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

Eisenhower Library, Eisenhower papers, Whitman file

No. 401
Memorandum of Discussion at the 178th Meeting of the National Security Council, Washington, December 30, 1953¹

top secret
eyes only

Washington, December 30, 1953

Present at the 178th Council meeting were the Secretary of State, presiding; the Acting Secretary of Defense; the Director, Foreign Operations Administration; the Director, Office of Defense Mobilization. The President and the Vice President did not attend because of their absence from the city. Also present were the Acting Secretary of the Treasury; the Attorney General (for Items 3 and 4); the Secretary of the Navy; the Director, Bureau of the Budget; the Under Secretary of the State; Assistant Attorney General Barnes (for Items 3 and 4); the Assistant Secretary of the Air Forces; Gen. Twining for the Chairman, Joint Chiefs of Staff; the Director of Central Intelligence; the Assistant to the President; Robert Cutler and C. D. Jackson, Special Assistants to the President; Robert Amory, Jr., Central Intelligence Agency (for Item 1); the NSC Representative on Internal Security (for Item 4); the Assistant 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 main points taken.

[Here follows discussion of items 1 and 2, significant world developments affecting United States security and NSC 176.]

3. United States Policy Toward Iran (NSC 175 and Annex to NSC 175)²

Mr. Cutler sketched the background of the statement of policy contained in NSC 175, and noted several disagreements as to the correct courses of action. He further pointed out the comments of the Joint Chiefs of Staff, which in some instances dealt with the split views.

After certain minor revisions had been agreed upon, Mr. Cutler pointed to the first important difference of view, which involved paragraph 15-c and the issue of unilateral action by the United States to assist Iran in the event of a failure by the British to reach an agreement on the oil problem.³

Secretary Dulles pointed out that the major issue in paragraph 15-c was whether the United States should follow a line of action independent from the UK in the achievement of the oil settlement.

Secretary Smith added that the State Department was strongly opposed to this proposal by the Defense Department. It was, indeed, the only unacceptable feature in an otherwise excellent paper. In the first place, Secretary Smith insisted that it was impractical to attempt to secure an oil settlement without British cooperation. Secondly, the State Department was opposed to the choice of any arbitrary date, such as the first of July, 1954, to inaugurate independent action to reach an oil settlement. All in all, the State Department preferred its own version of paragraph 15-c.⁴

Mr. Tuttle, the Acting Secretary of the Treasury, informed the Council that he had discussed this very issue with Secretary Humphrey on the previous evening. The latter had made it very clear that he was opposed to waiting even as long as July 1, 1954, to take independent action in the event that the British and Iranians did not reach an amicable settlement. He preferred a much shorter interval before taking independent U.S. action to get Iranian oil flowing again.

Secretary Dulles then suggested that it would be advisable to select an earlier date for reconsideration by the Council of a decision to take an independent line of action, but expressed himself as strongly opposed to a decision by the Council at this time to take independent action at any specified date. He went on to point to the Egyptian negotiations as indicating the great difficulty which would confront the United States if it chose to pursue a policy in Iran which might involve a break with the United Kingdom. We would be faced, said Secretary Dulles, with the same kind of difficulty if we tried this course of action in Iran. He pointed out that he was not insisting that we shouldn’t “go it alone” in Iran, but the grave question of whether or not to play along with the British in the Middle East was much too serious a decision for the Council to take now, particularly in the absence of the President. Secretary Dulles again recommended that the Council take up the issue of independent action on April 1, and try to reach a decision at that time.

Governor Stassen observed that in recent months we had achieved some limited success in our efforts to stabilize the Iranian economy, despite the small amount of aid we had actually given them. Such success as we had obtained, thought Governor Stassen, was largely due to anticipation by the Iranians that an oil settlement would presently be achieved. If, however, the Iranians ever reached the point of being convinced that no such settlement is in the offing, deterioration of stability would set in very rapidly. Furthermore, said Governor Stassen, we in FOA are inclined to believe that if it should prove necessary to provide further financial assistance to Iran, this assistance should take the form of a loan rather than a grant. In any case, if a settlement of the oil controversy was delayed beyond April or May of next year, the United States would be risking the loss of all the stability which it has built up thus far by its assistance to Iran. These considerations, concluded Governor Stassen, should be set over against the irritation of the British if we were to pursue an independent course of action in Iran.

. . . . . .

