Foreign Relations of the United States, 1969–1976, Volume XXXVI, Energy Crisis, 1969–1974

145. Intelligence Note Prepared in the Bureau of Intelligence and Research¹

RECN–36

Washington, December 6, 1972.

IRANIAN OIL NEGOTIATIONS

The claim of Sheykh Yamani, Saudi Arabia’s Minister of Petroleum, that the participation agreement² he negotiated is four times “better” than the one reached by the Shah has set off a chain reaction and brought forth demands from Iran that its spring 1972 agreement³ be revised. This is an example of the leapfrogging effect which has long been of major concern to the companies in their negotiations with various oil producing countries. The consortium companies⁴ have presented to Iran calculations that compare revenues to Iran under the spring 1972 agreement and under the Yamani agreement were it to be applied to Iranian production. These calculations appear to indicate that under the Iranian Spring Agreement revenues would exceed those of the Yamani formula through 1985 but would be less from 1986 through 1994. A tenuous consideration in these calculations is the appropriateness of including the new Kharg refinery—see below—as a revenue benefit to Iran, an important component of the Consortium’s comparison presentation.⁵ The benefits from the new refinery include the higher cost of refinery construction in Iran compared to that in large consuming markets and the higher transport costs of refined product compared to crude. The Iranians remain unconvinced of the validity of the assumptions upon which this part of the presentation is based.

[Omitted here are sections on Background and Current Demands.]

1. Source: National Archives, RG 59, Central Files 1970–73, PET 6 IRAN. Confidential. Drafted by Robert L. Dowell, Jr. (INR); approved by Ghiardi; and released by Weiss. Published in full in Foreign Relations, 1969–1976, volume E–4, Documents on Iran and Iraq, 1969–1972, Document 239.
2. See RECN–31, “OPEC: Participation Agreement,” November 2, 1972,” (Confidential). [Footnote in the original. For RECN–31, see footnote 2, Document 141.]
3. See footnote 5, Document 124.
4. Consortium member companies are: British Petroleum (40%), Shell (14%), Exxon, Gulf, Mobil, Standard Oil of California, and Texaco (7% each), Compagnie Francaise des Petroles (6%), and a mini-consortium of American companies (5% total). [Footnote in the original.]
5. The companies’ estimate of the benefit of the Kharg refinery to Iran represents about 20 percent of the estimated increased revenues from 1973 to 1994. [Footnote in the original.]