113. Telegram From the Embassy in the United Kingdom to the Department of State1

1505. 1. Summary. Shareholder rep described Shah’s position at St. Moritz meeting as reasonable and encouraging. At his request Consortium planning second meeting with Shah, and would like to have it before next OPEC meeting. End.

2. Our source said that first session had been rather difficult with Shah pointedly referring to end of Consortium concession in 1979 and airing very ambitious list of expectations, including cost oil and role in marketing operations in US.

3. In later session discussion reportedly more “realistic” and Consortium team took away and agreed to consider seven point shopping list.2 Shah asked team to meet again with him for further discussion this list, and although no date or place fixed, Consortium sentiment here is in favor of getting back to Shah before next OPEC meeting (which is expected at end February or very early March). Shah reportedly indicated that if Consortium responsive to his 7 points, he would rise above legalities of extension of concession in 1979, and foundation would be laid for “evergreen” agreement.

4. Our source did not enumerate Shah’s seven points nor offer details of package which Consortium team outlined to Shah, however 3 of Shah’s points reportedly overlapped with Consortium offer on investment in production and export capacity. According our source, Consortium envisaged doubling of its production and offtake over 5 years. In addition Shah sought commitment to considerably higher level of exploration activity and to construction of new export refinery. Reportedly, Shah abandoned his first references to cost oil, concentrating on Consortium’s suggestion of increased quantities of oil to NIOC at preferential price, and also set aside his initial suggestion of role for NIOC in Consortium marketing. However, Shah reportedly indicated that he does envisage increased marketing activity on part of NIOC, and he revealed throughout the discussion strong interest in US market. Apparently he mentioned Cities Service and Ashland as potential partners, if Consortium shareholders not able or willing.

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5. Consortium team presented its proposals for new capacity and higher offtake as part of package, which included additional oil to NIOC at preferential price, and offer to relinquish certain areas Consortium concession for purpose carrying out activity there on joint venture basis with NIOC. Team reportedly indicated that its package proposal predicated on assurances about continuation of concession after 1979, pointing to impossibility of investment if future uncertain, and assumed stability of Tehran agreement.

6. Consortium plans first meeting for discussion of St. Moritz results on February 18.

7. Comment: Our source was encouraged by the results of St. Moritz. He described Shah’s presentation as “statesmanlike” and apparently based on sound technical preparation. In view of this source, Shah’s seven points (or at least those revealed to us) are negotiable.

  1. Source: National Archives, RG 59, Central Files 1970–73, PET 3 OPEC. Confidential; Priority; Limdis. Repeated to Bonn, The Hague, Jidda, Kuwait, Lagos, Paris, Tehran, Tripoli, Dhahran, Vienna, and USOECD Paris.
  2. Although the telegram references a seven point shopping list, telegram 1137 from Tehran, February 24, lists the following points: substantial amount of oil for marketing in the United States, partnership in downstream operations, a change in the APQ voting procedure, and conservation measures. (Ibid.)