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

888.10/12–2252

No. 254
Memorandum by the Director of the Policy Planning Staff (Nitze) to the Secretary of State¹

secret

Washington, December 22, 1952.

As was decided at the meeting Friday afternoon on Iran, I called in Burrows and told him (a) that it had been decided to cancel the Eximbank meeting scheduled for Monday and to defer consideration of an Eximbank loan to Iran; and (b) that we desired to receive as early as possible any further U.K. views regarding a lump-sum settlement in the contingency that Henderson failed in his efforts to secure acceptance of the principle of arbitration without unacceptable conditions.

On Saturday morning, Burrows came in to see me to say that he had received instructions from London to tell us (a) that Mr. Eden deeply appreciated Mr. Acheson’s decision to defer consideration of an Eximbank loan; (b) that they would send us their views with respect to a lump-sum settlement; and (c) that they hoped we would consult with them again before taking favorable action on financial assistance to Iran.

On Saturday afternoon at 4:00 o’clock, Burrows came in to see me again to give me the attached aide-mémoire containing the U.K.’s views with respect to a lump-sum settlement.² I pointed out to Burrows that the arguments advanced in the aide-mémoire were similar to those made by Mr. Eden in Paris. As to their first point, it seemed to suggest that any variation from the Truman–Churchill joint proposal would be “to capitulate to Dr. Mossadeq”. I pointed out that an offer by Dr. Mossadeq of an adequate lump sum could similarly be viewed as a capitulation on his part. Clearly if a settlement were to be arrived at, some ground would have to be given on both sides. As to their second point, I said that were not asking the British at this time to agree to a lump-sum settlement; that if Dr. Mossadeq were to come forward with an offer of his own in an adequate amount this could hardly lead to trading down to a “derisory sum”, and that we were as much interested as the British in avoiding an inadequate sum which would have the effect of encouraging nationalization in other concession areas. As to the third point, I said we understood the political difficulties in the U.K. of agreeing to any lump sum, but that we felt the political difficulties in Iran in accepting arbitration with no restrictions were, perhaps, even greater, and that if a solution were desired the Iranian political problems must also be taken into account.³

It seems to me that a more formal reply to the British aide-mémoire may be advisable.⁴

Paul H. Nitze

1. At the top of the source text appears the following handwritten comment: “I agree with this paper including the last paragraph. DA.”
2. Not printed. Burrows handed this aide-mémoire to Nitze on the afternoon of Dec. 20. The aide-mémoire announced that Eden and his colleagues had considered Acheson’s suggestion of a “lump-sum” settlement on compensation, but strongly objected for the following three reasons: (1) a lump-sum settlement would represent an Anglo-American capitulation to Mosadeq because it would be an abandonment of the Truman—Churchill proposal of having Mosadeq accept compensation through impartial arbitration; (2) to settle compensation without resort to impartial arbitration would leave the British with no firm ground for negotiations with the Iranians and would start a process of extravagant Iranian counter-claims if the idea of lump-sum was introduced; (3) the principle of impartial arbitration had enormous advantages from the points of view both of British public opinion and of safeguarding concessions in other foreign countries. The aide-mémoire also reminded Secretary Acheson that President Truman had agreed on Aug. 25 that the International Court of Justice should be the tribunal on compensation, and that the British Government had not agreed that Ambassador Henderson should give any hint to Mosadeq about a lump-sum settlement during his forthcoming exchanges with Mosadeq. (888.10/12–2252)
3. On Dec. 24 Ambassador Gifford reported that Eden told him the previous day that the British Cabinet had reexamined the question of lump-sum compensation and had reiterated its opposition to Henderson exploring the idea with Mosadeq, even if he turned down arbitration. (Telegram 3529; 888.2553/12–2452)
4. At the top of the source text appears the following additional handwritten comment: “Nitze informed”. According to Department of State files, Nitze, on Dec. 23, drafted a proposed aide-mémoire to be used as a reply to the British note. He revised this draft on Dec. 30. Neither this document nor a substantially altered version drafted on Jan. 7, 1953, by Nitze was ever submitted to the British Government. Nitze, according to a handwritten statement on the Jan. 7 draft, handed a copy of this version to the appropriate officials in NEA for use at their discretion. No record exists that NEA ever gave this document to the British. Various drafts of response composed by Nitze, are in PPS files, lot 64 D 563, “Chronological 1952 Jan-Dec”, and “Chronological 1953”.