888.2553 AIOC/3–1751: Telegram

No. 9
The Secretary of State to the Embassy in Iran1


1623. FYI Dept prelim thinking re AIOC nationalization2 as fols:

While in general US does not favor nationalization, US recognizes right of sovereign states to nationalize provided prompt payment just compensation made. However, this policy not publicized abroad as it might encourage fon states to nationalize.
Dept not at present opposing AIOC nationalization because of (1) and because such opposition wld in present circumstances jeopardize politically US and West in Iran and might result in loss of Iran to Sovs.
Therefore, only Dept statement at this time is expression of hope Iran and AIOC will work out satis arrangements keep oil flowing to world markets view large area mutual interest.
Dept principally fears precipitate action by UK and/or co or further strong notes such as preceded Majlis action regarding nationalization might have adverse repercussions.3
Dept believes it dangerous consider Majlis action not representative Iran sentiment and for co to maneuver and lobby in Tehran in effort to have Majlis repudiate vote. US shld take care Irans do not associate US with such interference and we will endeavor dissuade UK from 1933 tactics.
Dept believes Internatl Court, UN or other action probably wld not prevent final nationalization without use of force. Furthermore, exposure of case history to internatl forum now might split West and particularly alienate Asiatic and Moslem world.
Dept, however, realizing great importance Iran oil to UK will consult closely with Brit and support them where possible within [Page 26] limitations imposed by above considerations. Prelim US position outlined this tel may be modified when nature Brit reaction becomes known and situation in Iran further clarified.
Irans apparently so far unaware how to put “nationalization” into effect and in next two months skillful, fresh AIOC approach looking towards future shld be able assure co continued operations in Iran. For example, exclusive management and handling of Iran oil shld be sought to avoid expulsion which we believe wld result from determined AIOC resistance to nationalization.
Iran production, particularly 500,000 bpd refined products, can not be replaced at this time and demands extreme respect for Iranian bargaining position.
Events in Iran over past year have repudiated UK and particularly AIOC policies re negot Supplementary Agreement. In gathering up pieces from current situation, Dept believes change in policies and/or management controlling AIOC obligatory. We shld reach same effective cooperation with UK FonOff re Iran oil as has developed over past year re Iraq oil problems.

  1. Drafted by Funkhouser and Ferguson and cleared by the Office of British Commonwealth and Northern European Affairs and the Petroleum Policy Staff. Repeated to London, Moscow, Paris, Baghdad, Jidda, Dhahran, Cairo, Beirut, Damascus, and Basra.
  2. On Mar. 8 the Majlis Special Oil Commission submitted a resolution accepting the proposal of the nationalization of the oil industry. One week later the Majlis unanimously approved the resolution of the Oil Commission and allotted 2 months for consideration of its implementation.
  3. At this point in the source text the following sentence was deleted before transmission: “With delicate handling, however, situation cld result in strengthening ME against Soviet aggression.”