888.2553/8–2752: Telegram

No. 211
The Ambassador in Iran (Henderson) to the Department of State1

top secret

892. Eyes only Bruce and Byroade. No other distribution whatsoever. Following tel drafted jointly by Henderson and Middleton:

PriMin recd us this morning at 10. Our conversation lasted until 1:30. We found him in better health than he had been in for some time. In fact, he seemed to withstand strain of conversation somewhat better than we.
We deeply regret to report that his reception of joint msg was not only negative but to extent hostile. He made it clear during course our conversation that if he shld receive this msg he wld be compelled to make it public at once and its publication wld greatly prejudice relations between Iran and US and UK. We, therefore, suggested that we wld postpone handing msg to him pending report to our govts of his views and receipt of fresh instructions. Mosadeq stated that number persons were already aware of fact that we were calling for probable purpose of delivering msgs from our respective govts. He said that therefore he wld be compelled to make public statement that he had disapproved of contents these msgs and that we had thereupon withdrawn them. We told Mosadeq that in that case we wld prefer to leave msg with him. After considerable discussion it was finally agreed that we wld postpone delivering msg; that he wld inform his advisers who already knew that we were coming and press that we “discussed matters of common interest to three govts”; and that we, in response to press queries, wld make similar replies. Middleton, however, said that he wld add to this statement one to effect, that during course of conversation he had “touched upon” Iranian note of Aug. 7.2
In opening our substantive conversation Henderson told PriMin that Middleton and he had come in response to inst which we had recd from our respective govts to deliver joint msg from Pres of US and PriMin of UK. Henderson said that he wld make no comment regarding substance this msg until after PriMin had had opportunity to read it. He hoped that in reading msg PriMin wld realize it had been prepared after much thought and discussion highest officials of Brit and Amer Govts and had been dispatched in spirit of sincere friendliness to Iran. It was his belief that [Page 465] manner in which PriMin recd msg might have profound effect upon world peace and future of Iran. He urged that PriMin wld examine it in spirit in which it was written. Middleton associated himself with statements made by Henderson and begged PriMin to give msg his most earnest and sympathetic consideration.
PriMin read msg several times; then laid it on bed. He said that he wld submit it immed to his Cabinet, to Majlis, and to Senate, and that he wld then give us reply. Henderson asked if he had any question; perhaps we might be able to give him background which wld be helpful in discussing proposals with his Cabinet and legislature. Mosadeq asked why US was offering Iran $10 million. Were there any strings attached to this offer? Was offer unconditional? Henderson replied that judging from text of proposal there was condition, namely, acceptance of first two paras. Mosadeq asked if in Henderson’s opinion US wld be disappointed if proposal were rejected. Henderson said that proposal had been made after much study and consultation. Amer Govt thought proposal fair; it offered sol of oil prob; its acceptance wld also assist Iran in present fin crisis. US wld therefore be deeply disappointed if proposal were rejected. PriMin made sarcastic remark to gen effect that it was too bad that US had joined in this proposal, that it cld have saved itself making offer of $10 million and considerable disappointment.

PriMin referred to first para of proposal. He entered into long diatribe, general tenor of which was that this para represented nefarious snare for purposes of reimposing upon Iran 1933 agmt and bringing into question nationalization laws.

Middleton said that his was by no means right interpretation. First para of proposals spoke of “compensation in respect of nationalization”; this was in effect recognition of fact of nationalization. Phrase regarding legal position of parties immed prior to nationalization was intended to allow both sides to put forward freely all claims and counterclaims which they might regard as justifiable. Court wld be in a much better position to reject frivolous claims if it cld give consideration to legal factors. Proposals specifically referred to legal position prior to nationalization; this in itself implied that nationalization was accomplished fact. Middleton thought that this was fair formula and emphasized that he was personally convinced that no snare was intended and that language used was to be interpreted in perfectly straightforward manner.

