888.2553/8–3051: Telegram
No. 79
The Ambassador in Iran (Grady) to the Department
of State1
868. The Shah requested me to call on him yesterday and I made an appointment and saw the PriMin this morning.2 The Shah wished to discuss with me the gen sitn in Iran as a result of the failure to reach an oil agrmt. I asked to see Mossadeq because I wanted to check with him on the gen sitn since I have not seen him throughout most of the time that Harriman was here. I am not assuming to mediate anything but naturally if there are any changes in the thinking of the PriMin and his group it is important that the Dept shld be informed.
There was nothing significant in my talk with Shah. He is deeply disappointed and concerned at the failure of negots, but does not see that he can intervene with Mossadeq at this particular time. He is hoping that developments will eliminate Mossadeq and make possible the selection of a rational PriMin. He speculated as to Mossadeq’s real intentions and neither of us had the answer. The group around him certainly wish to keep him in power until at least the 23rd of Sept.3 What their future plans are, assuming success in this regard, probably they themselves do not know.
The Shah expressed concern about terrorism in Iran and its effect on members of the Parliament. He particularly mentioned Mullah Kashani as a dangerous element in Iran politics, adding that his govt had intercepted communications between Kashani and the Russians which indicated that Kashani might be looking in the direction of collaboration with the Sovs.
The Shah is groping for a solution but is moving cautiously and I think he is wise in this regard. He is leaving today for an eight-day rest at his palace on the Caspian. Before seeing me he saw the Brit Amb and during the day Seyid Zia and Qavam. The Brit Amb is calling on me later this morning and I will report if there is anything significant in what he wishes to discuss.
I had several matters of a more or less routine nature to take up with the PriMin and then asked him what his plans were with regard to the oil problem. I asked him if he and his group were [Page 154] planning to make any more formal and comprehensive reply to the Stokes proposals. He replied that he had hoped that I was coming with further proposals from the Brit. I said that as I have read the press statements, the Brit feel the next step shld come from the Iran Govt. He replied that if he had to wait several years, he wld make no further reply to the Brit Govt nor wld he make any concessions that wld be in conflict with the oil nationalization law of March 20 nor the nine-point implementation law of April 30. He repeated to me what he had said to Harriman last Friday evening, that he wld not consider any proposal to give the Brit any profits out of the operation of the oil industry or the marketing of the oil products. The law provides for payment of compensation with due consideration to Iran counterclaims. To talk about the manner of operating the refinery is somewhat irrelevant if his position on the matter of profits is unchangeable. In other words, I found Mossadeq saying precisely what he said in our first discussion on the oil question.
He more clearly than at any time before indicated his expectation of assistance from the US. I said that there was no assistance other than the good offices of the Pres’s special rep, Mr. Harriman, that the US was prepared to give. He begged me almost pathetically for “good news”. I told him quite directly that I felt the good news cld come only from him and his associates; that the solution for Iran’s fin and econ problems lay in the hands of his govt. Unprepared as he is to make any concessions, he had no apparent plans as to how the govt cld be financed without oil revenues. He does not now seem to expect revenue from oil operations. This is a surmise on my part as I gathered it from his gen conversation. The matter will have to rest for the time being until we can see what developments may take place.