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

888.2553/1–953: Telegram

No. 271
The Ambassador in the United Kingdom (Gifford) to the Department of State¹

top secret
niact

London, January 9, 1953—10 p.m.

3777. Eyes only Secretary and Jernegan from Byroade. I am again encouraged by pace at which things now seem to be moving here on Iran. Eden extremely good at lunch and overruling his advisers in our presence, arranged series of meetings this afternoon culminating in meeting his Cabinet colleagues this evening. I think that British are on verge of decisions here which may well finalize quickly. One sign of encouragement is urgency and apparent open-mindedness with which British have undertaken to examine new formula for terms of arbitration which we put to them today (Embtel 3745 January 9).² Formula also discussed this afternoon with Company who seem favorably disposed, but wish to consult Shawcross who arrives from Aden tomorrow before final decision reached. Eden has indicated his willingness return if required for Iran discussions.

After lunch with Eden today, there was further discussion of question of tying DMPA advances in with commercial negotiations. We both reiterated our respective points of view, but there was no doubt that Eden definitely more flexible on this problem than most of his colleagues. At end of discussion Eden suggested that matter might be handled by our making initial advance of 40 to 50 million dollars upon completion arbitration agreement and DMPA contract and subsequent installments on monthly, or preferably bi-monthly, basis after schedule of deliveries agreed on, informing Mosadeq at same time that if commercial negotiations with international company were completed earlier, entire remaining advance would be handed over. I said we would be willing to look into this one.

On reflection, I no longer think personal message from Secretary to Eden suggested Embtel 3740 January 9³ is indicated to meet situation here on this point. If we can get workable arbitration agreed to, we can proceed with our part of package as we see fit (within reason of course) without undue resentment here. That of course, is all we ask and I have never requested their express agreement. Believe when all else is agreed I can close this one out by saying that we feel that our Ambassador in Tehran, on whom we both must rely for advice, is in best position to judge what can be done and that Washington is firmly of opinion that he must be backed on this point.

I would be grateful for the following actions:

(a) Department’s and Tehran’s urgent comments⁴ regarding arbitration formula contained Embtel 3745.

(b) Forwarding soonest of essential main headings draft DMPA contract (including advances) which must be included as part of package to be put to Mosadeq. Believe I could do this here, but would appreciate this assistance.

Gifford

1. Repeated to Tehran eyes only for Ambassador Henderson.

2. In telegram 3745 Byroade informed the Department that he was submitting a new formula for the terms of reference governing arbitration in an effort to meet British objections expressed the previous day. The text of the new formula reads:

   “To determine the sum required to provide fair compensation for the loss of property, rights and interests in Iran sustained by the company as the result of the passing of the Iranian Oil National Law of March and May 1951 and for that purpose the tribunal shall use as a basis any English law, which the company might specify, nationalizing any industry in the UK; and to determine the validity of counter-claims which the Iranian Government may have against the company and the sum required to meet them.” (888.2553/1–953)

3. In telegram 3740 Byroade reported that, in view of the fact that the discussions of the previous day with the British were disappointing, progress toward reaching a settlement of the oil crisis could be slowed considerably. To prevent this from occurring, Byroade suggested that Acheson should address a personal appeal to Eden in an effort to overcome British objections to the terms of reference and the method of handling the DMPA advance. (888.2553/1–953)

4. On Jan. 9 the Department responded that it thought Byroade’s suggested formula appeared to meet Mosadeq’s political and psychological problems. If, however, Henderson believed the insertion of the words “rights and interests” would be unacceptable to Mosadeq, the Department suggested that the first part of the formula might be changed to read:

   “To determine the sum required to provide fair compensation due the Anglo-Iranian Oil Company as the result of the passing of the Iranian Oil Nationalization Law”.

   Such general phraseology would permit the AIOC to claim compensation for any and all losses whether for property or other “rights and interests”. (Telegram 4557; 888.2553/1–953)

   On Jan. 10 Ambassador Henderson commented that he hoped the British would accept Byroade’s new language, especially as amended by telegram 4557 to London. Henderson did not see how Mosadeq could object to Byroade’s draft as amended. (Telegram 2630; 888.2553/1–1053)