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

888.2553/1–353: Telegram

No. 264
The Ambassador in Iran (Henderson) to the Department of State¹

top secret
niact

Tehran, January 3, 1953—3 p.m.

2518. Eyes only Secretary and Jernegan.

1. Grateful for London’s helpful telegram to Department 3611, January 1, final section of which unfortunately was not received until late last night. Nevertheless arrival two sections just before my conversation last evening with Mosadeq enabled me to so steer conversation as to clarify certain points. It clear as result my yesterday’s conversation that Mosadeq willing to have AIOC decide which UK national law it would be willing to have arbitration board use as basis. I asked him three times during this conversation if I had understood him properly and received affirmative reply each time. I also wrote down his formula in his presence and at his dictation through Saleh, my Iranian counselor.

2. With regard to other questions raised in latter portion reftel my comment is as follows: Re paragraph (b) in my opinion it would wreck negotiations to endeavor to tie additional monthly installments to conclusion commercial sales contract. It would be clear that reason for such tie would be endeavor to pressure Iran into concluding sales contract. If Iran should become conscious such pressure its suspicions which I doing my best to assuage would be aroused to greater degree than hitherto. I earnestly hope that British will not insist on this tie-in. Re paragraph (c) it also my hope that British will not continue to insist that question of price for DMPA be left open pending conclusion commercial sales contract. For us to endeavor to connect price paid by DMPA with that to be negotiated by international company will again arouse suspicions. I can fully understand British concern lest willingness by DMPA to pay price higher than international company would be willing to pay might be prejudicial to negotiations by international company. On other hand paragraph 7 purchase contract provides that price provisions contained in paragraph 4 shall be appropriately modified to conform with price provisions of commercial contract with “export company”. DMPA could emphasize orally at beginning its negotiations with NIOC that in its opinion price tentatively set is higher than commercial price likely to be and that eventually therefore it should receive more oil for its money than contract indicated. If it would not be embarrassing to NIOC, its statement to this effect could be given publicity in Iran at time contract signed. In my opinion it would be preferable if American governmental agency would not be used as battering ram in effort to obtain lowest possible price from NIOC for long term commercial oil agreement.

3. I obtained impression from reftel that British inclined to view with skepticism and reserve Mosadeq’s apparent willingness to make certain concessions and his expressed desire to see oil settlement effected at earliest possible time. Their past experiences, portion of which I have had honor to share, furnish them considerable justification for their attitude. I agree with their views that possibility receiving $100,000,000 has strong allure for Mosadeq. On other hand I hope British doubts will not cause them to consider situation entirely hopeless or to examine each suggestion made or agreed to by Mosadeq with so much suspicion that we shall become bogged down in morass from which no solution can possibly emerge. As I have said in previous telegrams, I would not undertake to guarantee what Mosadeq will or will not do. I left him last night with impression that for first time he beginning to believe that there real possibility of early settlement.

I hope developments will not lag to such extent that he will again become discouraged and relapse into his usual intransigent frame of mind. Analysis of present situation here convinces me that it will be easier to obtain agreement from him than from any Prime Minister who has any likelihood of succeeding him and that if an agreement is to be obtained from him we must move rapidly. Furthermore we can not afford to become discouraged at temporary reverses or at flares of intransigence on his part. We had partial reverse on December 31 and may have more. I believe nevertheless we have in general made tangible progress. Although thus far Mosadeq has shown more interest in settling question compensation since he has seen some dollars in offing than he had in matter future sales, I detected during our last conversation growing interest in matter of future sales and I believe this interest will continue grow as we surmount hurdle of compensation. Mosadeq has to extent one track mind and difficult for him concentrate on more than one problem at time. I not be surprised if in case the compensation question settled and international company set up he try persuade it contract buy more oil than it believed itself able absorb.

4. I sincerely hope British will reconsider their attitude re ICJ judges being used as arbitration panel. I wonder if intent Article 34 Charter was really to prevent judges from being of maximum assistance in settling dispute which although between state and private company nevertheless is developing into threat to world peace. Intent of Article may have been to prevent Court from having its energies taken up with multitude litigation not really of prime international importance. Court’s usefulness might be enhanced if it could in case of this kind resolve itself into, or permit several of its justices to assist in forming, arbitration tribunal. I partly responsible for suggestion that if certain justices did not wish to participate in proceedings they might drop out. Mosadeq’s original suggestion was that “full panel” of justices serve as arbitration tribunal. I pointed out it might be physically impossible to have full panel; that in recent proceedings between UK and Iran justices of India and USSR did not participate; similarly various judges might not wish or be able be present during arbitration proceedings. Mosadeq’s answer was if certain justices did not participate he would be willing to regard those who did as representative arbitration board. In case it impracticable for all or most judges to act as arbitration board I hope British will consider somewhat more sympathetically Mosadeq’s suggestion that McNair and Sanjabi represent nucleus of arbitration board of three. It seems to me that if matter were presented in proper light to Court some way should be found to give McNair leave from Court to act in this capacity. Sanjabi not regular justice and could serve without receiving sanction Court. Surely provisions that judges are prohibited from engaging in any other business were not intended to prohibit them from participating in quasi-judicial proceedings of this kind which can have so great significance for world stability. In any event my efforts here will suffer serious setback if Court not approached immediately and in good faith with inquiry as to whether or not it would be willing (a) to resolve itself into arbitration panel or (b) to permit McNair to act as arbitrator. If Mosadeq’s suggestions re use of justices of Court in arbitration proceedings are turned down because of British misgivings rather than because of decision of Court itself that agreement to them would be improper it would be difficult again to convince Mosadeq that British are not dragging their feet or that British really do desire early settlement. Mosadeq is infatuated with fairness of Court since its recent decision. It will be difficult persuade him trust any other arbitrator. Furthermore ICJ popular for present with Iran public.

Henderson

1. Transmitted in two sections; also sent to London eyes only for the Ambassador and Byroade.