891.6363 Amiranian/30

Memorandum by Mr. Raymond A. Hare of the Division of Near Eastern Affairs

The following is a summary of the essential provisions of the agreement signed on January 3, 1937, between the Amiranian Oil Company and the Iranian Government. The agreement was ratified by the Majliss on February 4, 1937, and promulgated by the Shah on March 9.

1. Exploration: Exploratory study must be begun within six months following promulgation (i. e. by September 9 of this year) and must be completed within three years (i. e. by March 9, 1940).

2. Area: At the termination of the three-year exploration period the Company shall choose two provinces within the concessionary area for further exploration and final choice of an area not to exceed 100,000 square miles.

(This area is the same size as that which the A. I. O. C.27 will have after December 31, 1938. The Amiranian agreement as originally signed provided for an area of about 200,000 square miles but this was reduced by the Shah first to 170,000 and then to 100,000 square miles and Hart consented to the change.)

3. Drilling: Within eighteen months after ratification (i. e. by September 9, 1938) one drilling outfit shall be put into operation. Within five years after ratification (i. e. by March 9, 1942) at least three drilling outfits shall be in operation and this number shall be increased to six if oil is struck in commercial quantities. Furthermore, in the latter event, development shall be stimulated with a view to reaching an annual production of at least 6,000,000 tons.

(The A. I. O. C. did not reach this production figure until 1930. Production during the first eleven months of 1936 amounted to 7,489,000 tons as compared to 6,771,000 during the same period in 1935.)

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4. Payments to Iranian Government: The Company will pay the Iranian Government a royalty of four shillings per ton on petroleum sold in Iran or exported. In addition the Company agrees to pay the Iranian Government a sum equal to 20% of the distribution to common stock shares of the Amiranian Oil Company in excess of distributions equal to 5% of the invested capital, which latter sum shall not exceed £300,000.

The total amount which the Iranian Government will receive under the above two headings shall not be less than £300,000 during the second five-year period following ratification; £500,000 during the third five-year period; and £600,000 for the remainder of the term of the concession.

(The rates of payment specified above are the same as in the case of the Afghan28 and the A. I. O. C. concessions.29 In the former, however, the eventual minimum payment is £450,000 and in the latter £750,000.)

At the expiration of the concession or in the event of its renunciation by the Company the latter shall pay to the Government 20% of the total reserves of the Company and 20% of the balance reported by the Company at the time.

(A similar provision is included in the Afghan and A. I. O. C. concessions.)

During the first twenty-five years of the concession the Company, in exchange for tax exemption, shall pay the Iranian Government nine pence per ton on oil produced up to 6,000,000 tons and six pence per ton thereafter. After twenty-five years a new rate shall be established by agreement between the contracting parties. Such payments shall not be less than £50,000 annually during the second five-year period after ratification and £75,000 thereafter.

(Similar stipulations are contained in the Afghan and A.I.O.C concessions, except that the former makes no specification of a minimum payment whereas the latter provides for a minimum of £250,000 for the first fifteen years and £300,000 for the second fifteen years, during which also a higher rate of one shilling per ton is specified, as is also the case in the Afghan concession.)

6. [sic] Provision is made for facilitating the acquisition of property needed by the Company.

7. Goods for the staff may be imported without special license upon payment of the usual customs duties and taxes. Medical equipment and materials for the use of the Company may be imported free of duty. No export duty or taxes shall be levied.

(Same as A.I.O.C. and Afghan concessions.)

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8. The Company is not obliged to exchange any part of its funds into Iranian money and its personnel may export freely moneys received as salary.

(Essentially the same as A.I.O.C. and Afghan concessions.)

9. The Government has the right to inspect the technical activity of the Company and to appoint experts for the purpose.

(Same provision in A.I.O.C. concession. The Afghan is also the same except that it specifies “foreign” specialists.)

10. The Government may appoint a “Delegate” who will represent it at the Company’s headquarters; his salary to be paid by the Company.

(Same provision in A.I.O.C. and Afghan concessions.)

11. Iranian nationals will be used exclusively for unskilled labor and as far as possible for skilled work.

(Same stipulation in A.I.O.C. concession. The Afghan contains the additional specification that foreign employees must be American.)

Following the beginning of exportation the Company shall furnish £10,000 annually for the training of Iranian students for the petroleum industry in the United States.

(Same stipulation in A. I. O. C. and Afghan concessions.)

12. Sale of gasoline, kerosene and fuel oil in the country shall be at a basic rate fixed by the f. o. b. price of Rumanian or Gulf oil minus 25% for sales to the Government and 10% to other consumers.

(Same as A.I.O.C. and Afghan.)

13. The concession is for a period of sixty years. It may not be abrogated or changed by the Government except in the case that the Company does not live up to its commitments during the exploration period. It may, however, be abrogated by the Company upon giving six months notice during the first seven years and two years notice thereafter. Annulment may also be accomplished by a decision of the Arbitration Tribunal under certain specified conditions. At the conclusion of the agreement all property of the Company resorts to the Government.

(The A. I. O. C. concession was also for sixty years, the Afghan for seventy-five. Provisions for renunciation are similar in all three concessions, except that in the cases of the Amiranian and Afghan concessions a preliminary period is specified during which movable property may be removed by the Company in the event of renunciation.)

14. Differences shall be settled by an Arbitration Tribunal.

(Same in A. I. O. C. and Afghan concessions.)

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15. Not later than sixty days after ratification (i. e. by May 9, 1937) the Company shall select an office in Teheran and designate its representative.

(Not stipulated in the Afghan concession. Clearly indicates desire of Iranians to get the affair under way as soon as possible.)

16. Any transfer of the concession shall be subject to the consent of the Iranian Government and the majority of the shares of the Company shall never fall into the hands of non-Americans or non-Iranians.

(Same as A. I. O. C. and Afghan concessions with regard to transfer. A. I. O. C. makes no specification with regard to majority ownership of stock; Afghan does.)

An exchange of letters (confidential) of the same date as the signature of the concession provides:
That payments provided in the Iranian concession are not and shall not be less favorable than those in the Afghan.
That the route of principal pipe lines will not leave Iranian territory.
That petroleum exported will always use the facilities of the Amiranian Pipe Line Company.
Another exchange of letters of the same date interprets certain aspects of force majeure.
A letter from the Minister of Finance of the same date, referring to the Afghan concession and stating that the propositions of the Amiranian Company with regard to minimum payments are unacceptable but that if amounts proposed by the Iranian Government are guaranteed liberal terms will be given for the pipe line concession. Thus far, however, we have no information as to whether this contention of the Iranian Government was maintained.
  1. Anglo-Iranian Oil Company.
  2. For summary of important provisions of concession, see p. 599.
  3. For text, see League of Nations. Official Journal, December 1933, p. 1653.