Banking on a Settlement
2-Year World Bank Takeover of Iran Oil Proposed

Arash Norouzi
The Mossadegh Project | May 14, 2019                     

Secretary of State John Foster Dulles In the interim between the fall of Dr. Mossadegh and an anticipated future agreement between Iran and Britain over the nationalized oil properties, Sec. of State John Foster Dulles cabled the U.S. Ambassador in Tehran, Loy Henderson, to discuss the strategy forward.

Both State Department figures had done their part in bringing down Premier Mossadegh, Iran’s chief crusader of oil nationalization, in a U.S.-backed royalist coup achieved only a month prior.

The State Dept. Office of the Historian indicates that the telegram was drafted by special envoy Herbert Hoover, Jr. and approved by Henry Byroade.

U.S. State Department Documents on Iran | 1951-1954

888.2553/9–2953: Telegram

No. 371

The Secretary of State to the Embassy in Iran1
[John Foster Dulles to Loy Henderson]

Washington, September 29, 1953—7:30 p.m.

NIACT [night action, requiring immediate attention no matter the time of day]

897. 1. Discussions with [the] British on [the] Iranian oil problem [have been] frank and cooperative. By mutual agreement no commitments [have been] made by either side.2

2. We both feel [there is] little probability [of] arriving [at a] satisfactory permanent solution now.

3. Various forms [of] interim agreements [were] examined. [A] Possible two year operation by [the] World Bank [was] discussed as follows:

A. All issues of principal on compensation for nationalization and deposits in escrow [would] be postponed with no prejudice to [the] rights of either party. If no permanent settlement [is] made during [the] two-year period [the] status reverts to [the] one now existing.

B. AIOC would waive all legal rights to oil produced by [the] Bank during [this] period. [Anglo-Iranian Oil Company, aka British Petroleum]

C. [The] Bank would supervise operations using [an] independent American engineering firm such as Stone and Webster. [est. 1889, Boston, Mass.]

D. [The] Bank would dispose of oil by contract at [its] own discretion probably direct to international companies individually who now operate in [the] Middle East and cutting back production [in] that area proportionately.

E. [The] Net income per barrel to Iran after operating costs would be essential[ly] [the] same as other countries in [the] Middle East [are] now receiving.

F. [A] Large scale operation [is] obviously not possible but [the] estimate[d] annual net income to Iran [would be] approximately sixty million dollars with [the] Bank making [an] initial loan against subsequent repayments.

4. Such [a] plan obviously requires [a] substantial compromise by both parties and [there is] no assurance that [the] British would agree although [they] indicate [a] real desire to be helpful. [It is] Now apparent [that] further progress awaits developments [in] Tehran.

5. [The] British apparently agree [with the] suggestion [that] Hoover proceed [to] Tehran when you believe [it] desirable.3 [special envoy Herbert Hoover, Jr.] He anticipates [that] such [a] visit would be exploratory only at this stage. [I] Request your comments on [the] suggested timing and reaction in Iran to such [an] exploratory visit. We would see [a] profit here [in] such [a] visit unless you foresee serious consequences.4 [Hoover did go, arriving in Tehran Oct. 17th]


• Note: Bracketed text added for better readability.
[Annotations by Arash Norouzi]

• Source: Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989)

1 “Repeated to London. Drafted by Hoover [Herbert Hoover, Jr.] and approved by Byroade [Henry Byroade].” — State Department Office of the Historian

2 “At this point, two meetings had been held between officials of the Department and British representatives led by Victor Butler, the British Minister of Fuel and Power, on Sept. 25 and 26. Subsequently, two additional meetings were held on Sept. 30 and Oct. 1. The texts of the minutes of these meetings are in file 888.2553.” — State Department Office of the Historian

3 “Byroade advanced the U.S. proposal that Hoover should proceed to Iran on a factfinding visit at the meeting with the British representatives on Sept. 26. (888.2553/9–2653)” — State Department Office of the Historian

4 “On Oct. 2 Ambassador Henderson responded, expressing disappointment that there seemed to be little possibility of reaching a permanent and satisfactory solution at that time, as he felt a temporary solution would leave Iran in a state of chronic political restlessness for the next 2 years. The country’s credit position would be such that foreign and private investors would not inject capital into the economy; nor would Iran have the funds necessary to carry out substantial economic development programs without foreign aid.

With regard to Hoover’s projected trip to Iran, Henderson thought such a visit would be extremely helpful as long as the British were agreeable, and Henderson recommended that Hoover should stay several weeks. (Telegram 820; 888.2553/10–253)”

Divvying Up the Loot: The Iran Oil Consortium Agreement of 1954
Divvying Up the Loot: The Iran Oil Consortium Agreement of 1954


Related links:

Sec. of State Dulles: “Extreme nationalization is the greatest problem” (Sept. 23, 1953 cable)

Amb. Loy Henderson on Iran Oil Consortium Details (May 17, 1954 Cable)

World Bank Tries Once More to Pry Loose Iran’s Oil (Feb. 10, 1952 editorial)

MOSSADEGH t-shirts — “If I sit silently, I have sinned”

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