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

888.2553/10–851

No. 113
Memorandum of Conversation, by Colonel Vernon Walters¹

secret

New York, October 11, 1951.

Participants:

• Prime Minister Mossadegh
• Ambassador Earnest A. Gross
• Assistant Secretary of State George C. McGhee
• Colonel V. Walters

After exchanging greetings, Mr. McGhee said that they had come to see Dr. Mossadegh and that if he had any question about Security Council procedures Ambassador Gross of the United States Delegation to the United Nations was there to help in any way he could.

Dr. Mossadegh looked quite grim and irritated when the group entered his room. He said that Ambassador Muniz had just been in to see him and had shown him the first resolution which had been prepared and which the Iranians intended to answer. Amb. Muniz also showed him a second resolution which the British intended to use instead of the first one. He did not recognize their right to do this and said that he would answer the first resolution. He had refused to accept from Amb. Muniz the text of the second resolution.²

Amb. Gross said that the second resolution was a more constructive one than the first. As he saw it, the problem from the Iranian point of view was two-fold: one, to answer the statement made by Sir Gladwyn Jebb;³ and the other, to answer the text of the resolution which was presented, which would be the second one. Dr. Mossadegh said that he would answer the statement and the first resolution, which is the one the Iranian Delegation had received. Mr. McGhee at this point said that the first resolution had been much sharper in tone. The United States had endeavored to obtain a constructive type of resolution, and the second resolution embodied considerable progress. If Dr. Mossadegh were to answer the first resolution this would be failing to recognize the progress that had been made.

Dr. Mossadegh then asked Amb. Gross what the procedure was on this matter. Amb. Gross replied that the Charter recognized the right of any member to present a resolution. They could circulate it and if they wanted to they could withdraw it and present another text with amendments. The British were going to circulate the second resolution, which would automatically withdraw the first one. Dr. Mossadegh did not feel that they had a right to do this and said that the Iranians must answer the first resolution. Furthermore the Iranians could never accept the competence of the Security Council on this matter.

Mr. McGhee then asked whether they could not accept the sense of the resolution which was merely a request to the two parties to resume negotiations, even though they could deny the jurisdiction of the Security Council if they felt so inclined. Dr. Mossadegh replied that this would be impossible; to accept the sense of the resolution would imply acceptance of the competence of the Security Council. Amb. Gross explained that this was not necessarily the case.

Dr. Mossadegh then inquired by what right the British could withdraw the first text of the resolution they had circulated. He wanted to know whether there was anything written in the Charter which authorized this. Amb. Gross said that the Charter set forth the right of all members to present resolutions but did not specify anything regarding the withdrawal of these resolutions. Nevertheless, in practice this has been a recognized right since the inception of the United Nations. He said that, for instance, we had done this three times in connection with resolutions on Korea.

In pointing out a case where a party though denying the competence of the Security Council had nevertheless discussed matters on which it denied competence, Amb. Gross said the Soviet Union had denied the competence of the Security Council on the Korean question but had nevertheless introduced several motions concerning Korea. Dr. Mossadegh replied rather sharply that that was probably because they felt it was to their interest, and every country must have the right to be a judge of its own interests. He then inquired whether there was restriction on freedom of speech in the Security Council. Amb. Gross replied that there certainly was not, that he could say anything he wished. Dr. Mossadegh, somewhat mollified, said he was glad to hear this as he had feared this would not be the case. He would therefore reply to the first resolution.

Amb. Gross explained that the second resolution merely asked Dr. Mossadegh to do what he wanted, namely to resume negotiations. He said that if the British, as Dr. Mossadegh believed, although we did not, were unwilling to resume negotiations, he could use this Security Council resolution to bring pressure on them to do so. The Security Council could well be a tool to help him achieve his objectives. Dr. Mossadegh said that be this as it might, he did not have this tool available to him to use as he wanted.

He reiterated his conviction that this whole question should be settled before it went to the Security Council. He reemphasized the need for speed because of the rapidly deteriorating situation in Iran. He knew the British were trying to drag this out. He had hoped the United States would do something. He had talked to Mr. McGhee several times until two days ago and now nothing had been settled, and the matter was after all going to the Security Council.

