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

Eisenhower Library, Eisenhower papers, Whitman file

No. 358
Memorandum of Discussion at the 160th Meeting of the National Security Council, Washington, August 27, 1953¹

top secret
eyes only

Washington, August 27, 1953

Present at the 160th Meeting of the Council were the Vice President of the United States, presiding; the Secretary of State; the Acting Secretary of Defense; the Acting Director, Foreign Operations Administration; the Director, Office of Defense Mobilization. Also present were the Secretary of the Treasury; the Acting Director, Bureau of the Budget; the Chairman, Atomic Energy Commission; the Chairman, Joint Chiefs of Staff; the Chief of Staff, U.S. Army; the Chief of Naval Operations; the Chief of Staff, U.S. Air Force; the Commandant, U.S. Marine Corps; Robert R. Bowie, Department of State; Frank C. Nash, Department of Defense; General Gerhart, Joint Chiefs of Staff; Robert Amory, Jr., Central Intelligence Agency; the [Acting] Director of Central Intelligence; Robert Cutler, Special Assistant to the President; C. D. Jackson, Special Assistant to the President; the Acting White House Staff Secretary; the Executive Secretary, NSC; and the Deputy Executive Secretary, NSC.

There follows a summary of the discussion at the meeting and the chief points taken.

[Here follows discussion of items 1 and 2.]

3. The Situation in Iran (NSC 136/1; NSC Actions Nos. 875-b and 766-a)²

General Cabell briefed the Council on the most recent developments in Iran. He said that General Zahedi appeared to be establishing a moderate nationalist government. There was real hope for its stability and for improvement in Iran’s economic and financial situation. Members of the new government were as experienced and capable as one could anticipate in Iran, although the Shah had expressed disappointment at the small number of new faces in the Cabinet. Indications are that General Zahedi will oppose the indiscriminate imposition of martial law, and when his control is firmly established he is expected to recall the Majlis. Elections for a new Majlis are to be anticipated thereafter. The army will doubtless manipulate these elections to ensure a conservative majority in the new Parliament.

General Cabell predicted that the Tudeh Party would be ruthlessly curbed, with the result that it would probably go underground. Its leadership is still intact, and it may be expected to work with the pro–Mossadegh factions to discredit the Shah and the new regime.

The allegiance of the tribes, said General Cabell, is not yet completely clear, but the fact that they have never been able to work in concert with one another minimizes the dangers which Zahedi must anticipate from the tribes.

General Cabell stated that the most urgent problems confronting the new government of Iran are economic and financial. It is unlikely that an agreement with Britain, to settle the oil controversy, can be readily and quickly achieved, if for no other reason than that General Zahedi cannot afford to seem a British stooge. However, concluded General Cabell, if United States financial aid can be promptly extended, Iran will again assume its place in the pro–Western grouping of nations and American relations with Iran will improve. Relations between Iran and Great Britain are not likely to undergo any sudden change, and a settlement of the outstanding issues between the Soviet Union and Iran is unlikely at present.

Secretary Dulles commented that while what happened in Iran was spontaneous, he did feel obliged to say that a number of people in Iran had kept their heads and maintained their courage when the situation looked very tough.…

As a result of what had happened, Secretary Dulles informed the Council, the United States now had a “second chance” in Iran when all hope of avoiding a Communist Iran appeared to have vanished. Secretary Dulles said that there had been an exchange of letters between the President and General Zahedi. Secretary Dulles summarized General Zahedi’s letter, pointing out the latter’s statement that he desired to reconsider the problem of the oil settlement and that he needed assistance. The President had replied that General Zahedi’s request would receive sympathetic consideration. Secretary Dulles went on to point out that in order to assist the new regime, the Administration would require funds beyond those programmed in the Mutual Security Act. The additional funds would probably be in the neighborhood of $35 million. The most difficult problem confronting us was how to develop revenues for Iran out of her oil. We can’t very well subsidize Iranian oil when we can’t make full use of present resources available to us. Since we must not, however, miss this second chance, Secretary Dulles suggested that we ought to select quickly an individual knowledgeable in the petroleum field, and a skillful negotiator, and then turn over to him full power to negotiate a settlement. In order to pick such a man quickly and get him started, Secretary Dulles recommended that the choice be entrusted to a committee consisting of himself, the Secretary of the Treasury, the Secretary of Defense, and Mr. Stassen.

Mr. Cutler inquired whether such an individual would be a special representative of the President. Secretary Dulles replied that he could represent the President or the Secretary of State. In any case, he would head up a task force. The main thing is to assure that all the manifold ideas for achieving a settlement should channel through this individual.

Secretary Dulles’ proposal was well received by the Council, and CIA asked to be included in the committee if its representation thereon appeared useful.

