887.2553/5–951: Telegram

The Ambassador in the United Kingdom (Gifford) to the Department of State 1


5853. Ref: Embtel 5740, rptd Baghdad 64, Paris 2202, Tehran 112, May 3.2 Emb reps talk with Jersey officials reveals fol as status Iraq Petroleum Company position re increasing Iraq oil revenues.

1. All owning groups of IPC are agreed that payments to Iraq shld be approx equivalent per ton with that Saudi Arabia receives from Aramco.

2. Gibson, IPC managing director, authorized negot on either of two alternatives: (a) arrangement for 50–50 profit-sharing or (b) plan to yield identical results but payments to be computed in such a way as to avoid continuing examinations of cost of oil with Iraq, since Fr object to discussion of costs with IG. AIOC, Shell and Amer group wld like use income tax route to increase payments to Iraq and establish Iraq trading companies to be sub taxes. Fr, while [Page 308] more conciliatory to this type plan, still showing reluctance adopt this course,3 and Gulbenkian continues refuse submit income taxes. Apparently, IG’s preference for form which plan shld take will play prominent part in settling differences between owing groups.

3. Under either alternative, Gibson instructed obtain undertaking from IG that oil revenues payable to Iraq may be made by third parties, thus leaving door open for groups to set up their Iraq trading companies to be taxed shld they decide take tax route.

4. Understand IPC will attempt apply same terms finally agreed on its concession to Mosul and Basrah concessions, but otherwise no major changes contemplated in terms MPC and BPC concessions.

5. IPC plans that future royalties to Iraq wld be figured on official London exchange rate, but company willing negot settlement present “gold clause” dispute. Understand company willing pay something over pounds 1 million to settle matter out of court.

6. Reps owning groups remaining London to work out such intercompany matters as may be necessary as Baghdad negots progress.

7. Understand Harding, who has returned States to report Socony Board, also making full report to Dept.4

  1. Repeated to Baghdad, Paris, and Tehran.
  2. Not printed; it reported that Gibson was flying to Baghdad on May 3 to begin negotiations with the Government of Iraq, and the Embassy would advise the Department when it had more information on the company’s terms. (887.2553/5–351)
  3. Telegram 6823 from Paris, May 9, reported the French were cool to the idea of a 50–50 sharing of the profits via the taxation of the Iraq Petroleum Groups, except as a last resort if the other formula for 50–50 sharing proved unacceptable to the Government of Iraq (887.2553/5–951).
  4. Telegram 703 from Baghdad, May 12, advised the Department of State of the first meeting of the Iraq Petroleum Company representatives with the Government of Iraq negotiating committee. Company officials reported that the atmosphere was satisfactory, and they had advanced two proposals based on the Aramco agreement for 50–50 profit sharing. (887.2553/5–1251) Telegram 752 from Baghdad, May 30, reported that negotiations had reached a point where no further progress would be apparent for the time being. The company representatives expected to return to London within a week but informed the Embassy they expected to reach an understanding before they left that would be the basis for a formal agreement to be signed during the summer. (887.2553/5–3051) Despatch 2170 from Baghdad, June 1, advised the Department that the specific terms of the probable agreement were not available, but the agreement would provide for a 50–50 division of the profits. (887.2553/6–151)