Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X

888.2553/5–1754: Telegram

No. 461
The Ambassador in Iran (Henderson) to the Department of State¹

secret

Tehran, May 17, 1954—8 p.m.

2347. Noforn. Limited distribution.

1. On afternoon May 16, shortly after my return to Tehran, meeting was held with consortium group, British Ambassador, Dutch Minister, Hoover, myself and United States-United Kingdom staff members. Meeting devoted largely discussion management arrangements. Consortium representatives discouraged as result meeting with Iranian negotiators evening May 15, during which Iranians appeared to them to backtrack considerably regarding certain basic aspects, particularly in relation management.

2. Consortium and Iranian negotiators met again evening May 16, when Iranian delegation tabled memorandum outlining their ideas regarding management and particularly terms of agency arrangement² under which consortium would operate. Consortium representatives primary concern was related to preamble which indicated Iranian Government, as principal, would have extensive authority in “supervising” management operations, and that relations between NIOC and consortium would be “normal relations between principal and agent”. During detailed discussion this memorandum, consortium representatives indicated to Iranian negotiators that with some modification, many points enumerated below preamble would be acceptable, although proposal as whole unacceptable. At suggestion Iranians, consortium representatives undertook revise memorandum in manner which would render it acceptable to them, such revision to be discussed at meeting scheduled evening May 17.

3. Early on morning May 17, Hoover and I were asked to call on Foreign Minister and Minister Finance, Amini. They expressed anxiety regarding progress of negotiation and difficulties arriving at satisfactory agreement, particularly regarding management problem. They asked if Hoover would undertake to intermediate and assist both sides in reaching acceptable formula. Hoover replied he most hesitant accept such responsibility as it might be misconstrued, unless he formally requested do so by both sides. Nevertheless, he glad offer suggestion at any time. In ensuing discussion of specific problems, Ministers showed us copy memorandum mentioned above. We stated that it our belief, primary difficulty was that of choice of words. In particular, we pointed out, that term “supervising”, used in document in relation NIOC responsibilities, had connotation indicating direct participation in management, and suggested word “inspect” be substituted. We suggested further, that mutually acceptable set of regulations might be agreed upon and that Iranians have full right of inspection to determine if regulations being complied with. We made clear we were prompted make these suggestions by our knowledge that consortium sortium had no objection to reasonable Iranian Government regulations, nor to inspection by competent body for determination of compliance. On other hand, we had understood from what Ministers told, not that Iranian Government did not in fact intend injecting itself into details of management, but sought only (a) assurances that proper regulatory functions of Iranian Government or NIOC could be effectively implemented, and (b) wording of agreement which would make it palatable to Iranian Majlis and public. We felt sure that these considerations could be adequately met through wording which would not lead consortium fear they would not retain effective management control. Furthermore, we asked Iranians if it not possible delete from memorandum phrase “normal relations between principal and agent”, as such wording could be misconstrued in existing circumstances. We stated that we planned attend routine meeting of consortium principals, British Ambassador and Dutch Minister shortly and with their permission would explore possibilities of above approach. They acquiesced and it agreed that Hoover and I would meet with them again later in morning to discuss results.

4. At meeting with consortium group, Harden outlined what had taken place on preceding evening, explaining why Iranian proposals unacceptable. We reported our conversation of few minutes before with suggestions we had made to Ministers. Consortium representatives agreed this approach acceptable to them and, at our suggestion, said they would modify wording Iranian memorandum along lines indicated. We said that their suspicions that Iranian delegation was seeking obtain control of management might not be founded on fact and expressed hope present difficulty might be overcome if revision of memorandum undertaken with great care bearing in mind Iranian Government’s public relations problem. Consortium representatives agreed we should state to Iranian Ministers their belief that such procedure appeared give hope of mutually satisfactory solution.

5. Later in morning we resumed discussions with Foreign Minister and Finance Minister, who appeared much encouraged by manner in which consortium had received suggestion. Consortium representatives are now preparing modification of Iranian proposal for discussion with Iranian delegation at meeting this evening.

Henderson

1. Repeated to London.
2. This document, entitled “Memorandum on Agency”, dated May 16, is in the folder entitled “Documents Relating to Negotiations With Iran, Apr. 14, 1954 to May 18, 1954,” in file 888.2553/4–1454.