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

888.10/3–1853: Telegram

No. 321
The Ambassador in Iran (Henderson) to the Department of State¹

top secret
priority

Tehran, March 18, 1953—6 p.m.

3752. Eyes only Secretary and Byroade.

1. As I was preparing leave Prime Minister today after conclusion our conversation regarding his proposed speech² he said he would like talk about extremely serious matter. He regretted his government could not accept oil proposals. To do so would represent betrayal trust Iran people. Now that there seemed be little hope oil settlement immediate future, he must decide course to be followed. Financial-economic situation extremely grave. Government must take action decisive character without delay. He would like my frank opinion as to whether it would be wise for government issue statement to effect it willing sell oil at 50 percent discount to any buyer. I told Prime Minister it not appropriate for me give him advice this matter. Decision this kind one which only Iranians responsible for future their country should make. Only comments which I could offer were that such announcement might make more difficult ultimate settlement oil problem; it would not be likely result in any material alleviation Iran’s economic and financial problems; if it would result in purchase by Iron Curtain countries of Iran oil, Iran’s financial and economic difficulties might be increased. I did not believe Iron Curtain countries had intention purchasing oil from Iran in helpful quantities; they might make limited purchases primarily to force US to take certain action in conformity with Battle Act which would curtail any US aid.

Prime Minister asked whether US could not make some kind loan to Iran to be repaid in form oil or from proceeds oil sold to other parties. I said I doubted US Government could extend financial assistance to Iran at time when Iran was rejecting proposals for settlement oil problem which US Government considered fair and reasonable and which, if accepted, would enable Iran obtain revenues from its oil resources. Prime Minister asked whether US Government could not at least sell Iran immediately 100,000 tons sugar on credit. I said such credit would really be loan and same considerations would apply as to loan. I also doubted that US Government had funds available for such purposes. He asked whether this could not be considered TCA transaction. I replied negative, such limited funds as were available to TCA were already allocated for technical assistance purposes. Prime Minister said Iran seemed have three choices; he would be grateful if I would describe them to US Government and inquire whether US Government would give him information enabling him determine which to make. He scribbled description “three choices” and asked Saleh, my Iran Adviser to copy. Following is translation:

• First: to purchase 100,000 tons of sugar on credit from American companies on condition that if within period six months countries other than those behind Iron Curtain should offer buy oil, Iran Government would sell them oil and pay price sugar from proceeds of sales.
• Second: Notice to be published whereby Iran Government would sell to first buyers 3,000,000 tons oil within period three months with 40 percent discount. If American oil companies would make first offer for these 3,000,000 tons, no contracts would be made with any iron curtain country during said period of three months.
• Third: Any purchaser may buy oil at any price acceptable to Iran Government on cash carry basis for definite period time, no purchases to be made on credit. Only countries of Western bloc could buy oil on such credit terms as they may desire.

2. I discussed briefly with Prime Minister what he had written, repeating I thought there no likelihood US would be able sell Iran 100,000 tons sugar on credit. I also stressed that Iran’s difficulties certain to increase if it should begin selling oil to iron curtain countries. It would be difficult find American oil companies prepared to purchase 3,000,000 tons oil at this time. I did not believe Iran could extricate itself from its present financial difficulties through any of three ways outlined. Only by settlement oil dispute would Iran be able in my opinion surmount its present difficulties. Prime Minister said in any event he would appreciate it if I would submit these three choices to US Government and inquire regarding extent it would be able to give assistance. If it could not give financial loan nor sell sugar on credit, could it prevail on some American company or companies to buy 3,000,000 tons Iran oil? He needed answer urgently. I agreed make inquiry but said I would be lacking in candor if I did not tell him now little possibility of loan, extensions of credit, or purchase large amounts oil by American oil companies. Prime Minister said would be extremely unfortunate if impression would be created in Iran US cooperating with UK in endeavoring strangle Iran in order force it accept UK terms oil settlement. I said US Government had no desire see Iran strangled. US Government was anxious that Iran be independent and healthy politically and economically. That was why US Government had been spending so much time and effort assist in finding solution oil problem and so many millions dollars annually in extension military and TCA aid. Prime Minister repeated hope I could obtain early answer.

3. Comment: In spite Prime Minister’s desire for early answer, I inclined believe might be preferable not rush reply. I plan tentatively visit Isfahan and Shiraz during Iran New Year holiday week March 23–29. We might postpone reply to Prime Minister until early April. Majlis will reconvene about April 5.

Henderson

1. Transmitted in two sections; also sent to London eyes only for Ambassador Aldrich.
2. Reference is to Mosadeq’s radio speech of Mar. 20 to the Iranian people announcing the breakdown of the oil negotiations. The text of his speech was transmitted to the Department in despatch 780, Mar. 24. (888.2553/3–2453)