888.2553/8–2152: Telegram

No. 206
The Acting Secretary of State to the Embassy in Iran1

top secret

460. Eyes only Chief of Mission. FYI only. As stated in Deptel 4522 Dept is very much aware and concerned ur views re inadequacy $10 million grant to IranGov. In mtg at highest level yesterday3 decision was made that at least for present not more than $10 million cld be taken from US grant funds and that time involved attempting to secure additional funds wld involve delay. As stated urtel 799 Aug 214 “urgency is at present almost overriding factor.”

Exam of amt of funds which wld be immed available to IranGov at start negots settle oil dispute [(1) any Brit advance, (2) internal finan resources, (3) US grant $10 million]5 leads us to believe that they wld be sufficient to cover Mosadeq’s most urgent expenses for several months. Dept realizes that finan assistance can be considered important factor in influencing satis outcome oil negots but there are disadvantages in placing large grant funds (even were they immed available) at Mosadeq’s disposal before he had opportunity show good faith and realistic approach in settling oil dispute. Furthermore Dept believes it unlikely that Irans wld accept $20 or $30 million with much more gratitude than $10 million (urtel 809 Aug 22).6

Urtel 804 Aug 227 is close to present Dept line thinking. If oil negots are proceeding in satis manner it is possible that additional [Page 455] sources of finan aid might become available. In these circumstances Irans wld presumably have good case in applying for withdrawal $8.75 million from IMF and possibly more. There is also possibility that Eximbank might prove to be source aid such as reactivated loan for internal development Iran which consistent with Mosadeq’s schemes for internal reforms. These possibilities have not yet been discussed with reps IMF or Eximbank in view delicacy and high level secrecy current US–UK discussions. Dept is prepared urgently raise these questions with parties concerned shld oil negots in opinion dept reach stage where such action appears warranted.

In addition, while firm commitment can obviously not be made at this time, if oil flow can be insured through adequate management and distribution guaranteed, there is reason to believe that substantial borrowings might be feasible from private sources.

  1. Repeated to London. Drafted by Stutesman and approved by Richards.
  2. Document 204.
  3. See footnote 2, supra.
  4. In telegram 799 Henderson expressed hope that the approaches to Mosadeq would be made quickly before a leak occurred which could jeopardize the initiative. (888.2553/8–2152)
  5. Brackets in the source text.
  6. In telegram 809 Henderson sent the Department some unfavorable remarks regarding American aid to Iran which were currently appearing in the Iranian press. (888.00 TA/8–2252)
  7. In telegram 804 Henderson suggested that the Department authorize him, when he delivered the proposed draft message to Mosadeq contained in telegram 452, to tell Mosadeq informally and personally that he was certain that if, while the negotiations were proceeding in a satisfactory manner, it was apparent that Iran had to have additional financial assistance, the United States would give sympathetic consideration to furnishing such aid. (888.2553/8–2252)