Foreign Relations of the United States, 1955–1957, Near East Region; Iran; Iraq, Volume XII

303. Memorandum of a Conversation, Department of State, Washington, March 30, 1955¹

Washington, March 30, 1955

SUBJECT

• Report and Request for Advice by Twelve Additional Companies Certified for Participation in Iranian Oil Consortium

PARTICIPANTS

• Mr. George H. Hill Jr., Director, Cities Service Company
• Mr. Dwight T. Colley , Vice President, Atlantic Refining Company
• Mr. Warner W. Gardner, Attorney, American Independent Oil Company
• Mr. Carroll Bennett, Attorney, Signal Oil and Gas Company
• Mr. Herbert Hoover, Jr., Under Secretary of State
• Mr. Robert Eakens—FSD

Mr. Hill opened the meeting by expressing his appreciation to the Under Secretary for the fact that through his efforts the five per cent interest in the Iranian Oil Consortium was made available to additional American oil companies. [At the first meeting of the twelve companies² certified by Price Waterhouse and approved by the Iranian Government Mr. Hill was elected chairman of the group. He has since been serving in this capacity in the efforts of the group to distribute among themselves the ownership of the five per cent interest available in the Iranian Oil Consortium.]³

The Under Secretary replied that the surprising thing was that it was possible for the five per cent to be made available. While the five American consortium companies were willing for some participation to be made available to other American oil companies and might have been willing for the participation to have been larger, it was only with great difficulty that Sir William Fraser⁴ had been persuaded to permit additional American oil companies to acquire even five percent. He also said that there was no practicable possibility of increasing the five per cent interest now available.

Mr. Hill then proceeded to outline and to present to the Under Secretary the problem of the twelve companies. He said that in leaving it up to the twelve companies to decide on the distribution of the five per cent interest available, the Department had put the companies in a very difficult spot. While the companies have discussed a number of other problems in the course of their meetings, their main problem is how to divide the five per cent interest.

There are two viewpoints. The five companies who were certified by Price Waterhouse as being qualified for a five per cent interest⁵ believe that the division of the available five per cent interest should be proportionate to the amounts for which the companies applied and were certified. The seven companies who were approved for amounts varying between one and three per cent believe that the division should be [made] equally among all twelve companies. The companies had not been able to resolve these different views and Mr. Hill left the impression that there was no hope that they would be able to do so without assistance. What they had been able to agree on, and this agreement was unanimous, was to seek the advice of the Under Secretary on this issue. All had agreed that they would abide by the Under Secretary’s advice without question or protest as indicated in the letter attached as Tab A.⁶

In reply the Under Secretary stated that the problem of the twelve companies seemed to him to be in large measure parallel to that of the larger companies who had decided among themselves to divide the 40 per cent available to them equally. He said that he would hesitate to express any view on the question presented because he did not know whether it would be possible for him in giving such advice to separate himself from his official position. This was a point on which he would need to consult the Department’s Legal Adviser.

Mr. Hill then discussed the arguments of the group in favor of a proportional division of the five per cent along the lines set forth in Tab B.⁷

Following Mr. Hill’s presentation, Mr. Colley spoke, along the lines set forth in Tab C,⁷ for the seven companies in favor of an equal division.

The Under Secretary commented that he had no idea that so many companies would be interested. He had thought that only two or three might possibly be interested and was surprised that all twelve of the companies seemed to want to stay in.

The Under Secretary then inquired whether the question of who owns whom had been set aside. Mr. Hill said that as chairman he had taken the position that it was not appropriate for the group to question the qualifications of any one of the twelve companies who had been certified by Price Waterhouse and approved by the Iranian Government. He also said that he had discussed this point with Mr. Armstrong. [Mr. Armstrong’s memorandum of March 17, 1955 to Mr. Allen⁸ indicates that Mr. Hill sought the Department’s view on this general question in connection with the qualifications of American Independent. Mr. Armstrong informed Mr. Hill that insofar as the Department was concerned there were two criteria, namely certification by Price Waterhouse and approval by the Iranian Government, and American Independent had met both.]⁹

Mr. Gardner said the miracle was that American Independent had signed the letter agreeing to seek the Under Secretary’s advice and to abide by it.

Both Mr. Hill and Mr. Colley considered that because of his special position in the settlement of the Iranian oil problem and his wider knowledge of all of its aspects and ramifications than possessed by anyone else, the Under Secretary was in a unique position to give advice on the issue presented to him. The Under Secretary did not think, however, that arbitration of the issue was very closely related to any special knowledge which he might have. Mr. Hill suggested that the Under Secretary not look at the problem as being one for arbitration but rather as a matter on which the companies were seeking his personal advice. They would be pleased to accept his advice on any basis that he was able to give it, however informal the basis might be.

The Under Secretary inquired whether the companies would accept his suggestion of a fair and impartial individual to arbitrate the issue. Both Mr. Hill and Mr. Colley indicated that they would be glad to have the Under Secretary’s recommendation but both made it clear that they did not believe anyone other than the Under Secretary would be acceptable to both groups. They emphasized that in their opinion the Under Secretary was the only person whose advice in the matter would be taken without question.

There was then some discussion of the manner in which the twelve companies would be organized and the obligations the group would be required to assume. The Under Secretary pointed out that the five per cent interest would have to be held by a wholly owned American corporation, mentioning among the other reasons that Iran has strong feelings on this point.

The Under Secretary said that he would consider the matter and the meeting adjourned.

About an hour later the Under Secretary invited the group to discuss the matter further with him. He said that he had discussed it with several individuals in the Department and that he had in draft a memorandum which he wished to read to the group. A copy is attached as Tab D.¹⁰ When the group agreed that the memorandum set forth the Under Secretary’s advice in satisfactory form, the Under Secretary had the memorandum typed in final form and signed a copy and gave it to Mr. Hill.

The group expressed their deep appreciation for the attention which the Under Secretary had given to the matter and for his willingness to comply with their request for his advice. They indicated that they could now proceed to organize and to begin negotiations with the five present American consortium companies for the transfer of the five per cent interest to their group.

1. Source: Department of State, Central Files, 888.2553/3–3055. Official Use Only. Drafted by Eakens on April 4 and approved by Hoover.
2. On March 11, a representative of American Independent Oil Company submitted a letter from the Bank of America National Savings and Trust Association of San Francisco indicating that the bank had made financial arrangements with American Independent which would enable that firm to qualify as an established company with sufficient financial responsibility to participate in the Consortium. Price Waterhouse then formally certified American Independent by means of a letter to Hoover, March 14. (Memorandum from Allen to Hoover, March 14, with attached letter from Price Waterhouse to Hoover, March 14, and letter from Price Waterhouse to American Independent Oil Company; ibid., 888.2553/3–1455)
3. Brackets in the source text.
4. Chairman of the Board of the Anglo–Iranian Oil Company (AIOC).
5. American Independent Oil Company, Cities Service Company, Pacific Western Oil Corporation, Richfield Oil Corporation, and Tide Water Associated Oil Company.
6. Not attached.
7. Attached but not printed.
7. Attached but not printed.
8. Not found in Department of State files.
9. Brackets in the source text.
10. Not printed.