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

888.10/12–1852: Telegram

No. 251
The Acting Secretary of State to the Embassy in the United Kingdom¹

top secret

Washington, December 18, 1952—6:23 p.m.

4101. Dept today informed Brit Emb it had decided recommend to Exim Bank favorable consideration Iran request for $25,000,000 loan for econ development. Bank will probably take decision Dec. 22. If approved, Henderson will so inform Mosadeq immed after his return.

Dept officers explained loan was intended improve psychological atmosphere for future oil settlement discussions. Wld not relieve current Iranian econ difficulties since wld not be used for budgetary support and money wld be paid out only in installments as specific projects were approved by Bank. Whole operation could be terminated at any moment. Utilization of funds wld probably be very similar that of present Pt. IV program and loan cld well be regarded as merely form of extension of that program. No early benefit to Iran economy cld be expected.

If Bank decision favorable authorization of loan wld probably become public immediately after info communicated by Henderson to Mosadeq. No prior announcement wld be made.

Brit Emb officer expressed fear news this action by Dept wld be unwelcome in London because Brit Govt wld expect adverse reaction by Brit public and stiffening of Iran public attitude toward oil settlement. Dept officers said they hoped Brit Govt wld make effort cope with Brit public opinion and added they thought effect on Iran sentiment wld be good rather than bad since wld counteract Iran feeling that Western Nations unfriendly.

FYI foregoing was conveyed as for info and without request for Brit comment. However Bank Board meeting on subject was postponed at our request from Dec 19 to 22 in order that Brit might be given few days notice and not feel we had presented them with accomplished fact. End FYI.

Emb need take no action and should not raise subject of loan on own initiative.²

FYI Nitze was not aware Dept decision re Eximbank loan while in London and Paris.

Bruce

1. Drafted and signed by Jernegan and cleared with Nitze and Linder.
2. On Dec. 19 Ambassador Gifford reported that he had taken no action vis-à-vis the British Government concerning the proposed loan. He commented, however, that he saw nothing in the Iranian situation to indicate that granting the loan would so improve the atmosphere that Mosadeq would adopt a reasonable approach to the oil settlement. (Telegram 3430; 888.2553/12–1952)