890G.6363/390: Telegram

The Acting Secretary of State to the Minister Resident in Iraq (Wilson)

54. Your 77, February 24, 6 p.m. The Department wishes you to emphasize to Nuri Pasha again that the American Government’s support of the American interests in the Iraq Petroleum Company in this matter is based on the injustice of the Iraqi Government’s action in receiving and demanding full ground rent for an oil concession while simultaneously refusing to admit that the concession is fully valid. Nuri’s statement that if ground rent is paid annually the concession is perhaps not “wholly” invalidated is not sufficient. If the concession is valid, ground rent is due. If it is not valid, no such rent is due. There can be no equivocation on this point, and no room for doubt should be allowed to remain in Nuri’s mind regarding the American Government’s position in this respect.

The Department is aware that the Iraqi Government will lose anticipated revenue by the deferment of the development of the concession, and the American interests involved are prepared to discuss the subject of an adequate adjustment in this regard. It would not serve any useful purpose, however, to discuss these matters as long as the Iraqi Government demands rent without conceding validity.

The fact that Nuri continues to show opposition to the concession is not encouraging as far as the American interests are concerned, who may well gain the impression that they are being led on to pay more and more money, in addition to the large sums they have already spent, to keep alive a concession when there may be no genuine desire on the part of Nuri that the concession be developed. The interests concerned quite frankly wonder, in view first of Nuri’s demand for ground rent without conceding validity and second of Nuri’s desire for [Page 650] increased revenue while admitting a preference for retaining the area as a national reserve, whether they are being asked to send good money after bad.

As regards the terms of the concession, the Department desires to emphasize again that American interests strongly favor the development of the Basra area, but are convinced that this will not be possible without some revision. However, British interests, as represented by the Anglo-Iranian Oil Company, may not desire revision. They may prefer to limit oil production in Iraq to the Kirkuk area, where Anglo–Iranian enjoys an overriding royalty. Moreover, it may well be that the Anglo-Iranian interests in IPC are not anxious to develop production in the Basra area since such production would presumably compete with production in Iran. Skliros is thought to favor the British desires and it is consequently feared that he may not genuinely seek a revision of the Basra terms to make the concession commercially competitive. The Department must therefore depend on you as the representative of American interests to emphasize direct to Nuri the genuine and particular American desire to develop the area. If Nuri wants to retain the area as a national preserve and consequently does not wish to see it developed, he should say so in all honesty, so the American companies will know where they stand. If, however, he would like Iraq to acquire the revenue to which Iraq is rightfully entitled from this area, he may do so by encouraging the American point of view. This can be accomplished by rendering the Basra area competitive with other areas in which the Anglo–Iranian has a dominant interest.

The Department wishes you to continue to press this matter to a successful conclusion.