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

888.2553/1–754: Telegram

No. 406
The Chargé in the United Kingdom (Butterworth) to the Department of State¹

top secret

London, January 7, 1954—6 p.m.

2908. Limit distribution. From Hoover.

1. I scheduled arrive New York Saturday, January 9, proceeding Washington Sunday, January 10, in anticipation Department meetings beginning Monday, January 11.

2. In view quickened tempo of developments anticipated London and Tehran (Tehran’s 1459, 1476, 1477)² believe desirable I return London about January 16 for reasons outlined below.

3. British Chargé Tehran has now completed pro forma assessment of Iran situation (Tehran’s 1477 January 6) and has been officially advised that (a) AIOC can only return as minority member of a consortium; (b) Iranian Government ready receive technical oil mission from HMG and representatives of consortium; and (c) this mission welcome to examine field producing, refinery, and terminal facilities. Understand HMG will clear this policy at cabinet level next week and will immediately desire to plan final course of action for actual conduct of negotiations in Iran.

4. This implies that anti-trust aspects of consortium should be clarified at earliest possible moment to permit American companies to join in evaluation of physical facilities in Iran and participate in ensuing negotiations with Iranian Government.³

5. Although probable that maximum permissible participation AIOC will be determined by Iranian Government at approximately 35 percent, remaining companies will hesitate to agree on own relative percentages until they can (a) obtain clarification of anti-trust situation, (b) evaluate physical facilities and probable costs of rehabilitation, (c) assess economic, political and social conditions in country where none other than AIOC have previously had direct contact and (d) obtain general outline of type deal obtainable from Iranian Government. While some of this information could be determined in absence of clarification of anti-trust situation, nevertheless, once wheels have been set in motion companies must be in position to proceed rapidly to final conclusion. Believe, therefore, matter of urgent necessity that every possible effort be made resolve anti-trust matter soonest possible.

6. Parenthetically, US Government has been putting strong and continued pressure on HMG at highest levels over period of some years to solve Iranian problem in interest of our highest mutual security interests. US Government has also voluntarily assumed broad obligations to Zahedi Government in Iran looking towards same end. If US now finds itself unable to proceed further at this time, and negotiations are either stalled or suspended, the implications and consequences might well be of the gravest nature.

7. Department may wish to pass contents this telegram to Attorney General and other who may be interested in anticipation of probable conferences next week in Washington.

8. Comments from Ambassadors Aldrich and Henderson, particularly with reference to paragraph 6 above, would be appreciated.⁴

Butterworth

1. Repeated to Tehran.
2. In telegram 1459, Jan. 5, Ambassador Henderson, reported that the Foreign Minister told him that the previous evening, the Iranian Government had decided it was time to move forward as fast as possible in the direction of an oil settlement, that Zahedi was planning to see the British Chargé some time within the next several days to inform him that it was absolutely impossible for the AIOC to have a monopoly or even a dominating position in producing or marketing Iran’s oil, and that negotiations should proceed on the basis of setting up an international consortium. (888.2553/1–554) Telegrams 1476 and 1477, both dated Jan. 6, are not printed. (888.2553/1–654)
3. For documentation regarding the development of United States policy regarding the applicability of the antitrust laws to international petroleum companies, see vol. i, Part 2, pp. 1259 ff.
4. On Jan. 9 Ambassador Henderson agreed with Hoover’s opinion that every possible effort should be made to resolve the antitrust matter as soon as possible in order that the American companies would be in a position to discuss participation in an Iranian oil arrangement. Henderson was of the opinion that there could be no solution of the problem without the involvement of the American companies. (Telegram 1504; 888.2553/1–954)