Telegram from Ambassador Henry Grady to Secretary of State Dean Acheson, Number 165

Gem INCOMING TELEGRAM Department of State TELEGRAPH BRANCH 24-B-X SECRET A Action Control: 6243 Rec'd: July 12, 1951 NEA FRON: Tehran 3:30 p.m. Info TO: Secretary of State SS DECLASSIFIED G NO: 165, July 12, 5 p.m. E. O. 11652, Sec. 3(E) and 5(D) or (8) E D pr. of State letter, Aug 4.4.18 P PRIORITY. By NLT. HC , NARS Date 5.4.78 PR NLT 72.5 EUR DCR SENT DEPT 165 RPTD INFO LONDON 39. Emb has recd from several sources increasing indications polit position Mossadeq Govt may have been considerably weakened by developments of past two weeks. Emb appraisal present sit fols: 1. Majlis is becoming increasingly restive. Prin reasons are: (1) Many deputies now (rpt now) realize oil impasse threatens Iran with serious financial difficulties. They state pri- vately govt must quickly inform country its plans to avoid or mitigate impending econ crisis. However, there is no (rpt no) evidence that any elements in Majlis yet prepared to assume responsibility for govt action to modify law nationalizing oil industry or to raise additional revenues from new taxation or other sources. (2) Manner in which seized AIOC documents were exploited for polit purposes by natl front members of govt has aroused indignation of many, especially those fearing to be implicated, and this controversy has deprived Cabinet of some of its press Cs any support. (3) Increasing confusion and inefficiency in conduct ordinary govt affairs and lack of confidence in integrity of Fatemi, parliamentary under secy, who is active administrator PRIMIN'S office, has led to public criticism. Tolu stated July 11: "Men surrounding Your Excellency are not endowed with an iota of faith and piety. These men wittingly or unwittingly add to the difficulties of the country". W (4) Demagogic tactics employed by Mossadeq supporters to keep nationalist sentiment at high pitch have alarmed many deputies, altho few have voiced concern publicly. However, Abdul Qadir Azad, former member natl front, in Majlis session July 8 made strongest attack so far noted against Mossadeq govt, coining phrase "ballyhoo cabinet" to characterized demagogic aspects its policy. His attack was enthusiastically endorsed REPRODUCTION OF THIS MESSAGE IS PROSIBITED