The Ambassador in Iran (Grady) to the Embassy in the United Kingdom¹

Tehran, July 29, 1951—1 p.m.

90. For Harriman and Gifford. [U.S. Envoy Averell Harriman and Walter Gifford, U.S. Ambassador to the UK] [I] Saw [the] Prime Minister [Mossadegh] at 10:45 this morning and discussed with him fully [the] content of London’s 33 July 28.² He was most cordial and expressed his very great desire to have the oil question promptly settled. He understands that discussions and [a] conditional reply of [the] British to [the] Iranian Government is [a] matter of deep secrecy and [a] British reply will only be submitted when there are assurances from him that it is acceptable. He made no difficulty about the wording and was agreeable to having in the British reply and Iranian reply reference to [the] importance of relieving present tensions which exist in [the] south. He says there is no tension of [a] serious nature there and he is perfectly willing under [the] circumstances to agree that what tension exists should be relieved in every way possible.

He has called the mixed commission and Cabinet for [a] meeting at once and will give me [a] more formal reply this evening or first thing tomorrow morning. In [the] meantime, he authorized me to tell Mr. Harriman that he has no objection to [the] proposed exchange of notes and their publication and will welcome the coming here of a mission headed by a Cabinet minute of [the] British Government. However, he asked me to say to Mr. Harriman as his own views prior to [the] meeting of mixed commission and Cabinet the following: That he assumes Mr. Harriman has brought to the attention of [the] British Government and [the] British understand and accept the minutes of [the] Cabinet meeting which he read to Mr. Harriman on July 23 (reference Embassy telegram 340 to [State] Department July 24 repeated [to] London 65³) He read 3 points from [a] document in his files:

1. [The] British Government must recognize on behalf of AIOC [the] principle of [the] nationalization of southern oil.

2. The Iranian understanding and definition of [the] “principle of nationalization” is that [the] “discovery, extraction, [and] exploitation of oil must be in [the] hands of [the] Iranian Government”. He said the sale of this oil falls under [the] pertinent article of the nine-point nationalization law.

3. [The] British Government must understand [that the] Iranian Government rejected Jackson’s proposal and could not accept any proposal along [the] same lines. [Basil Jackson of AIOC] He repeated several times that he assumes Mr. Harriman had informed [the] British of [the] foregoing so that [the] British mission would not come out to Iran and say they have only accepted their interpretation of [the] “principle of nationalization”. [The] Prime Minister said he is quite willing [to] accept Mr. Harriman’s statement that [the] British understand and accept [the] above 3 points and does not require [the] Brits to write anything to this effect in their formal reply to [the] Iranian Government.

You may be sure I urged him not to put conditions as [a] prerequisite of negotiations whether these are done directly or indirectly through Mr. Harriman, but he insisted there was no use of [the] British mission coming unless [the] Iranian position was clearly and definitely understood.⁴

Will wire at once [if] any further word we get from Mosadeq.⁵

Grady