The Minister in Persia (Caldwell) to the Secretary of State

No. 581

Sir: Replying to the Department’s instruction No. 140 of March 4, 1920 (File 891.6363/)2 I have the honor to enclose herewith translations of the two oil concessions which have been granted by the Persian Government; one to Mr. William Knox D’Arcy, rentier, and now apparently held by the Anglo-Persian Oil Company, and the other to Mr. Khochtaria. So far as is known these are the only oil concessions at present in force in Persia, and it may be well to state that the latter has not yet been confirmed by the Persian Parliament.

It will be noticed that in Article I of the former exclusive rights are given “throughout the Persian Empire for sixty years”, while in Article VI of the same the five northern provinces of Azerbaijan, Guilan, Mazanderan, Astrabad and Khorassan are withdrawn from that concession; while the Khochtaria concession includes the three provinces of Guilan, Mazanderan and Astrabad, apparently leaving the concessions for the large provinces of Azerbaijan and Khorassan as yet unassigned. However, it is the generally accepted theory that the Anglo-Persian Oil Company does have an absolutely exclusive concession covering petroleum production in all of Persia except the five northern provinces, and it is certainly believed that if any effort were made to enter the field of oil production in that part of Persia south of the meridional boundaries of the five northern provinces they would be most vigorously opposed by the Anglo-Persian Oil Company.

I have [etc.]

John L. Caldwell
[Enclosure 1]

Petroleum Concession Granted by the Persian Government to William Knox D’Arcy, May 28, 1901

Between the Government of His Imperial Majesty, the Shah of Persia, party of the first part and William Knox D’Arcy, rentier, living at London No. 42 Grosvenor Square (hereafter designated as [Page 348] “the Concessionnaire”), party of the second part, it is agreed as follows:

Art. 1—The Government of His Imperial Majesty the Shah grants to the Concessionnaire by these presents the special and exclusive privilege to prospect, obtain, exploit, develop, prepare for Commerce and to export and sell natural gas, petroleum, asphalt and mineral wax throughout the Persian Empire for sixty years, to be effective from the date of this instrument.

Art. 2—This privilege will include the exclusive right to install necessary pipe lines from the places where there shall be found one or more of the said products to the Persian Gulf, as well as necessary branch lines for delivery.

It will include also the right to construct and keep up all wells, reservoirs, stations and pumps for accumulation and distribution, work-shops and other works and agencies that may be considered necessary.

Art. 3—The Imperial Persian Government grants gratuitously to the Concessionnaire all the uncultivated land belonging to the state that the engineers of the said Concessionnaire may judge necessary for the construction of all or a part of the above-mentioned works, as to the cultivated land belonging to the state, the Concessionnaire shall buy the same at the price current in the province.

The Government grants likewise to the Concessionnaire the right to acquire all other land and buildings that may be necessary for the same object with the consent of the owners, upon conditions that shall be agreed upon between him and them without their being permitted to raise the price ordinarily asked for land situated in their respective localities.

Holy places and all out-houses within a radius of 200 Persian archines of the same are excluded.

Art. 4—The three petroleum wells situated at Shuster, Kasre-chirine province of Kermanshah and Talki, near Bushire, are now let to individuals and produce annually a revenue of two thousand tomans to the Government, it has been agreed that these three wells are included in this concession, according to Article 1, on condition that aside from the sixteen per cent mentioned in Article 10, the Concessionnaire shall pay each year the fixed sum of 2000 (two thousand tomans) to the Imperial Government.

Article 5—The location of the pipe lines shall be fixed by the concessionnaire and his engineers.

Art. 6—Notwithstanding the foregoing, the privileges granted by these presents shall not extend to the Provinces of Azerbaijan, Gilan, Mazanderan, Astrabad and Khorassan, but on the condition that the Imperial Persian Government shall not grant to any person [Page 349] the right to construct the pipe lines to the rivers of the South or the meridional Coast of Persia.

Art. 7—All land granted by these presents to the Concessionnaire or which shall be acquired by him in the manner provided for in Articles 3 and 4 of this instrument, as well as all products exported, shall be free of all taxes and duties through the duration of the present concession. All material and machinery necessary for the exploitation and development of deposits and for the construction and development of pipe lines shall enter into Persia free of all taxes and Customs duties.

Art. 8—The Concessionnaire shall send immediately to Persia at his expense one or more experts with the object of exploring the regions where there exists, as he believes, the products mentioned, and in case the report of the expert shall be, according to the opinion of the Concessionnaire, of a satisfactory nature, he shall send immediately to Persia at his expense, necessary technical personnel with material for exploitation and necessary machines to bore and sink wells and prove the value of the property.

Art. 9—The Imperial Persian Government authorizes the Concessionnaire to form one or more companies for the exploitation of this concession.

The names, the by-laws and the capital of these companies shall be fixed by the Concessionnaire and the managers shall be chosen by him, on the condition that the constitution of each company shall be presented by the Concessionnaire to the Imperial Government through the Imperial Commissioner and that he should indicate the places where the company should operate. This company or these companies shall enjoy all rights and privileges granted to the Concessionnaire, but they shall assume all the engagements and responsibilities.

Art. 10—It shall be stipulated in the contract between the Concessionnaire, on the first part, and the company on the second part, that the last named shall pay to the Persian Government within one month after the organization of the first company a sum of twenty thousand pounds sterling in cash and an additional sum of twenty thousand sterling in stock entirely exempt from the first company founded by virtue of the preceding Article; it shall pay likewise to the said Government annually a sum equal to sixteen per cent of the annual net profit, of each company or of all companies that shall be formed in accordance with the said article.

