888.2553/8–1951: Telegram

No. 72
The Special Assistant to the President (Harriman) to the Department of State 1

top secret
priority

705. From Harriman for President and Secretary. No distribution except as directed by Secretary’s office. British met with Iran negotiating committee this afternoon (Saturday2) for an informal exchange of views regarding British proposal. I was asked to participate. Iran group had been released by Prime Minister to express their opinions. However, these generally conformed to position taken by Prime Minister. They maintained that proposal did not conform to formula submitted through me principally on point that British control of both purchasing organization and operating agency means return to status quo with thin disguise. Other objections were raised that as that purchasing organization would have [Page 141] substantial monopoly of Iran exports, and that principle of 50–50 division of profit was inequitable, particularly if combined with payment for assets taken over. Such arrangements it was contended would not be acceptable to Iran public opinion. Stokes gave obvious replies explaining the commercial aspects of world oil business and necessity of creating arrangements which would induce British staff to remain in Iran. He was rather general in his comments on the control of operation by NIOC and also suggested that it was Iran politician problem to deal with their public opinion. Stokes stated he believed Irans would obtain under his proposal three times as much as they did in 1950. This would be about 50 million pounds on 1950 basis. He said he could not remain indefinitely and it was therefore agreed they would hold two meetings a day, the next one to be 10 a.m. tomorrow (Sunday).

At close of mtg I expressed my satisfaction that the two groups were at last talking informally and hoped that through this type of discussion an understanding could be reached. I stated I believed that the proposals put forward by British for discussion provided good basis for negotiation and that arrangements could be worked out under these proposals which would be within formula under which Brit mission had been asked to come to negotiate. In specific reply to some of Iran’s comments I stated that I did not consider these proposals as disguise. British were negotiating in good faith and in my opinion proper safeguards could be agreed to which would protect Iran interests and establish appropriate control by NIOC. I said that Levy and I would be glad to discuss details of this with Iran group should they wish to do so and I had had similar informal talks with Stokes. In this manner Irans could get Levy’s advice as to manner in which proper arrangements could be made in conformance to practical aspects of oil business.

Since Irans had talked of oil installations as Iran Govt property and had referred rather generally to compensation, I stated that I could not become involved in details of compensation but that I felt I shld state my govt’s position on nationalization. We recognized right of any govt to nationalize fon-owned property providing either mutually satisfactory arrangements were worked out with previous owners or prompt and adequate compensation was made. We recognized right of nationalization but not right of confiscation. I said I felt sure that these principles were accepted by Iran group and that as there were not funds available to make adequate prompt compensation they would work out mutually satisfactory arrangements with British interests. After I finished Stokes sent me a note saying it was vital that I state Brit proposals had my full support and came within the formula. As I felt my position stated above was clear and as far as I should go at this time I made [Page 142] no further comment on this aspect. In my opinion arrangements under British proposal can be worked out to result in either camouflage for complete return of British control or adequate recognition of NIOC’s right to appropriate control, safeguarding against practices which Irans objected to in past.

At close of meeting Irans handed Stokes written reply to his proposals. This was in Iranian language and I will not get translation until tomorrow morning. It was agreed that this reply wld be released at 9 p.m. Tehran time Sunday. After considering contents of Iran reply I will decide whether I should make statement to press and the form of such statement. My problem is that if I do not make a statement my silence will be interpreted by Irans that I do not consider Brit proposal conforms with formula. I am afraid that this will mean that they will make no genuine attempt to come to agreement and expect us to bail them out after break with British. On the other hand it is difficult to find language which will reasonably satisfy Brit and not give Irans impression that I have “sold out” to British.3

[
Harriman
]
  1. Repeated to London eyes only for the Ambassador.
  2. Aug. 18.
  3. The Iranian reply rejected Stokes’ proposal because it did not conform with the law nationalizing the Iranian oil industry, stating in particular that the points concerning the purchasing organization, the price of oil and the division of profits, the operating organization, and compensation were not satisfactory. Harriman transmitted a translation of the reply at noon on Aug. 19 in telegram 706. (888.2553/8–1951) For the complete text, see British Cmd. 8425, pp. 55–57 or Documents (R.I.I.A.) for 1951, pp. 504–506.