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

888.2553/2–1252: Telegram

No. 158
The Secretary of State to the Embassy in Iran¹

secret

Washington, February 12, 1952—6:25 p.m.

1661. Fol is substance Eden’s reply Feb 12 to Secy’s ltr Feb 8:²

“Am particularly glad we are in full agreement Internatl Bank shld be given every chance working out satis proposals with IranGov for interim settlement. Garner goes Tehran with good wishes all of us here and we have every confidence he will play hand in accordance gen principles which in my view must be safeguarded in any settlement Persian dispute.

Am sure will be most beneficial if you can bring home to Musaddiq importance you attach to successful outcome Garner’s negots. Nothing cld be more helpful than clear indication you and we are agreed on this pt. May be Garner will not be able come to satis arrangement at once. That event it not my idea negots shld be allowed break down, and I imagine Garner wld merely withdraw in order consider further steps he cld usefully take, having first tried establish Musaddiq’s minimum terms and whether he has advanced at all from orig positions. Speaking generally, Bank shld take time and try get some firm reaction from Musaddiq in response their own proposals. We wld naturally consider any suggestion Garner might then wish make us with utmost seriousness. There would of course as you say, be no prior commitment on part HMG.

I appreciate ur pt Bank shld have greatest possible flexibility in developing their proposals. We have sought tie Bank’s hands over question management. Same time I think Bank’s reps bound realise how essential it is that any arrangement which postulates coop commercial co shld provide for really efficient management. Any commercial undertaking required to purchase, carry and distribute oil must be assured oil forthcoming of right quality, in right quantity, at right time. This just as important in interim arrangement as in final settlement, and if management arrangements not efficient in interim scheme there will be even less chance their being efficient under final arrangements. We of course assume, and Bank agree, no arrangements for interim settlement will be offered which wld prejudice our case before Hague Court.

I think I shld tell you we were not happy about suggestion Bank might be authorised explore possibility purchasing existing stocks Abadan at 50 percent discount. This wld surely mean that AIOC who have already paid for existing stocks in production and refining costs, wld be asked pay again for oil Persian Govt have expropriated. It wld also be quite inconsistent with warnings we have issued to prospective purchasers Persian oil. In fact removal of existing stocks wld make it so much easier for such illegal purchases of oil to take place.

I do hope you do not feel we are approaching question from narrow viewpt. I am keen as you to reach satis settlement and remove dangers which will remain so long question unresolved, but we bound consider effects bad settlement, one which appeared reward illegal expropriation, wld have not only on other oil interests, Brit and Amer, but on fon investments generally throughout world. I feel I cannot stress too strongly gravity these effects on financial position of UK.

I entirely agree ur suggestion our respective reps shld begin exchange ideas on possible long-term solution if satis interim settlement cannot be negotiated. I expect you have heard I asked Oliver Franks to see whether Paul Nitze cld not come over for talks with us here.³ This wld, I am sure, be of greatest possible value in paving way to common action if Bank’s efforts shld in end come to nothing.”

In oral discussions Brit reaction US suggestions, Brit reps emphasized view that IranGov shld not get impression proposals other than those put forward by Garner are being considered, believing this wld enhance Garner’s difficulties in dealing with Mosadeq. Brit also extremely anxious that US pt out to Mosadeq great importance which it attached Garner’s mission. Without reference to verbal response Mosadeq’s request for aid or Pres’s written reply transmitted Tehran Feb 9,⁴ Dept assured Brit US had impressed this upon Mosadeq.

In these discussions Brit agreed Garner shld, within framework present Bank plan, have maximum flexibility in negot tactics with Mosadeq, and stated that if Mosadeq unwilling accept Bank proposals, Garner shld not completely break off negots but shld get Mosadeq’s ideas to determine if he has advanced in any way. They hope that even though Mosadeq might not accept Bank plan he will put up counterproposals or indicate some flexibility, in which case matter cld be reconsidered upon Garner’s return, which shld be arranged in way to leave door open for continuation negots.

Brit reps state that Brit position will be communicated to Garner discreetly through Brit Emb Tehran.

Acheson

1. Repeated to London. Drafted and signed by Rountree.
2. Transmitted in Document 154.
3. On Feb. 12 the Department cabled the Embassies in London and Tehran that the British representatives in Washington had informed the Department of their government’s desire to begin talks in London as soon as possible to formulate the elements of a final oil settlement if the interim proposals which Garner was going to present to Mosadeq should be refused. The Department thought this suggestion had great merit and, therefore, Nitze and Linder were departing for London that day. (Telegram 3835 to London, repeated to Tehran as 1658; 888.2553/2–1252)
4. See Document 156.