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

888.2553/12–2652: Telegram

No. 258
The Secretary of State to the Embassy in Iran¹

top secret
priority

Washington, December 29, 1952—6:27 p.m.

1568. In ur discretion you are authorized communicate all or part of fol to Mosadeq (reurtel 2425):²

1. Dept is encouraged by report ur conversation with him Dec 25. We believe his offer is constructive step and it is receiving our careful consideration.

2. We are communicating substance of offer to Brit. Byroade left for London today in connection various problems. This will afford him opportunity discuss Iran oil situation with Brits.

3. In absence of Brit reaction we cannot of course go farther into substance of ques. We do foresee however possible technical difficulty in suggested arbitral procedure if Iran Govt insists that Brit Govt must not be party to arbitration. Statute of ICJ provides that only states may be parties to proceedings before court. Therefore we do not believe AIOC cld be party in its own right; Brit Govt wld have be nominal party to proceedings before Court. We are studying matter and if Brit are willing consider Mosadeq’s offer will discuss this particular problem with them as well as with Irans. There might also be informal consultation with ICJ itself. On basis preliminary study we see two possible alternatives:

a) Arbitral agreement might be drawn between Iran Govt and Brit Govt in such way as to make Brit Govt nominal party before court but wld make plain by its contents that AIOC is real party at interest and that court not assuming jurisdiction except to extent specified by parties, or

b) Arbitral agreement between Iran Govt and AIOC might provide that court shld appoint panel of three, five or other mutually agreeable number to act as arbitral tribunal. In this case of course Brit Govt wld not appear at all.

We do not know whether either alternative wld be acceptable to Brit. (FYI If you have not discussed these technical difficulties with Mosadeq, we believe you shld do so in order to determine how he thinks problem can be handled. In discussing matter you cld pt out these difficulties arise because of nature of statute of court which cannot be changed by the parties. If Mosadeq is concerned that presence of UK Govt as party to arbitration proceedings might derogate from earlier ICJ ruling that dispute not between Govts, you can pt out that this can be avoided by proper drafting of terms of reference for arbitration. End FYI)

4. Dept has noted that you discussed at length possible means of resuming commercial flow of oil from Iran once compensation question settled and that Mosadeq did not appear see serious objections to outline you presented. It wld be helpful to us to know definitely whether he wld in fact be willing to enter into negots with subsidiary of AIOC (with or without assoc of Amer or other companies) as soon as agreement had been reached on method of determining amount of compensation. We consider resumption of substantial oil sales important because

a) it is only means by which compensation can be paid, and

b) it is essential to receipt by Iran of adequate revenues to meet current finan situation, which is our primary interest.

It is understood that there wld be no question of a monopoly or near-monopoly and, as you have already explained, it is unlikely that AIOC and other majors wld be interested in quantities exceeding 20 million tons yearly.

(FYI It is our present feeling that we shld not push Mosadeq to sell greater quantities than he wishes so long as amount is large enough to assure compensation and some net revenue to Iran Govt.

From our pt of view, if Brits cld be persuaded and Iran wld agree, we wld much prefer have commercial negots proceed simultaneously with negots of arbitral agreement. This wld reduce objection to our making advance prior consummation of commercial deal for future flow of oil. In this connection, if 100 million advance is to be undertaken prior conclusion of commercial negots, Dept considering desirability extending payments against advance over period of time. In ur discretion you may wish avoid permitting Mosadeq assume total advance will be made in one lump sum immed after agreement for arbitration. End FYI)

5. We agree entirely on importance preserving secrecy.

Acheson

1. Repeated to London. Drafted and signed by Jernegan and cleared with Secretary Acheson, Richards, Nitze, Linder, Metzger, and Bonbright.
2. See footnote 2, Document 256.