891.6363 AIOC/4–2849: Telegram

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


573. Long protracted negotiations revision concession AIOC have now been actively resumed.1 Representatives AIOC have recently returned and Sir William Fraser, chairman board, expected to arrive tomorrow. British Ambassador tells me, most privately, that negotiations, however, are difficult and that on Iran side there is no one truly competent from technical point of view to represent Iran Government.

[Here follow observations by the British Ambassador in Iran concerning the Iranian petroleum delegate at London.]

[Page 126]

British Ambassador states AIOC production is at peak level and Iran Government is devising every possible means to cash in. It has made some 20 to 25 specific demands, including Iranization and modification of arbitration clause. Moreover, Iran Government desires 50% gross profits. British Ambassador states that so many elements enter into gross profits that this presents an impossible condition. Moreover, he says, Board of Directors AIOC almost entirely Scotch and will, under no circumstances, accept conditions which would deprive them of control. British Ambassador says way things now stand Company is prepared raise royalties and make other concessions which would substantially double under present circumstances Iran revenue from AIOC. AIOC is in fact subject to very exacting regulations by British Government. For example of its profits last year 11 million pounds have had to be turned over to Treasury as reserve. This is source of lively complaint on part Iran Government. But, says British Ambassador, AIOC is ready hereafter to turn over whatever part of reserves accrue to Iran Government in accordance with contract. British apparently hope that negotiations will be concluded within next fortnight, but:

Thoroughly competent and entirely reliable American source intimately acquainted with course of petroleum matters here has informed me as follows: informant believes that one might mistake tactical moves on Iran’s part for objectives actually sought. For example, according to informant, the 25 specific demands cited represent only catalog of sources of dissatisfaction for discussion. Also he believes that Iran has no present intention demanding Iranization of Company. Also that Iran does not demand 50% gross profits but insists only that principle of equal division of benefits established Venezuela 19422 be used as criterion here in appraising equitability of revised royalty. Iran negotiators have insisted that this principle be accepted before any discussion other issues and until accepted have stubbornly refused yield on any point. Informant believes Iran prepared accept 2½ to 3 times present revenue per ton as representing equitable share on Venezuelan basis continuing same simple-type formula as in past and providing for rescision if warranted by either party after 5 years. AIOC negotiator, Gass, has apparently not been authorized make such settlement hence dispute has been confined to subsidiary issues without progress. Chairman Fraser’s arrival tomorrow [Page 127]may open way for resolving this basic issue which informant savs involves no technical problem.3

  1. Regarding the initiation of these negotiations on September 30, 1948, see editorial note, Foreign Relations, 1948, vol. v, Part 1, p. 49. For the text of the Convention concluded at Tehran on April 29, 1933, between the Iranian Government and the Anglo-Persian Oil Company (as the Anglo-Iranian Oil Company was then known), see British Cmd. 8425, Persia No. 1 (1951): Correspondence between His Majesty’s Government in the United Kingdom and the Persian Government, and Related Documents concerning the Oil Industry in Persia, February 1951 to September 1951, p. 9.
  2. For documentation on discussions between the United States and Venezuela regarding proposed legislation for control of the petroleum industry in Venezuela, see Foreign Relations, 1942, vol. vi, pp. 743 ff.
  3. London, on April 30, advised of information from the British Foreign Office that Mr. Bevin had informed the Iranian Ambassador that the negotiations between Iran and the Anglo-Iranian Oil Company were “between company and Iran Government. He said HMG could not negotiate with Iran over head of company and could not put pressure on company to increase its present offer.” (telegram 1675, 891.00/4–3049)

    London reported further, on May 17, that the “Iranian Finance Ministry is unwilling accept terms offered by Fraser. AIOC, which is secretive even with Foreign Office, indicates that it has made its ‘final’ offer which is ‘better than terms any other oil company in ME except Kuwait neutral zone concessionaires’.” (telegram 1940. 891.00/5–1749)