Max Thornburg on Iran’s Economy
July 5, 1951 Discussion at the State Department
The following document pertains to a conference held at the State Department between Secretary of State Dean G. Acheson, diplomat William Rountree and oil executive Max Thornburg on July 5, 1951.
Thornburg, Petroleum Advisor to the State Department, had recently returned to the U.S. after years advising the Iranian government on its economic development, and called for the meeting to offer his opinions. He asked Acheson to read the notes he made in preparation, which formed the basis for much of the discussion.
NOTES FOR DISCUSSION WITH DEAN ACHESON
Persia is in grave danger of revolution followed by Communist control.
SECT’Y OF STATE: 5 July 1951
Washington, D. C.
Mistake to regard oil nationalization as the critical contest. This an accident precipitated by Company stupidity. [Anglo-Iranian Oil Company] It has become the symbol of the basic rebellion against internal misgovernment, foreign political interference and foreign economic domination. Such rebellion was becoming inevitable, in 1950, in some form. If we endeavor to treat it as an oil problem, to suit the British, we are very likely to lose the basic contest — to Russia.
Persia’s corrupt government was consequence of several historical circumstances, to which Persians, Russia and Britain contributed.
Essential economic and social reforms cannot succeed in advance of political reforms.
Shah is liberal and progressive and the population generally is loyal to him. Also has support of army and of substantial following of responsible citizens, but politically unorganized to combat powerful vested interests backed by British. Persia’s strongest hope for essential reforms is in Shah’s success.
Shah, in June 1950, recognized need for critical action and proposed robust reform program under Razmara. [former Premier Ali Razmara] This was outlined to Dep’t of State in dispatch 21 June, with 3 requirements for success:
(a) explanation to American people to insure their support;
(b) British support of program (no political interference);
(c) prompt revision of oil royalties, to provide funds.
This was at time of change in Ambassadors from Wiley [John C. Wiley] to Grady. [Henry F. Grady] Wiley had been urging “flash program” of economic works to combat Communism, but for 18 months supported completely inert Saed Government which made any program impossible. [Premier Mohammad Sa’ed] Washington was indifferent to dispatch of 21 June. So was Grady. He lost 2 or 3 months ignoring critical political situation, drawing parallels with Greece, making new economic plans with new uninformed staff members and promoting US loans and other aid which never materialized.
Political sabotage of 7 Yr. Plan plus hold-back of oil funds by British and other worsening conditions resulted in moral and cash bankruptcy which gave all extremist and subversive elements opportunity for effective rabble-rousing based upon visible evidence of people. [Formulation of a Seven Year Plan for economic development began in 1946, under Premier Ahmad Ghavam] Coalition took up “oil nationalization” as battle-cry, though most admitted this was merely a club over the British.
Razmara’s assassination (7 Mar. 1951) following his anti-nationalization speech, plus other terrorist incidents, produced virtual anarchy which still prevails, with Mossadegh helpless to control fanatical religious groups, nationalist extremists, Communists or other rebellious factions which — with various ultimate objectives — had made him Prime Minister. A positive step by him in any new direction is likely to mean repudiation or assassination. Meanwhile contesting factions struggle for control of government.
Grady deliberately deprived the Persians of my services as oil adviser, without providing a replacement, assertedly both because I was American and because I was not acceptable to the British, at a time when experienced advice was vitally important to those hastily drafting the nationalization program. McGhee concurred. [George C. McGhee, Assistant Secretary of State for Near Eastern, South Asian and African Affairs]
In my opinion it is not yet too late to support the Shah in establishing a responsible government, under the present Constitution, thus providing a foundation for the reforms which must begin to materialize quickly unless Persia is to be lost to the Communists, as well as for a reasonable settlement of the oil problem. Nationalization need not interfere with a practicable financial and operation program which preserves all equities.
The political essentials remain as set out in the dispatch of 21 June, 1950. Despite subsequent complications, American and British statesmanship should still be equal to the task. I do not believe that our present course is headed toward a solution. Quite the contrary.
MAX WESTON THORNBURG
This document, attached to a “Memorandum of Conversation”, was declassified on March 27, 1985.
[Annotations by Arash Norouzi]
Oil, Iran, and the Anglo-American Art of Non-Negotiation (1951)
Prospects For Survival of Mossadeq Regime in Iran (1952 CIA Report)
“Broken Weekend” May Break British-Iranian Deadlock — J.E. Jones, August 9, 1951
MOSSADEGH t-shirts — “If I sit silently, I have sinned”