888.2553/5–1151: Telegram

No. 21
The Secretary of State to the Embassy in Iran1

top secret
priority

2088. Brit Amb called upon Secy, Matthews, and McGhee this morning2 and advised of proposed new Brit note to Iran Govt in response to Iranian note turning down the Brit note of May 2 invoking arbitration provisions AIOC concession agreement.3Amb also advised Dept of instructions to him and Shepherd in connection with note which together with note are summarized for you in separate tel.4

[Page 52]

Amb was advised that: a) US reps had taken and would continue take strong position with Iranian Govt against unilateral violation of concession contract; however, US had not been and was not able take similar position with respect nationalization as such; b) With respect to implied threat in proposed Brit note of serious consequences in event Iranian refusal to negotiate, which instruction to Amb interprets as involving possible eventual use of force, US would recognize right of Brit to evacuate Brit citizens whose lives were in danger. Open Soviet intervention in Iran or seizure of power in Tehran by Communist Govt, would, of course, also create situation where use of force must be considered. US would, however, have grave misgivings with respect to use of force in absence above conditions or, in case of danger to Brit citizens, to extension of use of force beyond evacuation. Dept noted that Brit Govt has made no firm decision in this matter and would expect Brit Govt, as they offer, to discuss matter with US Govt before any such decision is made.

In addition, fol suggestions were put forward to Brit Amb for consideration as possible modifications or supplements to proposed Brit course of action without, however, committing US Govt to such suggestions: 1) That Brit position might best be conveyed to Prim Min orally and without publicity rather than through formal note; 2) That Brit should consider advising Prim Min at same time that they are prepared to negotiate on basis of acceptance of principle of nationalization. US believes that under any other circumstances Prim Min would probably reject summarily Brit proposal to negotiate and that there would in any event be little chance of success even if discussion were held. As US told Brit Govt during recent conversations, US is unable support any substantive proposal by Brit which does not reflect principle of nationalization since we do not believe it would have a chance of success. On other hand, [Page 53]if Brit are willing accept principle of nationalization, US would, in addition to support against unilateral breaking of contract indicated above, be willing consider supporting general substantive position put forward by Brit, without giving support to particular details. Amb replied that, although there was no decision by his Govt to admit to principle of nationalization, the climate of thinking in London was along such lines. Brit tactics have been to initiate negotiations before making any substantive offer. Amb did, however, appear to be impressed with argument presented by Dept and promised to take matter up with his govt; 3) Dept indicated its willingness, under suitable conditions, to consider advising Iranian Govt that Amer companies would not be willing enter into agreement for operation of Anglo-Iranian properties, should Iran so desire, under any conditions in face of unilateral action by Iranian Govt. It was explained to Amb that this step could have grave political consequences in our relations with Iran and that our decision in this regard would be influenced by your judgment and by result from meeting which Dept is having with oil company reprs May 14.5 This is, however, position which Dept has thus far consistently taken with Amer oil companies and, in view of great influence which such statement if properly made could have on Iranian Govt, entering into negotiations with Brit, US Govt would be glad consider so advising Iran Govt in some appropriate way. Dept also suggested that such action might more appropriately be taken in advance of Brit approach in order prepare Prim Min and to minimize linkage of the two actions. Amer presentation would seek to avoid implication that it flowed from any desire to keep Iran from nationalization of oil properties but from US Govt and company reactions to unilateral action by Iran in breaking concession agreement and refusing to discuss it or arbitrate.

Request you consult with Shepherd and advise Dept ur reactions with respect to: 1) Proposed Brit line of action, and 2) Suggestions made by Dept. You might suggest to Shepherd that he show you complete texts of Brit communications referred to above.

Dept is influenced in this connection by growing feeling in UK typified by recent Economist article that US not supporting Brit to extent possible and that part of difficulty caused by competition Amer companies. Amer companies have expressed fear that soft Amer position with respect to unilateral cancellation of concession might weaken their own positions in Middle East and elsewhere. Dept proposes if US action referred to in 3 above is taken, to advise officials of other Middle East oil producing countries in order make clear US position re unilateral violations of contracts. Dept will [Page 54]continue to restrain Brit from so-called “strong” methods, although it must be recognized as pointed out by Amb that Brit public opinion combined with delicate Parliamentary situation may result in Brit taking rash course of action.

In ur suggestions with respect to above, Dept would appreciate it if you would consider timing, i.e., whether there is chance of success of UK proposal while Mosadeq is still Prim Min; whether UK should wait until his position deteriorates; or whether they should wait for possible successor. Dept believes we should keep in mind that importance AIOC concession, particularly Abadan refinery, both from standpoint of financial and physical value to UK and indirectly to US, and prestige value to Brit, is worth considerable calculated risk on our part even to extent of jeopardizing our own position in Iran, in assisting Brit and Iranians in coming to satisfactory terms. On other hand, it is not worth risk of complete break between Iran and West or setting into motion chain of events which could lead to communist seizure of Iran Govt or Russian intervention.6

Acheson
  1. According to typewritten notations on the source text, this telegram was drafted by McGhee and cleared by Matthews; however the only initials on the source text are Rountree’s. The telegram was repeated to London.
  2. No further record of Secretary Acheson’s conversation with Franks has been found in Department of State files.
  3. For texts of the British note of May 2 and the Iranian note of May 8, see British Cmd. 8425, pp. 31–33, or Documents (R.I.I.A.) for 1951, pp. 482–485.
  4. Telegram 2087 to Tehran, May 12. (888.2553 AIOC/5–1251) The instructions to Ambassador Franks asked him to urge the Department of State to instruct Ambassador Grady to give the British all possible support in their dispute with Mosadeq. The instructions to Ambassador Shepherd told him to deliver the message to Mosadeq and tell the Prime Minister that the Iranian note of May 8 had created a deplorable impression in London. At the time he delivered the message to Mosadeq, Shepherd was to inquire whether Iran would be willing to enter negotiations with a mission led by a member of the British Government. The message to Mosadeq reviewed the British view of the controversy, expressed the hope that it could be solved by negotiations, reaffirmed the willingness of the British Government to send a mission to Tehran, and concluded that a refusal to negotiate or an attempt to proceed with unilateral action would gravely harm Anglo-Iranian relations and have most serious consequences. For the full text of the message to Mosadeq, delivered by Shepherd on May 19 as an aide-mémoire, a text which is substantially the same as that summarized in telegram 2087, see British Cmd. 8425, pp. 34–36, or Documents (R.I.I.A.) for 1951, pp. 486–488. Copies of the three documents summarized in this paragraph, apparently those left at the Department of State by Ambassador Franks, are in file 888.2553 AIOC/5–1251.
  5. For a record of this meeting, see Foreign Relations, 1951, vol. v, p. 309.
  6. On May 13 Ambassador Grady replied that it was difficult to ascertain whether Mosadeq had any program beyond the oil legislation. The Ambassador believed the nationalization law was loose enough to allow a good agreement provided the British were willing to pay liberal lip service to nationalization. Grady cautioned that when the Iranians referred to nationalization they meant “confiscation to a greater or lesser degree.” He also advised that almost every Iranian demanded “release from British domination which means especially AIOC,” but was not sure how this demand could be met at that time. (Telegram 2787 from Tehran; 888.2553/5–1351)