275. Telegram From the Department of State to the Embassy in Iran1
138990. 1. In a meeting with top executives of Esso, Mobil, Standard Oil of California, Texaco, Gulf and Iricon (morning March 28) Undersec Rostow said USG wished to have candid exchange of views with them about Iranian oil negotiations in their full political context. We did not wish to cross the delicate line between political and commercial considerations nor did we wish to take responsibility for the negotiations. But there was a deep national interest in a mutually satisfactory outcome for the negotiations at this time. The Consortium came into being with special anti-trust and other privileges by reason of such political considerations. He wished to discuss directly with the responsible leadership of the companies the political factors we saw impinging on the negotiating process.
So far as the Persian Gulf was concerned, we faced a national security problem in view of the British withdrawal, and the risk of penetration of weak Gulf States by movements of radical Arab nationalism, as well as by more direct Soviet interventions. In that perspective, Iran was the keystone of American plans. We wished to have equal friendship with Iran and with Saudi Arabia, and close cooperation between them. At this point, Iran was clearly the stronger partner, progressive and developing. But Saudi cooperation with Iran was indispensable from every point of view, political, psychological and geographic, if stability in the Persian Gulf was to be assured. Rostow reviewed recent history and present prospects of efforts to bring Shah and Feisal together, and stressed importance of an oil settlement compatible with the necessities of that process.
[Page 494]But Persian Gulf problem was intimately linked to Middle East crisis as a whole. After reporting on problems of M.E. since Nov. 22 S.C. Resolution, Rostow said we regarded the situation as increasingly grave. UAR was blocking progress on the Jarring Mission. And Syria—perhaps UAR as well—was training and sending out terrorists on a very dangerous scale. Jordan had a Vietcong on its territory, as Laos does, and could no longer control it. In the absence of peace negotiations, Israeli reprisals were inevitable, despite our urgent efforts to prevent them. As a result, there was a serious possibility of renewed general hostilities in the Middle East, with incalculable potentialities. We were working on a crisis footing to head off hostilities, but we could not be sure of the outcome.
2. Rostow referred to Shah’s statements that he cooperated with West at his great risk during crisis last June. If he felt this cooperation not recognized through favorable treatment by Consortium, there was possibility he would not cooperate with West in new crisis. Rostow also said withdrawal of British from area made it necessary for Iran to cooperate with Arabs in Gulf and in a new round of hostilities he might not be willing risk their wrath by breaking Arab blockade again. As companies knew, even temporary boycott of Middle East oil, if it included Iranian production, would be catastrophic.
3. Iran, he said, has written $5.9 billion into its development plan and Shah would not change it. We know companies cannot give Iran all it wants for its plan but we also believe that if there is some increase in earlier estimates there will be chance of averting confrontation and new crisis in Iran this year.
4. Rostow asked without prejudice about possibility of investment commitments, raising APQ, altering over-lift arrangements to permit crude-hungry companies to take more oil, on equitable terms, increasing refinery throughput, and making special allowances for British Petroleum if it decided to reduce Abu Dhabi production in favor of Iran. Desirability of equality of treatment between Iran and Saudi Arabia was stressed, and generally accepted. Companies said they are examining all these possibilities and said all offered some room for adjustment but they gave no definite assurances on any.
5. They pointed to certainty more favorable treatment Iran would result immediate demands from Arab and other producing countries which they could not meet. In reference this as well as to willingness French other “oil hungry” companies to take more cost oil, they said such oil could only be sold at expense current marketing since demand was being fully met. Rostow said USG recognized all alternatives were impossible, but we would weigh the political value of a settlement with Iran very highly.
6. Companies asked USG attempt convince Iran that Consortium trying help it meet development goals. Rostow said we had done this repeatedly [Page 495] and would do so again, if companies assured us they would make genuine effort to reach satisfactory agreement. This assurance was given. To be effective, companies would probably have to improve their estimates and do everything economically feasible to help Iran. Companies said they knew any approach would have to be on this basis.
7. At end of meeting question was asked whether USG seriously thought risk of confrontation, and of rash and destructive action by Shah, was high. Rostow answered affirmatively, and said our concern over this risk was the subject matter of meeting, and the reason it was called.
8. Company position throughout meeting was neither hostile or negative and we believe they will endeavour seriously to devise new offer before April 20. Clearly any new offer will be below Iranian demands but we hope enough will be offered to avert crisis this year.
- Source: Department of State, Central Files, PET 6 IRAN. Secret; Limdis. Drafted by Akins and Rostow on March 29; cleared by Deputy Assistant Secretary for International Resources and Food Policy George R. Jacobs, Oliver, and in draft by McClelland; and approved by Rostow. Repeated to London, Kuwait, Jidda, and Dhahran.↩