888.2553/11–2252: Telegram

No. 241
The Acting Secretary of State to the Embassy in the United Kingdom 1


3510. Eyes only Gifford and Mattison. Secy and Mr. Eden had brief discussion on Iran situation in NY Nov 21. At conclusion of discussion Mr. Eden indicated that he wld cable London as to the course of the discussion and asked to assist him in this task for memo from us covering points which Secy had raised. To meet this request fol memo was handed to Brit in NY on evening of Nov 22. Text of memo fols:

“We have passed through many crises in the Iranian situation with our British friends, each of which has seen the situation grow steadily worse but never to the point of collapse. We believe in the present period, although it may be relatively calm in outward appearance, we are soon to face a new crisis which in all probability will be determinative.

“There is at the moment in Iran a feeling of some hope and expectation that somehow or other the United States will produce something new to assist in the solution of the Iranian oil problem. If this hope is frustrated by no progress it is our view that within a very short period Iran will also turn against the United States—and probably with the same end result of a complete break in relations. Should this happen, for all practical purposes Iran’s ties with the West would be broken. It does not follow automatically that the Tudeh Party or its stooges would come immediately into power. It probably would mean, however, that the point of no return had been passed in the Iranian situation and that there would remain [Page 535] nothing that the US and UK, in concert or individually, could do to save the situation.

“There is every chance, in the present state of high emotion in Iran, that we may expect quite unpredictable and irrational moves on their part. We know that preparation is underway to discharge thousands of Government employees and Army personnel. The resultant dissatisfaction of this group can only serve to make matters worse. There is reason to believe that additional important members of the National Front may shortly move into the cabinet with either the Majlis dissolved or rendered impotent. It is not unlikely that Mosadeq in the near future will begin addressing demands and ultimatum upon the United States which could only serve to make matters worse.

“For the past 18 months the United States has utilized its greatest efforts in attempting to put forth ideas which could lead to a mutually acceptable solution. The last such effort resulted in the ideas which Mr. Nitze recently discussed with British representatives in London. The United States believes that these discussions were helpful and that progress has been made within recent weeks.

“The United States is studying with great care the plan produced by the British within the past week. In spite of the progress that has been made we do not feel that this plan meets the present situation. We believe that arrangements under phase 2 would have to hold real inducement to the Iranians to arrive at a satisfactory agreement upon the question of compensation in phase 1. We do not see that the present British plan holds such inducement. This plan speaks of lifting from Abadan in the neighborhood of 7 to 10 million tons per annum. It seems clear that this is an inadequate movement of oil to meet the Iranian economical and financial situation. If we consider that part of the payments to Iran would have to be set aside for compensation and to meet advances on part of the US Government it is clear that remaining funds available to Iran would indeed be inadequate. It has been our feeling that a minimum of twenty million tons per annum must be reached reasonably promptly in order to effect a solution.

“The United States also cannot believe that there isn’t some other method of moving forward on the question of compensation. We have not given up the possibility that Mosadeq might be induced to put forward a satisfactory lump-sum settlement offer. There may even be variations of this idea. An example might be found among practices of the US Government during the two world wars. The United States in obtaining private property for Government use set what it believed to be a fair value on the property taken. The owner was notified of this amount and informed that he could collect the full amount in full settlement of his claim at his option. If the owner did not agree that the amount specified by the US Government was a fair value, he could challenge that evaluation and carry his case through legal proceedings. In such a case the US Government notified the previous owner that he could collect at will ¾ of the total amount, leaving the remainder to be settled at the final determination of the property value. At any time the owner could exercise the option of claiming the remainder of [Page 536] the amount originally specified by the US Government or continue to debate the matter through negotiation or legal proceedings.

“The feeling that some move on the part of the West is necessary in the Iranian situation is growing steadily within all interested departments within our Government. We feel it of utmost importance that some move be made with the Iranians prior to or at the time of Loy Henderson’s return to Tehran which should take place within two or three weeks.2 For our part, it remains our firm hope that a solution can be found by the British or certainly that one can be found that will be fully acceptable to the British. In the event this proves to be impossible, it is not believed that the US Government can afford to remain idle while the Iranian problem drifts into a steadily worse situation.

“We believe that a new and more vigorous effort is required on the part of both Governments, and we will be quite prepared to send representatives to London, or to receive their representatives here, if this would facilitate matters. For its part the United States now has approval at the highest level to make available the sum discussed by Mr. Nitze in London.

“As it appears that the AIOC may find itself unable to move but a portion of the Iranian oil which clearly must be moved, it may be that arrangements will have to be made by the US Government to meet the remainder of the problem. We are working urgently to determine what type of arrangements could be made by US companies and would like to discuss these arrangements with the British at the earliest possible date. We shall make every effort to reach agreement with the British on these procedures. We would in any event always consult with them and strive for the solution which would be most acceptable to them. In the last analysis, however, the US Government may have no alternative, but to move forward in a manner best designed in its opinion to save Iran.”

It was apparent during the discussion that Mr. Eden was not familiar with latest plan disclosed by UK and there was little discussion of substance on any specific aspect of the oil problem. Eden indicated his full agreement that both Govts shld step up their efforts in an effort to solve the problem. He stated that he wld be delighted if some of our reps wld again come to London for this purpose.

The question of a press release by US Govt covering question of purchase of Iran oil by US firms or individuals was also discussed. Eden was informed that we had accepted almost all of their proposed changes and had gone as far as we cld to meet their primary objection to the statement. Secy informed Eden that we wld release text at an early date. There is no definite date set at this time but [Page 537] the release will probably be made on Wednesday in Washington. Text of statement will be furnished by separate cable.3

  1. Also sent to Tehran. Drafted and signed by Byroade.
  2. Ambassador Henderson was in Washington.
  3. The basic text was cabled to London in telegram 3511, Nov. 22. (888.2553/11–2252) This statement, however, was not released to the press until Dec. 6. For the final text, which varied slightly from the version in telegram 3511, see Department of State Bulletin, Dec. 15, 1952, p. 946.