Office of the Historian

891.6363/12–3146: Telegram

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

secret
us urgent
Washington, January 8, 1947—7 p.m.

13. Embtel 1638 Dec. 31.45 While detailed provisions of AIOC–AM Cos agreement not fully known to Dept and many points may still be under negotiation among parties involved, quick analysis known developments indicate arrangement is strictly private transaction whereby one commercial firm, AIOC, agrees to sell and two other commercial firms, Standard New Jersey and Socony-Vacuum, agree to buy 134 million tons petroleum produced from Iran and/or Kuwait for delivery over period 20 years with not more than half total deliverable in first 10 years. Motivation appears to be that AIOC has vast ME holdings and large potential surplus oil production in Iran, Kuwait and Iraq, and AM Cos have large market outlets and relatively smaller crude reserves in ME area.

Other developments in ME area indicate Iran will not necessarily be principal source supply for AIOC–AM Cos agreement. For your confidential information Gulf recently negotiated to supply Shell with crude from Gulf’s share Kuwait oil, amounts ranging from approx 1 million tons in 1947 to 10 million tons in each of last 2 years of 10 year period. Gulf undoubtedly will have other commitments which with Shell transaction entail huge development program for Kuwait concession. Undoubtedly AIOC will take as its share Kuwait oil amount equal to Gulf’s production. Ready market to AIOC for such enormous quantities appears likely through arrangement being negotiated with Jersey Standard and Socony.

Possibility that AIOC may provide portion oil to Jersey and Socony under subject agreement from AIOC share Iraq oil should not be overlooked. IPC, in which AIOC participates, plans new development Mosul and Basra concessions in Iraq in 1947. With already [Page 50] available sufficient production in Iran to meet current market demands AIOC may turn to Jersey-Socony deal for market outlet. Dept knows no prohibition on use Iraq oil in fulfillment of contract.

It may therefore be observed that, while Kuwait and/or Iraq oil may be used in substantial quantities thus lessening extent to which Iranian oil will be needed, foregoing observations are based on broad outlines of transactions revealed to Dept by Am Cos and final contracts may contain specific provisions differing in some respects.

Byrnes
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