108. Telegram 5566 From the Embassy in Iran to the Department of State1 2

Subject:

  • Confrontation Between Oil Consortium and Iran-OPEC Appears Imminent

Ref:

  • (A) Tehran 5565 (B) State 209477
1.
There number of indications that Consortium may may be headed for major confrontation with OPEC group (Iran-Saudi Arabia, Cairo) on question of Jan 12 meeting to deal with oil price increases. In first place, Shah yesterday made major speech at Cabinet-PlanOrg meeting (for first time such meeting covered by both television and press) in which he stressed (a) in view major decline in purchasing power of sterling and dollars over past few years Iran and other oil producers in relative terms receiving substantially less for their oil than ten to twelve years ago and (b) determination to see oil [Page 2]prices for Gulf oil raised. (Ref A gives good summary and hard flavor of his remarks.)
2.
Furthermore last evening Court called me to say Shah was “deeply disturbed” by efforts of Consortium to postpone Jan 12 meeting. while Shah did not wish another unpleasant confrontation with Consortium if it insisted on postponement of Jan 12 meeting Iran would have no choice but to unilaterally decide on posted price increases. Shah therefore hoped USG would urge US companies in Consortium to meet Jan i2 deadline.
3.
I said that while I would transmit Shah’s request, I personally felt Iran and OPEC members had given Consortium very little time to get ready for such an important meeting. In first place, although Venezuela OPEC meeting had terminated Dec 12, report had not been made public until Dec 28. So neither oil consortium companies nor their govts had, insofar as I knew, accurate knowledge of Venezuela decisions until now. Furthermore, as Alam knew, Western world was now midst New Year holiday period when many important executives, whose views and judgment were needed, would probably be taking well earned vacation of anywhere from two to three weeks. Finally, I could tell him that USG did feel that time frame for Jan 12 meeting was very short and difficult to meet in view of what I had said to him above (ref B). Alam said nonetheless Shah trusted that USG would urge companies to meet deadline.
4.
Van Reeven (Consortium General Manager) informs us that FonMin Amouzegar, who represented Iran at Venezuela OPEC meeting, stopped over in London Dec 22 and gave Addiston (Consortium) copy of OPEC Venezuela report. Van Reeven also said Amouzegar has pressed him hard to urge Consortium members to meet Jan 12 deadline for meeting. Amouzegar said deadline not met OPEC Committee he heads (Iran-Saudis-Iraq) must report to SecGen OPEC and as practical matter this would result [Page 3]in extraordinary session of OPEC, results of which he could not predict. Van Reeven fears unless Consortium sends someone to at least begin talks Jan 12, there may be strong and very adverse emotional reaction on part of GOI which could lead to unfortunate decisions. Accordingly, he had urged Consortium to send senior representative to at least begin discussions Jan 12 even if they turn out to be prolonged (with need for suspension at some point for consultations).
5.
Possibility of beginning talks Jan 12 but stringing them out over period of some weeks would not seem to take into account one factor—this is Shah’s plans to proceed to Switzerland about Jan 20 for his annual four week medical check-up and vaction. We suspect that these plans may be in part responsible for adamant GOI positon that talks must begin Jan 12 with agreements reached relatively soon thereafter.
6.
Comment: Until we know Consortium reaction to Van Reeven’s strong recommendation that Consortium send team headed by senior member to at least begin talks Jan 12, we are not in position to make any recommendations as to what might be done to try head off possibility of head-on collision between Consortium and Gulf OPEC group of Iran, Saudi Arabia and Iraq. However, I do owe Alam reply to Shah’s request that USG urge companies to meet Jan 12 deadline and would appreciate Dept’s instructions.
MacArthur
  1. Source: National Archives, RG 59, Central Files 1970–73, PET 6 IRAN. Confidential. Repeated to Beirut, Dhahran, Jidda, the Hague, Kuwait, London, Paris, and Caracas. In Telegram 206077 to London, Bonn, Brussels, the Hague, Paris, Rome, and Tokyo, December 18, the Department disseminated the resolutions from the recent OPEC conference in Caracas, which included increasing and standardizing prices, and authorizing Iran, Iraq, and Saudi Arabia to negotiate with the oil companies within 30 days (Ibid., PET 3 OPEC).
  2. The Ambassador reported that another crisis between Iran, OPEC, and the consortium was brewing, due to the Shah’s insistence on raising oil prices.