891.6363/8–1947: Telegram
The Ambassador in Iran (Allen) to the Secretary of State
priority
770. Embassy’s 768, August 19.1 During conversation with Shah last night the latter referred to the expressed intention of the Soviets to demand oil concession along the same lines as the British if the existing proposals fail. He said Iran would refuse and would answer any accusations of partiality by pointing out that Iran was free to dispose [Page 937] of its concessions as it thought best. At same time he realized that the situation would be awkward for Iran and he asked me what I thought of putting all Iranian oil developments, including the British area, under some kind of international participation or supervision as2 had suggested last year. I said I thought it was not feasible for several reasons. In the first place the British had a valid and legal concession approved by Majlis with some four five years to run and the US could not support a move to abrogate a legal right of this kind where no justification for abrogation existed. Moreover, I thought that while the British oil company had not done everything it could during past 30 years to help Iran and had at times improperly meddled in Iranian politics, it seemed to me that on balance the concession had been mutually beneficial. As result of AIOC Iran oil had gained a prominent place in the markets of Europe and the Orient. The company brought $75 million in foreign exchange to Iran annually. Except for AIOC or some other foreign oil company developing Iran, great amounts of Iraqi or Arabian oil but none from Iran would be going to Europe and the Orient today. I considered Iran fully justified in insisting that AIOC or any other concessionaire comply with concession terms but that since Iran needed foreign technical and marketing assistance in oil, AIOC could probably stand on its record. I cited Mexico as an example of a large petroleum exporting country which had suffered greatly from expropriation. Iranian economy made the uninterrupted exportation of oil a necessity.
The Shah asked why the petroleum proposal recently made to ECOSOC by the World Cooperative Alliance had been rejected. I expressed confidence he would have voted against it himself if he had been present since the proposal as I understood it involved considerable infringement of national sovereignty over oil resources. International supervision of petroleum would have to come more gradually.
I should add that British Ambassador here has recently expressed concern to me over expected attempts to alter existing British petroleum rights in Iran and I have no doubt British are counting heavily on our assistance in this matter. I have assured him of the Embassy’s intention to carry out our known policy without equivocation.
Any instructions or guidance the Department may wish to furnish will be welcomed.
Sent Department 770, repeated London 92, Baghdad 87, Jidda 22. Department pass Moscow 88.