891.6363 Standard Oil/347

The Persian Minister ( Alai ) to the Secretary of State

Sir: Your Excellency has doubtless been informed that, in connection with the contract signed in December last by the Persian Government and the representative of the Sinclair Consolidated Oil Corporation in Teheran for the exploitation of petroleum in four of the five northern provinces of Persia, the Standard Oil Company of New Jersey have let it be known in a letter addressed by them to Mr. A. G. Berger on January 18th, referred to by the New York Times of February 4th last, as about to appear in the current number of The Lamp (a copy of the advance sheets of which is enclosed4) that they hold jointly with the Anglo-Persian Oil Company, Ltd., a British corporation, a one-half interest in the so-called Khoshtharia grants covering approximately three and one-quarter provinces in north Persia, and that they will take the proper steps to protect their rights and to develop a petroleum production.

In view of this attitude on the part of the Standard Oil Company of New Jersey, I deemed it advisable to publish, on my own initiative, a letter in the New York Times of the 8th instant, reciting briefly the various phases of my Government’s negotiations with the Standard Oil and the Sinclair interests. That letter has, I understand, been brought to Your Excellency’s attention, but nevertheless I enclose herewith a copy4 to complete the record.

Having kept my Government informed of recent developments, I have just been instructed by the Minister for Foreign Affairs to submit the following points for Your Excellency’s consideration.

[Page 542]

In the first place, my Government reiterate the sentiments expressed in a memorandum which I had the honour of handing you shortly after my arrival in Washington on September 15, 1921,5 namely, that the Persian Government and people have always recognized the altruism and impartiality which distinguish the American Government and people. They particularly appreciate the concern of the United States for fair play, for the respect of the independence of the smaller nations and for the maintenance of the economic open door.

It was because of their implicit faith in the lofty ideals and trusted friendship of America that my Government, over a year ago, confided the reorganization of their finances to American advisers and have consistently courted the technical and financial cooperation of this country in the industrial and economic development of Persia.

In harmony with this desire for America’s friendly cooperation my Government and the Madjless have consistently acted during the negotiations for an oil concession in the five northern provinces of Persia, as the following brief outline of the negotiations will demonstrate.

Early in November, 1921, the Standard Oil Company of New Jersey were approached by Mr. W. Morgan Shuster, as Fiscal Agent of the Persian Government, with a view to enlisting their interest in the development of the north Persian oil fields. As a result of these negotiations, I was able to submit by cable to my Government a draft agreement for a concession in the five northern provinces of Persia and for a five million dollar loan. Upon the receipt of this agreement, the matter was discussed in the Committees on Foreign Affairs and Public Works of the Madjless. After consideration in the Committee of the Whole, the Madjless passed a resolution approving the granting of a concession for the north Persian oil fields to the Standard Oil Company of New Jersey, and laid down certain conditions intended to safeguard the public interest, among which may be mentioned the condition that the Standard Oil Company of New Jersey should not, in any circumstances, assign or transfer this concession or enter into partnership without the approval of the Madjless. This condition was merely the enunciation of the fundamental policy of my Government that the capital employed must be entirely American. The resolution, of which a copy is enclosed,6 was communicated to the Standard Oil Company of New Jersey by Mr. Shuster, with a view to ascertaining whether it was prepared, as my Government hoped would be the case, to enter into an agreement in conformity with the conditions laid down therein.

Some months of negotiation ensued, during which representatives of the Anglo-Persian Company, Ltd., approached the Standard Oil [Page 543] Company and informed it of the exclusive rights which the former claimed in the north Persian oil fields under the supposed Khoshtharia concession. Thereupon, in February, 1922, the Standard Oil Company signified a desire to associate itself in the development of the Persian Oil fields on a fifty–fifty basis with the Anglo-Persian Company. Although I repeatedly requested it, I was never able to obtain from the Standard Oil Company a copy of its agreement with the Anglo-Persian Company, or any information as to its scope. Nevertheless, I was certain that an association of this kind would be distasteful to my Government and the Standard Oil Company was so advised by me. That Company, however, was insistent that this was the only plan upon which it would enter into the proposed concession and a new draft agreement was drawn up on this basis in February, 1922, and forwarded to my Government for consideration. This February proposal was rejected because of the association with the Anglo-Persian Company. On account of this association between the Standard and Anglo-Persian Companies and in order to give the Government more latitude in carrying on the negotiations, the Madjless on June 11, 1922, voted an amendment to its previous resolution, empowering the Government to negotiate a petroleum concession in North Persia with any independent and responsible American Company. With these broad powers, my Government extended the scope of its negotiations and sought proposals from not only the Standard Oil Company of New Jersey but from the Sinclair Consolidated Oil Corporation.

