Office of the Historian

888.2553/3–2654: Telegram

No. 447
The Ambassador in the United Kingdom (Aldrich) to the Department of State1

secret
niact
London, March 26, 1954—6 p.m.

4178. Limited distribution. From Hoover. At meeting between Caccia, Foreign Office group, Butterworth and myself, afternoon March 26, proposed agreement prepared as follows:

“The following is the understanding between the United States Government and Her Majesty’s Government:

1.
Apart from consideration between the members of the consortium in respect of the future there would be a reasonable sum payable by the Iranian Government to AIOC in respect of the internal distribution facilities, the Kermanshah Refinery and the Haft-i-Shah Field and for loss and damage arising directly or indirectly out of the events of 1951 up to the coming into force of the consortium agreement.
2.

Assuming the Persian Government will agree to a commercial arrangement with the consortium (on a 50–50 basis) a net sum taking into consideration claims and counterclaims is to be determined by negotiation or failing that by arbitration within the following limits:

Maximum: Pounds 100 million total net payment by the Iranian Government to AIOC.

Minimum: No net damage claims after counterclaims but payment for internal distribution facilities, the Kermanshah Refinery and the Haft-i-Shah Field on an engineering evaluation basis.

3.
Payment of whatever sum is determined will be made over a period of 20 years.
4.
This sum should form an integral part of any final settlement with the Iranian Government.
5.
The foregoing proposals do not refer to the value of the assets (apart from those mentioned at the end of paragraph 2) nationalized by the Persian Government or to future profits since it is assumed that these will be adequately covered by the conclusion of the acceptable commercial arrangement referred to above.
6.
Consequently, the US Government and HMG agree:
(a)
That, as part of the forthcoming negotiations in Tehran, HMG will put forward a claim on behalf of AIOC to the Persian Government in the manner that they think fit. In doing so, HMG will, of course, take full account of the needs of the consortium negotiations as a whole and of the above understanding.
(b)
That, although the US Government will not commit itself to a figure, it will support the principle of just compensation and will leave the Persian Government in no doubt that it is to [Page 971] the advantage of all concerned that the matter of claims and counterclaims involved shall be settled in order that the consortium may have the best chance of success.”

Comments included in Embtel to follow.2

Aldrich
  1. Repeated to Paris and Tehran.↩

  2. On Mar. 26 Hoover cabled that the proposed agreement was, in effect, a modified version of the formula outlined in telegram 4104 (Document 444), that all commitments were included in the proposal; that the proposal envisaged a solution by negotiation and failing that, by arbitration; and that Hoover believed that the British Government would, in fact, be reasonable in negotiations, certainly more so than if the AIOC were handling matters. (Telegram 4179 from London; 888.2553/3–2654)

    The Department replied to telegram 4178 later on Mar. 26 informing Hoover that the Department confirmed U.S. agreement to the memorandum of general understanding. (Telegram 4993; 888.2553/3–2654)

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