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

888.2553/12–1853: Telegram

No. 397
The Chargé in the United Kingdom (Butterworth) to the Department of State¹

secret

London, December 18, 1953—4 p.m.

2678. Limit distribution.

1. Representatives eight oil companies, namely AIOC, Shell, Cie Francaise de Petroles, Standard Oil France, Standard Oil California, Texas, Gulf, and Socony, have held meetings at invitation AIOC in latter’s offices London December 14, 15 and 17.²Hoover attended as observer at request Justice Department. Discussions solely of exploratory and hypothetical nature in anticipation companies may be called upon assist future re-establishment Iranian oil industry.

2. Fraser opened meeting with statement that discussions must be of hypothetical nature not only because limitations placed on American companies by Justice Department but also AIOC must await assessment of Iran situation by HMG to determine extent their own participation. He indicated strongly AIOC interested 50 percent participation in future venture, but in no event could they discuss matter until such report available, perhaps early January. American companies made no comment and extent of individual participation not mentioned further.³

3. Fraser outlined desire AIOC receive compensation by (a) receiving free oil directly from Iran in addition to (b) cash and percentage of profits from any future partners in contribution for latter’s participation in venture.

4. Considerable portion of meetings given over to factual description by AIOC staff of working conditions, field operating and refinery facilities, together with probable estimates of costs and expenses of rehabilitating installations. AIOC estimated possible crude production of ten million tons (200,000 BPD) during first year, 20 million tons (400,000 BPD) during second year and 30 million tons (600,000 BPD) during third year. Further estimated following amounts of above crude could be refined: Five million tons (100,000 BPD) first year, ten million tons (200,000 BPD) second year and twenty million tons (400,000 BPD) third year. Above AIOC figures apparently predicated partly upon physical limitations of facilities and partly by their own ability to market 50 percent of off-take and adjust production from other sources accordingly. American companies offered no comment in view hypothetical nature of AIOC position and latter’s unwillingness discuss, even tentatively, relative participation by others.

5. Group felt that nature of agreement to be negotiated with Iran constituted matter of utmost importance. Effective operating management of producing and refining facilities by industry off-taking group believed absolute necessity in view (a) extremely large investment by industry necessary rehabilitate and make possible financial advances Iranian Government pending full scale operation, and (b) dependence of marketing organizations upon steady, reliable and efficient operation, with high degree quality control refined products, if commitment for large volume off-take anticipated. Furthermore, unless development of series of situations similar Iran to be avoided in other countries Middle East, South Africa and East Indies, additional details of agreement must not be better than most liberal instances elsewhere.

6. Proposal for participation by IBRD considered and, while no firm conclusion reached, general consensus was that workable solution probably attainable if political situation in Iran demanded such form of approach.

7. American participants in meeting voiced readiness to consider any constructive solution if requested to do so by US Government, though not anxious participate from commercial standpoint in view adequate sources supply elsewhere. Plans made for working group reassemble early January when decisions by HMG and AIOC based upon own reports from Iran would permit more realistic approach.

8. Industry members felt, notwithstanding nebulous nature of AIOC position, that considerable progress was accomplished in assessing economic, political and technical aspects of problems in Iran and in general outlining procedures necessary reach a final solution.

Butterworth

1. Repeated to Tehran.
2. Memoranda of these meetings are in GTI files, lot 57 D 155, “Top Secret Mr. Hoover—Correspondence”.
3. Hoover cabled the Department on Dec. 18 that the British were determined to pursue this course of action, but he was confident if the British appraised the Iranian situation fairly, they would discover that the AIOC would only be able to return to Iran in a minor capacity. (Telegram 2679; 888.2553/12–1853)