Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X

888.2553/1–1453: Telegram

No. 278
The Ambassador in the United Kingdom (Gifford) to the Department of State¹

top secret
niact

London, January 14, 1953—3 a.m.

3841. From Byroade. This is message No. 1.²

Following is text DMPA Agreement agreed last night with UK subject final clearance later today:

Main Headings of DMPA Agreement

“After the entry into force of the agreement of today’s date for arbitration between the Government of Iran and the AIOC: The United States Defense Materials Procurement Agency will contract to take from the National Iranian Oil Company over a period of time oil products or crude oil to a value of approximately $133 million; 25 percent of the value of oil products of crude oil delivered to DMPA under the contract will be placed in escrow to be disbursed in accordance with the terms of the arbitration award; and DMPA will advance $100 million to NIOC against future deliveries of oil products or crude oil upon the following basis:

1. Of the $100 million, $50 million will be advanced immediately to NIOC; the balance will be advanced in installments of $10 million a month as soon as DMPA and NIOC agree on a provisional schedule of shipment and DMPA has satisfied itself concerning the availability and quality of the oil products or crude oil to be shipped under the schedule and has assured itself of the suitability of port, loading, and other essential facilities.

2. It is understood that following the approval of this agreement the NIOC will enter into negotiations with a company of an international character (hereinafter called the international company) which would include AIOC and would be registered outside the United Kingdom or Iran, with a view to concluding a commercial agreement under which the NIOC will sell to the international company substantial quantities of crude oil and oil products annually over a period of years; such negotiations to be undertaken as soon as the international company is formed and ready to begin them.

3. DMPA intends to appoint the international company as its agent for receiving delivery f.o.b. Iranian ports of oil and oil products for the account of DMPA.

4. Until such time as a commercial agreement is made between the international company and the NIOC, the price for the quantities of refined products to be delivered against the DMPA advance shall be the United States Gulf posted price (which is the present Persian Gulf going price) less a discount of 35 percent. In the event sufficient refined products desired by DMPA are not available, DMPA shall have the option of receiving crude oil at the same discount from the going Persian Gulf posted price. If NIOC should sell refined products or crude oil to other customers than the international company at prices lower than the posted price or going prices referred to above, the price to DMPA will be calculated on the basis of such lower prices less such appropriate discounts as may be negotiated between NIOC and DMPA.

5. For each delivery made under the purchase and advance contract, NIOC will be credited with 75 percent of its value as determined under paragraph 4 above and DMPA will pay 25 percent of its value to the Federal Reserve Bank of New York to be held by it in escrow until disbursed in accordance with the terms of the arbitration award.

6. Deliveries under the purchase and advance contract will continue until the advance by DMPA of $100 million (carrying an interest charge of 4½ percent per annum on unpaid balances) is liquidated.

7. At such time as a commercial agreement is made between the NIOC and the international company, the price provisions contained in paragraph 4 shall be appropriately modified to conform with the price provisions of the commercial agreement.

8. The foregoing is an agreement binding upon the DMPA and the Government of Iran and the parties agree to work out detailed arrangements to implement this agreement.”³

Gifford

1. Sent to Tehran eyes only for Ambassador Henderson as telegram 147 and repeated to the Department.
2. On Jan. 13 Byroade informed the Department that the documents to be presented to Mosadeq would be sent to Tehran and Washington in four separate messages. Byroade’s comments on the final meeting with the British in which the documents were approved and his observations about the documents themselves would follow in message 5. (Telegram 3839; 888.2553/1–1353)

3. Several minor changes were made in the text of this as well as the other three documents. These alterations are in Document 283.

   On Jan. 14 the Department informed Henderson that, as a result of a telecon that day with Byroade, the Department had approved the text of the DMPA heads of agreement which was being transmitted in London telegram 3841. (Telegram 1715; 888.2553/1–1453)