Art. 11—The said Government shall be free to appoint an Imperial Commissioner who shall be consulted by the Concessionnaire and the managers of the companies formed, he shall furnish all useful information within his power and he shall indicate to them the best line of conduct to serve in the interest of the enterprise.

[Page 350]

He shall establish with the Concessionnaire the control that he considers useful to safeguard the interests of the Imperial Government.

The above mentioned attributions of the Imperial Commissioner shall be indicated in the by-laws of the companies created.

The Concessionnaire shall pay to the commissioner thus named an annual sum of one thousand sterling for his services to begin from the date of the organization of the first company.

Art. 12—The laborers employed by the company shall be subjects of His Imperial Majesty, the Shah, with the exception of the technical personnel, such as directors, engineers, borers and foremen.

Art. 13—In any place where it can be established that the inhabitants of the country now obtain petroleum for their own use, the company shall furnish them the quantity of petroleum which they have procured themselves heretofore; this quantity shall be ascertained from their own declarations, subject to the control of the local authorities.

Art. 14—The Imperial Government obligates itself to take all necessary measures to insure the safety and the execution of the object of this concession, of the material and the machinery which have been mentioned for the objects of the enterprise and to protect its representatives, agents and employees. The Imperial Government having thus executed its engagements, the concessionnaire and the companies formed by him cannot, under any pretext, claim damages to their interests from the Persian Government.

Art. 15—Upon the expiration of the life of this concession, all materials, buildings and machinery which shall then be in use by the company for the exploitation of its industry, shall become the property of the Government and the company shall have no right to indemnity.

Art. 16—If within two years from the date of this instrument, the Concessionnaire has not formed the first of the companies authorized by article 9 of the present convention, the concession shall be null and void.

Art. 17—In case there shall arise between the parties to the present concession any question or difference on the subject of its interpretation or the rights or responsibilities of the one or the other of the parties, the question or the difference shall be submitted to two arbitrators in Teheran, one of whom shall be named by each of the parties and a third arbitrator who shall be elected by the arbitrators before proceeding with the work of arbitration. The decision of these arbitrators and in case they can [not] agree, of the third arbitrator, shall be binding.

[Page 351]

Art. 18—This deed of the concession, in duplicate, is written in the French language and translated into Persian with the same meaning.

However, in case there should be any dispute as to the meaning, the French text shall prevail.

[Enclosure 2]

Petroleum Concession Granted by the Persian Government to A. M. Khochtaria, March 9, 1916

The Minister of Foreign Affairs acting under orders of the Persian Government on the one side and Mr. Khochtaria, a Russian subject, on the other side have agreed as follows:

Art. 1—The Imperial Government by this concession grants to Mr. Khochtaria for a period of seventy years the exclusive right of exploitation of petroleum and natural gas found in the districts of Gilan, Mazanderan and Astrabad. The districts which, by the order of His Majesty, on Shaban 1313, were given to Mohammed Vali Khan Sepahsalar are not included in this concession.

For a period of seventy years from the signing of this concession, the right of boring and exploitation of mines in the above mentioned districts is given to the grantee.

Art. 2—The Imperial Government authorizes the owner of this concession to form any company desired, but with the condition that he should fully inform the Ministry of Public Works as regards regulations, location of offices and the amount of capital. Besides, he is required to present the name of the manager of the company to that same Ministry. In that case, the company formed has the same rights as the owner of the concession and has to fulfill the same conditions.

Art. 3—The owner of the concession is also authorized to build all necessary roads, tanks, stores and any other building needed for boring and transporting the petroleum.

Art. 4—The Imperial Government will give all the arid land which the engineers of the owner of the concession think necessary for the investigation of boring the wells, without charge. In case the land is not arid or belongs to somebody else, the owner of the concession has either to buy or to rent the land at a normal price. Land[s] belonging to shrines are an exception to this article.

Art. 5—The owner of the concession is obliged to inform the Ministry of Public Works of any new discoveries by a special report with a map, on the scale of one ten thousandth. If the owner of the concession finds the mines beneficial to himself, he shall pay one hundred thousand roubles in cash and present one hundred thousand thousand [sic] roubles in capital stock to the Ministry of Public [Page 352] Works. This payment is to be made but once and at the time of discovery.

Art. 6—The owner of the concession shall make an annual payment of 16% of his net income to the Imperial Government and present his balance sheet in duplicate.

Art. 7—The Imperial Government has the right at any time to inspect the books of the owner of the concession. A representative will be appointed by the Government to assist the owner of the concession and to give him all informations required. The owner of the concession shall give an annual salary of six thousand roubles to the said representative.

Art. 8—With the exception of the engineers, all employees engaged by the owner of the concession shall be Persians.

Art. 9—The importation of all machines and utensils needed by the owner of the concession shall be exempt from Customs duties.

Art. 10—After the expiration of the period of the concession, all the machines, utensils, wells, buildings, other real or personal property shall be turned over to the Imperial Government. The owner of the concession or his partners shall raise no objections to this.

Art. 11—In case the owner of the concession does not begin work within five years from the date of this concession, the concession becomes null and void.

Art. 12—Differences between the two parties shall be settled by a joint committee of two persons one of whom is to be appointed by the Ministry of Public Works and the other by the owner of the concession. In case the joint committee cannot settle the matter in dispute, a third person shall be appointed by the joint committee for the purpose of deciding the matter.

Mohammed Vali
Ala-el-Molk Minister of Justice.
Yamin-ol-Molk Finance.
Momtaz-ol-Molk Public Instructions.
Jamshid War.
Sardar Mansour Post & Telegraph.
Ahmad Public Works and Commerce.
  1. Not printed.