888.2553/1–2054
No. 411
The Attorney General (Brownell) to the National Security Council1
top secret
[Washington,] January 20, 1954.
Gentlemen: You have asked my opinion as to the
legality of an international consortium which might be arranged along the
lines stated in paragraphs I to IV of the “Proposed Iranian Consortium Plan”
submitted to me (copy of which is attached), including the legality of
participation therein by any or all of the five mentioned or other American
oil companies.
Upon the assumption that the proposed consortium will be organized as set out
in the memorandum submitted to me, and will be made up of participating
companies in accordance with the specified composition of the group, and
with particular emphasis upon the provisions respecting the freedom of each
member of the group to sell the oil and products acquired by it freely, both
as to price and purchaser, it is my opinion that such joint contract or
joint company, in view of the facts and circumstances which now characterize
the production and refining of Iranian oil and the determination by the
National Security Council that the security interests of the United States
require that United States oil companies be invited to participate in an
international consortium to contract with the Government of Iran, for the
production, refining and acquisition of petroleum and petroleum products
from within the area of the former AIOC
concession, would not in itself constitute a violation of the antitrust
laws, nor create a violation of antitrust law not already existing, subject
to the limitations stated below.
[Page 902]
This opinion of non-violation is limited to the actions described in said
memorandum and does not extend to any other act whatever, such as, but not
limited to—
- (a)
- Any other agreement or understanding among the participating
parties, or any of them, or between any of the participating parties
and non-participating persons,
- (b)
- Marketing, distribution, further manufacture, or transportation of
any petroleum or petroleum products, and any plan, program,
agreement, or understanding, whether past, present or future,
relating thereto.
This opinion of non-violation is given only subject to the express
reservation of all rights of the United States, unlimited in any way by this
opinion, to continue to prosecute the action against Standard Oil Company of
New Jersey and others, pending in the United States District Court for the
Southern District of New York, Civil No. 86–27, in accordance with the
Federal Rules of Civil Procedure, and to prosecute the charges of such
complaint with respect to the actions of the defendants therein and any
other persons who may be added as parties defendant, as to any petroleum and
petroleum products, including any and all actions dealing with petroleum and
petroleum products acquired as a result of the consortium, other than any
action which the preceding paragraphs of the opinion state “would not, in
itself constitute a violation of the antitrust laws, nor create violation of
antitrust law not already existing.”
Sincerely yours,2
[Attachment]
confidential
“Proposed Iranian Consortium
Plan”
- I.
- The British Government (herein referred to as H.M.G.) and the Anglo-Iranian Oil
Company (herein referred to as AIOC) on the one hand and the Government of Iran on the
other have been disputing the validity of the Iranian Government’s
action in purporting (a) to cancel the oil concession agreement
between the Government and AIOC;
and (b) to nationalize certain properties of AIOC. The United States has long
recognized that a settlement of that dispute which will provide for
the reopening of the Iranian oil industry on a sound and permanent
basis is vital to its national security. For this reason the United
States has sought such a solution since the inception of the dispute
early in 1951. (See NSC Action 454,
March
[Page 903]
21, 1951; 473 May
16, 1951; 500 June 27, 1951; 680 November 19, 1952; 735 March 11,
1953; 875 August 6, 1953; 891 August 27, 1953; 947 October 29, 1953;
998 December 30, 1953; 1015 January 14, 1954.)3
- II.
- Many, including American oil companies engaged in business at home
or abroad, have felt that the best solution of the problem would be
for AIOC to return to Iran alone
but H.M.G., AIOC and the United States now agree that the Iranian
attitude makes such a solution impossible. At the same time, H.M.G., AIOC and the United States also agree that it might be
possible to organize a group of oil companies which, in turn, might
be able to negotiate a sound and permanent settlement. The basic
principles of any such settlement would:
- (a)
- Permit a group of companies to negotiate a commercial
contract with Iran;
- (b)
- Provide compensation to AIOC for such interest it might not retain;
and
- (c)
- Not adversely affect existing oil production concessions
from Governments of oil producing foreign countries.
- III.
- Consummation of a settlement within the framework of these basic
principles will be extremely difficult and the final terms cannot be
foreseen. It is believed, however, that the following points will be
handled, as indicated:
- 1.
- Composition of the group: The group
will consist of AIOC and
such other oil companies as are approved by H.M.G. and the Government of
Iran as being qualified to contribute to a solution by
providing capital, and by agreeing to take Iranian crude oil
and refined products and otherwise, with the provisos:
- (a)
- that approximately five American companies will be
approved to participate, and actually do
participate, in the joint contract (or organize a
joint company), and
- (b)
- that the powers of H.M.G. and Iran to give or withhold
approval will not be exercised to establish in
advance of approval, or require as a condition of
approval, with any American company any conditions,
agreements, undertakings or commitments which make
impossible compliance, in whole or part, with the
provision of paragraph III 2(c) hereinbelow, or
which affect, or in any manner relate to, petroleum
operations (either with respect to Iranian petroleum
or petroleum products, or petroleum or petroleum
products of any other origin) outside the AIOC concession area in
Iran by such approved companies, or their
affiliates. The relative participations by
nationalities or companies cannot be foreseen at
this time.
- 2.
- Form of organizations:
- (a)
- The group would seek contractual arrangements with
Iran within the framework of the basic principles
and such arrangements might take the form of
undivided interests in the contract or the
organization of a new company to be the contracting
party with Iran.
- (b)
- In any case, the group would determine the total
production and each member would take its proportion
(based on capital contributions) of the Iranian
crude oil and products.
- (c)
- By the provisions of the consortium, each member
of the group would be free to sell oil and products,
at prices individually determined by it, to any one,
in any market, including sale to any party.
- (d)
- Provision would be made for adjustment of
over-and-under-liftings in advance of any operations
under the joint contract or joint company by the
group members.
- 3.
- Arrangements with Iran: The
contractual arrangements would give the group (however
organized) effective management of the oil operations in and
exports from the AIOC
concession area in Iran. The group would agree to develop
the property in accordance with sound commercial practices.
This probably would mean, in practice, that the group would
expand or contract production, transportation and refining
in Iran as economic conditions indicated. All or part of the
revenue to Iran would be derived by income taxation.
- IV.
- While, as noted, the question of participations in the group has
yet to be negotiated it is likely that some or all of the five
American oil companies which are defendants in the civil suit
commenced by the United States in April, 1953 will be invited to
participate. It is also likely that any American oil company
(including but not limited to the five mentioned companies) which
did participate would find it necessary to reduce temporarily (on an
individual basis, without agreement, understanding, or combination
with any other company) its present takings of crude oil and refined
products from other sources in order to be able to absorb such
Iranian oil as it might take.
- V.
- The Secretary of State requests the National Security Council to
obtain an opinion from the Attorney General as to the legality of
any arrangements which might be made along the foregoing lines,
including the legality of participation therein by any or all of the
five mentioned American oil companies.
