Foreign Relations of the United States, 1969–1976, Volume E–4, Documents on Iran and Iraq, 1969–1972

114. Telegram 722 From the Embassy in Iran to the Department of State¹ ²

Tehran, February 12, 1971, 1001Z

Subj:

• Oil Situation (Briefing by Companies)

Following is summary of briefing given to U.S., U.K., French Ambassador and Dutch Charge by company reps Piercey (ESSO), Carlyle (Shell), Kirchner (Continental), Montigue (CFP) on morning Feb 12:

1. Piercey as spokesman said companies had “collapsed” and met virtually all OPEC demands in meeting in Paris with Amouzegar which he characterized as “very good.” However, there were still some matters to be sorted out relating to a small posted price difference (he mentioned one cent) marketing allowance (one-half cent a barrel) and a few other items.

2. He then went on to say that the most important element of solution still not settled related to freight differential in Mediterranean due to to favored geographic position (State 22654, para 3A). OPEC Gulf producers had originally taken position that if presently justifiable frieght differential for Libya is not reduced with drop in freight rates, OPEC wants Persian Gulf prices increased comparable amount. Piercey said companies had made an offer which would limit their liability. While Amouzegar in Paris had seemed receptive to this offer which was very best companies could make, he had not actually accepted it. Therefore companies felt that time might come in next few days when governments (basically US and UK) should intervene with GOI on this matter on which an agreement depended.

3. US and UK Ambassadors replied that they had already taken this matter up informally with Court Minister Alam on Feb 4 (Tehran 605) urging he look into it. Without instructions from their governments the US and UK Ambassadors did not believe that they could make any formal demarches to the GOI. Furthermore in view of the extreme sensitivity of the Shah, any such demarches at the government level at this juncture could do harm and be counter-productive.

4. The company representatives said they understood this but dependable assurances for a five-year agreement were so vitally important that perhaps if an agreement was actually reached and signed, it could be nailed down by some diplomatic note to the Shah. British Ambassador explained that Embassies did not send diplomatic notes to Shah but that we fully understood the importance of a dependable 5 year agreement and as the situation evolved we would have to remind the desirability of trying to do something that would nail down a bit more the assurances which OPEC might give to companies.

Comment

5. After above meeting I met privately with UK Ambassador wright for purpose of discussing possibility of nailing down further such assurances as Iran and other OPEC members might give to companies re five year agreement. Since Shah had given such assurances to UnSec Irwin in latter’s capacity as presidential emmissary. I told Wright that if agreement reached between producers and companies, I would recommend we consider possibility of message from President to Shah expressing gratification that agreement had been reached making reference to importance of assurances for five year period, etc. On his part Wright undertook to ask London to consider a formal foreign office statement in same sense following agreement. He felt this was best way for British to nail down assurance since if there were parallel messages from both President and UK PriMin Heath to Shah, latter might feel that it was a ganging up job and be resentful. If agreement is reached and whether or not there is a presidential message (which tentatively I believe could be useful but wish to reserve final judgment until after conclusion of present talks) we believe it would be extremely helpful if other important consuming governments, particularly Japan and Western Europeans, make formal and public declarations nailing down the fact that the agreement is for five years.

6. Companies meeting with OPEC Gulf committee at 1530 local Feb 12.

MacArthur

1. Source: National Archives, RG 59, Central Files 1970–73, PET 3 OPEC. Secret; Priority; Exdis. Repeated to London. In Telegram 476 from Jidda, February 14, Ambassador Thacher wrote, “we should avoid any action tending to endorse the arbitrary short deadlines and coercive legal measures by which U.S. corporations were forced on very short notice commit themselves to payments of billions of dollars over the next few years.” (Ibid.) In Telegram 28309 to Tehran, February 19, Rogers informed Zahedi that “The settlement just reached with the companies is of great importance … in assuring stable market arrangements during the five-year period of the agreement. Of particular importance to the negotiations and us were the assurances given in this respect at the time of Mr. Irwin’s visit.” (Ibid.)
2. Ambassador MacArthur and his British counterpart rejected the oil companies’ request for a formal démarche to Iran to resolve remaining disputes with OPEC. The U.S. ambassador favored a message from the President to the Shah to help cement the final deal.