888.2553/1–1853: Telegram

No. 289
The Ambassador in the United Kingdom (Gifford) to the Department of State1

top secret

3935. Subject Iran Oil. As indicated in separate message,2 we had two meetings at FonOff today. At second meeting strong current of British thinking was apparent in their reactions to Mosadeq redrafts of documents. They felt there was sinister thread running through the numerous changes made by Mosadeq in his redrafts. They particularly feared that he intended simply to secure $50 million advance while making as few commitments as possible and at the same time include provisions in documents which contained concealed booby traps for UK and also for US. Because of this strong impression which British received in further study of Mosadeq redrafts, they hoped it might be possible to secure some clarification on the significance of Mosadeq’s changes in these redrafts. British felt that while it would be possible to work on basis of new language in Mosadeq’s redrafts, British would be most reluctant to enter upon this course if they felt that Mosadeq’s design was not really to reach agreement on basis of ideas discussed earlier by Henderson with Mosadeq. Following are points on which any clarification that could be provided by Henderson would be most helpful. British urged, as matter of tactics, that Henderson should not at this stage go back to Mosadeq.

British are concerned know why wording “loss of enterprise” is not acceptable to Mosadeq. They want to know what meaning is ascribed to words “in accordance with” in Mosadeq’s redraft of Article 2 in agreement for settlement of claims. British are particularly concerned by Mosadeq statement that inflexibility is what he wants in terms of reference. Basic point here is whether terms of reference give UK clear right to establish value of concession and expected future profits as elements of loss. British do not understand what objection there is to “the principles applied for the purpose of determining the compensation awarded under any UK law”.
British wonder why “method of payment” is mentioned in Article 2 of Mosadeq’s redraft. They are not clear as to relationship between Article 2 (1) and Article 8.
Does Art 2 (2) remain in agreement under Mosadeq’s new draft? What articles are deleted without substitution in Mosadeq redraft?
Why has the reference to “sterling” been omitted from redraft of Article 4 and Article 8 (1) and 8 (2)?
As mentioned earlier British do not understand relationship of Article 2 (1) to Article 8. They note that, under redrafted Article 8, escrow deposits cease on making of award by ICJ. They query whether, if escrow deposits are insufficient to satisfy award, remainder of award can be satisfied only through deliveries in kind agreed to by UK and Iran; or whether, if escrow deposits are insufficient to satisfy award, ICJ is given power to determine method of paying balance of award, with UK and Iran free, if they choose, to agree that balance of award should be satisfied through oil deliveries.
Even if Mosadeq considers exchange of letters unnecessary, why does he object to an exchange of assurances contained in the draft letters?
British note that DMPA agreement no longer contains undertaking by Iran to negotiate with international company as soon as company formed and ready to negotiate. This naturally matter of great concern to them and they inquire if this actually intended in Mosadeq’s redraft. Brit also inquire as to who are the parties to agreement referred to in part 4 of Mosadeq’s redraft-agreement on negotiations with international cooperation.

If it were possible to obtain satisfactory clarifications on above points, general British misgiving about Mosadeq’s intentions might be alleviated, with result that they could more easily see their way to working now on basis of Mosadeq’s redrafts.

  1. Sent to Tehran eyes only for the Ambassador as telegram 161 and repeated to the Department.
  2. See telegram 3936, Jan. 18, infra.