888.2553/12–1452: Telegram
No. 249
The Ambassador in France (Dunn) to the Department of
State1
3475. Following memo handed Dixon, United Kingdom Foreign Office by Nitze today:
Begin Verbatim Text:
Points to be made in discussion with Eden on Iran
- 1.
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Background of our discussions with United States majors.
We were concerned that an off-take of ten million tons as contemplated by the British paper would not be enough (a) as an inducement to the settlement of compensation; (b) to meet Irans economic problems and (c) permit the negotiation with NIOC of adequate protective provisions with respect to the sale of the remainder of Iran’s oil.
If an off-take of say 20 million tons were necessary to a solution of the Iranian question and AIOC were not in a position to handle so large an off-take by itself, the question arose as to whether other companies operating in the area could help. Discussions with the United States majors confirmed that they all considered their present sources of supply in the Middle East to be adequate and would only want to purchase Iranian oil if it were necessary to a solution. They felt that if they were asked to cooperate, Shell and possibly the French company should also be asked to cooperate, and that if cut-backs in other ME productions should be necessary, Kuwait should bear most of the burden.
In London, Nitze discussed with Dixon and other members of the oil committee and also with the AIOC the technical problems. One related to the type of provision which might be necessary in a contract between AIOC and NIOC to protect by a most-favored-nation [Page 549] type of clause the relationship between discount and volume. The other question related to the terms on which AIOC might resell to others oil which it could not itself market. It may be advisable to work out arrangements under which representatives of AIOC, the United States majors together with representatives of the United States and United Kingdom governments might meet together to work out more detailed proposals with respect to phase two. This might take some time.
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Line which Henderson might take on his return to Iran.
We believe it necessary that Henderson return to Iran within the next week or ten days. We believe we have gone as far as we can usefully go in clarifying what might be within the realm of the possible from our standpoint and that of the British without further clarification of what might be possible in Iran. We think it might be advisable for Henderson to take approximately the following line in talking with Mosadeq:
The United States has clarified its position with respect to the so-called oil blockade and the possible movement of small quantities by United States independents. The United States does not believe any substantial quantity of oil can or will be moved by independents. The United States believes that a substantial movement of oil will only be possible if a settlement of the compensation issues can be worked out on terms which are acceptable both to Iran and to the United Kingdom. If the compensation issue can be gotten out of the way, we believe that two things will be possible: (a) A large and immediate advance to Iran against future oil deliveries. The United States Government would be the source of the funds, but it could be so arranged that the advance was made by AIOC or a subsidiary thereof; (b) that arrangements could be made for a movement on commercial terms of substantial quantities of oil as rapidly as production could be restored in Iran.
On compensation, Henderson would urge on Mosadeq acceptance of the principle of arbitration either by the World Court or some other arbitral body. He would refer to Mosadeq’s previous statement that the Court would be free to follow the principles contained in the nationalization laws of any other country in the light of the law under which coal nationalization took place in the United Kingdom. He would take the position that the conditions to arbitration which Mosadeq had laid down could not be accepted.
If it appears from Mosadeq’s reaction that he will still not accept the principle of arbitration without conditions but would be prepared to offer, on his own initiative, an adequate lump sum settlement Henderson would explore this possibility. He would make it clear that the British have never acceded to, or expressed a willingness to consider, this type of solution, but that if Mosadeq were to [Page 550] come forward himself with an adequate offer, we would be prepared to take it up with the British.
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Possible economic assistance to Iran.
In the event Henderson is unable to make any progress with Mosadeq on compensation, the United States feels that it may be wise to buy a certain amount of time and to endeavor to improve the political climate in Iran for an eventual settlement by making limited economic assistance available to Iran unrelated to a settlement of the oil issue.
We understand that Mr. Gutt has submitted to Mosadeq a program2 involving revised and increased taxes and a reform of their foreign exchange procedures, which should in itself go a substantial way toward alleviating the current budgetary deficit of Iran. We understand that Mr. Gutt believes that with a loan of 30 to 50 million dollars to the Bank Melli, the remainder of Iran’s budgetary deficit for a period of 12 to 15 months might be met.
Should Henderson’s efforts to persuade Mosadeq to agree to a proper settlement of the compensation issue fail, it would be our intention to make economic assistance of this type available to Iran and we would hope that the British Government would cooperate by helping the British public to understand that this is in furtherance of our common purposes and does not run counter to the obtaining of a proper oil settlement.
End Verbatim Text.
- The Department repeated this telegram to Tehran. (888.2553/12–1452)↩
- See footnote 3, Document 226.↩