888.2553/8–2252: Telegram
No. 205
The Acting Secretary of
State to the Embassy in
Iran1
463. For Chief of Mission only. Fol msg from Churchill to AmbFranks furnished Dept during discussions Aug 212 which gave rise to msg reported Deptel 452 to Tehran, 1249 to London, Aug 21, rptd FYI only:
“Fol amplifies my msg to Pres and may be used in discussion with State Dept.
Arbitration
I hope give final view about terms of reference very shortly. Subj to this, it wld be normal to propose a ‘special agreement’ (‘compromis’) which, when it had entered into effect, wld be submitted to Internatl Court by either of parties or both. Draft of such a doc is contained in Annex A. Its precise terms can of course be discussed. It seems very desirable that it shld be subj to ratification by Persia.
Financial Aid
HMG cannot make any grant or credit to Persia. In consideration of agreement on arbitration, however, and as earnest of their goodwill they wld relax certain of present restrictions on exports to Persia and on Persia’s use of sterling. A list of such concessions is given in Annex B. So far as co are concerned, they have admitted publicly that sum of 1.3 million pounds remains to be paid on account of sums due to Persian Govt in respect of 1951 under 1933 concession agreement. But as co have also made clear publicly, this amount is trivial compared with losses which co have suffered as result of nationalization and HMG cld not advise co to release it unconditionally. Still less cld they advise any immediate payment on account of sums which Persia wld have recd if she had not rejected supplemental oil agreement.
As regards US aid, I trust that we are right in thinking that USGov still only contemplate small initial grant to be made when agreement to arbitrate is reached, and that question of any further aid wld only be considered in context of progress towards satis arrangements for flow of oil.
Negots
We shld prefer that these shld take place outside Persia or at least be preceded by prelim discussions outside Persia. We realise [Page 453] that this may not be possible. It is however essential that any negots shld be conducted on Persian side by reps of greater experience and auth than oil sales commission, since they are bound, even on most favorable estimate, to be extremely difficult.
Annex ‘A’
Fol is prelim draft of ‘Special Agreement’ (compromis):
Begins. Govt of UK of Great Britain and Northern Ireland and Imperial IranGov have agreed to submit to ICJ question of compensation to be paid in respect of nationalisation of enterprise of AIOC in Persia and termination of 1933 Concession Agreement having regard to all claims and counter-claims of both parties [and to juridical position existing on 19th March 1951].3
This Agreement shall be ratified. Instruments of ratification shall be exchanged as soon as possible in Tehran. After exchange of ratifications this Agreement may be notified to ICJ by either of parties. In faith whereof undersigned, being duly authorised by their respective Govts, have signed present Agreement. Done in duplicate at Tehran this … day of …4 in English and Persian, both texts being equally authentic. Ends.
2. Words in square brackets might be included if reference to 1933 Concession Agreement has, on polit grounds, to be omitted.
Annex ‘B’
Fol are relaxations in question:
- (a)
- Supply of refined sugar for 80% payment in dollars;
- (b)
- Supply of goods and provisions of services to NIOC (except Petroleum and Petroleum Products, equipment for direct use in production, refining and export of oil and services connected with Internatl trade in oil such as hire of tankers and insurance of oil plant, tankers and cargoes);
- (c)
- Supply of locomotives;
- (d)
- Supply of some of railway track equipment requisitioned last year;
- (e)
- Limited supplies of other scarce non dollar-worthy goods;
- (f)
- Persia wld be allowed to use her sterling for purchases from other
countries, provided that:
- (i)
- the goods were of type which we were willing to supply to her from UK
- (ii)
- the transactions did not cost sterling area gold or dollars. This means that Persia wld not be allowed to convert her sterling into dollars, and UK Sterling Control Order wld continue to keep her sterling transactions with EPU countries in rough balance, and
- (iii)
- the country supplying goods was one to which sterling transfers from third countries generally are permitted. This [Page 454] wld exclude primarily transfers to Italy, Japan and Portuguese Monetary area.”