82. Telegram From the Department of State to the Embassies in Iran and the United Kingdom1

16444. Subj: Oil Situation (Possible Message to Shah). Ref: Tehran 464; London 856.2

1.
We strongly concur your view message from President or USG in concert with other consumer countries to Shah designed to stave off final break and adoption of Venezuelan formula would be counterproductive at this time. Indeed most likely result of concurrent approach would be to stiffen Shah’s resolve to exact toughest terms possible from oil companies. As noted State 25432 (Notal)3 we have been in forefront in oil situation and now prefer to await developments before deciding whether further action our part advisable or feasible. We will of course keep this possibility in mind in days ahead.
2.
Only course we see open at this moment is for oil companies to make maximum effort to keep negotiations going. In present climate of deadlines and threats we are likely face almost daily crises. Companies and other governments should recognize that frequent representations to Iranians and other OPEC states or heads of state are not likely weaken their resolve to strike a hard bargain.
3.
For Ambassador MacArthur. We have heard through McCloy that companies have impression Amouzegar has watered down assurances expressed to UnSec Irwin4 and to you against whipsaw and is weakening on five-year agreement. Unless you have reasons to contrary suggest you consider in manner you deem appropriate [Page 206]querying Amouzegar about companies’ impression which we hope erroneous.5
4.
London for Akins. Request you make foregoing points with oil company reps should they raise question with you of further USG and/or consumer country initiatives.6
  1. Source: National Archives, RG 59, Central Files 1970–73, PET 3 OPEC. Secret; Immediate; Exdis. Drafted by Miklos and Katz on January 29; cleared by Davies and Trezise; and approved by Samuels. Repeated to Tripoli Immediate. Printed from an unsigned copy.
  2. In telegram 464 from Tehran, January 29, MacArthur noted that he and British Ambassador Wright believed that, in the likely result of failed negotiations in Tehran, the Shah would adopt the Venezuelan formula. Wright planned to request that the British send a message to the Shah in parallel with messages from the United States and other consumer countries to stave off a final break. MacArthur noted his reluctance to adopt this action. (Ibid.) As related in telegram 856 from London, January 29, BP had voiced its concerns that the Shah would adopt the Venezuelan formula. (Ibid.)
  3. This reference is in error. The correct reference is telegram 15432 to Tripoli, January 29, which stated: “After having been actively in forefront in oil situation (Under Secretary’s trip, consultations with OECD and companies) we believe preferable to await developments during next few days before deciding whether representations on our part would be desirable.” Palmer was instructed to inform the British, French, and Dutch about this U.S. “non-participation.” (Ibid., PET 6 LIBYA)
  4. See Documents 74 and 79.
  5. In telegram 495 from Tehran, January 30, MacArthur responded that the companies continued to believe that “no assurances that Shah gives on five-year agreement are worth much.” This assessment was based on Iranian failure to abide by agreements negotiated in the early 1950s, on the annual confrontation between the Consortium and Iran, and on the Shah’s insistence on flexible pricing. MacArthur thought a query of Amouzegar would not elicit anything other than the assurances already given. (Ibid., PET 3 OPEC) The telegram is published in Foreign Relations, 1969–1976, volume E–4, Documents on Iran and Iraq, 1969–1972, Document 113.
  6. In telegram 865 from London, January 30, Annenberg stated that in a meeting that day with Akins the oil company executives complained that the assurances given to Irwin “have been watered down,” or have become “completely worthless.” Akins strongly disagreed with their interpretation, stating that they “have confused assurances of a firm agreement with hope for steady prices for five years; the two are not synonymous.” Akins reiterated that the assurance Irwin received was “that any agreement the companies entered into would be firm and would be honored and would not change with settlements elsewhere in OPEC. This was a substantial achievement and they should not discount it.” Akins pointed out that the companies, not the United States, were responsible for an agreement they could live with, and to insure against escape clauses or unexpected escalation of prices. (Ibid., POL 33 PERSIAN GULF)