Mr. McGhee then said that Amb. Gross had come along to try and be helpful to Dr. Mossadegh in answering any questions he might have concerning the Security Council and wondered whether there was anything else along these lines that Dr. Mossadegh wanted to ask Amb. Gross. Dr. Mossadegh said that there was not. At this point Amb. Gross, who had another appointment, took his leave.

Mr. McGhee said that he knew Dr. Mossadegh understood that neither he nor the United States had any authority to negotiate as such, but because we were friends of both parties to this dispute we were attempting to use our good offices. In order to be able to be helpful we had to know what the thoughts of both sides were. In the conversations he had had with Dr. Mossadegh he had been exploring the present Iranian position. This was without commitment, yet nevertheless made it possible for us to see whether there were any grounds for hoping that the talks could be resumed. He would understand that in a similar manner we would explore what the British present thinking was and see if there were sufficient grounds for hoping that talks could be resumed. He would understand that this would take time. Dr. Mossadegh expressed agreement with this idea and said he understood it.

Mr. McGhee pointed out that at the time the talks broke down at Tehran there had been disagreement on a number of points; the question of management, compensation, discount rate and so forth. He would not attempt to minimize these differences; they represented serious obstacles that would have to be overcome. Subsequent to the Tehran breakdown, Dr. Mossadegh had made further proposals which represented a modification of his previous position. What we were trying to do was to find out what the present Persian position was and what the present British position was. Mr. McGhee said that some of these differences were legalistic in nature and perhaps he did not understand them too well as he was not a lawyer. Dr. Mossadegh chuckled and said that that was why he liked to talk to Mr. McGhee, because he was not a lawyer.

Mr. McGhee said he wanted to go over some of the principles involved in the oil business with Dr. Mossadegh. He said that as he understood it, Dr. Mossadegh understood the requirement for efficient management and the need for access to technological developments in the world’s oil business. Dr. Mossadegh said that indeed he did recognize these two problems. Mr. McGhee said he would like to cite three cases of countries and the results for them of the oil policies which they had adopted.

First there was Mexico, which twenty years ago had nationalized its oil business, driving out the foreign companies and making no provision to insure for itself access to the technical knowledge of the business. During this period, Mexico had fallen from being the world’s second largest petroleum exporter to a position where their oil requirements were just about in balance. During that period not a single large new oil field had been brought it, and Mr. McGhee did not feel that Mexico’s oil resources were making a serious contribution to the living standard of the Mexican people. Dr. Mossadegh said that if a ridiculously small price were paid the producing country for the oil as in the case of Iran, it would be better to leave the oil in the ground. Mr. McGhee said that he was coming to just that case, and he asked Dr. Mossadegh to be patient. Dr. Mossadegh laughed and said he would be.

Mr. McGhee then cited the case of Colombia, a country with great natural resources in petroleum, which had passed very stringent laws making it extremely difficult or impossible for foreign oil companies to operate there, with the result that many fields had been abandoned and the petroleum resources of the country were practically no good at all to Colombia.

Mr. McGhee then said that the third case was that of Venezuela which had made an equitable arrangement, thereby insuring itself a tremendous revenue running into several hundred million dollars a year, making it possible for the Venezuelan Government to undertake projects to improve the living standards of their people. Dr. Mossadegh then fished a paper out of his night table which he claimed indicated that Venezuela’s production of crude oil was approximately the same as that of Iran. Mr. McGhee said that while he did not have exact figures he was sure that Venezuela’s production was several times larger. Dr. Mossadegh then quoted from his paper the revenue paid the Iranian government and the revenue paid the Venezuelan government. In the case of the latter the sum was very much larger. He said that this illustrated the “theft” committed by the Anglo-Iranian Oil Company in Iran. Mr. McGhee then said that the arrangement in Venezuela was an equitable one, satisfactory to both the Venezuelan government and to the oil companies operating there. He hoped that Dr. Mossadegh would have an opportunity to talk to the Venezuelans while he was here. Dr. Mossadegh was noncommittal on this suggestion.

