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

888.2553/1–653: Telegram

No. 268
The Secretary of State to the Embassy in the United Kingdom¹

top secret
priority

Washington, January 7, 1953—7:58 p.m.

4505. Eyes only Ambassador & Byroade. Department’s views re four numbered points in urtel 3694, Jan 7 [6], are as follows:

• Point 1. Subsequent to telcon today, it developed it would be extremely difficult for Fisher fly London Thurs. If you need technical legal help, he could send Meeker immediately. Fisher himself could leave here Sunday if really necessary. Suggest you telephone tomorrow morning.

  Agree we should approach Court since British desire and Mossadeq approves (Tehran’s tel 823, rpt to Dept 2585).² In absence Fisher, believe you and anyone else you choose might go to The Hague.

• Point 2. DMPA will be assuming considerable risks in making advance under the best of circumstances. Basic purpose of advance is, of course, security to the West as a whole of the Middle East and its resources. Immediate purpose, however is to secure agreement re compensation to AIOC and in a form desired by the U.K. We do not see how we can ask DMPA to further increase the amount of money it will have at risk merely to meet a U.K. public relations problem. We could justify to the Congress an advance to Iran because of its contribution to the security of the U.S. and its allies. It would be difficult to justify an advance merely for the purpose of making compensation available to AIOC.

  The U.K. paper of Nov 19³ indicated that it would be desirable, but not a condition precedent to agreement on arbitration, that a portion of Iran’s oil revenues during phase two be placed in escrow. We believed we had fully satisfied their point in our original formulation of Heads of Agreement re DMPA advance.

  It might be possible to change the appearance without changing the substance, but believe even this would present us with grave difficulties and delays in being able to get the prompt action which is desirable from DMPA and the other interested agencies.

  We believe Eden is under misapprehension when he states that “If oil does not flow through a commercial contract there will be nothing set aside toward compensation”. Heads of Agreement paper provides that NIOC must agree to a schedule of deliveries, etc. before monthly installments of advance are made. We anticipate that even if commercial agreement should be delayed or in the last event prove impossible that International Export Company would have been formed and DMPA would receive deliveries, at least of products now in storage and of crude, and that as deliveries are made an amount equal to twenty-five per cent of their value would be put in escrow. Thus whether or not commercial agreement is made, payments will be made into escrow account proportionately and as rapidly as U.S. receives reimbursement of advance.

• Point 3. Subject to Henderson’s comments, Department believes both your suggestions may have merit. As to first suggestion, it should be understood of course that Mossadeq would not be asked to go beyond his previous statement reported Tehran Tel 2506 that he would be willing sign agreement for sale definite quantity oil over definite period years with an international organization of which AIOC could be participant. Validity or implementation of arbitration agreement or DMPA contract would not be dependent upon final conclusion commercial agreement. As to second suggestion, Brit should be clear that international consortium will be in a position to initiate negotiations as soon as Mossadeq is so prepared to do.

• Point 4. In view of fact we do not believe we can meet Eden’s problem on Point 2, we feel it would be desirable to make figure for initial advance forty million dollars. We would not want, however, to be foreclosed from raising this to fifty million dollars in the event that Henderson should find it impossible to get Mossadeq’s cooperation on other essential points if we stick adamantly to the lower figure. Obviously, from our standpoint, forty million dollars rather than fifty million dollars would be desirable.⁴

  Re tactics, we are inclined to favor British suggestion. An additional consideration in this connection is that the memo re Heads of Agreement on DMPA advance would need to be elaborated at some time into a more formal and detailed contract between DMPA and NIOC. We doubt whether it would be wise to send a DMPA representative to negotiate such a detailed contract prior to agreement by Mossadeq on the three points contained in the British package suggestion.

  Reurtel 3696 Jan 6, para 3, assume you continuing press utmost speed in organization of International Export Company. In its prompt activation and initiation of negotiations for commercial agreement lies UK’s best hope that our advance will not cause Mossadeq to become “pensioner”. Except for problem of negotiations between AIOC and other participants which should not be permitted to drag indefinitely, we see no reason why with determination to move forward company could not be organized and be in position to begin negotiate within month at outside even though all arrangements with all participants have not been worked out by that time.

Acheson

1. Repeated to Tehran eyes only for Ambassador Henderson. Drafted by Nitze, cleared by Linder and Jernegan, and signed by Jernegan.
2. See footnote 3, Document 266.
3. See Document 237.
4. On Jan. 9 Ambassador Henderson expressed the hope that he would receive instructions to offer Mosadeq an initial advance of $50 million rather than $40 million because he was fearful that if Mosadeq gained the impression that the most liberal offer was not being made from the beginning, he might haggle at every point of the negotiation. (Telegram 2612; 888.2553/1–953)