Telegram from Ambassador Henry Grady to Secretary of State Dean Acheson, Number 705

307 INCOMING TELEGRAM Department of State CORY 10F2 234 TELEGRAPH BRANCH 12 B X mon gnonet A Action mean Control: 9941 Rec'd: August 19, 1951 NEA FROM: Tehran 8:53 a .m. Info TO: Secretary of State DECLASSIFIED SS E. a 11652, Sec. 3(E) and est G NO: 705, August 19, 10 a.m. Dept. of letter, 4-4-2 EUR PROJCET NLT74.2 E By He BARS 9.44.71 DCR PRIORITY. JOB DECHEL SENT DEPT 705, LONDON 152 EYES ONLY AMBASSADOR. FROM HARRIMAN FOR PRESIDENT AND SECRETARY. NO DISTRIBUTION EXCEPT AS DIRECTED BY SECRETARY'S OFFICE. ED British met with Iran negotiating committee this afternoon (Saturday) for an informal exchange of views regarding British proposal. I was asked to participate. Iran group had been released by Prime Minister to express their opinions. However, these generally conformed to position taken by Prime Minister. They maintained that proposal did not (rpt not) conform to formula submitted through me principally on point that British control of both purchasing organization and operating agency means return to status quo with thin disguise. Other objections were raised that as that purchasing organization would have substantial monopoly of Iran exports, and that principle of 50-50 division of profit was inequitable, particularly if combined with payment for assets taken over. Such arrangements it was contended would not (rpt not) be acceptable to Iran public opinion. Stokes gave obvious replies explaining the commercial aspects of world oil business and necessity of creating arrangements la which would induce British staff to remain in Iran. He was rather general in his comments on the control of operation by NIOC and also suggested that it was Iran politician problem to deal with their public opinion. Stokes stated he believed Irans would obtain under his proposal three times as much as they did in 1950. This would be about 50 million pounds on 1950 basis. He said he could not (rpt not) remain indefinitely and it was therefore agreed they would hold two meetings a day, the next one to be 10 a.m. tomorrow (Sunday). At close of mtg I expressed my satisfaction that the two groups were at last talking informally and hoped that through this type of discussion an understanding could be reached. I stated I believed that the proposals put forward by British for discussion provided good basis for negotiation and that arrangements could be worked out under these proposals which would be within formula under which Brit mission had been asked REPRODUCTION OF THIS gop OLCRET MESSAGE IS PROHIBITED