Telegram from Julius Holmes to Secretary of State Dean Acheson, Number 1091

NLT (RSF-SUBJ). 289 INCOMING TELEGRAM Department of State copy 1002 TELEGRAPH BRANCH 803 5-X TOP SECRET A Action Control: 14890 NEA Rec'd: August 28, 1951 FROM: London 11:36 pomo TO: Secretary of State DECLASSIFIED G EUR NO: 1091, August 28, 2 p.m. Authority, NLT 1999-640#6 E By so NARA, Date 7/16/07 DCR SENT DEPT 1091, RPTD INFO TEHRAN EYES ONLY AMB 67 o FROM HARRIMAN FOR PRESIDENT AND SECRETARY; NO (RPT NO) DISTRIBU- TION EXCEPT AS DIRECTED BY SECRETARY'S OFFICE. I met yesterday afternoon (Monday) with Attlee and group con- sisting of Stokes, Shinwell, Addison, Ede, Lord Alexander, McNeil and Strang. Holmes and Rountree accompanied me. In reviewing Iran situation I said Stokes mission had been of real value and had reduced to some extent Iran resistance to Brit and made progress in breaking down Iranian intransigence thus making any future negotiations considerably easier. I pointed out explosive situation exists which requires skillful handling and closest coordination US - UK policies I emphasized importance working with Shah and of giving him proper encourage ment to act when situation permits, while not) forcing him to take measures which he considers wld be dangerous. I urged caution in next moves and suggested Brit let situation simmer for a time, pointing out that adverse economic conditions in Iran will weaken Mossadeg only if there is minimum indication that they are brought about by outside pressures but are under- stood to be the result of inept handling. This may take some time, particularly in view financial reprieve obtained by Mossadeq by virtue 14 million pounds made available from currency cover. NARA Stokes mentioned two encouraging developments, namely the strengthening of Iranian security forces at Abadan to prevent disorders, which apparently was the result of talks which we had had with Shah, and message received Monday from Shepherd saying Shah advised him that Mossadeg had agreed to establish managing board under NIOC with two British, two Iranian and two neutral directors and with British general manager. British said and I agreed, however, that there shld be clear evidence Iranians prepared to be realistic in financial aspects of settle- ment before sending mission with Minister back to Iran. We dis- cussed desirability of Brit sending to Tehran a technical level officer conversant with previous negotiations and with knowledge all aspects of problem. He would be assigned to Ambassador's staff for purpose keeping in touch with Iranians, being avail- able assist them in understanding realities of situation, and encouraging REPRODUCTION OF THIS TOP SECRET MESSAGE IS PROHIBITED