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

888.2553/1–953: Telegram

No. 273
The Secretary of State to the Embassy in the United Kingdom¹

top secret
priority

Washington, January 10, 1953—4:47 p.m.

4599. Eyes only Amb and Byroade. Fol covers Tehran’s tels 2612, 2626, 2627, 2628, 2630 and London’s tel 3777.²

1. Terms of Reference:—(Re Tehran’s tels 2628 and 2630).³ We hope Byroade can persuade Brit accept his formula transmitted London 3745⁴ as modified by third para Deptel 4557⁵ and endorsed by Henderson.

2. Amount of initial advance:—(Re Tehran’s tel 2612, para 2 and 2627 para 5).⁶ In view Henderson strong feelings we are reconsidering this ques.

3. Subsequent installments:—(Re Tehran’s tel 2627 paras 5 and 6).⁷ We do not propose that installments shld be tied to conclusion contract between DMPA and International Company. Our present thinking is that provided NIOC lives up to commitment to begin commercial negotiations within time specified, monthly installments wld begin as soon as schedule of shipments agreed between DMPA and NIOC and DMPA has satisfied itself regarding availability and quality of oil and suitability of port, loading and other essential facilities. See numbered para 1 of heads of agreement text transmitted 1588 to Tehran. With reference to possible tie-in of monthly installment to commencement commercial negotiations, we await Henderson and Byroade views on suggestion contained para 5 Deptel 1674 (4570 to London).⁸

We doubtful utility Eden’s suggestion reported second para London tel 3777 that Mosadeq might be told balance of installments wld be paid in lump sum if commercial negotiations completed before end of period during which installments wld normally be payable. Believe Mosadeq might resent this as too obvious pressure. (See para 6, Tehran’s tel 2627.) In view Byroade’s belief we can proceed as we see fit (within reason) with our part of package (third para London’s tel 3777) we prefer leave installment ques as it now stands with relation to Brit.

4. Escrow arrangement:—(Tehran’s tel 2612). Believe this point adequately covered in para 3 Deptel 1674 (4570 to London) unless Brit strongly object. Re financial institution, it is our idea as set forth Deptel 1588 to Tehran and 4337 to London⁹ that Federal Reserve Bank NY shld hold funds on deposit. Re formula for deposit, is not formula in para 5 in Deptel 1588 adequate? Only additional point we see is that actual detailed escrow agreement would make it explicit that if award is less than amount deposited in escrow account any balance wld be paid to NIOC.

5. Mosadeq commitment re commercial agreement:—(Tehran’s tel 2627 numbered para 2).¹⁰ Suggest Henderson draft form of commitment he believes Mosadeq wld accept and be willing make public, bearing in mind definite time period for beginning negotiations shld be specified, this time period to begin with signing arbitration agreement. See para 4 Deptel 1674 (4570 to London).

6. Main headings draft DMPA contract:—(Re London’s tel 3777 final para). Heads of agreement sent London Deptel 4337 and Tehran 1588. Believe at present juncture they need only fol modifications:

a. Change first (unnumbered) para of quoted text to read: “After agreement is reached between AIOC and Iran upon methods and terms for arbitration of compensation, DMPA will contract to take from NIOC over period of time oil products or crude oil to a value of approximately $133 million. Twenty-five percent of the value of oil products or crude oil delivered to DMPA under the contract will be placed in escrow to be liquidated in accordance with the terms of the arbitration award. DMPA will advance $100 million to NIOC against future deliveries of oil products or crude oil upon the fol basis:”

b. In numbered para 1 of quoted text change amount of initial advance to $40 million (or to $50 million if that is the figure finally determined).

c. In numbered para 2 of quoted text change name to “International Export Company”.

7. We hope Brit can soon show us draft of full arbitration agreement.

8. We assume Brit actively working on formation international company.

9. We concur heartily in need for secrecy as stressed Tehran’s 2629.¹¹

Acheson

1. Repeated to Tehran eyes only for Ambassador Henderson and to The Hague for Byroade. Drafted by Jernegan, cleared with Nitze and Linder, and signed by Jernegan.

2. In telegram 2626 Ambassador Henderson asked the Department for information about the price which the United States was going to offer Iran for Iranian crude oil. (888.2553/1–953)

   Telegram 3777, Jan. 9, is Document 271. The remaining telegrams are explained in footnotes below.

3. In telegram 2628, Jan. 9, Ambassador Henderson expressed the opinion that there was no possibility that Mosadeq would accept the British preferred draft as set forth in London telegram 3738 (Document 270) as Mosadeq could never agree to a formula which specifically referred to future profits. (888.2553/1–953)

   For a summary of telegram 2630, Jan. 9, see footnote 4, Document 271.

4. See footnote 2, Document 271.
5. See footnote 4, Document 271.

6. For a summary of telegram 2612, see footnote 4, Document 268.

   In paragraph 5 of telegram 2627, Jan. 9, Ambassador Henderson expressed the hope that, in view of the psychological value involved, he would be instructed to advance $50 million instead of $40 million, and that the British could be persuaded to withdraw their objections to the American offer of $50 million at the outset of the DMPA negotiations. Henderson believed that his advice should prevail, especially because Mosadeq would in all likelihood be disagreeably surprised when he learned that DMPA would not begin paying the additional installments to Iran until after the contract providing for the schedule of DMPA deliveries had been made with the international company. (888.2553/1–953)

7. In paragraph 6 of telegram 2627, Jan. 9, Ambassador Henderson stated that it would be unwise to include a clause in the DMPA contract which would disallow the payment of subsequent installments until negotiations with the international company had started. Mosadeq had already stated his willingness to enter negotiations as soon as the international company was ready, and such a tie-in would be regarded by Mosadeq as an insult to his integrity. (888.2553/1–953)
8. Supra.
9. Dated Dec. 31, 1952. (888.2553/12–3152)
10. In paragraph 2 of telegram 2627, Jan. 9, Ambassador Henderson suggested that Mosadeq make a formal statement of his intention at the time of signing the agreements to enter into a commercial agreement. (888.2553/1–953)
11. In telegram 2629 Ambassador Henderson stressed the need for secrecy concerning the Henderson–Mosadeq talks and concurred with Mosadeq’s view that premature disclosures of substance might strengthen the hand of the nationalist extremists to such an extent that Mosadeq would be compelled to retreat from positions that he has taken. (888.2553/1–953)