PriMin said he cld not agree with Middleton’s interpretation. If he accepted this para of proposal he wld be accepting validity of 1933 agreement and wld be contributing to creation of doubts re legality of nationalization law. He wld not be caught in trap of this kind. Henderson asked who PriMin thought was trying to lay trap [Page 466] for him. Was it Pres of US or was it PriMin of UK? Mosadeq replied that it was AIOC. Henderson said that he was sufficiently well acquainted with background of proposals to be able to state categorically that co had nothing to do with drafting of para. PriMin replied sarcastically that he was glad to receive this info, but that in any event he cld never agree to para this kind. Portion of para beginning with “having regard” must be deleted. We asked PriMin if para wld be agreeable to him if last portion to which he had taken exception shld be dropped. After studying first part of para he said that he cld not agree to any proposal which wld give co right to make any kind of claim which it might desire. We asked him what he thought wld be acceptable wording of this para. He did some scribbling on slip of paper. Translation of what he wrote is as follows: “Compensation caused former co on acct of oil installations as result of nationalization of oil industry shall be determined and paid. Claims of Iranian Govt on acct of customs duties and amts that former co must pay according to its balance sheet shall also be determined and paid.” What he wrote did not make complete sense. In an effort to find out what he meant we asked whether we were to understand that his formula was to be considered as his suggested terms of reference for arbitration by Internatl Court. He said that we must first agree to principles contained in his formula; only after such agmt wld he be ready to discuss matter of arbitration.
We discussed Mosadeq’s formula at some length. It gradually emerged that he wld never agree that any claims of co wld go to arbitration unless he had had opportunity to review them in advance and had found them suitable for arbitration. His position was that no claims of co wld be suitable for arbitration except those arising from damages due to loss by co of its physical installations in Iran. On other hand, he insisted that Iran shld be able to counter claim for losses incurred from importation by co over period of years of goods upon which it had not paid customs duty and also from failure of co to pay what its balance sheet showed to be due Iran.
Middleton asked PriMin what sums he believed to be due to Iran. PriMin replied he wished to claim only what stood in balance sheet. Middleton inquired whether he meant lbs 50 million placed to special reserve in respect of GassGolshayan supplemental agmt3 which had never been ratified by Majlis. Mosadeq answered [Page 467] evasively that he asked only for what was legally due to Iran. In course of further discussion PriMin made surprising statement that altho never ratified by Majlis GassGolshayan agmt had superseded “facto” 1933 agmt and that there cld therefore be no question of legitimacy of Iranian claim for 50 million pounds. Middleton said that his govt fully recognized need of Iranian Govt for financial assistance and that it might well be possible to make advances under para 3(A) of proposals to meet this need. PriMin again said emphatically that Iran wished to receive only its just dues. In reply to question by Middleton he said that if co or Brit Govt wished to make free gift of lbs 50 million he wld accept it as payment for what co had wrongfully taken from Iran in past. At this point, PriMin made long and emotional harangue on desperate internal situation of his country. There was no money in Treasury, security forces cld not be paid, and there is no assurance that next time civil disorders occurred, security forces cld be depended upon. He regretted that Amer and Brit Govts were unwilling to recognize gravity of situation. Brit Govt appeared to believe that danger of Communism was not imminent. If UK did not pay Iran what was justly due, it wld be responsible in eyes of God and of world for any disaster which might befall his country. If Brit Govt wld respond with generous gesture it wld earn gratitude of Iranian people. He did not want $10 million gift or any other aid from US.
Henderson asked if PriMin seriously wished him to report to his govt that he did not desire any econ or other aid from US. PriMin replied in affirmative. He said Iran was not going around with beggar bowl in hand. Henderson said US did not consider that extension of aid to Iran was matter of charity. PriMin retorted that US offer of insignificant sum of $10 million in present sit smacked of charity. Henderson endeavored explain why US was offering no larger sum. He said that it was extremely difficult with Congress out of session for US on short notice to find any larger amt among appropriations not already committed. Mosadeq said $10 million would not take care of Iran’s deficit for more than two months. We both pointed out that our two govts had hoped that within two mos revenues from oil would again be flowing into Iranian treasury. Henderson said he was personally convinced that if contemplated negots proceeded satisfactorily US might be able within two mos period to find ways of giving additional assistance to Iran in case latter should again face finan crisis. Mosadeq repeated that Iran wanted no gifts or finan assistance to which it was not entitled. He insisted that what he wanted was the 50 million lbs which stood in balance sheet of AIOC. He did not care whether this amt came to Iran in form of gift or as payment of debt due.
