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TEXT OF DRAFT TELEGRAM TO H.M. AMBASSADOR IN TEHRAN AND OF DRAFT REPLY TO PERSIAN PRIME MINISTER'S MESSAGE OF 8TH MAY, 1951.

My

ivly telegram No. 363 of 8th May: Persian Prime Minister's message on oil./

My immediately following telegram contains the text of an Aide Memoire replying to Mussadiq's message contained in my telegram under reference which you should communicate to him at the earliest possible moment. A copy will also be given to the Persian Ambassador here..

2.

In making this communication, you should leave Mussadiq in no doubt that the tone of his message has created a deplorable impression here. I have been at pains to make clear, both in the House of Commons and in previous messages to him, that His Majesty's Government while not prepared to negotiate under duress were anxious to settle this matter by negotiation. Mussadiq's response appears to be a flat rejection of this approach and a reassertion of his intention to proceed by unilateral action.

3.

His Majesty's Government cannot accept this procedure, which smacks of a technique with which we have become all too familiar in other parts of the world, but which we did not expect to encounter in a country with whom we have long had such close and friendly relations. As you have already pointed out to him, dispossession of the Company could only lead to economic chaos in Persia and consequently would produce exactly the contrary of those aims which he professes to be pursuing, and with which we fully sympathise. We are not prepared with folded arms to watch him embark on a course from which only the Communists can profit. We are convinced of the strength of the Company's legal position, and of our own right to intervene to protect its interests if the Persian Government refuse its demand for arbitration and our invitation to negotiate. Precipitate action by Dr. Musaddiq could not fail to have the most serious consequences for Persia.

Draft Message to Persian Prime Minister from Foreign Secretary

I have received through His Imperial Majesty's Ambassador in London your reply to the message which I sent to you through him on 2nd May. I regret to find that it contains no response to the suggestion which I made, and which I have since reaffirmed publicly, that His Majesty's Government in the United Kingdom wish to see the question of the future operations of the Anglo-Iranian Oil Company in Persia settled by negotiation, but instead appears to assert a right by the Imperial Government of Iran to proceed by unilateral action to dispossess the Anglo- Iranian Cil Company.

2.

His Majesty's Government fully understand and sympathise with the desire of the Iranian Government to strengthen the economic structure of their country and to provide for the general welfare of its

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people. They themselves have constantly shown in practical ways that these 4bjects&re of deep concern to them. The Aña fficult

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to believe, however, that the unilateral action which the Persian Government are proposing to take will contribute towards their fulfilment.

3.

His Majesty's Government moreover neither desire nor intend to question the exercise by Iran of any sovereign rights which she may legitimately exercise. They maintain, however, that the action now proposed against the Company is not a legitimate exercise of those rights. The 1933 Agreement between the Iranian Government and the Company has a double character. First, it is a contract between the Persian Government and a foreign Company concluded under the auspices of the League of Nations after an attempt by the Persian Government to deprive the Company of its rights under its previous concession had been brought by His Majesty's Government before the League of Nations. Secondly, it was ratified by the Majlis and became a Persian Law. Further, the Agreement contains two very important provisions:

4.

(a) that the position of the Company under its agreement shall never be altered by action of the Iranian Government or even by Iranian legislation (Article 21) except as the result of an agreement between the Company and the Iranian Government.

(b) that if the Persian Government had any complaint against the Company or vice versa and the dispute could not be settled otherwise, it was to be referred to arbitration (Article 22), the arbitral tribunal being presided over by an umpire appointed by the arbitrators themselves or, in default of their agreement, by the President of the International Court of Justice at The Hague.

These two Articles show that this agreement was placed on quite a different footing from an ordinary contract between the Iranian Government and a Company, in that (a) disputes arising out of it were not to be subject to the Persian Courts, and (b) the Iranian Government was bound not to exercise what might have otherwise been its sovereign right of altering or annulling the Agreement in return for compensation.

5.

If as Your Excellency claims the Iranian Government had grievances against the Company, its remedy, as I have shown above, was to seek arbitration. That course has not been adopted. Instead, the Iranian Parliament have enacted a law which envisages a fundamental change in the status of the Company. The Company therefore had no alter- native but to make known to the Iranian Government its wish to take the whole matter to arbitration.

6.

The Anglo-Iranian Oil Company is a British Company registered in the United Kingdom; moreover, His Majesty's Government own a majority of the shares in the Company. It is clear therefore that His Majesty's Government have the fullest right to protect its interests in every way they properly can. The Company has had its valuable rights established under the Agreement injuriously affected by an Iranian enactment when Article 21 provided that this should not be so. The Company has appealed to the only remedy which is open to it, namely, arbitpation under Article 22. If that remedy should be re

rendered illusory 53

Page by the Ranian Government, His Majesty's Government would have an

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unansweagb154igh5&nder international law to take Page45asef 5&A, if they deemed it expedient, to bring their complaint against the Iranian Government before the International Court of Justice at The Hague. In that contingency they would hope that the Iranian Govern- ment would collaborate in enabling the Court to give a decision as quickly as possible.

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7.

On the other hand, His Majesty's Government still hope that the problem can be solved by negotiation to the satisfaction of all concerned. The Company's offer to discuss the terms of a new agreement had already been conveyed to the Iranian Government, and I take this opportunity to reaffirm that His Majesty's Government are prepared to arrange for a Mission to proceed forthwith to Tehran for this purpose. They earnestly trust that Your Excellency will be prepared to agree to this procedure and to conduct negotiations with this Mission on a fair and equitable basis.

8,

In conclusion, I note that Your Excellency has reciprocated the desire which I have already expressed to you of maintaining good relations and strengthening the foundation of friendship between Iran and the United Kingdom. I should, however, be less than frank if I did not say that a refusal on the part of the Iranian Government to negotiate, or any attempt on their part to proceed by unilateral action to the implementation of the recent legislation, could not fail gravely to impair those friendly relations which we both wish to exist and to have the most serious consequences.