The Three Power Conference
Although he had ridden quite high after the end of the Three Years War, General Secretary Laventry Beria found his power continually diminishing. The humiliation of both the United States and France beating the USSR to space created a widespread impression among the Soviet nomenklatura that Beria's USSR was falling behind the West. In response, Beria blowed large amounts of state funding for scientific development, including promising a "Five Year Plan" that would end with the Soviet Union reaching space. Ironically, growing prosperity in the Soviet Union made Beria's brutal NKVD even more hated, as improving technology actually made it easier to spread tales of NKVD brutality. In addition, Beria''s "Georgia Mafia" monopolized state positions and often abused them for their own profit. Aware that his political power was diminishing and aware that his typical modus operandi of terror and torture wasn't actually working as well as it used to.
However, this also meant motivated and capable young Georgians could easily rise through the Soviet oligarchy. One profoundly ambitious Georgian Communist, the 34-year old Eduard Shevardnadze, had already risen to a high position in the Soviet diplomatic corps. Indeed, it would be Shevardnadze's memo to Beria that changed the trajectory of several nations. Shevardnadze pointed out his belief that the "Western alliance" was actually fraying and that even the Western Europeans could be divided. The memo cited two foreign leaders as particularly pliable with realpolitik. Just to see if this idea would go further, the Soviet diplomatic corps send missives to both leaders. Much to the surprise of Beria, both leaders responded positively, albeit it for different reasons.
The first leader, President Sun Fo of the Republic of China (South China), could be easily swayed. Namely, the Soviets had the ultimate trump card: North China. The second leader was a more enigmatic figure: Prime Minister Charles de Gaulle of France, who had once taken France into a war to fight the Soviet Union. However, de Gaulle was known to be exceptionally swayed by concerns of geopolitics - he entered the Three Years War not due to anticommunism, but due to fears of Soviet domination of Europe. In contrast, the Soviets had three cards to play, namely East Germany, Algeria, and Syria, that if properly played, could assuage De Gaulle's concerns. Beria's geopolitical goal was through by any means, create a totalitarian state that could rise to the level of development and national unity of a nation like, well, France. The brutal repression of minority groups was part of this agenda, especially in the Baltic States, where the NKVD responded to the Forest Brothers with mass killings on a truly staggering level, a reality that was not to be revealed until several years later. In addition, if a few "pawns" had to be discarded towards those purposes, so be it.
In perhaps the ultimate humiliation to the British Empire and to an outraged United States, the largest international event of 1963 was scheduled actually before the Battle of Souda, but took place just a week after. Meeting in "neutral" territory, a majority of the members of the UN Security Council met in Tehran, namely the Soviet Union, France, and China. The French and South Chinese delegation were shocked at how much the Soviets were willing to concede. For both delegations, it seemed that the Soviets were willing to fix every major geopolitical problem they had, at the relatively low cost of infuriating the Americans. For example, the conference actually had a fourth guest - representatives from the Algerian Communist Party.
For the South Chinese, the Soviets promised to pull out Soviet troops from North China, Port Arthur excluded. Although they obviously wouldn't be able to effectuate a change in the North Chinese government, they vaguely hinted at pressuring a more reformist government to come in charge. In exchange, only one minor concession had to be given: the South Chinese trade embargo on the People's Republic of Korea had to be dropped, which meant recognizing it as the official government of Korea. As the Soviets could not promise to withdraw from North Japan due to the lack of a North Japanese military, the two powers could not make a similar deal on North Japan. In addition, North Japan was significantly smaller than South Japan. In contrast, the ROK-Jeju was seen as an almost irrelevant backwater island nation. and ROC diplomats generally mocked the Jeju government - the idea of an anticommunist remnant hiding on a small island to "retake" the mainland seemed utterly laughable to the Republic of China. However, dropping the embargo on Mainland Korea essentially ruined the embargo against North Japan, because Mainland Korea was North Japan's closest trading partner. Through this phenomenon, the Chinese and Soviet blocs essentially established commercial relations, using Mainland Korea as their conduit. The South Chinese took the deal.
