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

888.2553/1–2854: Telegram

No. 416
The Ambassador in the United Kingdom (Aldrich) to the Department of State¹

secret
priority

London, January 28, 1954—7 p.m.

3230. Limit distribution. Noforn. From Hoover.

1. At conference with Fraser and AIOC officials January 26, invitations were transmitted to five US companies, Shell and CFP for meetings to begin February 1 in London.² Anticipated discussions limited to working levels as top officials not attending. Purposes outlined follow:

a. Legal and tax committee to resume consideration nature of corporate vehicle and its domicile to satisfy legal and taxation problems of approximately 8 companies of 4 different nationalities. This plus problems inherent operations and sales in sterling area present complex difficulties which must be resolved prior to any solution. Results are of only incidental interest to Iranian Government but important to industry.

b. Technical committee to evaluate data in AIOC files on probable recoverable reserves together with daily production potentials and expected life each oil field. This also time consuming but necessary for each new partner assess for themselves as final figures of vital significance in later inter-company negotiations. This committee also expected organize consortium survey team for preliminary examination facilities Abadan and oil fields when practical.

2. In absence any direct statement by Iranian Government to HMG re maximum allowable participation AIOC, companies unable negotiate basic problem of relative participations. This precludes discussion re more obvious problems such as general management policies and personnel, and also other less obvious but equally vital re relative capital contributions and resultant off-takes.

3. AIOC perhaps understandably hoping for dominant share for prestige, financial and sentimental reasons; and management personnel laying plans and expecting return Iran resume essentially previous position in fact, even if not in appearance. HMG and AIOC assert Iranians have tacitly agreed give AIOC dominant role because (a) Iranians have not so far defined AIOC participation at less than 50 percent and (b) did not protest Wright’s earlier statement (December 29) that “it would be necessary for AIOC to play a major part”. While on one hand AIOC and HMG take official position AIOC must have at least 50 percent, on other, AIOC still in effect refuses negotiate and says all discussions re relative participation must be “hypothetical.”

4. From commercial standpoint, US companies desire minimum participation for selves and interest only as matter public service and attainment sound solution. They do not feel in position contest AIOC desire for dominant role although privately express opinion AIOC attitude unrealistic. Top US representatives not attending meeting February 1 in view unwillingness AIOC negotiate on basic issues.

5. Shell officials not consulted at any stage by HMG, who appear to be backing AIOC exclusively. This notwithstanding Shell probably could use crude and products to better advantage than any other member; and whose large participation would be in best interest of HMG sterling position. Shell officials also believe AIOC position unrealistic and see no constructive progress until respective participations can be negotiated.

6. Fraser tentatively suggests small top level consortium group go Tehran middle February determine desires Iranian Government relative participations and other points, then return London continue inter-company negotiations. While this might allay Iranian suspicions that consortium “prepared ultimatum” (Tehran’s 1623),³ at same time would give company officials, other than AIOC, first opportunity make direct assessment political, economic and social conditions Iran. Industry and especially AIOC understandably hesitant accept evaluation by respective government officials re participation in view extreme importance and necessity substantiate to director and stockholders.

7. At Foreign Office meeting scheduled January 29, we propose point out present progress effectively stalled by following: (a) HMG and AIOC position that Iranian Government approves dominant role for AIOC, which approval we believe to be misunderstanding; (b) assessment by British Chargé Tehran, promised for early January, apparently still incomplete; (c) AIOC not willing negotiate relative participations except on admittedly “hypothetical” basis they receive minimum 50 percent; and (d) limitation of British share to AIOC effectively excludes Shell, who appears meet all criteria for admittance and are potentially large off-taker.

8. Further propose point out, in effort expedite solution, US adopted virtually heroic measures to:

(a) Stabilize a friendly government in Iran,

(b) Advance $45 million grant in aid,

(c) Support resumption diplomatic relations between HMG and Iran,

(d) Resolve anti-trust situation and obtain cooperation US petroleum industry.

Additionally, US apparently being expected give still further monetary aid to Iran.

9. We feel that constructive action by HMG is indicated since status of negotiations is still approximately where it was when diplomatic relations were resumed 45 days ago.

10. Comments or instructions from Department and Ambassador Henderson appreciated by 3 p.m. local time January 29 if possible.⁴

Aldrich

1. Also sent to Tehran.
2. A copy of the invitation is in GTI files, lot 57 D 155, “Top Secret Mr. Hoover–Correspondence—January 1, 1954”.
3. See footnote 4, supra.
4. The Department responded on Jan. 29 that it fully supported the line Hoover was proposing to take with the British as outlined in paragraphs 7, 8, and 9 of telegram 3230 from London. The Department informed Hoover that he could report, in the meeting scheduled for Jan. 29, that the highest levels of the U.S. Government were deeply interested in the development of the present favorable situation and that the United States had risked much to help create the present opportunities and would be disturbed if this situation were not exploited to the maximum because of unreasonable or inflexible attitudes on the part of the AIOC regarding their own participation in future Iranian oil operations. (Telegram 3906; 888.2553/1–2854) In telegram 3254 from London, Jan. 29, Hoover reported on that day’s meeting with the British indicating that the British and AIOC positions remained firm. (888.2553/1–3054)