A few days ago an American oilman offered me a hot tip. He said that a solution of the Iranian oil problem reconciling Iranian nationalist claims with British insistence on sanctity of contract was finally in sight. In fact, he added, that he expected a public announcement to this effect at any time.

Other Americans, reading the State Department’s announcement that U.S. oilmen who bought Iranian oil did so at their own risk, may likewise have concluded that finally something concrete was in the works which the Department did not want the U.S. oilmen to rush in and spoil.

Unhappily, there is nothing in it. The Middle Eastern sky is as dark and stormy as before.

Iran’s Mossadegh continues to confront Britain’s Churchill. Each of them has a position which he considers reasonable and right. Neither shows the slightest intention of giving way. [Winston Churchill]

Now as 20 months ago, Iran’s Premier stands on his conditions: Iran to pay no more compensation “than it can afford” for the confiscated oil properties; the Iranian government to remain in full control of properties and policies; foreigners to have charge only of management and techniques—presumably salaried foreigners; foreign oil companies to return to Iran a share of the world oil market at a profitable price: a big loan to enable Iran to pay its outstanding bills. Rather than take less Mossadegh would—he repeats—prefer to see Iran go broke and go Communist.

Now as before Her Majesty’s Government in London prefers getting nothing at all to accepting a “preposterous pittance.” It says it will never yield to blackmail or ratify a bare-faced steal. It stands its ground and mutters grimly of a new occupation of Iran by British and Russian troops.

This last is something the U.S. Administration believes it must do everything to prevent. Therefore it continues, in the teeth of continued rebuffs, to seek a compromise acceptable to both sides.

U.S. officials believe that Mossadegh is sincere in his threats. They even suspect that he cannot take much less if he wants to without being murdered by the very nationalist and fanatical Moslem forces which he himself unleashed. They fear that if the Iranian people came to believe that the United States stands solidly with Britain, they would commit national suicide rather than submit.

On the other hand, these same U.S. officials admit that if Mossadegh is successful in blackmailing Britain, every other Middle Eastern government may start playing the same game. They believe in particular that these governments would end by nationalizing all Middle Eastern oil holdings, including those of the United States. They point out that far from diminishing in importance, Middle Eastern oil has become the most valuable prize in the world. Recent discoveries in the area, now justify the claim that this single area could satisfy the world’s entire needs for the next 50 years from already ascertained resources, without counting new supplies sure to be discovered. They believe that allowing the USSR to get control of this wealth would be a deathblow to the West.

Placed between the irresistible claims of Iran and the immovable resistance of Britain, these officials see no way out except patient and persistent efforts to reach a solution partly satisfactory to both sides. They have to admit that so far they have made no progress. Nonetheless, they think that our best bet is to keep on trying to “prevent the Iranian situation from getting worse too fast,” and to hope and pray for a break.