Telegram from Ambassador Henry Grady to Secretary of State Dean Acheson, Number 422

INCOMING TELEGRAM Department of State TELEGRAPH BRANCH 17 PLAIN A Action Control: 15210 Rec'd: July 28, 1951 NEA FROM: Tehran 11:55 a.m. Info SS TO: Secretary of State G L NO: 422, July 28 EUR E DCL PRIORITY P to ARCHIVES "NATIONAL AND RECORDS SERVICE'" IE SENT DEPT 422, RPTD INFO LONDON 88 CONTINED OLI CIA FOR HARRIMAN. DCR Bakhtar Emruz reports the following statement to press June 27th by Senator latine-Daftari, member Joint Oil Commission, concerning interview he had with British Ambassador at latter's request: "Under instructions his govt Sir Francis Shephard requested interview to discuss specifically conditions under which we would accept agreement concerning the expolitation of oil in Khuzistan. In other words, the Ambassador desired especi- ally to know whether the parliamentary commission and the govt were ready, and on what conditions, to accept a provi- sional modus vivendi in order that the industry might continue to operate pending the resumption of negotiations The reply which I gave him was the following: The only condition for such an understanding is the recognition of the present Iranian legislation concerning nationalization of petroleum industry, as well as official recognition of the existence of the Iranian National Oil Company, and of the powers of the Provisional Board of Directors. Only on these conditions would Iran be ready to enter into an agreement for the continued operation of the industry and the export of petroleum abroad while the negotiations were going on. Keihan reports that Kazen Hassibi, Undersecy of Fin and govt representative on the Joint Oil Commission commented to press July 27 that conversations with British should begin as soon as possible, because if there were further delays Iranian public opinion would be affected, and it was possible that the talks might be again broken off. He added "it goes without saying that the return of a delegation of the ex-AIOC to Tehran necessarily depends upon the recognition of our oil nationali - zation legislation, The exploration, extraction, refining and sale of oil in Iran must be placed under absolute Iranian control. Iran can no longer permit the existence on its territory of an important foreign enterprise, and it can no longer accord a monolopy right REPRODUCTION OF THIS PLAIN MESSAGE IS PROHIBITED