Secretary Dulles replied that this thought perhaps was inherent in our policy papers, but he thought it would be desirable if the Attorney General would look into the whole matter. All our planning would be more realistic if the Attorney General found himself in the position of advising the President that a UN resolution, for example, was sufficient to permit the President to order military action in Korea, Indochina, etc., etc.

The Attorney General commented that by coincidence this very issue had come up in a discussion in the Department of Justice only yesterday. The Attorney General thought that the issue ought to be raised for discussion in the National Security Council.

After agreement had been reached that the Attorney General should study and report on this matter, Mr. Cutler reminded the Council that no discussion of U.S. policy toward Iran would be complete if it ignored the problem which was raised by the current anti-trust suit against the American oil companies in connection with Iranian oil. He therefore suggested, after summarizing prior Council action on this matter, that it would be desirable for the Council to discuss briefly the problem of the anti-trust suit, particularly in view of the remarks made by the Vice President on this subject at the last Council meeting.

Secretary Smith pointed out that while the State Department as yet had not received the details as to the discussions which Mr. Herbert Hoover, Jr., had had in London with the British Government and with the AIOC officials, it seemed already clear that there were two major problems involved in achieving a satisfactory oil settlement. The first of these was the problem of reasonable compensation to the Anglo-Iranian Oil Company. The second was that of a consortium replacing AIOC to market Iranian oil. The prospect of the consortium to market Iranian oil, continued Secretary Smith, inevitably brings the cartel suit to the foreground, because the American members of such a consortium would almost certainly include the big oil companies now charged with violations of the anti-trust laws.

The Attorney General stated that approval by the Council of NSC 175 amounted to adopting a policy in the interest of national security which was contrary to the anti-trust laws of the United States.⁵

Secretary Smith and Secretary Dulles agreed that this was substantially if not literally correct.

The Attorney General went on to point out that there were two phases to settlement of the Iranian oil problem. First, the phase of discussion or consultation now in progress, and second, the phase of execution of the plans which flowed from these consultations. The provisions of the Defense Production Act⁶ safeguarded those involved in the first phase from charges of violating the anti-trust laws. The second phase, implementation of the plans, would, however, almost certainly involve violation. So far as he could see, said the Attorney General, it would prove necessary to go to the Congress for legislation to provide relief. Such legislation might be specifically directed toward the problem of the oil companies and Iran, or more broadly to all U.S. companies doing business outside the United States. Whichever course was chosen, however, would certainly involve great difficulties with the Congress, which would seize on the issue as a political football.

The National Security Council:⁷

a. Adopted the statement of policy on the subject contained in the reference report, subject to the following changes:

(1) Page 2, paragraph 1-d: Delete “to disrupt the free world pattern of petroleum production and marketing”.

(2) Page 5, paragraph 8–c: Delete “the method employed by”.

(3) Page 7, paragraph 14: Insert, after “internal security”, the words “and providing some resistance to external aggression,”.

(4) Page 8, paragraph 15:

(a) Revise subparagraph c to read as follows:

“c. If such a settlement has not been reached by April 1, 1954, review U.S. policy toward the problem in the light of circumstances then existing, including giving consideration to taking independent action with Iran, in order to bring about a resumption of revenues from its oil resources as a stabilizing influence in the Government of Iran tending to obviate the need for U.S. emergency economic assistance.”

(b) Add a new subparagraph d to read as follows:

“d. In implementing actions under b or c above, seek to avoid establishing any precedent which would adversely affect United States interests in Middle East resources.”

(5) Page 8, paragraph 16: Insert, after “economic aid”, the words, “preferably in the form of loans,”.

(6) Page 9, paragraph 19-a: Insert, after “provide”, the word “some”.

(7) Page 12, paragraph 27: Revise as follows:

. . . . . .

b. Discussed the comments of the Joint Chiefs of Staff regarding the Annex to NSC 175, and agreed:

(1) That the comments regarding Part 3 of the Annex should be inserted as new paragraphs after paragraph 5 on page 14.⁸

(2) To refer the comments regarding Part 4 of the Annex back to the Joint Chiefs of Staff for reconsideration in the light of the Council discussion.⁹

c. Agreed to recommend that the President request the Attorney General to make a study, and report to the National Security Council, with reference to the constitutional authority, either with or without Congressional action or United Nations authorization, for the use of U.S. forces in reacting promptly to aggression seriously threatening U.S. security in Korea or elsewhere.

d. Discussed the relation of a settlement of the Anglo-Iranian oil controversy to United States anti-trust laws.

