89. Telegram From the Embassy in Iran to the Department of State1

1935. Subject: Shah’s Concern Over Libyan Oil Settlement.

When I saw Shah April 14 he spoke critically of Libyan oil settlement,2 saying oil companies always made greater concessions to radical producing states than to their moderate producing state friends. He said he was sending FinMin Amouzegar to London to discuss with oil companies Libyan settlement with view to finding some way to partially bridge gap between Gulf settlement3 and excessive terms given Libya.
I reminded Shah of assurances he had given US and oil companies that terms of Gulf settlement would not be changed for five years even if Libya received more than Gulf producers.4 I also observed that large part of disparity between Gulf and Libyan settlement was result of Libya’s favored geographic position and low sulphur content of its oil. I concluded by saying that Iranian production and offtake so far this year was running substantially ahead of last year and that therefore I thought Iran was doing extremely well.
Shah replied that he would honor his word re five year assurances but would seek some way outside terms of Tehran settlement to help bridge disparity between Gulf and Libyan prices. For example, oil exported from Basra was obliged to pay a “port tax” and he had in mind possibility of port tax on oil lifted from Kharg Island.5 I said such a step would be serious disappointment to oil companies and Iran’s friends.
  1. Source: National Archives, RG 59, Central Files 1970–73, PET 3 OPEC. Confidential. Repeated to Dhahran, Jidda, Kuwait, London, and Tripoli.
  2. See Document 88.
  3. For the terms of the Tehran agreement between the companies and the Gulf States, see Document 86.
  4. See Documents 74 and 81.
  5. On July 12, the Consortium agreed to grant the Shah’s three demands for increased revenue, including port dues, compensation for barter deals with Romania completed prior to the increase in posted price, and increased capacity of the Abadan refinery. (Telegram 125275 to Tehran, July 13; National Archives, RG 59, Central Files 1970–73, POL 33 PERSIAN GULF)