No. 216
Memorandum by the Secretary of State to the President


  • Letter from Dr. Mosadeq

There are transmitted for your attention a copy of the letter from Prime Minister Mosadeq of Iran to you dated September 24, 1952, a summary of Dr. Mosadeq’s views, and the complete text, as received from the U.S. Embassy in Tehran, of the Iranian Government’s reply to the joint message put forward by Prime Minister Churchill and you to Dr. Mosadeq.1

The Department’s comments will follow later.

Dean Acheson

Attachment Number Two

Summary Of The Iranian Government Note Of September 24

The joint US–UK proposal cannot be accepted nor approved by the Iranian nation. Before proceeding with the transmission of a counter proposal, it is necessary to explain briefly the position of the Iranian Government in regard to the message.

The proposals are inconsistent with Iran’s oil nationalization law.
Iran desires to strengthen friendly relations with the British people.
Iran has always been prepared to negotiate within the limits of legal principles for the settlement of the oil dispute.
Failure to achieve any results up to this time is “due to the fact that the British Government has desired to retain the influence of the former AIOC under other titles in the same shape and form as before in violation of the law and of the rights and desires of the Iranian nation”.
The proposals are “not only inequitable but far more inequitable than previous proposals”.
The British Government seeks to convert the oil dispute from an internal affair in Iran into a dispute between two Governments.
It is feared that Article 1 of the proposals is designed to legalize the “invalid 1933 agreement which has never been acceptable to the Iranian people”.
If Article 2 of the proposals means that “a purchase monopoly be given to a specific company …2 this will never be approved by the Iranian nation”.
Article 3 of the proposals admits “that the British Government’s motive in its previous measures to bring economic pressure on the Iranian nation” were designed to force Iran to submit to “unfair terms”.
In order for the Iranian Government “to make a definite decision” about paragraph (a) of Article 3 “views about the price (of oil stored at Abadan)” should have been specified.
“It is neither friendly nor equitable to make the removal of illegal restrictions contingent upon the acceptance of certain terms” as suggested in paragraph (b) of Article 3.
Iran nationalized the oil industry for two reasons: (a) “to eradicate foreign influence”, and (b) “to improve economic conditions”.
“In the present circumstances, Iran may follow one of two roads: (a) ‘It should endeavor to improve social conditions and ameliorate a situation of the deprived classes, something that would be impossible without oil income’; and (b) ‘If this road should remain blocked, Iran should surrender itself to probable future events which would be to the detriment of world peace’.”

counter proposals

“Iranian courts are the only competent channel for investigating the former company’s claims and are prepared to adjudicate them, but should the company not wish to refer its claims to the above-mentioned competent authorities, and should the International Court of Justice at The Hague be able to deal with the dispute between the Iranian Government and the former AIOC on the basis of an agreement between the two parties, and should there be no illusion that such action recognizes the existence of the dispute between the two Governments, my Government, in order to show its good will, after agreement on the four articles below, is prepared to agree to the judgment of the International Court.” In this case, the court will be requested to issue its final verdict as soon as possible and within six months.

[Page 478]

Article 1—Compensation

“Determination of compensation to be paid for property belonging to the former AIOC at the time of nationalization of the oil industry in Iran” and arrangements for paying this by installments will be based on any law selected by the former AIOC which has been used by any country for nationalizing its industries in similar instances. This is the only compensation which the Iranian Government will pay, and the company will have no right to make any further claims whatsoever.

Article 2—Basis of Examination of Claims

The ICJ shall use as a basis for judgment one of the following: (a) Claims of the two parties up to the date of nationalization to be on the basis of the D’Arcy Agreement3 with due regard to calculation of income tax which the Iranian Government should have received. The D’Arcy Agreement cannot be applied beyond the date of nationalization. (b) Claims from 1933 to the end of 1947 and from the beginning of 1948 to April 30, 1951 to be on the basis of the abovementioned invalid agreement and the GassGolshayan Supplementary Draft Agreement4 which was signed by the former AIOC but not by the Iranian Government. These agreements cannot be applied beyond the date of nationalization. (c) The claims of both parties to be examined on the basis of the fairest concession agreements of other oil producing countries in the world where the cost of producing oil according to that concession is not less than producing Iranian oil during a corresponding period.

Article 3—Determination of Damages

In determining damages due the Iranian Government there shall be taken into consideration the obstruction of sales of Iranian oil by the AIOC as well as losses resulting from the delay in payment of debts owed by the company.

Article 4—Payment in Advance

The AIOC shall pay 49 million pounds in sterling convertible into dollars. If the court does not consider Iran entitled to this amount, restitution shall be made in oil.

The foregoing proposals must be accepted in their entirety and are valid for ten days.

[Page 479]

“The Iranian Government will take up through the International Court of Justice as a case between two governments the question of losses caused” by the British Government through its support of the “former company”, as well as losses resulting from restrictions imposed on exports to Iran and on the use of sterling.

  1. Mosadeq’s letter to President Truman and the text of the Iranian Government’s reply to the joint U.S.-U.K. message are not printed. The summary of Mosadeq’s views, printed below as attachment 2, is a synopsis of his letter addressed to Prime Minister Churchill. Presumably Mosadeq’s letter to Churchill and the text of the Iranian Government’s reply are the same document. The verbatim text of Mosadeq’s letter to Churchill is in telegrams 1269 and 1270 from Tehran, Sept. 24. (888.2553/9–2452 and 888.2553/9–2552)
  2. Ellipsis in the source text.
  3. The D’Arcy Agreement, named for William Knox D’Arcy, was the original oil concession which had served as the basis for the Anglo-Iranian Oil Company’s operations in Iran. It was negotiated on May 28, 1901; was to last for 60 years; and the Iranian Government obtained only 16 percent of the profits accruing to the exploration and development company.
  4. See footnote 3, Document 211.