Foreign Relations of the United States, 1947, The Near East and Africa, Volume V

891.6363/1–1147: Telegram

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

secret

Tehran, January 11, 1947—3 p. m.

22. Le Rougetel¹ has been to see me twice recently on subject of “grave danger” of Majlis² refusal to grant Soviet oil concession³ (Department’s 15, January 9⁴). I agree fully that Iranians would make serious error if they refused flatly to grant petroleum rights to USSR under any conditions, as some anti-Soviet Iranians would now like to do. However, I think we would make an equally grave mistake if we went over to the other side and made representations which could be construed by Iranians as pressure on them to grant such rights.

I have informed both Shah⁵ and Qavam⁶ that US does not object in principle to Soviet petroleum interests in northern Iran and that from economic and geographic point of view we recognize that normal outlet for oil of northern Iran is to USSR. Moreover I have expressed personal opinion that Saed⁷ Government handled petroleum negotiations with Soviets badly in 1944 and that they should not repeat this mistake. Instead of informing Kavtaradze⁸ in 1944 that Iran would not consider any Soviet request for oil rights at that time, it would have been better if Iranians had either asked for detailed Soviet project or else have drafted provisions themselves which they would be willing to accept. If USSR had refused to agree to reasonable and proper conditions Iran would at least have shown its willingness to negotiate. I do not believe there is much likelihood of Qavam’s repeating Saed’s mistake.

The fact that the British are so greatly disturbed lest the Iranians refuse the Soviet proposals is significant. The British hope the USSR will obtain petroleum rights in Iran because the British think their own concession will be safer and that no future Iran Government will be likely to nationalize the oil of the country if the British [Russians] have a concession here too. I believe one can even say that British are not deeply concerned whether Iranian political and economic interests are fully safeguarded in the matter or not. This attitude means, in essence, a return to the 1907 policy of disregarding the interests of the country as long as the great powers are satisfied.⁹

I am very much afraid Qavam will construe Le Rougetel’s representations as British pressure on behalf of the Soviet proposals, even though Le Rougetel will add that Iran should “of course” ask for adequate safeguards. The British would like for US to make similar representations. But if we do, the Iranians will feel they have no support and must give the Soviets very nearly whatever the Soviets ask for. It seems to me we should allow our position to stand on the representations I have already made.

I hope the Department will bear in mind that Soviet action in Iran during the past few months as regards petroleum has not been such as to inspire confidence among the Iranians. The promise to submit the oil proposals to the Majlis was forced out of Qavam last April at the point of the bayonet. The Soviets appear to have the 50–50 caviar agreement in mind as a precedent for their oil proposals. If so all the oil from Iran which goes to Russia will be paid for in blocked rubles, at an artificial price set in Moscow, without any reference to the world market price. Efforts by Iran to use those rubles will be in vain. The concession itself, instead of showing a profit, will never repay development costs and Iran may very probably have to put up cash in one way or another to keep it going, in addition to losing its oil. Since the agreement will be with the Soviet Government rather than a private company, all conversations regarding day to day operations will be on a government to government basis, and any Iranian official who presumes to ask that the interests of Iran be considered equally with those of the Soviet Union will be considered unfriendly by the Kremlin.

There is little adequate basis to judge whether the new Majlis will turn down the Soviet proposals or not. A few of the candidates who seem likely to be elected will favor a flat refusal, but Qavam will recommend passage and his party will probably have a substantial majority.

I am inclined to think that the primary danger is not that the Iranians will turn the Soviets down too brusquely but rather that the Majlis will agree to provisions detrimental to Iranian interests and sovereignty.

Soviet insistence upon petroleum rights in Iran brings to a focus the broad question whether a government like that of the USSR is capable of owning economic concessions in foreign countries without inevitably violating the sovereignty of that country. Under the system of private enterprise, a foreign petroleum, aviation, or other corporation can operate in Iran subject to the laws of the country, can sue and be sued, etc. I am not certain that a small and weak country like Iran can adequately safeguard the interests of the local people in this important natural resource, no matter how carefully the terms of the agreement with the USSR are drawn. Some kind of supervison over these matters by the United Nations may be inevitable.

Sent Department 22, repeated London 4 and Moscow 2.

Allen

1. Sir John H. Le Rougetel, British Ambassador in Iran.
2. The Iranian Parliament.
3. For text of the agreement entered into by Iran and the Soviet Union in April 1946, see telegram 485, April 9, 1946, from Tehran, Foreign Relations, vol. vii, p. 413; see also telegram 460, April 4, 1946, from Tehran, and footnote 72, ibid., p. 405.
4. Not printed.
5. Mohammed Reza Shah Pahlavi.
6. Ahmad Qavam, Iranian Prime Minister.
7. Mohammed Saed, who resigned as Iranian Prime Minister on November 9, 1944. It was widely believed that his resignation was forced by Soviet pressure; see Foreign Relations, 1944, vol. v, pp. 456–472, passim.
8. Sergey Ivanovich Kavtaradze, Soviet Vice Commissar for Foreign Affairs, who headed the Soviet delegation which came to Iran in September 1944 seeking oil concessions for the Soviet Union.
9. The reference is to the Convention between Great Britain and Russia relating to Persia, Afghanistan and Tibet, signed at St. Petersburg on August 31, 1907; for text, see Foreign Relations, 1907, Pt. 1, p. 550.