Office of the Historian

299. Memorandum for the Record by the Under Secretary of State (Hoover)1

Washington, February 26, 1955.

I was advised this morning by Mr. Eakens that the American Independent Oil Company had failed to provide Price Waterhouse with a satisfactory statement of financial resources in order to qualify for participation in the Iranian oil consortium,2 and they were therefore advising the American companies that it was not eligible to participate. I understand that American Independent has formally written to the State Department demanding that they be allowed to participate notwithstanding their failure to meet the standards set by Price Waterhouse.3

I telephoned to Mr. George Koegler, of Standard Oil of New Jersey, at Noon today and made two points clear:

(1)
That any decision to exclude American Independent was one which would have to be made, and for which full responsibility must be taken, by the existing American members in the consortium, and that the Department of State had no responsibility for such a decision.
(2)
It was the informal suggestion of the Department that notwithstanding this preliminary decision by the consortium, nevertheless, American Independent should be allowed to take part in the present negotiations on condition that satisfactory financial responsibility be established prior to any actual admission as a participant.

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Mr. Koegler said he appreciated all of these considerations. Having in mind that the sole responsibility devolved upon the American companies, they felt that they could not admit American Independent because of that company’s failure to satisfy Price Waterhouse. He would bear in mind the suggestion that we had made and would present it to the other companies on Monday, February 28. If there was any change in the decision, he would advise the Department immediately.

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  1. Source: Department of State, Central Files, 888.2553/2–2655. Confidential.↩

  2. The five American companies participating in the Iranian Oil Consortium, Gulf, Socony–Vacuum, Standard (New Jersey), Standard of California, and Texas Company, were prevailed upon to allow other American companies to participate in their share of the Consortium. The total participation, according to the Participants Agreement, October 25, 1954, of these additional American companies could amount to 5 percent of the Consortium. There was a time limitation on any such transfer of 6 months from the date of effective agreement between the Government of Iran and the Consortium, October 29, 1954.

    At the insistence of the Department of Justice, a common agent was designated to examine the applicants’ financial data and to determine if they had adequate financial responsibility to join the Consortium. The commercial accounting firm of Price Waterhouse and Company was chosen. The procedure was fully outlined in a Department of State press release on December 7, 1954. Any established American oil company interested could file an application with supporting financial data with Price Waterhouse. If the applicant was found to possess the required financial responsibility, the Department of State would assist in obtaining determination of Iran’s approval of the company’s participation in the Consortium.

    For text of the press release, December 7, see Department of State Bulletin, December 27, 1954, pp. 985–986. For text of the Participants Agreement, October 25, 1954, and related documentation, see U.S. Congress, Senate, Subcommittee on Multinational Corporations of the Committee on Foreign Relations, The International Petroleum Cartel, the Iranian Consortium and U.S. National Security, Committee Print, 93d Cong., 2d sess., 1974, p. 95 and passim.

    ↩
  3. Dated February 16, not printed. (Department of State, Central Files, 888.2553/ 2–1655)↩