Foreign Relations of the United States, 1955–1957, Near East Region; Iran; Iraq, Volume XII

401. Memorandum of a Telephone Conversation Between Mr. McLaughlin of the Socony Mobil Oil Company, Inc., and the Chief of the Fuels Division (Beckner), Washington, April 16, 1957¹

Washington, April 16, 1957

SUBJECT

• Socony’s views on Agip-Iranian Contract

Mr. McLaughlin stated he had been requested by Mr. Arnold Stebinger, Manager of the Socony Middle Eastern Affairs Department, to call me regarding the company’s views on the Agip-Iranian Agreement. He stated that the company is seriously concerned about the Agip agreement on several grounds.

(1) While it could be said that the proposed agreement does not necessarily breach the 50–50 formula since each of the partners to the agreement has a 50 percent share in the stock, nevertheless since the NIOC does not put up any risk capital the agreement actually represents a 75/25 deal. Agip is reimbursed for the risk capital it provides if oil is found and profits are made. If the project is unsuccessful Agip has of course put up the entire 100 per cent and bears all of the loss. The NIOC does not put up any money at any time. Even the reimbursement of Agip will come out of earnings, not out of capital advances by NIOC.

(2) Socony does not like the agreement to the extent that it would put the NIOC in business as a potential seller of oil on the international market. Socony does not welcome this prospect.

(3) Socony does not like the oil pricing arrangement which is based on Agip’s return on sales to consumers in Italy for refined oil products rather than on the posted price principle. Socony believes that the posted price principle should be used.

(4) Socony does not like the idea of granting the NIOC a share in the administration of the enterprise. The Consortium successfully fought off this idea.

Mr. McLaughlin asked me about the current status of the Agip contract. I told him that we thought that the contract had been initialed by someone on the Iranian side but that we understood that the contract could not go into effect until it had been approved by the Majlis and signed by the Shah. We understood that the Iranian government had made arrangements with Mr. Elmer Batzell to prepare a draft oil law and that it was unlikely anything would be done by the Iranians about the Agip contract until after an oil law had been adopted. This would presumably require a considerable period of time.

1. Source: Department of State, Central Files, 888.2553/4–1657. Official Use Only. Drafted by Beckner on April 22.