above is unfortunately the best; that course (c) is quite unacceptable to the West; and therefore that, if course (a) cannot be developed, course (b) becomes almost inevitable in spite of the disadvantages inherent in it.4

  1. Repeated to Tehran. Byroade drafted it, cleared it in draft with Nitze and the Secretary, and approved it for transmission.
  2. In telegram 387 Ambassador Henderson reported that Mosadeq on July 25 had suggested to Chargé Middleton that in return for certain British economic or financial aid, he would be willing to arbitrate the compensation aspect of the oil dispute and to sign a contract with AIOC to allow it to distribute Iranian oil abroad. Henderson told Middleton that he hoped the British Government would not reject these proposals prior to discussing them with the United States. Henderson also thought Mosadeq’s approach represented the last opportunity for the United Kingdom to salvage a settlement which would offer the prospect of compensation and would allow AIOC to act as a distribution agency for Iranian oil. (888.2553/7–2552)
  3. In telegram 390 Henderson informed the Department that he had ordered the Embassy staff to refrain from making any comments which could be interpreted as hints by the Iranians that the Embassy or the U.S. Government would welcome the opportunity to play a further role in settling the oil dispute. (888.2553/7–2652)
  4. On July 28 the Chargé in London, Julius C. Holmes, informed the Department that the contents of telegram 585 had been communicated to the Foreign Office; that the Foreign Office analysis of the situation followed the same lines; and that recommendations had gone forward to the Ministers suggesting that they propose that the British Government follow up Mosadeq’s offer. (Telegram 517; 888.2553/7–2852)