38. Memorandum of Conversation1
SUBJECT
- Conversation with Shah of Iran on OPEC and Oil Matters
PLACE
- Car riding between Department of State and Washington National Airport
PARTICIPANTS
- Howard W. Page, Vice President, Standard Oil Company of New Jersey
- George L. Parkhurst, Vice President, Standard Oil Company of California
- M. Gordon Tiger, Officer in Charge, Iranian Affairs GTI
- Edward H. Thomas, Desk Officer, Iranian Affairs GTI
Mr. Tiger referred briefly to the Alphonse-Gaston type of confusion about whether or not the Shah really wanted a serious talk with Page and Parkhurst during his U.S. visit. After the initial negative finding, Governor Harriman had got the impression Saturday that the Shah did want such a talk, and this was confirmed the next day, the appointment being made for 11:30 a.m. Monday, June 8.
Messrs. Page and Parkhurst then described the conversation they had just had with the Shah. He had brought up nothing new, but merely emphasized how important it was that the oil companies not submit to Arab “blackmail.” The Shah, of course, would not be opposed to further concessions by the companies, but they should first be offered to Iran.
Page and Parkhurst had reassured the Shah, explaining that they had already told Dr. Fala that the companies would make no deals with the Arabs behind Iran’s back. Discussions had been going on with Yamani of Saudi Arabia. Aramco’s Brougham, who had just been talking with Yamani, was due back in the U.S. tomorrow. The Brougham-Yamani talks were only exploratory, of course, since Brougham was not empowered to negotiate for the oil industry. If these talks indicated there might be some possibility of reaching agreement with Saudi Arabia within the general framework of the oil companies’ offer, the companies had promised to inform Fala immediately.
There had been some discussion of petroleum economics, which the Shah introduced by remarking that, in Iran at least, oil was no longer a political problem, but solely an economic one. The Shah indicated that he knew something of this subject, being aware, for example, that posted [Page 80] prices were somewhat artificial and that the companies make much of their profit in other operations—transport, refining, etc. Page and Parkhurst had explained that it all depended where one began. If one began on the basis of posted price, then the companies made nothing on the other operations. But in reality they were able to realize overall gains which, while less than those of many other industries, were sufficient to keep them in business. They hoped by improving efficiency to increase their margin of profit. Page and Parkhurst had also explained to the Shah why the competition from other fuels made it impossible to raise oil prices.
Returning to Arab affairs, the Shah had said that it was in Iran’s interests to remain on good terms with Saudi Arabia and Kuwait. He thought the companies shared this interest with Iran and that the U.S. Government’s interest paralleled that of the companies. The Shah thought highly of Faysal. The big danger, in the Shah’s mind, was Nasser and Nasserism. And behind Nasser was Khrushchev.
The Shah had also encouraged the oil companies to invest in non-petroleum activities in Iran. Page and Parkhurst had said the companies were indeed in the process of studying possibilities for such investments.
- Source: Department of State, Central Files, POL 7 IRAN. Confidential. Drafted by Thomas on June 9.↩