888.2553/12–1952: Telegram
No. 252
The Acting Secretary of
State to the Embassy in
Iran
1
1497. Eyes only Mattison. Fol memo handed Dept by Brit Emb today:
FonOff have instructed this Emb to communicate attached annex to State Dept in accordance with Nitze’s request to Sir Pierson Dixon. State Dept will appreciate that this is for their own info only and not in any circumstances for communication to Persians.
- 2.
- As State Dept are aware, HMG are most anxious that nothing shld be said at this stage which might prejudice their right or that of AIOC to put forward any claims they might wish to make in course of arbitration.
- 3.
- FonOff ask that furthest Henderson shld go wld be to speak in terms of paras 2 and 3 of the paper, and if he judged it useful, to say that he believes HMG are aware of Persian apprehensions about a compensation award based on forty-two years which concession still had to run, and that HMG have publicly affirmed that they wld regard Internatl Court as free to decide whether—and to what extent—compensation for loss of concession shld be awarded. Para 4 of paper cld only be used as an expression of Mr. Henderson’s personal opinion. FonOff wld have no objection to his pointing out to Dr. Musaddiq, as if on his own initiative, that, once award had been made, it wld be in no one’s interest to kill goose that laid golden egg; and he might in same manner like to put into Dr. Musaddiq’s mind idea of asking Internatl Court to cover method and period of payment in its award. If, however, this point is not covered in award, it is essential that HMG shld be entirely free subsequently to negotiate upon it and shld not be fettered by a commitment to maintain prosperity of Persia’s oil industry.
- 4.
- It wld be much appreciated if this Emb cld have opportunity to comment in advance on any communication which Mr. Henderson may be instructed to make to Dr. Musaddiq on basis of attached annex.”
Following is annex to preceding memo:
“At recent discussions with Mr. Nitze it was recognized that joint proposals of the 30th August had little chance of acceptance by Persians unless they could be persuaded that submission of question [Page 554] of compensation to International Court wld be advantageous to them and not result in an award which, if implemented, wld cripple Persia’s economy for an indefinite period. Her Majesty’s Govt have now given further thought to problem and believe that there wld be such genuine benefits to Persia in accepting reference to the Court that, if only she cld be brought to realise them, her reluctance might be overcome.
- 2.
- First, an honourable end to dispute wld in itself carry great advantages for Persia. It wld enable Dr. Musaddiq to represent himself to world as having satisfied Persia’s natl aspirations by reasonable means and to divest himself of his reputation as reckless fanatic who pursues his idealistic aims with utter disregard for consequences of Persia’s economy and reputation. If Persia continues refuse allow the dispute to go to impartial internatl arbitration except on terms quite unfair to AIOC, her attitude will be lasting reflection on her reputation for fair dealing and will strongly suggest lack of confidence in her own case and claims. Furthermore, if she agreed such arbitration, Persia wld again have chance of attracting foreign capital and purchasers to help in developing and disposing of her resources, which will not be case if her refusal to accept arbitration continues. She wld restore her creditworthiness in eyes of foreign investors, in particular the Internatl Bank. Moreover, once impartial internatl arbitration is accepted, Persia will have prospect of substantial purchases of Persian oil for established outlets in world markets. An arrangement on the lines of the joint US/UK proposals wld thus seem to offer an effective method by which large scale operation of Persian oil industry cld be speedily resumed.
- 3.
- Secondly, it wld be open to Persia as well as HMG to present her full claims to Court. There is no question of limiting terms of reference to Court in such manner as to prevent Persia advancing any claims connected with oil dispute which she considers to be justified and it is recognized that Persia cld not agree to admit in advance that HMG’s claims were in any way justified; nor wld Persia expect AIOC to admit in advance of impartial arbitration the contentions of Persian Govt. Both parties having submitted their claims, it wld be for Court to decide whether and to what extent they are justified. Persians can now no longer doubt Court’s impartiality.
- 4.
- Thirdly, if in end an award for payment of compensation by Persia is made by Court, it wld clearly be disadvantageous to press for payment in any manner which cld not be borne by Persia, and Court cld be asked to determine manner in which, and period over which, compensation shld be paid. Implementation of Court’s award must depend upon Persia’s ability to pay and thus upon Persia deriving substantial benefits from a prosperous oil industry.
- 5.
- HMG wld be glad to consider further with US Govt how advantages of arbitration cld best be brought home to Persians. However, in any discussion with Persians it wld be most important to ensure that nothing was said which might impair our right to put forward any claims which we wished to Court or to give other countries impression that we were being soft with Persia.”
- The Department repeated this telegram to London on Dec. 22. (888.2553/12–2252) Drafted and signed by Richards.↩