888.2553/7–1251

No. 40
Memorandum of Conversation, by the Assistant Secretary of State for Near Eastern, South Asian, and African Affairs (McGhee)

top secret

Participants:

  • The Secretary of State
  • Mr. H. Freeman MatthewsG
  • Mr. W. Averell Harriman—Special Assistant to the President
  • Mr. George C. McGheeNEA
  • Sir Oliver S. Franks—British Ambassador

The British Ambassador called at his request. He first of all stated that he had, on reflection, discovered that the first question raised in the Aide-Mémoire which he had brought to the Department the previous evening had due to oversight not been discussed.1 This point involved the British proposal, subject to approval by the Cabinet, to announce a phased withdrawal of British technicians in Iran starting with those in the oil fields and ending with those in the Abadan Refinery. The withdrawal could be stopped at any time if the Iranian Government proved more cooperative in working out a settlement of the oil issue. The Department representatives confirmed that this point had not been discussed, whereupon the British Ambassador asked what the Department’s views were in this matter.

[Page 90]

The Department’s representatives replied that the proposal would in their judgment be wrong from a tactical standpoint, since the Department had always believed that the best policy for the British to pursue was to hold on in Iran as long as possible in the hopes of a turn for the better. Indeed this had, up to now, appeared to be the British policy. If, in fact, the British did not wish to withdraw and were announcing their intention of withdrawal only to induce the Iranians to back down, they ran the risk that the Iranians might not back down and that the British might be forced to carry out their announced intention. It was thought that everyone had agreed, particularly Mr. Drake, the AIOC Manager, that once the British withdrew it might prove very difficult or impossible for them to ever come back. In any test of will with the Iranians or any attempt at a bluff the British might, in the light of the highly irrational and emotional view of the Iranians, not be successful. Evidence from other similar situations, as for example that in Mexico, has shown that people do not easily recede from emotional nationalist positions even when the economic stakes are high. The Department recommended that the British not make the announcement in question, but rather attempt to hold on in Iran with all the patience at their disposal in a hope of a change in the situation.

The British Ambassador then stated that he had a note from Mr. Morrison which he had been instructed to give to the Secretary in hopes that it could be given to Mr. Harriman before his departure (copy attached).2 Mr. Harriman read the note but stated that he did not feel it proper for him to comment on the points raised. No comment was made either by any of the Department representatives present. The British Ambassador stated that he was not requesting comments, that his purpose had been achieved when the note in question had been delivered to Mr. Harriman. He merely wished Mr. Harriman to have the UK point-of-view with respect to [Page 91]his mission and hoped that he would keep these points in mind in his discussions with the Iranians.

The British Ambassador then reviewed at some length the difference between the U.S. and U.K. positions with respect to the Iranian issue, and asked what the U.K. could do to facilitate the success of Mr. Harriman’s mission. It was in general suggested to the Ambassador that it would appear best for the U.K. not to take any new steps for the time being either to increase their pressure against the Iranians or to redefine their position, pending Mr. Harriman’s arrival. The next step to be taken could, it is believed, best be determined after Mr. Harriman has had an opportunity to explore the situation on the ground with the Iranian officials and the British and American Ambassadors. The British Ambassador stated that he hoped Mr. Harriman would consult freely with the British Ambassador, who is at his disposal, since the British Government relied greatly on the “man on the spot”.

I then outlined my own views as to how I thought Mr. Harriman might approach his task in terms of the various elements of the problem. I stated that the Iranians had in accordance with their own view now nationalized their oil properties, however they had not yet discovered any effective means of operating them under their nationalization laws. The British, on the other hand, stood ready to provide both the technicians, the management, the tankers, and the markets which were necessary to the Iranian oil industry. The customers of Anglo-Iranian were prepared to pay for the crude and products which were taken away from Iran. The immediate problem seemed to me to put these elements together in some type of interim trustee arrangement as suggested by the ICJ. Such arrangement should provide for the impounding of the receipts, the taking out of the expenses of the operation, and the ultimate division of the profits remaining in accordance with the agreement reached. It seemed to be that somewhere along these lines a solution could be found.3

  1. On July 11 Ambassador Franks called at his own request on Secretary Acheson, McGhee, Matthews, and Hickerson to discuss the Iranian oil crisis. He presented, but did not leave, an aide-mémoire which covered the following points: (a) phased withdrawal of technicians from Iran, (b) the assumption that Mosadeq’s reply to President Truman confirmed the Iranian rejection of the International Court’s decision, and (c) a proposal to take the question to the U.N. Security Council and a request for U.S. support of that position. Ambassador Franks was told that referral to the United Nations just as Harriman was about to depart for Iran with a new initiative appeared to be unwise and that he should be given an opportunity to improve the situation. (Memorandum of conversation by McGhee, July 11; 888.2553/7–1151)
  2. The attached note, as sent by Morrison to Franks from London on July 12, is not printed. In the note, the British Foreign Office stated, inter alia, that it would be difficult for Harriman to find a basis for discussing Iran’s position regarding the recommendations of the Hague Court and Mosadeq’s stand on the nationalization laws. Mosadeq could be expected to use the occasion of Harriman’s visit to bring further pressure on the United Kingdom to accept the nationalization laws (as opposed to the principle of nationalization), thereby further prejudicing the British position. The note expressed the hope that Harriman would impress on Mosadeq the implications of flouting the Hague Court and persuade him to accept the Court’s recommendations. Subject to cessation of Iranian interference in the company’s operations and resumption of operations by the company under the company’s management, the United Kingdom was ready to discuss a settlement based on the offer already made to the Iranian Government by the company during its delegation’s visit to Tehran. The note concluded with a request that Harriman keep in close touch with the British.
  3. On July 13 Burrows discussed the question of the loan with McGhee, saying “that his Embassy was under instructions to present to the Secretary the view that the British Government assumed that the U.S. would not, while Iran was in defiance of the recommendations of the Court of Justice, make the proposed loan.” McGhee reviewed the background of the loan and told Burrows that the U.S. position was to take no new steps “with respect to the loan, neither withdrawing it nor pushing it.” Following his conversation with Burrows, McGhee sent a memorandum to Secretary Acheson, reviewing his talk with Burrows, noting that Mosadeq had submitted the loan agreement to the Majlis, and recommending that the United States should not withdraw the loan, but “should through continuing negotiations delay its implementation until such time as contrary action becomes desirable with the realization that it may become necessary at any moment to proceed with the urgent implementation of the loan.” (Memorandum of conversation and memorandum by McGhee, both dated July 13; 888.10/7–1351)