891.6363/8–2846: Telegram
The Acting Secretary of State to the Ambassador in Iran (Allen)
723. Following point by point expressions Dept views re many important Emb observations outlined Urtel 1050 July 3125 designed provide fullest possible clarification.
First Dept concurs your view we must defer permitting US companies send reps to Iran to express interest in or undertake negotiations for oil concessions until appropriate future date when conditions warrant but not before restrictions based on following points removed:
- 1.
- US Govt support Iranian case in Security Council26 not motivated by selfish interest; Govt has accordingly requested US companies refrain from initiating oil negotiations in Iran. This position holds while Iranian case remains on agenda.
- 2.
- Prevailing Iranian Law forbids concession negotiations by Iranian officials with foreign nationals. Not clear here whether recent Sov negotiations constitute law violation, however, no risk of law infringement by US nationals should be taken.
Second Dept concurs your view US Govt cannot enter oil business. This precludes possibility creating Govt corp to acquire concessions ownership wholly or jointly with Iranian interests. Criticism US industry, Congress, and press against wartime proposal Govt ownership Arabian pipeline27 is case in point. Furthermore, it would be contrary to traditional US pattern open door competitive bidding, equal opportunity, and ownership of petroleum resources and facilities by private enterprise.
Third While Dept may not be able sponsor creation private US corp patterned after IPC (with interested US companies participating) there is no reason preclude voluntary establishment in industry of new corp (composed of interested Cos) patterned after Arabian American Oil Co (composed of California Standard and Texas Co).
In obtaining concessions and marketing oil therefrom Dept feels principal issue is whether maximum competitive opportunities are provided to private enterprise and secondary issue is whether negotiations are conducted by joint Co or number of individual Cos.
Fourth In event more than one Co seeks concessions, Dept could undertake at appropriate later date minimize possibility free for all concession hunt by preliminary discussions here with Co reps emphasizing need for orderly negotiations and for restricting submission of bids to Emb channels if considered necessary. In latter case you could be authorized devise procedure locally for handling bids and negotiations in such manner eliminate undesirable consequences free for all concession hunt. Dept believes number interested Cos limited to few including Jersey Standard and Sinclair because unstable local conditions and huge investment required for developing concession and constructing attendant facilities; therefore problem re concession seekers may be limited.
Fifth Iranian Govt may find solution for problem arising from demands of concession seekers, including Sovs, by
- 1.
- Adopting standard concession contract form applicable all parties seeking future concessions or equivalent privileges in Iran, and
- 2.
- Limiting privileges under such standard contract to commercial exploitation and omitting privileges which may be used for political penetration.
Before offering assistance to any Co in acquiring concession, Dept would acquaint Co with necessity adherence to US economic foreign policy.
- Not printed; it reported that on July 30, the Shah made a strong plea for an American oil concession in Iran, stating that it was impossible for Iran to give an oil concession to the Soviet Union in northern Iran without offsetting it by an American concession in southern Iran. Ambassador Allen replied to the Shah that his point of view was understandable. He also advised the Department that it was his opinion that the United States should wait for an oil concession because of internal and external political considerations but that it was not too early to make plans. (891.6363/7–3146) For subsequent discussion on oil with the Iranian Prime Minister, see telegram 1192, September 6, from Tehran, p. 514.↩
- For documentation on this subject, see pp. 289 ff.↩
- For documentation on this subject, see Foreign Relations, 1944, vol. v, pp. 17–34, passim.↩