Middleton reverted to argument that formula given in first para of proposal was only designed to allow both sides freely to present their claims and counter claims and that no trap or deceit was intended. In subsequent discussion PriMin again referred to proposals as “nefarious document” and said that we should see that when document was published Iran public would rise as one to reject it. We then inquired whether it was intention to publish immed; this was private msg from two heads of govts and was meant to provide basis for discussion in friendly spirit. Mosadeq said that he could not regard such msg as private matter and that it was his duty to nation to make it public at once. He wld not argue any further; we would judge for ourselves from public reaction total unacceptability of proposals.
Long discussion followed regarding publication of msg, outcome of which was that we agreed to postpone delivery until we had received further inst. We felt compelled to agree to this since Mosadeq was adamant on subj of pub and at same time made it very clear that public reaction to msg would have most harmful effects on relations between Iran and UK and US. We were convinced that he was not bluffing and intended to publish it in such manner as to give it sinister aspect. It was clear to us that in such circumstances pub might mean final break and we therefore took decision already mentioned. Mosadeq finally agreed that he would regard note as not having been received and would mention it to no one not even his closest advisers. For our part we said we should regard delivery of msg as having been postponed pending report of this conversation to our respective govts and receipt of fresh inst. We left no copy of msg with Mosadeq.
We told Mosadeq that we thought that something constructive should come from our conversation and therefore we would like to have his suggestions as to what might be done next. He replied that what he wanted was answer to his note to UK of Aug 7.4 He could not wait any longer for this answer. He therefore proposed tomorrow or Aug 30 to send new note to Brit Govt. Implication was that he intended in next day or two to sever relations with UK. He maintained that finan sit was so critical that he had no other choice than to take this action. He did not attempt to justify logic of this step. Henderson told PriMin that msg which we had been discussing had been intended as reply to note of Aug 7; that he should give UK at least time to consider what kind of reply to make now that delivery of contemplated msg had been postponed; that in this grave situation one should not act precipitously. Middleton also urged PriMin to regard proposed msg as having [Page 469] been intended as conciliatory and drafted in recognition of gravity of sit of Iran. PriMin thereupon interjected that his note of Aug 7 was also intended to be conciliatory. He had written it primarily in order to get money. He still needed money and would give UK one week in which to reply to note of Aug 7 or to let him have 50 million lbs. He added that if he did not get money he would write another note and that next October he would go to UN to tell whole story.
Just prior to our departure Mosadeq as usual became more cordial. He made some remarks of personally friendly nature. He said that he was sure that we were giving our govts correct picture of sit Iran but that unfortunately our govts did not seem to believe what we told them. We replied that we thought that our govts had5 factors to consider other than particular sit in Iran; they could not ignore world problems and their own public opinion, etc. As we departed Mosadeq said he was looking forward to something from us before next Wed.6
Comments later.7

  1. Transmitted in three sections; repeated to London eyes only for the Chief of Mission.
  2. See footnote 2, Document 197.
  3. The GassGolshayan Agreement of July 18, 1949, formally known as the Supplemental Oil Agreement, represented an attempt on the part of the Anglo-Iranian Oil Company and the Iranian Government to revise the terms of the basic Oil Agreement of 1933. The Majlis never ratified it. For documentation regarding American interest in these negotiations, see Foreign Relations, 1949, vol. vi, pp. 91 ff.
  4. See footnote 2, Document 197.
  5. The following phrase was omitted from the telegram when it was deciphered: “confidence in us otherwise they would not keep us in Iran but that our govts had”.
  6. In a cable to President Truman on Aug. 28, Prime Minister Churchill said that he and Foreign Secretary Eden believed that Henderson and Middleton should have presented the joint message to Mosadeq and withdrawn. Although the two representatives had not done this, Churchill urged that when the two saw Mosadeq again, they should then hand him the joint message, and both governments should publish its text. (888.2553/8–2852)

    Ambassador Gifford reported on Aug. 28 in telegram 1155 that Foreign Secretary Eden urged the same course of action. Gifford expressed agreement with this proposal. (888.2553/8–2852)

  7. See footnote 2, infra.