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

888.2553/2–1554: Telegram

No. 423
The Acting Secretary of State to the Secretary of State, at Berlin¹

top secret
priority

Washington, February 15, 1954—7:22 p.m.

Tedul 50. Limit distribution.

1. Department hopes be in position this week instruct Embassy London present joint views US Government Cabinet level and US companies on number important aspects position Iranian oil settlement to UK Government. Included very importantly in this presentation will be points that US Government and companies feel question of percentage participation should be worked out Government level and that US Government deeply regrets must firmly reject British position AIOC should have as much as 50% participation.

2. Hope you can have further talk with Eden before leaving Berlin indicating US Government backs position US companies that participation must be worked out Government to Government. US companies are reluctant to participate and are doing so solely in interest of contributing to sound solution at invitation AIOC and at urging of US Government. They feel that they themselves in no position evaluate sound solution, especially from Iranian standpoint. US Government supports their position this question and accepts responsibility for determining percentages participation in view fact this not ordinary commercial negotiation.

3. On matter size AIOC participation US Government feels AIOC participation as large as 50% would place in hands of opposition present Iranian Government powerful weapon against reaching a solution or carrying out an operating program effectively thereafter. US Government feels strongly this added and unnecessary risk should not be assumed. US Government could not urge US companies participate under arrangements which would give AIOC such a dominant role. In presenting this position you may wish emphasize to Eden that in no sense should it be interpreted as desire of US Government or US companies to control or dominate. There is no desire for US interest larger than that AIOC. Furthermore, US would not object to total British interest over 50% accomplished, for instance, by association in venture of Shell. This position should forestall any British public or Parliamentary feeling that this is effort obtain US dominance enterprise. This, it seems to us, is the important point to sell to Eden. Our position AIOC percentage participation based solely on consideration Iranian political factors which we believe overriding. Were AIOC to have as much as 50% in consortium this would certainly be regarded generally in Iran as merely cloak for return of AIOC to Persia and would become focal point for Tudeh and communist propaganda.

4. FYI. Our initial suggestion to UK Government will probably be magnitude of 35% each for AIOC and US companies with remaining 30% to shell. US willing accept 40% each for AIOC and US companies with remaining 20% to Shell, but placing initial suggestion lower in view apparent UK desire to trade on all points. Above suggestions made on assumption French interest would not exceed one or two percent, and would be taken from AIOC or Shell share. End FYI.²

Smith

1. Repeated to London and Tehran. Drafted by Raynor and Hoover, cleared by Richards and Byroade, and signed by Richards.
2. The Department informed the Secretary in Berlin, on Feb. 17 that it had not as yet made the representations contained in Tedul 50 to the British. The Department was waiting until it was informed of Eden’s reactions. (Tosec 160; 888.2553/2–1754)