Note: NSC 175, as amended and approved by the President, subsequently circulated as NSC 5402 and referred to the Operations Coordinating Board as the coordinating agency designated by the President. The recommendation in c above subsequently approved by the President.

[Here follows discussion of items 4–6, internal security legislation, United States civil administration in the Ryukyu Islands, and United States objectives and courses of action in Korea.]

S. Everett Gleason

1. Drafted by Gleason on Dec. 31.
2. NSC 175, “United States Policy Toward Iran”, and the Annex to NSC 175, entitled “Certain Problems Relating to Iran”, along with appropriate cover sheets and a background note dated Dec. 21, from James S. Lay, Jr., Executive Secretary of the National Security Council, were circulated to members of the NSC, the Secretary of the Treasury, the Attorney General, the Director of the Bureau of the Budget, the Chairman of the Joint Chiefs of Staff, and the Director of Central Intelligence for their consideration on Dec. 21. (S/S–NSC files, lot 63 D 351, “NSC 175–Memoranda”)

3. Paragraph 15-c in NSC 175 reads as follows:

   “c. If no such settlement has been arranged by July 1954, be prepared [insofar as practical]* to take independent action with Iran, in order to bring about a sufficient resumption of revenues from its oil resources to terminate the need for U.S. emergency economic assistance.” (S/S–NSC files, lot 63 D 351, “NSC 175-Memoranda”)

   A footnote following the asterisk in the source text reads as follows: “The Defense and JCS Members propose deletion.”

4. According to a memorandum dated Dec. 29 from Jernegan to Secretary Dulles, the Department’s substitution for paragraph 15-c reads as follows:

   “If such a settlement has not been reached in an reasonable period of time, review U.S. policy toward the problem in the light of circumstances then existing.”

   In addition, the Department objected to the Department of Defense version of this paragraph because a) the Department believed it unwise to make such an advance commitment in the complicated and fluid Iranian situation; b) the contingency foreseen implied British failure to reach a reasonable agreement with the Iranians when the Iranian internal political situation could well be a factor in disrupting oil negotiations; and c) it was questionable if arrangements could be made for sales of Iranian oil “sufficient to terminate the need for U.S. emergency economic aid” in the absence of an amicable liquidation of the oil controversy. (S/S–NSC files, lot 63 D 351, “NSC 175–Memoranda”)

5. For documentation regarding the development of U.S. policy regarding the applicability of antitrust laws to international petroleum companies, see vol. i, Part 2, pp. 1259 ff.
6. The Defense Production Act of 1950, as amended, was signed into law on Sept. 8, 1950, as P.L. 81–774; for text, see 64 Stat. 798.

7. Paragraphs a–d, were adopted verbatim as NSC Action No. 998. (S/S–NSC (Miscellaneous) files, lot 66 D 95, “Record of Actions by the NSC, 1953”)

   President Eisenhower subsequently approved NSC 175 and its Annex, as amended. For text of NSC 5402, see Document 403.

8. In the Annex to NSC 175, paragraph 5 of Part 3 reads:

   “5. It should be noted here that at the present time the U.S. has no commitment to employ U.S. forces in Iran. If it is found necessary for the U.S. to provide military forces in this area, implementation will require either an augmentation of U.S. forces or a reduction of present military commitments elsewhere.” (S/S–NSC files, lot 63 D 351, “NSC 175—Memoranda”)

9. According to an undated, unattributed Department of State memorandum, the JCS also wished to have the following comments included in Part 4 of the Annex to NSC 175:

   • “(1) There are many political and religious differences within the Middle East which may militate against really effective cooperation among Turkey, Pakistan and Iran. The feeling is that Iraq will maintain a position of benevolent neutrality.
   • “(2) The Turkish forces have commitments to NATO which would prevent any substantial diversion of troops to help Iran. Any participation in the defense of Iran by Turkish forces would require, among other things, a reorientation of the Turkish effort as now conceived and probably an increase in planned Turkish strength.
   • “(3) At present, the limited combat effectiveness of Pakistan’s forces precludes their use other than for the defense of their homeland.
   • “(4) The many weaknesses of the Iranian Army, including the low level of education, inept leadership, cumbersome system of command, supply and administration, and inadequate training, cannot be easily overcome. Considerable time will be needed to obtain any major increase in combat effectiveness.” (S/S–NSC files, lot 63 D 351, “NSC 175–Memoranda”)