Mr. Cutler then reminded the members of the Council of the task which it had asked the Attorney General to perform, noted that Judge Barnes had been appointed by the Attorney General to carry out this task, and that Judge Barnes was planning a committee of three individuals to perform the task. Mr. Cutler stated that Judge Barnes had already produced a tentative statement of the problem to which his committee should address itself. Mr. Cutler further pointed out the relationship between Judge Barnes’ assignment and the committee which had been contemplated in NSC 138/1,³ which, of course, had never materialized. Mr. Cutler assured the members of the Council that Judge Barnes would consult with the heads of appropriate departments and agencies before completing his report, which he hoped to have ready by December.

Secretary Dulles inquired whether any new consideration was now being given to postponing the civil suit against the so-called oil cartel. As he understood it, open hearings on the case were scheduled to begin in September, and while he sympathized with the problem confronting the Attorney General, to whom was entrusted the task of carrying out the law of the land, he was still very worried over the implications of this suit for the national security and for our foreign relations. It would be highly advantageous, said Secretary Dulles, if the case could possibly be settled out of court.

Secretary Humphrey expressed emphatic agreement with Secretary Dulles, and inquired whether this assignment should be added to that contemplated by the special representative.

Secretary Dulles expressed doubts as to the feasibility of Secretary Humphrey’s proposal, but again insisted that the civil proceedings should be postponed if it was humanly possible.

Mr. Cutler suggested that the Council invite the Attorney General to come to the next meeting of the Council to hear the arguments and to discuss possible postponement of the suit.⁴ It developed that the Attorney General would be out of town except for one day this week, and Mr. Cutler therefore suggested that the Secretary of State get in touch with the Attorney General and explain to him the Council’s unanimous feeling that, for reasons of national security, it favored postponement of the civil suit.

The National Security Council:⁵

a. Discussed the situation in Iran in the light of an oral briefing by the Acting Director of Central Intelligence on developments, and in the light of an oral report by the Secretary of State on actions taken or contemplated with respect to the situation.

b. Agreed that the Secretaries of State, the Treasury, and Defense, the Director of the Foreign Operations Administration, and the Director of Central Intelligence, should nominate, for the President’s consideration, an individual to act as special representative of the United States to deal with problems related to an Anglo-Iranian oil settlement.

c. Noted an oral report by Mr. Cutler regarding the status of the Attorney General’s study of the Near East oil situation pursuant to NSC Action No. 875–b.

d. Agreed, with the concurrence of the Attorney General, to recommend to the President that in the interests of national security, in view of the Iranian situation, the Attorney General be requested to conduct proceedings in the so-called oil cartel civil suit, now being carried on as indicated in NSC Action No. 766–a, with due regard for their effect upon United States foreign relations.

Note: The action in b above subsequently referred to the Secretaries of State, the Treasury, and Defense, the Director of the Foreign Operations Administration, and the Director of Central Intelligence, for implementation. The recommendation in d above subsequently approved by the President and transmitted to the Attorney General for appropriate action.

[Here follow discussion of items 4–7, the situation in French Morocco; the programs affecting escapees, refugees, and defectors; the consideration of a report by the President’s committee on international information activities; and a brief statement on armaments and American policy.]

S. Everett Gleason

1. Drafted by Gleason on Aug. 28.

2. For text of NSC 136/1, see Document 240. The text of NSC Action No. 875, adopted at the 158th meeting of the National Security Council on Aug. 6, and the text of NSC Action No. 766, adopted at the 140th meeting of the National Security Council on Apr. 22, are in S/S–NSC (Miscellaneous) files, lot 66 D 95, “Record of Actions by the NSC, 1953”.

   NSC Action No. 875-b reads as follows:

   “Noted the President’s request that the Attorney General, with the assistance of other appropriate departments and agencies, seek to develop a solution which would protect the interests of the free world in the Near East as a vital source of petroleum supplies.”

   NSC Action No. 766-a reads as follows:

   “Concurred in the statement which the Attorney General proposed to make to the court with respect to termination of the Grand Jury proceedings in the so-called oil cartel case, institution of a civil action under the anti-trust laws, and constitution of a committee drawn from governmental departments and agencies to screen evidence and segregate from public disclosure evidence with national security implications.”

3. For text, see vol. ix, Part 1, p. 637.
4. According to the memorandum of discussion at the 161st meeting of the National Security Council on Sept. 9, the Attorney General was not present and the subject was not discussed. (Eisenhower Library, Eisenhower papers, Whitman file)
5. Paragraphs a–d and note constitute NSC Action No. 891. (S/S–NSC (Miscellaneous) files, lot 66 D 95, “Record of Actions by the NSC, 1953”)