Telegram from Ambassador Henry Grady to Secretary of State Dean Acheson, Number 285

NLY (PSF-5UBT)362 copy 10f2 INCOMING TELEGRAM Department of State 254 TELEGRAPH BRANCH TOP SBORET A 21-X Action Control: 10069 NEA Rec'd: July 19, 1951 FROM: Tehran 3:11 p.m. Info SS TO: Secretary of State G EUR NO: 285, July 19, it p.m. DICLASSIFIED DCR B. a 11632, Sec. 3(3) and D.pr. of State former, 5-31-71 Bg NLT, HL MADS 10.2.4 NO 72.1 PRIORITY FROM HARRIMAN FOR THE PRESIDENT AND SECRETARY. NO (RPT NO) DISTRIBUTION EXCEPT AS DIRECTED BY THE SECRETARY's OFFICE. I have reported by separate telegram the general course of my discussions with Iranians. It might be useful to outline to you some of the basic elements of the situ- ation which I have found and which must be taken into account in my efforts to work out some solution. There is complete unanimity of opinion among qualified American officials that Mosadeq is strongly supported by very large majority of Iranian people, and no (rpt no) Iranian program has ever been backed to the extent of his program to eliminate Brit influence in Iran and nationalize the oil industry. In whipping up public emotions on this issue, however, Mosadeq has created an atmosphere which has made it possible for extreme ele- ments, both right and Communist, to establish situation under which it is practically impossible for him sub- stantially to retreat. While it is generally believed that Mosadeq is the only man who cld make deal of any kind with the Brit without it resulting in strong oppo sition and violence, he cannot conclude an agreement 3. AND which he cld not (rpt not) square with the nine points RECORDS of the nationalization law. bexusba SERVICE' to Mosadeq's rigidity thus results as much from practical political factors as from his emotionalism. There is chance that he can be convinced to some extent upon the practical reali ties on the oil company operation, and that his emotions can to degree be tempered with realism. It is more unlikely, however, that he can be convinced that the political aspects of the problem wld permit him to seek an amicable settlement with the Brit which wld appear to involve concessions on his part. From my conversation with the Shah and Ala, it is clear that they believe the Shah cannot now afford to replace Mosadeq REPRODUCTION OF THIS TOP SECRET MESSAGE IS PROHIBITED