Office of the Historian

147. Research Memorandum From the Director of the Bureau of Intelligence and Research (Hughes) to Acting Secretary of State Ball1

RNA–38
Washington, June 3, 1966.

SUBJECT

  • Shah of Iran Demands Greater Oil Offtake

The Shah has expressed disappointment with Iran’s 1965 crude oil export figures and considers a substantial increase during 1966 necessary to finance his plans for economic development and an expanded defense establishment. This paper explores the background of recent discussions on this subject and its relationship to the Shah’s attitude toward the US.

Abstract

The Shah considers the 1965 increase in crude oil offtake inadequate in view of Iran’s financial needs for its economic development and defense. [Page 262] Iranian officials assert that the Organization of Petroleum Exporting Companies (OPEC) authorized a 20 per cent increase in offtake for Iran in 1966 (almost twice the 1965 increase). However, OPEC has not made a public announcement of allotments, and the oil Consortium (which insists that OPEC allotments are not binding on the producing companies) notified the Iranian Government on May 25 that it planned to increase oil liftings by about 9–11 per cent in 1966. Prime Minister Hoveyda has already termed this increase “unsatisfactory” and “unacceptable.” The Shah has threatened to go elsewhere for military and economic assistance if the US does not provide what he wants, and Iranian officials have the impression that the Consortium could have promised greater oil offtake had the US applied pressure on the American companies who are members. As a result of the Iranian dissatisfaction, the Shah is likely to become more intransigent in his dealings with the US. However, if the Consortium maintains a unified position on the issue of oil offtake, it is possible that the Shah will be obliged to proceed in a more pragmatic fashion toward a resolution of the conflicting demands of military modernization and economic development on Iran’s limited resources.

[Here follows the body of the paper.]

  1. Source: Johnson Library, National Security File, Harold H. Saunders Files, Iran, 4/1/66–12/31/67. Confidential; No Foreign Dissem; Controlled Dissem.↩