Memorandum, State Department Summary of Telegrams

NLTCNaval Aide)287 of OFFICE OF THE SECRETARY OF STATE DECLASSIFIED WASHINGTON E.O. 12065, Sec. 3-402 State Dept. Guidelines, March 6, 1982 November 9, 1951 By DEB NLT, Date 9-6-85 TO S E E r SUMMARY OF TELEGRAMS IRAN The Department informed Prime Minister Mosadeq yesterday evening that we have failed to bridge the gap between the British and Iranians, and it pointed out the Iranianposi- tions, including that on price, which had contributed to the difficulty. We emphasized, however, that we did not wish to assess the blame for the failure. We stated that we believed the British still wished to ne- - gotiate if a suitable basis could be found and we offered to do anything we could to facilitate a settlement. Mosadeq replied that the British think they can force the capitulation of the Iranians by economic pres- sures but that they are wrong. He said he would write a letter to Presi- dent Truman immediately requesting emergency assistance of $ 10 million a month as an advance against future oil income in order to face the Iranian budgetary crisis until oil revenues can be resumed. Mr. Eden gave our Paris delegation an informal memorandum yesterday evening in response to the Secretary's request of the day before, setting forth the UK's minimum requirements for an oil settlement. The following are the principles, together with Mr. Eden's comments on them: 1) There must be fair compensation for loss agreed between the two parties or, in default of this, settled by arbitration. (Un- less the principle of leaving the compensation to be settled by some inde- - pendent judifical authority is accepted, no British--orAmerican--interes in foreign countries is safeguarded against breach of contract, and there is no possibility of encouraging foreign investment in backward countries. ) 2) There must be security for effective means of compensation. (In the case of Iranian oil, compensation can only be paid if their oil industry is maintained at about its present scale and in effect is in the form of oil. This can obtain only if there is an efficient management and some com- pany having world-wide markets is prepared to rely on Iranian oil over a long period of time for supplying its markets.) 3) Iran should not by rea- son of her unilateral expropriation of the AIOC secure, over-all, a more favorable return from her oil than other concessionary governments who have respected their contracts. (Subject to the establishment of fair and effective compensation in the form of free oil and of efficient management,