891.6363 Amiranian/74

Memorandum by the Chief of the Division of Near Eastern Affairs (Murray)

Only a little over a year ago the Seaboard Oil Company (American) appeared to be making important oil history when, after three years of negotiation, it succeeded in obtaining extensive oil concessions in both Afghanistan and Iran. Within the last few days, however, [Page 753] we have learned from the Seaboard Company that the Afghan and Iranian chapters of their activity are about to be brought to an unexpected and sudden conclusion as a result of their decision to give notice to the Iranian and Afghan Governments of the company’s intention to withdraw from both concessions. In the case of Iran, it is understood that the company’s representatives (one being Mr. Charles C. Hart, former American Minister to Iran) are now in Teheran and that notice may be given any day now, following which the representatives will proceed to Kabul on a similar mission.

According to an official of the Seaboard Company, the following reasons will be given to explain the company’s decision:

The only oil bearing areas discovered thus far in the territory included in the company’s concessions lie in the northern part of Iran and Afghanistan. The exploitation of these areas has been rendered uneconomic by the recent discovery of oil in important quantities on the Arabian mainland near the Persian Gulf coast which it will be possible to put on the market at a fraction of the price of oil produced in northern Iran and Afghanistan, which lie a thousand miles or more from the sea.
The present economic situation in the United States has caused the company to adopt a more conservative attitude with regard to the extent of its operations.
The discouraging nature of developments in the international picture are regarded as disquieting. In this connection, a company official said that he particularly had in mind developments in Mexico in which his company was involved. He added, however, that no direct reference to the Mexican situation would be made to the Iranians.

In addition to the foregoing reasons which will be given the Governments concerned, we have been given confidentially to understand that the following considerations also enter into the picture:

The fairly recent deaths of Mr. Ogden Mills and of Mr. Case of the banking firm of Case, Pomeroy and Company, both of whom were interested in the Iranian and Afghan concessions.
Interest of the Seaboard Company in securing a concession in southern Iraq.

It goes without saying that the decision of the Seaboard Company, even though entirely in accord with the concession contract, will come as a stunning blow to the Iranian and Afghan Governments from the standpoints both of pride and of deflated hopes of increased revenue. It would by no means be surprising if considerable resentment resulted, particularly on the part of the Iranian Government, which is extremely sensitive in such matters and might be expected to be especially so in this instance due to the abnormal status of Irano-American relations since March, 1936, when Iranian representation in this country was withdrawn following the appearance in the American press of articles regarded by the Iranians as insulting to the [Page 754] Shah.42 Furthermore, this situation will not be made easier as a result of the appearance of an article in Time which has already been taken up informally with our Legation in Teheran by the Iranian Foreign Office.

On the other hand, we have been told by representatives of the Seaboard Company that it is their intention to be as conciliatory as possible in approaching the Iranian Government and they tell us that they would be willing, should the Iranian Government so desire, to continue exploration activity perhaps until the end of the present year and to turn over any data obtained to the Iranian Government. Judging by our past experience with the Iranians, however, it will be a welcome surprise if this reasonable attitude on the part of the Seaboard Company meets with reciprocal good will on the part of the Iranian authorities.

The attached memoranda43 contain a full account of these recent developments.

Wallace Murray