After becoming prime minister for the second time, and having won the oil nationalization case at the World Court, Muhammad Musaddiq was hopeful that the British would be more compromising in their approach toward the oil nationalization issue. He was also hopeful of the American support in the dispute.

President Truman and Secretary of State Dean Acheson were both sympathetic toward Iran. At the same time Churchill, who had just become prime minister, was concerned about maintaining American support in this crisis. The mutual efforts of the British and Americans to reconcile their objectives finally led to a joint proposal issued by Truman and Churchill. This proposal spelled out the basis for a new agreement regarding the oil nationalization dispute. This proposal was rejected by Musaddiq's government. The two leaders subsequently issued a second proposal that was also rejected by Musaddiq's government. With this second rejection the Americans and British concluded that they could not resolve the oil issue through negotiation with Musaddiq.

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