888.2553/11–253: Telegram

No. 378
The Ambassador in Iran (Henderson) to the Department of State1


1022. For Bedell Smith, Byroade, Phleger only. Following is translation document handed Hoover and me by Foreign Minister evening November 1:

[Page 820]

(Embtel 1020 November 2; repeated London 3022) (translation from Persian).

“The following points are by no means binding on the Iranian Government. They are for information purposes only:

After the former oil co (i.e. AIOC-translator’s note) started to operate in Iran, and as it organization expanded, the directors of the company uniformly had colonial aims in Iran and their behavior was of a nature that incurred public odium. Interferences by the agents of the former oil company in the affairs of Iran and their connection with doubtful characters caused trouble for Iranian officials and created all kinds of difficulties. Their influence was so great even in England and among British representatives in Iran that by deluding the minds and concealing the facts they prevented the British Government from getting a true picture of conditions in Iran and from carrying out a policy that would be in the interest of both countries. Consequently it was never possible to establish the relations between the two countries on a basis of mutual respect and sincerity. On the contrary, however, conditions were always conducive to misunderstanding and tension. Also from a financial and economic standpoint the interests of the Iranian Government were always being adversely affected, and the company failed to carry out its rightful and moral obligations to its personnel and to the laborers. In view of these facts it is impossible for the former company to return to Iran.
It seems to the government that negotiations for Iran sale, transportation and distribution of oil should be initiated with the representatives of a group of large international companies having had previous experience. Such group should purchase oil from the National Iranian Oil Company and undertake to handle its transportation and distribution. The former company may take part in this group, but not to such extent that it could own the majority of the shares. If other British companies desire to join the group, their total shares must not exceed fifty percent. On the conclusion of an agreement and during the first years when the flow of Iranian oil to the market has not been restored to a normal state these companies must extend considerable financial assistance to the Iranian Government, to be gradually reimbursed out of revenues accruing in future years. Also these companies must assume certain obligations to purchase refined oil so that the Abadan refinery may operate to its productive capacity.
As to the question of compensation the companies purchasing oil and undertaking to transport and distribute must make an arrangement [Page 821] with the former company for a settlement that would obviate further anxiety in this respect. It goes without saying that no claim for loss of profits should be taken into consideration.
The Iranian Government believes that it would be desirable for the success of the work if the International Bank were to act as intermediary in the conclusion of an agreement between Iran and the group of companies taking over the transportation and distribution and undertake to examine the accounts and supervise the enforcement of the agreement.
In order that companies in charge of transportation and distribution may be sure that the NIOC will be able to meet its obligations in point of quantity and quality, a solution agreeable to both parties will be found through negotiations between the two parties.
An agreement between Iran and the companies for transportation and distribution must be drawn up in such a manner that at no time in the future Iranian interests would be adversely affected, i.e., whenever the price of oil increases, the Iranian Government should benefit from such increase and that its income should at no time be less than the maximum accruing to others.”

  1. Repeated to London eyes only for the Ambassador.
  2. Telegram 1020 summarized the conversation during the meeting at which Entezam handed the document to Hoover and Henderson. (888.2553/11–253)