Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X
888.2553/10–1652: Despatch
No. 227
The Ambassador in Iran (Henderson) to the Department of State
Subject:
- Transmittal of Note from the British Government to the Iranian Government.
There are transmitted herewith five copies of the note from the Government of the United Kingdom to the Iranian Government of October 14, 1952, concerning the oil question. These copies were made available by the British Embassy in Tehran.
First Secretary of Embassy
[Enclosure]
Text of Note Dated 14th October From Her Majesty’s Government in the United Kingdom
Her Majesty’s Government note with regret that in spite of the recent messages from Mr. Acheson on behalf of the President of the United States of America and from Mr. Eden on behalf of Her Majesty’s Government in the United Kingdom correcting certain misunderstandings which appear to exist in the mind of the Iranian Government as to the meaning of the joint proposals put forward on the 26th August 1952, the Iranian Government should still be unwilling to regard these proposals as an equitable basis for the solution of the oil dispute and should revert to the counter-proposal contained in the Iranian Government’s note of the 24th September 1952. The Iranian counter-proposal was not referred to in Mr. Eden’s message of the 4th October 1952 since that message was sent with the sole purpose of enabling the Iranian Government to understand the joint proposals correctly, and in the hope that these proposals would be re-examined by the Iranian Government in the spirit in which they were intended. But since the Iranian Government now insist on putting forward their counter-proposal as the only basis for a settlement of the dispute, Her Majesty’s Government feel obliged to state in some detail why this counter-proposal is unreasonable and unacceptable. Moreover, the terms in which the Iranian Government now purport to describe the joint proposals show that the joint proposals are still not understood and make it necessary for Her Majesty’s Government once more to place their views and intentions on record.
The Iranian Government state in their counter-proposal that the question of claims by the Anglo-Iranian Oil Company and counter-claims by the Iranian Government may be referred to the International Court of Justice provided agreement is previously reached on four conditions. They now invite the Company to send representatives to Tehran within seven days to discuss these conditions while [Page 496] at the same time they demand the partial fulfilment of one of the conditions even before the Company’s representatives are set out.
By the first and second of their conditions the Iranian Government seek to limit the question of claims by the Anglo-Iranian Oil Company to the value of the Company’s property in Iran and expressly rule out all possibility of any claims on behalf of the AngloIranian Oil Company relating to the period subsequent to the date of nationalisation. In the joint proposals Her Majesty’s Government accepted the nationalisation of the Iranian oil industry as a fact but in return claim just compensation on behalf of the Anglo-Iranian Oil Company, the question of such compensation being referred in its entirety to the impartial judgment of the highest judicial tribunal in the world. The International Court should be asked to consider all claims and counter-claims of both parties without limitation and to have regard to the legal position existing immediately prior to nationalisation. Her Majesty’s Government would when presenting claims on behalf of the Company, ask the Court to consider what compensation was due, not for the mere loss of the Company’s installations in Iran, but for the unilateral termination of the 1933 Concession Agreement contrary to the explicit undertaking in the Agreement that it would not be so terminated. As was made clear in Mr. Eden’s message of the 4th October Her Majesty’s Government did not seek to revive the Concession Agreement in other respects. Naturally it would be for the Court to decide whether and to what extent a claim for compensation on the basis indicated above was justified and Her Majesty’s Government would of course be bound by its decision. Her Majesty’s Government could in no circumstances agree to debar themselves from raising such a claim before proceedings had even begun and as a condition for reference to the Court as the Iranian Government demand.
With regard to the third stipulation, Her Majesty’s Government cannot admit that Iran has any claim against the Anglo-Iranian Oil Company in respect of Iran’s failure to sell oil abroad. The Anglo-Iranian Oil Company have merely exercised their legal rights in regard to oil they regard as theirs, an attitude in which they have the full support of Her Majesty’s Government, and they have declared their intention of defending those rights throughout the world.
The fourth stipulation refers to the payment in advance and on account of £49,000,000 erroneously stated to be shown in the AngloIranian Oil Company’s balance sheet for 1950 as “due to Iran”. The Iranian Government now insist that of this sum £20,000,000 should be paid within seven days. The Supplemental Oil Agreement as is well known was intended to modify the 1933 Concession Agreement in such a way as to entitle the Iranian Government to considerable [Page 497] additional payments from the Company. There would have been an increase in tonnage royalty and in the annual payments in respect of Iranian taxation. In addition, by very considerably bringing forward the date of payment and by altering the method of assessing the amount of the payment in respect of the sum allocated to the general reserves, the Supplemental Agreement would have ensured to the Iranian Government a greater and more certain and more immediate benefit in respect of the sum so allocated. The additional financial benefit to the Iranian Government would have amounted to some £49,000,000 up to the end of 1951 solely by reason of the terms of the Supplemental Agreement and not by those of the 1933 Agreement. It was a condition of the Supplemental Agreement that the 1933 Agreement revised in this manner should remain in full force and effect. Iran rejected the Supplemental Agreement and wrongfully terminated the 1933 Agreement. It is therefore clear that the sums are in no sense due to the Iranian Government. Her Majesty’s Government are thus being asked to agree, before a given date in the immediate future, that the Anglo-Iranian Oil Company should pay a fictitious debt of £49,000,000, nearly half of which is to be largely convertible into dollars (a demand not previously made by the Iranian Government) in return for the Company’s abandoning its right to claim just compensation. Her Majesty’s Government are not prepared to entertain this request.
As stated above the Iranian Government have in the first sentence of their note described the joint proposals in terms which suggest that misunderstandings still exist. Her Majesty’s Government therefore wish to make it abundantly clear that
- (i)
- Her Majesty’s Government and the Anglo-Iranian Oil Company accept the nationalisation of the Iranian oil industry as a fact, but in return Her Majesty’s Government claim just compensation on behalf of the Company
- (ii)
- Her Majesty’s Government consider that the question of compensation should be referred to the impartial adjudication of the International Court
- (iii)
- Her Majesty’s Government claim compensation on behalf of the Anglo-Iranian Oil Company for the unilateral termination of the 1933 Concession Agreement contrary to the explicit undertaking in the Agreement that it will not be so terminated
- (iv)
- neither Her Majesty’s Government nor the Anglo-Iranian Oil Company seek to revive the 1933 Concession Agreement in any other respect
- (v)
- as soon as agreement is reached as to the terms on which the question of compensation is to be adjudicated the Anglo-Iranian Oil Company will be ready to open negotiations as indicated in the joint proposals. As already stated, neither Her Majesty’s Government nor the Anglo-Iranian Oil Company insist on the Company’s securing a monopoly of the purchase of Iranian oil
- (vi)
- pending agreement as to the terms on which the question of compensation is to be adjudicated, Her Majesty’s Government on their own behalf and on behalf of the Anglo-Iranian Oil Company reserve their full legal rights.