Mr. McGhee said that we were extremely anxious to be helpful in this question because it was of such importance not only to the Iranians and the British but to the whole free world. Petroleum was one of the sinews of the strength of the free nations of the world. He said that we were interested in seeing that it was produced in adequate quantities and properly distributed around the world. He said that we were anxious to see Iran get a deal which would give her the largest possible revenue and conditions as good as those enjoyed by any nation in the world. He said that Dr. Mossadegh would understand that he could not hope for an arrangement which would be much better than any other prevailing in the industry at the present time. If he attempted to do so, Iran’s oil could not be made competitive in the world markets and the petroleum business was one of the most competitive in the world. He said that while we were anxious to see Iran get the best possible deal she could, we could not support an agreement which would destroy the whole fabric of the oil business throughout the world.

Dr. Mossadegh said that the reason for this was that the United States also had oil interests throughout the world and if the Iranians got an arrangement much better than any other, this would tend to upset the pattern in other countries. Mr. McGhee said that this was partly so, but that the stability of the production of petroleum was what we were interested in. The United States government did not own any oil companies; they were all privately owned, independent companies. Dr. Mossadegh then asked whether the United States did not have any financial interest in these companies and was told that it did not. He said that this should make the United States disinterested in the matter. Mr. McGhee said that we were disinterested, but that we merely wished to see an arrangement made which would give fair shares. “What kind of shares?” asked Dr. Mossadegh. Mr. McGhee said some kind of an arrangement generally along the fifty-fifty line. Dr. Mossadegh said that Iran could not accept this. The Russians had offered this kind of a deal for the oil in Northern Iran and if Iran accepted it in Southern Iran they would be obliged to accept it also in Northern Iran. Mr. McGhee said that this was not the case since the Iranians had nationalized their oil business. Dr. Mossadegh said he still felt that they would have to accept a similar deal with the Russians if they accepted it in the South. He said he could not see why they should share with anyone. Their law required that the oil fields be operated by the Iranian government, for the Iranian people.

Mr. McGhee said that it was important that Iranian oil be made competitive or else Iran would lose her markets. Over a period of time the lack of Iranian oil could be made up. He said that this principle of not making an arrangement which would upset the world pattern of the oil business was an important one for the United States. He pointed out that it was not because of the government’s financial interest in the American oil business, which was in fact owned by hundreds of thousands of small shareholders, widows, small businessmen and so forth. We believed that the arrangement should be fair and equitable to the countries who owned the subsoil resources and to these little people who put up the money to develop production. He felt that the Venezuelan type of arrangement was fair to both. He emphasized that he was not speaking of a concession or anything of that type but merely the principle of equitable sharing.

Dr. Mossadegh said that an exception must be made in the case of Iran because Iran was a neighbor of the Soviet Union. Saudi Arabia and Venezuela were not. Mr. McGhee said that in this matter there were certain principles which were important to Iran, namely to be masters of their own house, to be secure against outside interference in their internal affairs and to derive the maximum possible revenue from their subsoil resources. He said that the Iranians must understand that this principle of not upsetting the pattern of world trade was an important one to us. He would not press the point at this time but he asked Dr. Mossadegh to keep it in mind and think about it. Dr. Mossadegh said that he would do so.

He said that Mr. McGhee was a reasonable man. He himself would go before the Security Council and defend his country. He would be obliged to deny its competence in this matter, but the question of jurisdiction of course was something the Security Council itself would have to decide. Then, after the Security Council action, he was entirely at Mr. McGhee’s disposal for any further talks which might be possible providing that no great period of time would be required, because of the rapidly deteriorating situation in Iran. Mr. McGhee said that he was pleased to hear that Dr. Mossadegh would be available in this way. We were looking forward to seeing him in Washington. Dr. Mossadegh then repeated his readiness to talk, after the Security Council action. He emphasized that this was very confidential and he was only telling Mr. McGhee because he had full confidence in him. Mr. McGhee expressed appreciation for what Dr. Mossadegh had said and said he would return shortly to Washington and as soon as he had something new he would get in touch with Dr. Mossadegh further. He then took leave of Dr. Mossadegh.

1. The meeting took place at New York Hospital.
2. Regarding the first resolution, see Document 92; regarding the second resolution, see Document 110.
3. Presumably Mosadeq is referring to Jebb’s statement on Oct. 1 at the introduction of the first resolution. For the text of Jebb’s statement, see Security Council, Sixth Year, 559th Meeting, 1 October 1951, pp. 11 ff. An extract is printed in Documents (R.I.I.A.) for 1951, pp. 531–539.