888.2553/7–151: Telegram

No. 35
The Ambassador in Iran (Grady) to the Department of State


6. Eyes only for Secretary Acheson. I wish to make a strong personal appeal to you and to the President if you care to discuss the matter with him. All last fall and winter we endeavored to get the AIOC to change its policy in the interest of the over-all objectives of the British and ourselves vis-à-vis Russia. I talked with Shepherd a number of times, with Furlonge when he was here last November and again with Ambassador Franks in Washington last December. My pleas were in addition to the many efforts made by the Department though the London Embassy and particularly the efforts of McGhee in London last September. All that time it was impossible to get the Foreign Office to influence the oil company to carry out our strong recommendations with regard to some non-monetary concessions which would enable Razmara to get the supplemental agreements through the Majlis and incidentally to strengthen him to get through various reforms he was seeking to effect.

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The same intransigence on the part of the British that thwarted us last fall and into the spring seems again to be manifesting itself. The British, led by Mr. Morrison, seem to be determined to follow the old tactics of getting the government out with which it has difficulties. You will find in recent cables from London some evidences of this and I am sure it is the view of many of the oil officials. (I do not include Jackson as having this view.)

Mosadeq has the backing of 95 to 98 percent of the people of this country. It is utter folly to try to push him out. If he falls of his own weight, that is another matter. When I got him to make the concession of promising to withdraw the antisabotage law,1 it was interpreted by Mr. Morrison as a manifestation of weakening on Mosadeq’s part and a justification for stiffening on the part of the British. This is not the spirit in which to approach the problem here.

Since the Foreign Office is prepared (London telegram 6943 June 302) to allow me to endeavor to get Mosadeq to accept endorsement on receipts for tanker shipments which I proposed (Embtel repeated information Department 3520, June 303) I will endeavor to get Mosadeq’s acceptance which will permit outward flow of oil and consequently, continuance of operations of the refinery. This will provide interim period during which efforts can be made to get negotiations re-started especially if, as I have urged, Jackson would explain and elaborate the British position. I think if Jackson could indicate a flexibility regarding the down payment of 10 million pounds and indicate it might be raised to 20 or 25 million pounds, this would greatly help in creating an atmosphere in which negotiations could re-start.

Mr. Morrison’s statements in Commons, including personal criticism of Mosadeq, are anything but helpful. If I am unable to get Mosadeq to accept endorsement on receipts proposed by the company, there will be great unemployment resulting from the inevitable closing down of the oil refinery.

We have about ten days in which to get some action before the catastrophe of closing down of the plant takes place. If the British think they can, as some directors have said, bring the Iranians to their senses by having the plant closed down, they are making a [Page 81] tragic mistake. Those who are making the policy on the oil question in London evidently are counting on Mosadeq falling if the plant closes. This is very doubtful. In any case it is my opinion there is no chance of any reasonable Prime Minister succeeding him. (London telegram 191, July 1.4) It is all too likely that the country will quickly fall into a status of disintegration with all that implies.

I appeal for your support and the President’s in the policy I am trying to follow here, that is a policy of conciliation and an attempt to bring reasonableness into a most explosive situation.5

  1. On June 28 Ambassador Grady told Foreign Minister Kazemi that the antisabotage bill was having a demoralizing effect on the oil technicians and that in the interest of solving the oil dispute it should be withdrawn. (Telegram 3468 from Tehran, June 28; 888.2553/6–2851) On the following day Mosadeq agreed to pigeonhole the bill.
  2. Not printed.
  3. The receipts in question stated the amount of oil received and its destination and indicated that the receipt had been signed by the captain of the oil tanker without prejudice to the rights of the AIOC. (888.2553 AIOC/6–3051)
  4. Not printed.
  5. On July 2 Secretary Acheson took a copy of this telegram to President Truman and reviewed the Iranian situation in detail. Acheson told the President that the Department of State was considering a new approach to Iran and the United Kingdom which would involve a modus vivendi in the oil dispute and the offer of a U.S. mediator. (Memorandum of conversation by Acheson and memorandum from McGhee, both dated July 2; 888.2553/7–251)