192. Telegram From the Department of State to the Embassy in Iran 1

75441. Iran Oil.

1.
Following summary FYI only and Noforn. It is uncleared and subject to amendment upon review of memcon.
2.
British Ambassador called on Under Secretary Rostow 27th to make following points which also incorporated in paper which he left and which being pouched addressees:2
a
Motives for Iranian demands on Consortium are mix of need for money, desire to establish a position in marketing of oil, belief that Iran should be able utilize her own oil assets, and Shah’s views that Iran deserves more than its neighboring oil countries, that East-West détente makes him less dependent on West and that Iran should do more to assert independence.
b
Demands on Consortium come from Shah and there is real risk of unilateral Iranian action which would not only be contrary Iran’s best interests but would also cause “irrevocable damage” to UK and US political, commercial and strategic interests.
c
It is vital that Consortium should agree on position which would be “negotiable” with Iranians if latter also prepared show some give.HMG stressing this to British companies and hopes USG will do same with US companies.
d
Both governments should use influence with companies to persuade them “take as forthcoming an attitude as possible.” In this connection companies should be aware that issues involved are far wider than commercial. Warder’s recommendations seem worthy of serious consideration.
e
HMG proposes team of FonOff officials (Morris of Eastern Dept and Fearnley, petroleum expert) come Washington next week to discuss “factual oil questions” and political issues.
f
HMG believes two aspects of problem should be raised with companies. First they should be encouraged liberalize currently rigid overlifting arrangements, a move which would have dramatic short-term effect on offtake. Secondly some US companies, particularly Jersey, SOCAL, Texaco and Gulf, “do not take as high a proportion of their maximum offtake entitlement as other member companies” and hopefully USG can persuade them to “come closer to their maximum entitlement.”
3.
British also said they have report of Shah’s speech 26th which particularly rough on Consortium.
4.
Rostow replied we would be happy have discussions next week; we are also concerned and wish continue keep in close touch. He said that we have been asked by our companies only to express hope to Iranians that they work for a reasonable solution and that we have indicated to US companies similar hope.3 Before agreeing to talk with US companies again we would wish study British proposals and have the suggested talks next week. We would hope get by without becoming too much involved. One aspect of matter is Iranian concern about British withdrawal from Aden and South Arabia.
5.
British Ambassador responded by indicating HMG awareness of Iranian concerns about British withdrawal is one reason for suggesting political aspects be discussed next week. He stressed HMG thinks there is real risk of unilateral Iranian action against Consortium and Shah is capable of upsetting applecart.
6.
Talks are now scheduled take place in Washington November 2 and 3.4 We do not intend mention these meetings to companies before they take place. We are also asking British not to tell Iranians about UK-US talks next week because we do not wish to raise Iranian hopes that US Government will intervene with US oil company Consortium members since this would make it more difficult for GOI and Consortium reach compromise agreement. For same reason we do not wish give talks any publicity. Septel follows.
7.
Embassies London and Tehran should transmit soonest their comments on British position to assist Dept prepare for talks. In particular [Page 354] would appreciate Tehran’s views on what Iranians hope achieve from current confrontation with Consortium and extent of risk of unilateral Iranian action against Consortium.5
Katzenbach
  1. Source: National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1964–66, PET 6 IRAN. Confidential. Drafted by T. Eliot (NEA/IRN), cleared in draft by Oliver (E/FSE) and S. Rockwell (NEA), cleared by Solomon (E) and Shaver (S/S), and approved by Hare (NEA). Also sent to London.
  2. A copy is attached to an October 28 memorandum from Fried to Solomon. (Department of State, E Files: Lot 70 D 54, PET—Petroleum (Iran) 1966) An October 27 background memorandum prepared by Hare for Rostow sums up the U.S. understanding of the Iranian oil situation. (National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1964–66, PET 6 IRAN)
  3. Telegram 71891 to Tehran, October 24, informed Ambassador Meyer: “While expressing hope you would continue help keep lid on, companies agreed USG should not become involved in substantive questions.” (Ibid.)
  4. See Document 193.
  5. Ambassador Meyer reported in telegram 1927 from Tehran, October 31, that while he generally agreed with the British analysis, he did not think that the Shah was preparing for a confrontation: “While some dangerous brinkmanship involved in present exercise, fact we are dealing with Persians who have behind them 2500 years of bargaining experience leads us conclude they have sensed there still some give in Consortium position.” (National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1964–66, PET 6 IRAN)