888.2553/8–2152: Telegram

No. 204
The Acting Secretary of State to the Embassy in Iran1

top secret

452. Eyes only officer in charge—no other distribution. Fol msg from Pres to PriMinChurchill handed Brit Emb this evening at seven.

“I want you to know that I am personally grateful for fine msg you sent me last evening. I consider its contents a great step forward in solution of a problem which seems fraught with grave danger to interests of our two countries.

I shall be happy to give your latest proposal my support, and to assist in every way we can to convince IranGov that it is in their interest to accept this offer.

Our physical separation complicates problem of joint msg. Furthermore I am concerned lest enemies of West in their propaganda seize on such an approach as evidence that our two nations are “ganging up” on Iran. The most logical procedure seems to me to have each of us send a msg to Mosadeq but so drafted as to clearly indicate consultation and agreement between us. I wld much prefer this procedure and hope you can agree. My suggestions for drafting are attached in Annex A.

In agreeing with you as I have above, I wish to point out certain matters which I believe will continue to merit ur personal attention.

If we are successful in this approach, the type of representation of AIOC for scheduled talks will be of utmost importance. I earnestly ask ur consideration of appointment of a highly qualified and preferably well-known rep of ur Govt to be in fact AIOC rep. I wld be extremely reluctant to join in approach if I felt that future negots wld be conducted on anything but broadest possible point of view in interests of our Govts.
Mosadeq’s request for immediate finan assistance from UK Govt seems to have been met only partially. If you can see ur way clear in finding additional and immediate funds, that wld be of great importance. We have in past suggested as an approach to this problem that you make immediate arrangements [Page 450] to lift and make payment against oil now stored in tanks, and Mr. Eden in his msg to Acheson of Aug 9 indicated that advances in respect to oil lifted cld be made after satis terms of reference of arbitration had been agreed upon.
In agreeing to ur proposal, I assume that wording of para (II) in which you spoke of arrangements for flow of oil refers to distribution problem. As you know, I consider that unfortunately it is not any longer a matter for discussion as to whether AIOC wld produce oil or operate Abadan refinery. We wld probably both have to stand ready to offer our assistance to IranGov in its arrangements for efficient future operation of oil industry in Iran, if requested to do so.
I hope in drafting msg you wld send you will be able to rearrange Point I so as to avoid specific mention of “termination of 1933 Concession Agreement”. Henderson has informed us in past that direct reference to this matter might place Mosadeq in difficult position with some of more extreme elements of Nationalist Front. Perhaps this cld be avoided by deletion of this phrase and substitution of “having regard to legal position of parties existing at time of nationalization”.
Matter of handling publicity on this deserves consideration. With so many unfortunate leaks these days, I think we shld both use every precaution to keep our approach secret until we discover how Mosadeq wld like matter handled. I think perhaps only he can judge whether immediate publicity wld be helpful or harmful.
Of course, I am certain you understand our agreement in this particular matter does not limit freedom of action of either of our Govts in future to meet situations not now known. I believe in these critical times we will both want to maintain our freedom to judge each situation as it occurs, and on what we believe to be merits of case.

I wish again to express my apprec for ur msg which I consider represent statesmanlike approach to an extremely difficult problem.”

“Annex A. Text of my msg to Mosadeq.

‘Mr. Churchill has consulted me on proposals that he is communicating to you in effort to secure a settlement of oil question.2 My Govt has had an earnest and continuing interest in efforts to bring about resumption of flow of Iran oil to world markets and it is my belief that present proposals offer splendid opportunity for parties to resolve their difficulties. I believe that proposed course of Brit action is one which fairly meets ur problems and on behalf of this govt I am glad to urge you to give it most sympathetic consideration.

[Page 451]

Interest of US is solely that of standing ready to assist in this matter if such assistance is desired by parties. I wish to assure you that if agreement is reached on present proposals, the Govt is prepared assist you in ur current finan difficulties, if you so desire, and will for this purpose make an immediate grant of $10 million available to ur Govt.

It is my sincere hope that a basis can now be found which will permit a renewal of oil operations in Iran and afford an opportunity for bringing about improvement of conditions of Iran people through the programs of development for which we all so devoutly hope.’

If above wld be acceptable I shld think you wld wish to place a cross reference in ur msg to ur consultation with me and our agreement. Specifically, I shld think para 2(c) which speaks of US assistance shld be worded to indicate that I had informed you of our willingness to provide such a grant. I hope in drafting ur msg you will consider other points I have made above and wish to assure you that any drafting suggestions on my part for ur msg are due entirely to my conviction of urgent need for arriving speedily at an agreement acceptable to Irans and satisfactory to you.

If points I have made are agreeable to you, it might be possible to put forward proposals in terms of such a formula as fol:

Submission to ICJ of question of compensation to be paid in respect of nationalization of enterprise of AIOC in Iran, having regard to legal position of parties existing at time of nationalization and to all claims and counterclaims of both parties.
Appointment of suitable reps of both parties to negotiate arrangements for resuming flow of oil from Iran to world markets. As first step, HMG are prepared to seek appropriate arrangements for lifting of all oil products presently held in storage in Iran and for advances in respect of such oil products.
Upon agreement to submit claims of both parties to ICJ (a) HMG will relax restrictions on exports to Iran and on Iran’s use of sterling, and (b) it is our understanding that USGov will make an immediate grant of $10 million to IranGov.”3

For Henderson: Dept appreciates and is concerned by ur comments re inadequacy ten million dollar grant. Will wire you separately this problem tomorrow.4

  1. Also sent to London.
  2. John H. Ferguson, Deputy Director of the Policy Planning Staff, informed Richards on Aug. 22 that, at Secretary of Defense Lovett’s suggestion, the phrase “has consulted me on” had been changed to “has advised me concerning” in the first sentence of the draft message to Mosadeq. (PPS files, lot 64 D 563, “Chronological 1952”)
  3. On Aug. 22 Ambassador Henderson informed the Department that he agreed fully with all of the President’s suggestions contained in his message to the Prime Minister. (Telegram 804; 888.2553/8–2252)
  4. Ambassador Henderson initially expressed his concern in telegram 784, Aug. 21. (888.2553/8–2152) The Department replied in Document 206.