The resumption of diplomatic relations between Britain and Persia is good news as far as it goes. It opens the way for a new attempt to settle the oil dispute arising from the nationalisation laws of the Mossadeq Government. The British Government has made it clear for some time that it has been prepared to heal the diplomatic breach created by Dr. Mossadeq, when he was Prime Minister, in order to facilitate discussion of the oil issue. General Zahedi, who now heads the Persian Government following his overthrow of Dr. Mossadeq and recall of the Shah, has had to tread a rather delicate course in reopening official contact with Britain. He has had to contend with the intense nationalistic sentiment which was inflamed by Dr. Mossadeq, whose trial on a charge of treason is still in progress, and with economic problems which are likely to remain acute until some reasonable settlement of the oil dispute, leading to a revival of the Persian oil industry, is in sight.

General Zahedi, if his restoration of order in Persia is to be maintained under stable civil government, has to take account of public sentiment, which has come to resent foreign “exploitation” of the country’s oil resources, even though the results of that resentment may practically be ruinous to Persia and politically useful to the pro-Communist Tudeh Party. [Premier Fazlollah Zahedi] Nationalist feeling, as stirred up by Dr. Mossadeq for his own purposes, has been particularly directed against Britain because of the Anglo-Iranian company’s oil operations under the contracts repudiated in the oil nationalisation legislation. General Zahedi has therefore been at pains to publicise his insistence that Britain must agree to the fact of the nationalisation of Persia’s oil resources as a prelude to the reopening of negotiations.

There is no difficulty about that. Mr. Eden stated last month that the British Government was “prepared to recognise the principle of the nationalisation of oil in Persia within the framework of an arrangement which, on the basis of justice and equity, satisfies the interests of the parties concerned.” [Foreign Secretary Anthony Eden] That obviously means that the Anglo-Iranian company must be paid compensation for the loss of its assets under nationalisation, presumably from the proceeds of Persian oil sales, if the industry can be profitably restarted as the result of an agreement with Britain. [AIOC] As it is, Persia has lost heavily in the oil dispute. The oil supplies which she previously sold to the world through the Anglo-Iranian company’s operations have been made good from other sources. Whatever agreement may be reached, a nationalised Persian oil industry under any management will have difficulty in recovering the former position, and certainly not without foreign assistance in production and marketing. But there are sound reasons for seeking a renewed flow of Persian oil on reasonable conditions, especially for the buttressing of a Persian non-Communist economy in the interests of Middle East stability.