Telegram from Ambassador Henry Grady to Secretary of State Dean Acheson, Number 601

DECBEE WCTCAFF-CUST.) 312 INCOMING TELEGRAM Department of State COPY OF2 TELEGRAPH BRANCH D-X A Action Control: 6429 NEA Rec'd: August 13, 1951 FROM: Tehman 8:05 a.m. Info SS TO: Secretary of State 628 G EUR NO: 601, August 13, Noon DECLASSIFIED E DCR PRIORITY By AR State Dept. E.0. Customic WLT 12035, Sec. June 3-402 SENT DEPT 601, LONDON 134 EYES ONLY AMBASSADOR NARS, Date 4-5-K2 1979 FROM HARRIMAN FOR PRESIDENT AND SECRETARY NO (RPT NO) DISTRIBUTION EXCEPT AS DIRECTED BY THE SECRETARY'S OFFICE Reaction of Mosadeq as reported by Bushehri to Stokes and myself has been unfavorable to proposals of British (re tele- gram August 12) on three counts: (1) Mosadeq would refuse to sell to one purchaser and pro- poses sales contract by NIOC to former customers individually. British to participate to extent of previous direct con- sumption, estimated by Iran to be about 40 to 50 percent (2) NIOC to be managed by twelve directors--four Iranian and eight foreign neutrals selected with approval of British and to employ staff including present British personnel and operate oil production and refining. (3) Half of profits to apply only to British share of sales, and this to include compensation for properties nationalized. These counterproposals are obviously unacceptable. Purchasing organization arrangement referred to in British proposal might be adjusted to include sales contracts with group of companies affiliated with AIOC, which might be acceptable to Iranians. No (rpt no) solution to (2) is now evident. There could be no (rpt no) assurance that government owned company could operate without political interference no (rpt no) matter who foreign directors might be, and Irans oppose vigor- ously use of British managed operating company o Point (3), of course, untenable. cusp Stokes is seeing Shah this morning (Monday) to seek his advice and will probably submit his proposal to Iran negotiating committee this afternoon. (Yesterday'a meeting was postponed until today. . ) It appears REPRODUCTION OF THI MESSAGE IS PROHIBITE