379. Telegram From the Embassy in Iran to the Department of State1
1086. In confidence, Minister of Finance Forouhar dictated (to Embassy employee) contents of draft oil legislation (re terms for exploration and exploitation outside Consortium area) which Shah wishes him introduce Parliament immediately, and lent copy draft agreement with AGIP (subsidiary of Italian Government agency) which conforms with proposed legislation. Bill and draft agreement being pouched.
Bill provides (1) in agreements with foreign companies 50 percent of shares shall belong to NIOC and half of directors appointed by NIOC, (2) foreign companies pay 50 percent of their share of net income as taxes plus annual payment (called “compensation right”) to be determined each case by NIOC when agreement negotiated. In lieu latter foreign company may agree pay all exploration expenditures. When considerable capital required and foreign company agrees provide all capital plus transportation facilities and markets for considerable quantities oil, NIOC may reduce its 50 percent ownership but not 50 percent tax. Agreements to become effective on approval by Council Ministers.
Forouhar considers bill ill advised, says will resign if Shah continues insist he introduce and defend it in Parliament, says Foreign and Justice Ministers also strongly opposed. Shah presented bill Council Ministers Jan 9, reportedly drafted at Shah’s instructions by Rouhani and Naficy (NIOC directors) without prior consultation any ministers. Mehbud very much in picture, tells Forouhar agreement with AGIP be signed soon as bill passed, maintains agreement also indicated with Standard of Jersey.
If Department wishes representations to Shah, please instruct.2
- Source: Department of State, Central Files, 888.2553/1–1757. Secret.↩
- See Document 384.↩