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

888.2553/11–3053: Telegram

No. 392
The Ambassador in the United Kingdom (Aldrich) to the Department of State¹

secret
priority

London, November 30, 1953—5 p.m.

2340. Limit distribution. Hoover and I lunched with Eden and advisers this noon. Hoover made detailed and reasoned statement urging British agreement to consortium. He emphasized both Persian situation and problem presented by independents who at any time might undertake direct negotiations with Iranians. In absence United States agreement with British on future course of action, independents would be free to pursue such negotiations to prejudice of British-Iranian settlement. Eden immediately took much more flexible position than officials have maintained in meetings and in fact over-ruled their reiteration that first approach to Iran should be to ask for return of AIOC as sole operator and distributor.

Substance of Eden’s comments was that British have obligation both to AIOC and Parliament to obtain best settlement possible. First step is to re-establish relations. After receipt estimate of situation from their representative Tehran they will concert with us on next step. Although his advisers insisted that try should be made to arrange for return of AIOC alone, Eden himself said he believed this impractical but could not make commitment re consortium until first-hand reports of British representative Tehran received and matter considered by Cabinet. Later in discussion, however, he suggested possibility that matter might be put up to Cabinet even before relations re-established. He seemed receptive to Hoover’s suggestion that AIOC (Fraser) might take initiative in near future with American and perhaps French companies active in ME which would have to cut back to make way for Iranian oil, and invite them to discuss formation consortium, consortium would then negotiate with Persians, perhaps through International Bank as agent or intermediary. During discussion it emerged that principal British concern is that any preliminary conversations on consortium would almost inevitably become known to Iranians and thus destroy British “bargaining position”.

At conclusion of discussion it was agreed that:

(1) First priority effort by all concerned (including, Eden hoped, Vice President Nixon)² would be to push for re-establishment relations;

(2) Hoover would probably not proceed Tehran at this time;

(3) British course of action after re-establishment relations would be concerted with us (a commitment British have previously avoided) and would probably take preliminary steps towards formation of consortium.

Third point was left rather vague and it was agreed that British officials would meet this afternoon, meet again with Hoover tomorrow morning³ and luncheon group would meet tomorrow afternoon in effort obtain a general agreement prior to conversations at Bermuda. Hoover endeavoring to get British agree in principle to a consortium as preliminary to possible conversation between President and Prime Minister at Bermuda along lines Hoover discussed with President on November 21.⁴ So far no attempt made to agree on relative British and American participation but only to get general agreement to principle. President would then be free to propose equal participation by both sides if opportunity presented itself.

Luncheon meeting today represented considerable step forward in British thinking and we are optimistic that further progress can be made before Eden departs for Bermuda.⁵

Aldrich

1. Repeated to Tehran.
2. Vice President Nixon was scheduled to arrive soon in Iran as part of his trip to the Far and Middle East, Oct. 7–Dec. 14.

3. On Dec. 1 the Embassy in London informed the Department that Hoover, instead of having a morning meeting on Dec. 1 with British officials, had a long discussion with Sir William Fraser, of the Anglo-Iranian Oil Company. During that conversation Hoover convinced Fraser that a consortium was the only practical solution to the oil problem and Fraser agreed to put the matter to the AIOC board of directors that evening along the following lines:

   “When relations are re-established AIOC will either directly or through British Embassy ask Persians whether they will accept AIOC. When they refuse, active steps to form consortium will be taken. In meantime, AIOC would without publicity, undertake ‘exploratory’ conversations with representatives of American interests. Fraser suggested American and British interests would participate on 50–50 basis. He admitted, however, that French would probably have to be included, but hoped to postpone bringing them in until final stages when all-important terms of consortium would have been settled.”

   The Embassy further reported that at the meeting with Eden that afternoon, the Hoover–Fraser discussions were approved and Eden expressed great pleasure and appreciation of Hoover’s efforts. (Telegram 2375; 888.2553/12–153)

4. According to a memorandum dated Nov. 21 from Hoover to President Eisenhower, which the President saw that day, Hoover recommended that the President tell Prime Minister Churchill at Bermuda that the stage was set to achieve an equitable oil settlement, that the United States and United Kingdom had to cooperate to achieve such a success, and that the vehicle for success had to be a consortium of American and British oil companies. (GTI files, lot 57 D 155, “General”)
5. Hoover informed Henderson on Nov. 30 that, in view of the more reasonable British attitude, he was not going to go to Tehran at that time. (Telegram 73 from London; 888.2553/11–3053)