For the French, their concerns were more complex. First, Charles de Gaulle desperately wanted an "out" from Algeria, but one that wasn't pure defeat. Ironically, even though the French had more or less negotiated a detente with Syria, the Syrian conquest of North Israel had inspired other Arab ultranationalists, chiefly those within the FLN in Algeria, away from a negotiated peace with France. That meant the other main group willing to make peace with the French was the PCA, the Algerian Communist Party. Luckily for De Gaulle, he understood that the PCA more or less took marching orders from the Soviets - and could be forced into a peace by Moscow. PCA delegates had arrived to the Second Tehran Conference, brought by Beria to negotiate the terms of peace with France. Second, the French were afraid that Communist rebels in Lebanon would threaten their influence in Lebanon. The French had already come to an agreement with Syria, but this was seen as fragile, especially because the Syrians were more acceptable than the French expected. A planned Soviet withdrawal from North China was viewed by the French as a likely death knell to North Chinese intervention in the Middle East. Third, France was now tied at the hip with West Germany, with the Bundeswehr and French Army closely connected. By offering a Soviet withdrawal from East Germany, Beria could essentially crown De Gaulle as the elder statesman of Western Europe, especially as he could contrast the tranquility of France with....whatever the heck was going on in Great Britain. All the French had to do acquire this was to open up economic relations with the Soviet Union, including transferring large swaths of military and civilian technology. The French took this deal.
The results of the Tehran Conference, closely guarded by Soviet, French, and South Chinese officials, shocked and horrified most of world leaders. First, the Americans were obviously horrified. President Kennedy viewed this as two stabs in the back by two nations that the United States had aided and helped recover. That being said, the French betrayal was much worse to the Americans, since they were openly allowing a Communist government to come in charge. Kennedy was deeply unhappy with the ROC for recognizing the PRK and opening commercial relations, but it wasn't as outrageous as actually trading off an entire nation.
Second, most Eastern bloc nations were horrified. East Germany had no intention to go quietly, nor did North China. A secret agreement between various Communist states bypassing the "revisionist madman Beria" was immediately signed. North China, East Germany, Romania, Czechoslovakia, Poland, and much to the surprise of even the other plotters, Bulgaria-Macedonia all signed on to a secret agreement (interestingly, the Macedonian leaders all signed on, though not any Bulgarians). Foreign Minister Molotov was so outraged, he resigned on the spot, something he realized was a terrible idea when the NKVD was dispatched to his location. He barely escaped with his life and only by fleeing to North China, which angrily refused to return him. Molotov may have been an old guard, but his opinions were widely shared in the Soviet officer corps. Third, similar fierce outrage exploded in France itself, where many locals saw De Gaulle seemingly throwing Algeria over to Beria's Communist friends, which was exceedingly loathed by certain quarters, especially those that were not going to forget Stockholm. In contrast, there wasn't much rage in South China over the deal with Beria - the Three Years War was after all, not directly waged between the USSR and South China. The South Chinese were very much more focused on North China.
Interestingly, most Algerians also loathed the deal, which harmed the popularity of the PCA. After all, De Gaulle chose to make peace with the PCA, nor the FLN, which allowed the FLN to denounce the peace as one-sided neocolonial. In addition, under the Tehran Accords, most of the weapons of the pro-French security forces in Algeria would be turned over to the PCA, which outraged the (generally anticommunist) pied-noirs as well as the Americans. Finally, the Tehran Accords allowed the French to keep an enclave on Oran, as well North Algiers (Algiers had to be partitioned, as neither side was willing to let go of the symbolic nature of Algiers being the capital of Algeria), and the Sahara itself (the PCA was actually convinced that it was worthless). The PCA desperately did not want to concede coastal enclaves, but Beria essentially strongarmed them. Beria's ability to strongarm the PCA into what was seen as a deeply disadvantageous was in fact why De Gaulle responded so positively to overtures from the USSR. The FLN responded by declaring war on the PCA as well, as well promising to throw the French out of coastal Algeria. In practice, as the French walled off their enclave in Oran, it would be largely an Algerian Civil War, one that put American and French secret services on opposite sides.
In contrast, the conference was actually pretty popular among citizens and intellectuals across the world, who saw the Soviets pull out from East Germany and North China and the French make peace in Algeria. In addition, intellectuals were lured by the fact that the three parties had agreed to a nuclear arms reduction treaty. Ironically, having more or less murdered millions of people through the use of nuclear weapons, Beria was quick to agree to nuclear disarmament, since he viewed the number of nuclear weapons as not so-important compared to the deterring fact that everyone knew the USSR to be a nation that would use a nuclear weapon. This was seen as a horrible outcome by not only the Americans, but pretty much every nation aligned against the USSR, from Yugoslavia to Israel to Sweden.