Memorandum, State Department Summary of Telegrams

NYT (Naval Aide)3 OFFICE OF THE SECRETARY OF STATE the DECLASSIFIED WASHINGTON E.O. 12065, Sec. 3-402 State Dept. Guidelines, DOP March 4-10-05 6, 1982 August 1 1952 By DEB NLT, SECRET SECURITY INF ORMA TION- SUMMARY OF TELEGRAMS IRAN In view of the serious situation in Iran the Secretary called in the British Ambassador on Thursday to discuss joint US-UK - action in the crisis. In an aide-memoire which was given Franks we stated that we consider that the situation in Iran has reached the critical stage and it is essential to take immediate steps in an effort to prevent the loss of Iran to the Western world. We see little likelihood that the Shah or the con- servative elements will recapture political influence from the nationalist government of Mosadeq, and meanwhile the danger ofa Communist take-over - is increasing. Unpalatable though it is, there seems to be no reasonable alternative to supporting the present government. Such support must be in a manner which will not relinquish British claims to compensation for the oil nationalization, and it must be done in such a way as to be justifiable both to British and American public opinion. Also there must be some prospect that Iran will benefit from the resumption of oil revenues to the end that budgetary financial aid will not be required indefinitely. We feel that the time element is so short that the first step in providing funds must be taken before any final elaborate agreement could be worked out, and therefore we propose that the British and American Govern- ments jointly make an offer along the following lines to Mosadeq: 1) the US will make an immediate grant of $10 million to the Iranian Government; 2) the AIOC or some other British designated agency will purchase from Iran all oil products presently held in storage by the NIOC at commercial Persian Gulf prices less an appropriate discount; 3) on the basis of the proposal dis - cussed between Mosadeq and the British Charge in Tehran on July 25th, it would be agreed that an arbitral commission consisting of three persons be set up immediately to consider the question of compensation, but neither the American grant of $10 million nor the heginning of British oil purchases would be held up pending the commencement of the arbitral procedure; and 4) nego- tiations looking a more permanent arrangement for the distribution of Iranian oil would be undertaken promptly. TURKISH STRAITS Our Special Representative in Europe, Ambassador Draper, states that the comments from our embassies in Moscow and London confirm his initial impression that the project for TOP SECRET SECURITY INFORMA TLON