McGhee Files: Lot 53 D 468: Petroleum

Memorandum of Conversation, by Mr. Richard Funkhouser of the Office of African and Near Eastern Affairs

confidential

Subject: Discussions with Anglo–Iranian Oil Company Officials

Participants: Assistant Secretary McGhee (part-time)1
Mr. Heath-Ives, AIOC, New York Office
Mr. Sedden—AIOC newly appointed Manager, Tehran
Mr. Lockett, Standard Oil of New Jersey, Representative Middle East Pipeline Company
Mr. Becker, AIOC Legal Counsel, Washington
GTI—Mr. Jernegan2
ANE—Mr. Funkhouser
GTI—Mr. Ferguson3
GTI—Mr. Kitchen
PED—Mr. Moline4
ANE—Mr. Clark5
[Page 14]

Anglo-Iranian Oil Company officials called on the Department ostensibly to introduce Mr. Sedden who will leave shortly for Iran to take over the managership of Anglo-Iranian Oil Company operations. Discussion centered about the following points:

(a)
Political conditions in Iraq which would affect the successful negotiation of Middle East Pipeline transit rights.
(b)
Situation in the US with respect to oil imports.
(c)
Request by the Department for statistical information on AIOC producing and refining operations in Iran and Kuwait.
(d)
Request by the Department for information on latest developments concerning AIOC–Iranian concession contract renegotiations.

The only substantive information which the Department gained from these discussions was that:

(a)
Kuwait production was not expected to increase substantially over the next year despite the completion this month of the new 600,000 b.p.d. Mena Al Ahmedi Pier.
(b)
The Iranian port of Bandar Mashur could handle 160,000 b.p.d. crude liftings.
(c)
Abadan refinery was producing approximately 500,000 b.p.d.
(d)
AIOC planned to increase the capacity of their Kermanshaw refinery. No definite information was available.
(e)
Mepco was proceeding with its efforts to obtain transit rights through Iraq and was optimistic that these negotiations could be carried out successfully. Discussions had not progressed to the point where any Iraqi demands that Basra oil be transported through the line had teen made but Mepco officials were prepared to negotiate on this point.
(f)
Heath-Ives promised to make more frequent trips to Washington to discuss latest AIOC developments and offered to try to answer any information requests the Department would care to make.

Assistant Secretary McGhee then met briefly with the AIOC officials. Following a brief summary of points noted above, the status of AIOC negotiations with the Iranian Government was discussed. AIOC officials stated that they had no late information which would indicate any change in the AIOC position. Mr. McGhee informed them that during his recent visit to the area the informed consensus in Tehran indicated only a small margin separated the two sides and that the chief point of contention arose over funds allocated to reserves before profits were declared. Mr. Sedden expressed great interest in this issue since he personally was not aware of the importance attached to this point by the Iranian Government. Mr. Heath-Ives added that the company already had, however, made liberal concessions and that the point would arrive where AIOC would have “nothing in the till”. Mr. McGhee stated that having read the AIOC annual report, he was convinced that, as one oil man to another, profits were still far from disappearing. Mr. McGhee added that conditions had greatly [Page 15]changed in the Near East since most contracts were signed, that Iranian and other Near East officials were now perfectly aware of the more favorable concession terms existing not only in the western hemisphere but even in the Persian Gulf, and that it was therefore necessary for oil companies to deal with the situation realistically by recognizing the legitimate demands of oil producing states. Mr. McGhee briefly reviewed the importance to the stability of the area involved in successfully concluded oil negotiations. Anglo-Iranian officials expressed their appreciation of the Assistant Secretary’s views, particularly the information regarding the AIOC impasse, and promised to keep in closer contact with the Department.

  1. George C. McGhee, Assistant Secretary of State for Near Eastern, South Asian and African Affairs.
  2. John D. Jernegan, Director, Office of Greek, Turkish and Iranian Affairs.
  3. C. Vaughn Ferguson, Officer in Charge, Iranian Affairs.
  4. Edward G. Moline, Assistant Chief, Petroleum Policy Staff.
  5. Harlan B. Clark, Officer in Charge, Lebanon–Syria–Iraq Affairs.