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

No. 151

Sir: Reference is made to the Department’s mail instruction No. 140 of March 4, 1920,3 your mail despatch No. 581 of May 18, 1920, and the Department’s telegram No. 17 of August 6, 1920,3 relative to the oil situation in Persia and especially in the northern provinces.

The American Consul General at London in a despatch No. 9382 [9582], dated May 14, 1920,3 reports the organization of a new British company, the North Persian Oils, Limited, formed, it is announced, “to work in conjunction with the Anglo-Persian Oil Company” and to develop further concessions obtained from the Persian Government. In an instruction dated July 8, 1920,3 the Department called the attention of the American Ambassador at London to this report and requested him to make oral inquiries of the British Foreign Office regarding the activities of the North Persian Oils, Limited.

The Persian Minister at Washington has stated orally that British companies are working to acquire oil concessions in the northern provinces, but that his Government would prefer to grant these concessions to American rather than to other foreign interests.

The Department has received a despatch from the American Legation at Berne, Switzerland, dated January 23, 1920,3 transmitting [Page 354] copies of a memorandum3 embodying a conversation between Mr. Habibollah Khan Chahab, First Secretary of the Persian Legation at Berne, and Mr. Louis Sussdorff, Jr., Secretary of the American Legation at Berne. In this conversation Mr. Habibollah stated that he is an intimate personal friend of Prince Feirouz, Persian Minister for Foreign Affairs, and that the latter is very friendly to the United States and would be glad to see American business men come to Persia with a view to developing its great natural resources.

It is assumed that, in accordance with the Department’s telegram of August 6, you have discreetly and orally conveyed to the Persian Foreign Office information to the effect that the Department believes that American companies will seek concessions in the northern provinces and that the Department hopes that American companies may obtain such concessions. The Persian Government appears to appreciate the undesirability of having an important economic resource monopolized by a single foreign company. The Department has taken the position that the monopolization of the production of an essential raw material, such as petroleum, by means of exclusive concessions or other arrangements, is in effect contrary to the principle of equal treatment of the nationals of all foreign countries. It would seem, accordingly, to be conducive to the best interests of Persia and desirable from the standpoint of international economic relations for the Persian Government to postpone any further grants of its oil resources until opportunity can be given to American companies to enter into negotiations regarding such grants. You may on suitable occasions call the attention of the Persian Foreign Office to these considerations and you may state that the Department has received information that an important American oil company would consider favorably a proposal to operate in northern Persia, if a satisfactory agreement could be reached with the Persian Government, and if investigation of the areas, from a geological standpoint, would lead the company to believe that there was a reasonable possibility of producing oil in commercial quantities. The substance of the information received from the oil company referred to has been communicated to the Persian Minister at Washington.

You are instructed to report fully on the general oil situation in Persia, especially in the northern provinces, on any attitude assumed or action taken by the Persian Government in relation thereto, and on the possibility of American interests obtaining oil concessions.

I am [etc.]

For the Secretary of State:
Van S. Merle-Smith
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