Foreign Relations of the United States, 1950, The Near East, South Asia, and Africa, Volume V

888.2553–AIOC/8–1050: Telegram

The Ambassador in the United Kingdom (Douglas) to the Secretary of State

secret

London, August 10, 1950—8 p. m.

839. Deptel 683, August 7. I am requesting early appointment with Bevin to discuss question AIOC agreement. I wish, however, express my serious doubts re wisdom our pressing on either foreign office or AIOC the suggestion that the company make immediate payment of all or at least the greater portion of the amounts due under the supplemental agreement particularly in the light of the company’s reluctance to concede this point because of what it considers to be its obligations to its stockholders. While I appreciate the fact that the British Government is the majority stockholder and that the risks which it would incur would presumably be no greater than those involved in any government loan made on political grounds, I think it also important not to lose sight of the minority stockholders, and particularly due 22 percent public subscription. I cannot perceive how it is possible for us to press a suggestion of this nature without assuming a large degree of moral responsibility in the event that the company complies with our urging. And if the net result, despite the concession by the company of this and other points, is still no ratified agreement and consequently further demands for further concessions, how do we discharge the responsibility we have assumed?

Despite the foregoing, I entirely appreciate the seriousness of the present situation and agree that we should press vigorously on all fronts here for immediate and effective reaction by the company on a scale sufficient to achieve the desired results. I will take this line with Bevin. But I feel that the nature of the action should be lent to the British themselves to work out. This may well (and undoubtedly should) include a loan, perhaps guaranteed by UK Government, but the responsibility for the decision should be, in my opinion, entirely on the British without pressure from US.

In the light of the foregoing, I do not propose in my first meeting with Bevin on this subject to press for any specific line of action.

There is a further aspect of this problem which I think deserves the Department’s urgent consideration. While I agree that the attitude of the company, and probably the British Government for that matter, leaves much to be desired, nevertheless, as I view the situation from here, I feel that there is much more the Iranians could do to facilitate a solution to this problem. It is not the British who are objecting to an agreement made in good faith and while I entirely appreciate the fact that the present Iranian Government has inherited a difficult political situation not of its own making, nevertheless as a succesor government it cannot escape a large degree of responsibility and certainly has an obligation to exert every effort to get this agreement ratified with the minimum possible change. I have noted carefully both Department’s and Ambassador Grady’s views in recent telegrams about the undesirability of renegotiation of the supplemental agreement and I entirely concur with those views. If I understand the situation correctly, however, renegotiation is precisely what Razmara is demanding as indicated in point two of his demands as reported in Tehran’s 215 July 25.¹ It seems to me, therefore, that there is a considerable divergence of views as between the Department and Razmara as to what is required to get the agreement through. It seems to me that we should give serious consideration to talking as frankly to Razmara on this question as we have to the British and to try to persuade him that it is necessary for him to present to the company an impression of moderation and reasonableness and assurance that present concessions by the company will not lead to demands for further concessions at a future date. In this general connection, I was glad to see Deptel 686, August 7.² I consider this matter important, not only because of the effect on Razmara, but because of the effect here as well. There is a definite impression here that our approaches have been too one-sided and that Razmara is aware of this fact and thereby encouraged in what is regarded as his intransigence. I feel that our intervention in this problem should extend to Razmara as well and that we should make every effort to induce moderation and good faith on his part, making the British fully aware of our efforts. I think that this would advance considerably the prospects of a more forthcoming British attitude.

I would like to make two further observations on Deptel 683:

1. Re last sentence paragraph 2, I regret US and UK Government not completely in accord this question. Although we feel we have made at least some useful progress in Foreign Office, there is not yet identity of views between us as to the required action. Picture now complicated further by entry Treasury and Ministry Fuel and Power into picture and particularly by Treasury sharing concern of AIOC re economic consequences large scale loan on Iranian economy (paragraph 2 Embtel 792, August 8³).

2. Re final sentence final paragraph, according explanations here, government will probably realize 13 and one-half million pounds in royalties this year under old agreement. Of this amount 6,000,000 has already been paid as an advance. Greater part of remaining 7,500,000, from which company might make further 6,000,000 advance, not due until end company’s fiscal (which is calendar) year and therefore is not presently “owed” by company.

Sent Department 839, repeated info Tehran 16.

Douglas

1. Not printed; in it Grady reported that Razmara would insist on the following items with regard to the AIOC agreement:

   “(1) Payment all royalties due under new rates and application of new rates immediately.

   (2) He will withdraw present supplementary agreement and seek modification on following points before re-submitting to Majlis:

   (a) Iranization to be completed within period ten yrs.

   (b) Audit by Iranian Govt of books of AIOC pertaining business in Iran.

   (c) Lowest prices to be charged for petroleum products sold in Iran as are charged anywhere else (this means rate given Brit Navy).

   (d) Check by Iranian Govt of oil exported by company.” (888.2553/7–2550)

2. Not printed; in it the Department of State advised Grady that, if he believed there was any danger that Razmara’s extreme statements about the AIOC agreement would result in the alienation of the British, then the Ambassador should suggest to the Prime Minister that he take no action which would result in serious friction between the United Kingdom and Iran. (888.2553–AIOC/8–750)
3. Not printed; it reported that the question of the supplemental agreement had been reviewed on August 8 with Wright and Furlonge who, inter alia, questioned the justifiability of a loan which might be used at least in part to balance the Iranian budget. (888.2553–AIOC/8–850)