The Ambassador in Iran (Murray) to the Secretary of State

No. 112

Sir: I have the honor to refer to the Department’s telegram No. 523 of September 14, 1945,5 and the Embassy’s telegram No. 803 of October 4,6 on the subject of the proposal of the Seaboard Oil Company to send a representative to Iran for the purpose of negotiating an agreement with the Iranian Government for the development of the country’s petroleum resources. The proposal has been discussed at length by the Embassy staff and in amplification of the Embassy’s telegram referred to above, I believe the Department will be interested in the following points which have been brought out in the course of our discussions:

It appears to the Embassy that there is perhaps one argument in favor of the proposal, namely, that with troop withdrawals in process,7 [Page 582]the Iranian Government may reopen oil concession negotiations some time within the next year and there may be some merit in having an oil company representative in Tehran closely in touch with developments. Whether this would turn out to be an advantage or a disadvantage, however, would depend very much on the type of man that was sent. Inasmuch as the Seaboard Oil Company proposes to discuss a managerial relationship rather than a concession as such he would not, technically at least, be directly violating the existing prohibition against concession negotiations on the part of the Iranian Government.

On the other hand, in view of the substantial foreign capital that would be required, any managerial relationship would probably have to be developed on lines rather similar to a concession. The discussions, therefore, would raise the question of violation by the Iranian Government of the Majlis8 prohibition of concession negotiations, particularly since secrecy would be definitely impossible and the public would assume that concession negotiations were in progress.

Inasmuch as Seaboard held a concession in the northern zone in 1937–38,9 the return of this company’s representative might be interpreted here as a challenge to the Russian claim for a northern concession. The consequence might be to retard Russian troop withdrawals. It is quite likely that the Russians would intervene, demanding concessions for themselves, and applying pressures on the Government of the sort exercised last fall. It is unlikely that the Russians would be any happier at the prospect of the Americans holding a managerial type concession than a direct concession.

Other American oil companies, particularly Sinclair and Standard Vacuum, would probably want to send out representatives for the same purpose. Even one oil man in Tehran would be likely to stir up difficulties with and for the Iranian Government, but with two or three men here, the American Government would be placed in an awkward position unless it were prepared to force the issue.

Furthermore, there would be considerable risk that premature discussions would prejudice the American position for negotiations later on. In view of the delicate position politically of oil concessions in Iran, it would seem advisable to obtain informal clearance with the Iranian Government in advance of the arrival of any oil company representatives. It is the Embassy’s opinion that it would be impossible to secure such clearance at the present time, but that it might be possible later on after the departure of the Russian troops.

In general, the Embassy’s position is that this is not an appropriate time to discuss the development of Iranian petroleum resources by an [Page 583]American company, either on a managerial basis or an outright concession basis. The effect might be particularly unfortunate in the case of the Seaboard Oil Company because of its previous connections in the northern zone.

These are the Embassy’s views, based largely on political grounds. However, it is believed that it might be helpful to discuss the pros and cons of the managerial type of concession with the Petroleum Attaché10 and the Embassy suggests that the Department instruct Von Schilling to come to Tehran in the near future for a short visit.

Respectfully yours,

Wallace Murray

[In a letter of October 12, 1945, to John M. Lovejoy, President of the Seaboard Oil Company, the Deputy Director of the Office of Near Eastern and African Affairs (Allen) stated: “Following up our conversation concerning the possibility of your sending a representative to Iran, Ambassador Murray has now expressed his strong belief that this would be very inadvisable at the present time.

As you may have observed from the press, foreign troops must be withdrawn from Iran by March 2, 1946, after which time the Iranian Government will presumably feel free to discuss petroleum matters with the representatives of foreign firms.” (891.6363/10–445).

A letter of similar purport was sent to Philo W. Parker, President of the Standard-Vacuum Oil Company, by the Chief of the Petroleum Division (Loftus) on November 28, 1945 (891.6363/10–945).]

  1. Not printed; it advised that the Seaboard Oil Company wished to send a representative to Iran to discuss the possibility of an agreement with the Iranian Government to develop petroleum resources for Iran under a managerial type of contract and requested the views of the Ambassador regarding the feasibility of such discussions (891.6363/9–1445).
  2. Not printed; it stated: “Visit Seaboard representative definitely inadvisable-at this time.” (891.6363/10–445)
  3. For documentation on the withdrawal of foreign troops from Iran, see pp. 359 ff.
  4. Iranian Parliament.
  5. For documentation on concessions held by the Seaboard Oil Company in Iran during these years, see Foreign Relations, 1937, vol. ii, pp. 734 ff., and ibid., 1938, vol. ii, pp. 752 ff.
  6. Franz von Schilling, Petroleum Attaché at the Legation in Egypt.