788.00/3–1451

No. 5
Memorandum by the Deputy Assistant Secretary of State for Near Eastern, South Asian, and African Affairs (Berry) to the Secretary of State1

secret

Subject:

  • The Iranian Situation.

The following summarizes the current Iranian situation for your information:

The assassination of Prime Minister Razmara by a religious fanatic on March 7 has resulted in an extremely confused situation in Iran, some disorders, and an impasse over the Anglo-Iranian Oil Company dispute. Matters such as the Export-Import Bank and IBRD loans are in abeyance until the situation becomes more stable.

Razmara’s assassination arose out of the highly emotional atmosphere surrounding the Anglo-Iranian Oil Company dispute, which fanatical nationalist elements in Iran have used to stir up popular feeling. The Prime Minister was killed two days after he made a long speech in the Parliament in which he pointed out the difficulties inherent in nationalization and clearly placed himself in opposition to it. Communist elements in Iran were quick to seize upon the opportunity of spreading discontent, and on the day following the assassination held a large public demonstration during which strong anti-American and anti-Western slogans were shouted in the vicinity of the American Embassy. The immediate security situation has, however, remained fairly quiet throughout the country.

Upon learning of the assassination, the Department telegraphed Ambassador Grady its belief that the Shah alone could be counted upon to provide the firm leadership needed in the crisis, and that we should give him our full support. We expressed the view that the principal quality of the person to be selected as Prime Minister to replace Razmara should be his loyalty to the Shah. Both Ambassador Grady and the British Foreign Office agreed with this, and the Ambassador has informed the Department that joint United States–British advice along these lines has been conveyed discreetly to the Shah.

On March 11, Hossein Ala, the former Iranian Ambassador to the United States, was named Prime Minister, and although his cabinet has not yet been presented to the Majlis, Ala received a [Page 10]preliminary vote of confidence. Ala is known to have unquestioned loyalty to the Shah and is generally acceptable to most factions in the Parliament, although he is opposed by the National Front. His frail health renders it unlikely that he will continue in office for a long period, or that he will endeavor to replace Razmara as a “strong” Prime Minister. Ala himself has indicated that he intends staying in office only until the situation becomes more stable, after which he will give way to stronger leadership.

While we do not know the current British view in this regard, they indicated earlier the belief that the Shah should proclaim martial law and dissolve Parliament. The Department, recognizing that this might be necessary under the circumstances, authorized Ambassador Grady, if he concurred, to tell the Shah that the United States would understand and sympathize with his motives if he should decide to take action along these lines. The Shah thus far has considered it unnecessary to resort to this course, and Prime Minister Ala recently told Ambassador Grady that he believes such drastic measures should be avoided but that he will invoke martial law if there are any further disturbances.

The British are naturally extremely concerned over the oil question. Press reports indicate that the British Government has sent a note to Iran protesting the Iranian Parliament’s decision to consider nationalization of the oil industry, pointing out that the contract cannot be terminated legally until 1993.2 There is a danger that this course will have serious effects in Iran and might make the situation even worse than it is. We were hopeful that at this juncture the British would see fit to offer to the Iranians, possibly in a dramatic manner, a new, realistic and generous arrangement which we could, under certain circumstances, support.

Although it is far from clear what the Iranians have in mind when they speak of “nationalization”, it seems clear that a major change in the status of AIOC is inevitable, and that any attempts by the United States at this time to block the Iranians by strong diplomatic action would only make matters worse. We believe that we should be prepared, if necessary, to help both the Iranians and British work out a new arrangement which would satisfy Iranian political requirements and at the same time assure the flow of petroleum to Great Britain and Western Europe.

[Page 11]

The British Government is planning to send Mr. Geoffrey Furlonge, head of the Eastern Department of the Foreign Office, to Washington in the near future to discuss the situation.

  1. Drafted by Rountree; copies also sent to Matthews and Perkins.
  2. For text of this letter, dated Mar. 14, see British Cmd. 8425, Persia No. 1 (1951): Correspondence between His Majesty’s Government in the United Kingdom and the Persian Government, and Related Documents concerning the Oil Industry in Persia, February 1951 to September 1951, pp. 25–27, or Documents (R.I.I.A.) for 1951, pp. 475–477.