Telegram from Ambassador Henry Grady to Secretary of State Dean Acheson, Number 595

INCOMING TELEGRAM Department of State cofy TELEGRAPH BRANCH 14-D-X TOP SECRET A Action Control: 6392 NEA Rec'd: August 13, 1951 FROM: Tehran 6:07 a.m. Info 535 SS TO: Secretary of State G EUR NO: 595, August 13, 9 a.m. E KRUMAD NARA DCR PRIORITY. SENT DEPT 595, LONDON 133, (EYES ONLY AMBASSADOR), FROM HARRIMAN FOR THE PRESIDENT AND SECRETARY. NO DISTRIBUTION EXCEPT AS DIRECTED BY THE SECRETARY's OFFICE. In his recent meeting with Mosadeq and mixed oil commission group, Stokes has followed two general lines which have not (rpt not) strengthened his general position with Iranian Govt or contributed to improvement of atmosphere. He has proposed broad generalities which he has endeavored to get Iranians to accept in advance of detailed discussion, such as recognition by Iranian Govt that it cannot operate its oil industry without British assistance; that Britain and Iran must have "partnership" in operation of industry; that British operating staff will continue in Iran only if employed by British company, etc. Other line has been to set forth complaints re situation in south, with requests that Iranian Govt take specific measures such as withdrawal of Makki and removal of provisional administration oil commission from Abadan to Ahwaz, as well as other steps to improve morale of British NARA employees I have urged Stokes not (rpt not) to expect Iranians, expecial - ly Mosaded, to commit themselves on generalities which wld imply dependence upon Britain with consequent weakening of their bargaining position, or imply intention to negotiate arrangement which public might think may not (rpt not) be consistent with hationalization laws. I therefore suggested that such talks be ceased until he had specific suggested plan to put up to Iranians for discussion. I have also said that it wld be much better, insofar as possible, to delay specific demands regarding the situation in the south, since not (rpt not) only do they adversely affect atmosphere for discussions but real solution to problem depends upon working out through negotiation some arrangement with Iranians. I expressed view, for example, that it wld be unwise to insist that Mosadeq recall Makki to Tehran since this action itself wld build up Makki's prestige and presence here wld create difficulties for negotiators Shah has also told.me that this TOP SECRET REPRODUCTION OF THIS MESSAGE IS PROHIBITED