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

888.2553/4–154: Telegram

No. 449
The Ambassador in the United Kingdom (Aldrich) to the Department of State¹

secret
priority

London, April 1, 1954—8 p.m.

4311. Limited distribution. From Hoover. Butterworth and I met with Caccia and representatives Ministry Fuel and Power and Treasury today. They showed us text of proposed joint statement which they believe should be made in writing, probably early next week, to Iranian Government by Ambassadors Henderson and Stevens and which they are sending to Ambassador Stevens for his comments. They also showed us instructions which they are sending Ambassador Stevens regarding oral communication which he would make to Iranian Government in connection with proposed joint statement. Approach to Iranians, however, would not be made until further instructions received, as explained below.

After suggesting one or two obvious changes (to which British agreed) in proposed statement, we explained we would be glad forward it to Department and Ambassador Henderson, but that the latter’s instructions would have to come from Department. Therefore, we could not make any recommendation regarding matter pending receipt of Ambassador Henderson’s and Department’s comments. We also undertook forward our tentative suggestions, which we showed British, as to instructions which Department might give Ambassador Henderson in this connection.

Text of proposed joint statement is as follows:

• “1. A consortium has now been provisionally formed and is ready to discuss with the Persian Government the resumed operation of their oil industry. The group is composed of: Jersey Standard, 8 percent share, Socony Vacuum, 8 percent, California Standard, 8 percent, Gulf Oil, 8 percent, Texas, 8 percent (making total United States participation of 40 percent), AIOC 40 percent, Royal Dutch/Shell, 14 percent and Compagnie Francaise Des Petroles, 6 percent share.
• “2. Three representatives of the consortium will leave for Tehran to negotiate with the Persian Government as soon as the latter indicate that they are ready to receive the delegation. The consortium representatives are Mr. Harden of Jersey Standard, Mr. Snow of AIOC and Mr. Loudon of Royal Dutch/Shell.
• “3. This delegation will be concerned with arrangements for the future and, in order not to complicate their tasks, it is proposed that two other matters, related to the general agreement which all hope will be reached, should for convenience be dealt with separately between Her Majesty’s Government and the Persian Government.
• “4. The first is the question of compensation for AIOC. Assuming that an acceptable arrangement is made between the Persian Government and the consortium, compensation will not be claimed in respect of assets to be used by the consortium or in respect of the future, that is for the period following the date on which general agreement comes into force. In such event, the problem becomes one of covering claims and counterclaims for losses and damages up to the date of the coming into force of the consortium agreement. Her Majesty’s Government wish to assure Persian Government that what will be sought will be reasonable in amount and in period for payment, in order to avoid undue burden to Persia’s economy. The principle of fair compensation is supported by Her Majesty’s Government, the United States Government and all the members of the consortium and it is understood that the Persian Government has also assented to it.
• “5. Both governments believe that every possible effort must be made to obtain a rapid, sound and durable solution. Therefore, though several alternate methods of arriving at an agreement might be chosen, they suggest that a sensible course, obviating need for protracted and contentious procedure of detailed examination of claim and counterclaim, would be for Her Majesty’s Government and Persian Government to agree on an amount to be paid to the company which would dispose of this issue once and for all.
• “6. The second matter which it is suggested should be dealt with separately is that of payments arrangements covering Persia’s use of sterling, in which currency the consortium representatives will propose that their members, when settlement is reached, should pay the Persian Government. These arrangements will provide for conversion of Persian-owned sterling into dollars and other currencies to such extent as may be agreed.”

End Joint Statement.

Our suggestion as to instructions which Department might give Ambassador Henderson, if he agrees, would be more or less as follows:

“In conveying the attached statement to Iranian Government you should make it clear that in our opinion it would be in accord with the principles of international economic intercourse for Iran to pay AIOC net damages, taking into account counterclaims as well as claims, for losses incurred as a result of nationalization to date. While the British Embassy will be carrying on the negotiations for compensation and the consortium members will be negotiating regarding future operations in separate meetings, nevertheless, it should be recognized that both problems form part of an integral whole.

“With regard to publicity, it has been agreed that the negotiating team will not make any statements other than a general statement on arrival expressing their pleasure at being in Iran and their confidence that with goodwill on both sides, a sound solution may be found to the oil problem. We also believe that neither the British nor American Embassies nor the Iranian Government should make any statements to press regarding course of negotiations without first clearing with each other and with negotiating team, and you should discuss this with the Foreign Minister.”

British instructions to Ambassador Stevens, which are necessarily somewhat different, will be made available to Department and Ambassador Henderson by British Embassies Washington and Tehran. They relate largely to negotiations which British Embassy is to carry out with Iranian Government regarding compensation for AIOC.

British expect that after joint statement (or separate statement with same content if that determined to be more desirable) has been made to Iranian Government and negotiating team has left London for Tehran, Eden will make statement in Commons along lines paragraph one and two of joint statement.

Companies are meeting with AIOC tomorrow April 2 to receive final text memorandum of understanding setting up consortium which they are expected to initial.² Memorandum will then require clearance with company headquarters which it is hoped will not take more than 48 hours. As soon as agreements secured, Ambassadors Henderson and Stevens would be instructed make joint approach Iranian Government, assuming they and Department concur.³

Hoover leaving for Tehran April 2 as scheduled. Embassy would appreciate Department’s and Ambassador Henderson’s comments soonest.⁴

Aldrich

1. Repeated to Tehran and Paris.
2. The text of the final version of the Memorandum of Understanding, dated Apr. 9, among the companies forming the Iranian oil consortium, is enclosed as an attachment to a letter of Apr. 30 from Stutesman to Rountree. (GTI files, lot 57 D 155, “Consortium”) Regarding the signing of this Memorandum of Understanding, see Documents 452–455.
3. Henderson proposed and the Department agreed that the U.S. and British statements, slightly different in text, should be issued separately. (Telegram 2040 from Tehran and telegram 1988 to Tehran, both Apr. 2; 888.2553/4–254)
4. On Apr. 7 the Department informed the Embassies in Tehran and London that the Justice Department wished to emphasize that the statement to be presented to the Iranian Government could not be considered in any way to amplify the Attorney General’s opinion given to the NSC regarding American company participation in the Iranian oil consortium. (Telegrams 2020 and 5229 to Tehran and London; both 888.2553/4–754)