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

888.2553/9–2953: Telegram

No. 371
The Secretary of State to the Embassy in Iran¹

secret
niact

Washington, September 29, 1953—7:30 p.m.

897. 1. Discussions with British on Iranian oil problem frank and cooperative. By mutual agreement no commitments made by either side.²

2. We both feel little probability arriving satisfactory permanent solution now.

3. Various forms interim agreements examined. Possible two year operation by World Bank discussed as follows:

A. All issues of principal on compensation for nationalization and deposits in escrow be postponed with no prejudice to rights of either party. If no permanent settlement made during two-year period status reverts to one now existing.

B. AIOC would waive all legal rights to oil produced by Bank during period.

C. Bank would supervise operations using independent American engineering firm such as Stone and Webster.

D. Bank would dispose of oil by contract at own discretion probably direct to international companies individually who now operate in Middle East and cutting back production that area proportionately.

E. Net income per barrel to Iran after operating costs would be essential same as other countries in Middle East now receiving.

F. Large scale operation obviously not possible but estimate annual net income to Iran approximately sixty million dollars with Bank making initial loan against subsequent repayments.

4. Such plan obviously requires substantial compromise by both parties and no assurance that British would agree although indicate real desire to be helpful. Now apparent further progress awaits developments Tehran.

5. British apparently agree suggestion Hoover proceed Tehran when you believe desirable.³ He anticipates such visit would be exploratory only at this stage. Request your comments on suggested timing and reaction in Iran to such exploratory visit. We would see profit here such visit unless you foresee serious consequences.⁴

Dulles

1. Repeated to London. Drafted by Hoover and approved by Byroade.
2. At this point, two meetings had been held between officials of the Department and British representatives led by Victor Butler, the British Minister of Fuel and Power, on Sept. 25 and 26. Subsequently, two additional meetings were held on Sept. 30 and Oct. 1. The texts of the minutes of these meetings are in file 888.2553.
3. Byroade advanced the U.S. proposal that Hoover should proceed to Iran on a factfinding visit at the meeting with the British representatives on Sept. 26. (888.2553/9–2653)

4. On Oct. 2 Ambassador Henderson responded, expressing disappointment that there seemed to be little possibility of reaching a permanent and satisfactory solution at that time, as he felt a temporary solution would leave Iran in a state of chronic political restlessness for the next 2 years. The country’s credit position would be such that foreign and private investors would not inject capital into the economy; nor would Iran have the funds necessary to carry out substantial economic development programs without foreign aid.

   With regard to Hoover’s projected trip to Iran, Henderson thought such a visit would be extremely helpful as long as the British were agreeable, and Henderson recommended that Hoover should stay several weeks. (Telegram 820; 888.2553/10–253)