Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X

888.2553/5–3151

No. 24
Memorandum of Conversation, by the Second Secretary of the Embassy in Iran (Stutesman)¹

secret

Tehran, May 31, 1951.

Participants:

• Prime Minister Mohammad Mosadeq
• British Ambassador Sir Francis Shepherd
• United States Ambassador Henry F. Grady
• John H. Stutesman, Second Secretary, U.S. Embassy

At 1:15 p.m., May 29, 1951, the above listed persons came together at the residence of the U.S. Ambassador. The conversation turned immediately to the question of the nationalization of the oil industry. The Prime Minister said that he looked to the American Ambassador to act as intermediary in bringing together the Iranians and the British on the oil question. The Prime Minister continued to say that there were three points upon which discussions could be held:

1. Establishment of an organization to assure continued production and sales of oil.

2. Decisions regarding the claims of the ex–AIOC for compensation.

3. Developments of procedures whereby foreign governments can contract with the Iranian Government to buy definite percentages of the total oil production of Iran.

Dr. Grady proposed to the British Ambassador that it might be appropriate to indicate to the Prime Minister that the AIOC was considering sending some top men, possibly Directors, to carry on discussions with the Iranians. The British Ambassador took the position that such a statement would be premature at this time since Mr. Seddon was representing the Company on May 30th in an interview with the Minister of Finance. He felt that it was more appropriate to await a report from Mr. Seddon on the results of this interview, at which time the Company would take its own decisions for future moves.

Sir Francis indicated, however, that it might be possible for a British Government Mission to come to Tehran to open discussions on the basis of two rather broad formulas: (1) to discuss Anglo-Iranian relations with regard to production and distribution of oil; (2) to discuss practical arrangements for the future of the oil industry in Iran.

The conversation was halted at this point by the announcement of lunch, and conversation turned to mild banalities during the meal. After coffee, the conversation was reopened at the point where the British Ambassador was proposing that a British Government Mission open discussions on the basis of the first formula described above.

The Prime Minister completely rejected this opportunity to commence discussions with the British Government, repeating over and over again emotional and generally irrelevant references to the misery and poverty of his country, and indicating clearly that he would invite a British Government Mission only on his own terms and within a strict literal interpretation of the existing nationalization law.

The British Ambassador pointed out carefully that the whole basis for discussion should be to settle the conflicting views between the sovereign British nation and the sovereign Iranian nation over the oil industry. He repeated Mr. Morrison’s statement that the British could not stand aside with folded arms while the Iranians pursued a course leading to inevitable disaster. Both Ambassadors attempted to persuade the Prime Minister that an oil industry is a most complicated affair, involving not only pumping of oil from the ground, but refining, distribution and sales. The Prime Minister replied, “Are the British supernatural that only they can accomplish this”, and obstinately refused to accept the fact that the oil industry could not succeed if the intricate organization presently established were completely destroyed. “Tant pis pour nous. Too bad for us. If the industry collapses and no money comes and disorder and communism follow, it will be your fault entirely”.

The two Ambassadors again attempted to persuade the Prime Minister to receive a British Government Mission to open discussions on the oil question. His position was adamant that the Mission would be invited only after specific questions which they wished to raise had been studied by himself and found acceptable under the terms of the existing nationalization law.

The Prime Minister took his leave, saying that he continued to look to the United States Ambassador as a mediator in the dispute, to which Dr. Grady replied that he would always be pleased to assist in bringing the British and Iranians to some agreement.

1. Transmitted as an enclosure to despatch 1022 from Tehran, May 31. (888.2553/5–3151) In the despatch Richards, writing for Ambassador Grady, characterized the conversation as follows:

   “The results were most disappointing since the Prime Minister proved completely adamant in his attitude that the British must accept completely a strict interpretation of the existing nationalization law and that any discussions could only be pursued within the framework of that law. The British Ambassador, on his side, appeared more concerned with the legal aspects of the British case than a flexible intent to achieve some agreeable interpretation of the nationalization law.”

   A telegraphic summary of this conversation was transmitted in telegram 3042 from Tehran, May 30. (888.2553 AIOC/5–3051)