At the end of June, the Standard Oil Company indicated its willingness to conform to the resolution of the Madjless and to take and operate the concession entirely on its own account without entering into partnership with any other company so far as the carrying out of the concession was concerned. This new attitude of the Standard Oil Company, which, it will be observed, left out of consideration entirely any partnership alliance with the Anglo-Persian Company, was set forth in an initialed memorandum of June 30, 1922, a copy of which is herewith enclosed.7 At the same time, my Government was receiving proposals from the Sinclair Consolidated Oil Corporation through its representative in Teheran. Also after the receipt of the June memorandum, my Government sought more definite terms, in conformity therewith, from the Standard Oil Company, and a draft concession was forwarded to Teheran in the following August. With the Standard and the Sinclair proposals in hand, my Government, in view of the great importance of the concession and the vital interests involved, sought the views of the Madjless by laying both proposals before a special committee of that body.

[Page 544]

After a thorough examination by this Committee and by my Government, the Standard declining to make any substantial modifications in their proposal or to send a representative to Teheran to discuss the matter directly with the Government, both sets of proposals were rejected because they did not seem to safeguard sufficiently the interests of Persia. In view of this, the Madjless deemed it best to pass a law laying down in greater detail the basis of a concession which my Government was authorized to grant to any independent and reputable American concern that might show interest in the matter. The Standard Oil Company of New Jersey did not show any inclination to meet the requirements of the law and made no proposals, but the Sinclair Consolidated Oil Corporation submitted terms following closely the conditions laid down in the Oil Law. The Standard manifesting no further interest in the concession, an agreement was consequently signed last December by the Government and the Sinclair representative in Teheran subject to the ratification of the Madjless, as the Sinclair Company was the only applicant in the field.

Now that there is at last a prospect of the northern oil fields of Persia being developed under purely American auspices, the Standard Oil Company of New Jersey advances certain claims on the basis of association with the Anglo-Persian Oil Company, Ltd., in the so-called Khoshtharia concessions.

I need not repeat the arguments laid in detail before Your Excellency in my note of January 3, 1922,8 which to your judicial mind will, I am sure, carry conviction that these so-called concessions are null and void. If the Standard Oil Company believed it had acquired any valid rights under these alleged concessions by virtue of association with the Anglo-Persian Company, why did it continue for two years to negotiate for a new concession with the Persian Government? The negotiation indicates the doubtful sincerity of the claims now advanced by the Standard Oil Company.

I cannot, therefore, but express surprise that a large American corporation should in these circumstances ally itself with a policy known by it to be repugnant to the Persian nation and openly declare that it maintains its so-called rights under the Khoshtharia concessions and that it proposes to enforce them in defiance of the Persian Government.

The Standard Oil made the mistake of yielding to the unwarranted contentions of the Anglo-Persian Oil Company. They were repeatedly warned by Mr. Shuster and myself of the strong feeling of suspicion inevitably entertained in Teheran, in view of past experiences, as to British motives and aims, and of the decision of the Persian Government to stand on the firm ground of the invalidity of the alleged Khoshtharia concessions. In spite of this warning, the [Page 545] Standard Oil Company made their proposal of February, 1922, to exploit the five northern provinces in association with the Anglo-Persian Oil Company on a fifty-fifty basis.

In view of the facts of the case and the known policies of my Government, Your Excellency will appreciate that the announced determination of the Standard Oil Company in association with the Anglo-Persian Company to enforce its rights under concessions which my Government regard as invalid, cannot be carried out within Persian territory with my Government’s approval. Should, however, the Standard Oil Company of New Jersey, as an American concern, seek the assistance of the United States Government with a view to asserting its alleged rights in the North Persia oil fields, I, acting under instructions from my Government, beg you to take into consideration the history of this whole transaction as I have outlined it above:—the association of the Standard Oil Company with a British concern, in which the British Government has a predominant influence,—an association peculiarly distasteful to my Government, my Government’s well-founded view that the concessions, on which these companies base their rights, are null and void, and also the earnest desire of Persia for American aid, free from foreign influences, in the development of her natural resources.

In conclusion, I am instructed to express again the gratitude of the Government and people of Persia for the friendly and valuable assistance already given them by Your Excellency and to formulate the hope that your Government will continue the policy of encouraging unalloyed American enterprise in Persia.

Pray accept [etc.]

Hussein Alai
  1. Not printed.
  2. Not printed.
  3. Printed in S. Doc. 97, 68th Cong., 1st sess., p. 87.
  4. Not printed.
  5. Not printed.
  6. Printed in S. Doc. 97, 68th Cong., 1st sess., p. 94.