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

888.2553/1–2654: Telegram

No. 415
The Ambassador in the United Kingdom (Aldrich) to the Department of State¹

secret
priority

London, January 26, 1954—1 p.m.

3171. Limit distribution. From Hoover.² Held meeting at Foreign Office 25th at which Dixon and Fry, Foreign Office, Maud and Butler, Minister Fuel and Power, and Playfair, Treasury, represented HMG. Butterworth and Embassy officers attended.³ No company representatives present. I suggested oil problem be considered in following three phases:

1. Exploratory assessment situation and clearing away preliminary obstacles;

2. Setting up consortium;

3. Negotiations between consortium and Iran.

British agree with us phase 1 substantially complete. About to enter phase 2. Phase 3 should not be entered until second phase substantially agreed among companies.

AIOC preparing invitations which will initiate phase 2. Expect talk with AIOC today and that invitations will go out promptly.

Principal problems in connections second phase are: (a) legal and tax aspects influencing form of arrangement, (b) sterling problems for American companies, (c) engineering and technical problems and (d) relative percentages of participation. Last point complicated somewhat by desire Americans to have lowest shares consistent with sound solution. In view hesitation US companies argue this point and necessity determining participation solely on basis sound solution, many aspects of which beyond their capacity assess, I suggested this matter be settled upon governmental level. British promised consider.

We agreed phase 3 would have three elements: (a) assessment of physical facilities Iran by technical mission under sponsorship HMG (though possibility some work in this connection will be needed permit decisions in phase 2); (b) a brief assessment of economic, political and social conditions in Iran by partners of AIOC which have had no experience there and finally (c) negotiations with Iran.

We touched on compensation question briefly at which point I suggested it would be well to avoid punitive element in compensation which in American view seemed psychologically bad. I feared, however, some AIOC desire in this direction. British seemed inclined to agree though did not commit selves.

On matter Iran need for interim aid British agree undesirable have appearance of putting economic pressure on Iranians. They have no desire withhold assistance as had been true during much of Mosadeq period. However resources very limited. No Iranian funds frozen here and no ability HMG make loan without specific parliamentary approval which reluctant to ask. Had hoped US would put up cash and HMG would continue rails, locomotives et cetera, aid.

We suggested and British agreed British and ourselves seek identify main points of principle on which our companies or governments will wish to stand in order that respective governments can bear equal brunt of problem presentation such points to Iranian Government. For example, need for effective management was one such element.

We raised question of possible inclusion independents in consortium noting matter raised by Nemazee and Nakasian. British still very doubtful this point desiring keep group to those major companies now ME. I warned British also there is probably major problem hidden behind Iran apparent willingness some quarters have AIOC major share in consortium since Iranians probably considering off-taking share only and not cognizant implied proportionate share in effective technical management. In view evident misunderstanding on this point, I emphasized need for clarification.

British agreed with us as to need to consider what we could tell Iranians about forthcoming London talks (paragraphs 1 and 2 Tehran’s 1623).⁴

Aldrich

1. Repeated to Tehran.
2. Hoover had returned to London on Jan. 24.
3. The record copy of the minutes of this meeting, is in a folder entitled “Minutes of Meetings at Foreign Office on Iranian Oil”, in file 888.2553/4–554.
4. In telegram 1623, Jan. 25, Ambassador Henderson reported that the previous day he had a conversation with the Foreign Minister, who noted that the AIOC was inviting a number of oil companies to a conference in London to make plans for the organization of a consortium to negotiate a comprehensive settlement with the Iranian Government. He hoped that the London meeting would not result in the formulation of plans and their presentation to Iran as an ultimatum. He also hoped the Iranian Government could be kept informed at least of those aspects of the plans in which it had a legitimate interest. Henderson suggested that the Foreign Minister discuss this matter with the British Chargé, Wright, who would undoubtedly convey the Iranian views to the British Government. The Foreign Minister said he would have a talk with Wright. (888.2553/1–2554)