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

888.2553/1–353: Telegram

No. 265
The Secretary of State to the Embassy in the United Kingdom¹

top secret
priority

Washington, January 3, 1953—6:18 p.m.

4403. Eyes only Amb and Byroade. Re Byroade–Nitze telecon today fol are our views on major points:

1. Arbritration: We agree Henderson views expressed para 4 Tehran tel [phone] London).² As we see it there are three lines which cld be followed: (a) as suggested Tehran reftel Court cld be asked resolve itself into Arbitral Tribunal, (b) Court cld be asked give McNair leave to join with Sanjabi in nominating third arbitrator and serving on Arbitration Board, or (c) reluctantly we suggest that if Brit find neither (a) or (b) acceptable, Henderson cld attempt to persuade Mossadegh accept formal participation Brit Govt as party before Court by presenting to him detailed draft agreement which wld spell out plainly and carefully that Court in no way going back on its previous decision that dispute not subject its jurisdiction and making plain UK appearing solely as rep AIOC.

Re (c) wld appreciate Henderson views whether he considers it feasible take this up with Mossadegh on basis draft transmitted Deptel 1611 (4384 to London)³ or if we provide more elaborate draft.

Re (a) and (b), we think shld be possible get around prohibition on Judges engaging in other business if they receive no compensation for arbitral services. In any event we agree with Henderson that Brit shld not reject these two possibilities until Court itself has been asked to consider them. If they agree believe they should immediately consult Court. Unless Brit object we wld recommend we be authorized notify Mossadegh this being done as evidence Brit interest in coming rapidly to settlement.

2. Price: In light Henderson telegram we gather 35 percent discount in proposed DMPA contract wld probably be acceptable to Mossadegh and we hope Brit will also find it reasonable.

3. International Company: We believe Mossadegh latest proposal (Tehran tel 2506 rpt London 783)⁴ offers satisfactory solution question negotiation sales contract. We believe that UK should be pressed at this time only to agree (a) that name of “Export Company” be changed to one including word “International”, (b) that this company be incorporated in Switzerland or some other non-British jurisdiction and (c) that there would be a non-British interest or interests sufficient to justify calling it international. However, we think it probably unnecessary actually to complete formation of company before arbitration agreement concluded, so long as Mossadegh can be assured that company will be international and incorporated outside UK. Although we anxious see speedy progress on both lines, we fear that if conclusion arbitration agreement tied to complete organization of company inevitable delays in deciding participation and completing incorporation wld endanger arbitration agreement. Company need not be in existence prior to advances by DMPA since such advances cld be made direct to NIOC even though new company wld be made agent for receiving and delivering oil bought by DMPA.

FYI Our preliminary thought is that AIOC might participate to extent of something less than 50 percent, with Shell taking a good slice; thus together they wld have control. French having requested participation they might be allotted five to ten percent and remainder held open for American participation. Question of how to decide what American companies shld participate is somewhat troublesome although we are confident it can be worked out. End FYI.

4. Message to Mossadegh: We think point has been reached at which it is important Henderson be able convey to Mossadegh some reaction as coming from Brit rather than Amer Govt. It is of course up to Brit to determine what they might be willing to say but we wld think minimum wld be expression of genuine interest in Mossadegh proposals plus statement they being urgently studied and British Govt hopes soon to be able discuss details. Henderson cld simultaneously say that US Govt considers Mossadegh proposals offer real basis discussion and is prepared cooperate fully with Iran and Brit Govts in working out agreement along these lines.⁵

Acheson

1. Also sent to Tehran. Drafted by Nitze, Linder, and Jernegan; signed by Jernegan.
2. Supra.
3. Not printed. (888.2553/1–253)
4. Document 263.
5. Byroade responded on Jan. 4 that he agreed with the analysis contained in telegram 4403 and believed that the proposals outlined in it might well serve as the basis for an agreement. He went on to say that the British were being brought up to date, that the British Cabinet was scheduled to consider the matter shortly, and that he hoped that there would soon be decisions made in London which could be transmitted to Mosadeq. (Telegram 3644; 888.2553/1–453)