Office of the Historian

203. Memorandum of Conversation1

Washington, March 3, 1967.

SUBJECT

  • Iranian Consortium Exports

PARTICIPANTS

  • The Secretary
  • Ambassador Patrick Dean, British Embassy
  • Derek Eagers, Petroleum Counselor, British Embassy
  • Theodore L. Eliot, Jr., Director, Iranian Desk
  • John Oliver, Director, Office of Fuels and Energy
[Page 374]

Ambassador Dean said he had been instructed by the Foreign Secretary to speak to Secretary Rusk about Iranian oil production. The Foreign Secretary was very encouraged by the degree of Anglo-American cooperation in resolving the dispute last year between the Iranian Oil Consortium and the National Iranian Oil Company, and although the Shah was not restive at this moment, there could be further trouble between the Consortium and Iran about the volume of oil exports. The Shah could be expected to react critically if the rate of production in Saudi Arabia should continue to be substantially larger than the growth in Iran. Once he is dissatisfied with the Consortium the consequences might be serious for U.S. and U.K. interests. While the Foreign Secretary fully appreciated the relative position of Middle East countries in oil production involves issues of commercial judgment and policy, the Foreign Secretary nevertheless considered it very important that all the oil companies involved should appreciate the need in making their commercial judgments to take into account wider political considerations. The Foreign Secretary stressed this particular point to the British companies during last year’s dispute and would speak to them again on the same line if necessary. The Foreign Secretary very much hoped that should it become necessary, Secretary Rusk might see his way clear to speak to the U.S. oil companies and emphasize the need for them to take wider and longer term considerations into account with a view to improving prospects for Consortium production. Ambassador Dean commented that a particular difficulty is that the American-owned Aramco has fewer member companies than the Consortium in Iran and is of greater importance to the owner companies than their holdings in the Consortium, but at the same time the Aramco member companies carry such weight within the Consortium as to be able to determine the Consortium’s policies, at least in a negative way.

FYI. The British AideMèmoire2 left with the Secretary connects the comments about the influence of the Aramco membership within the Consortium to specific comments by the Foreign Secretary as to ways the American companies could influence an increase in Consortium production, i.e. increase their own liftings, and by agreeing to a more flexible over-lift arrangement for all members of the Consortium. The Ambassador did not mention these ways for the U.S. companies to be helpful within the Consortium. He made his presentation one of urging the Secretary to insure that the U.S. participants met fully their obligations under the 1967 crude export program. End FYI.

The Secretary inquired whether the Consortium had committed itself to a specific percentage rate of growth for 1967 and was informed [Page 375] that the Consortium as a matter of practice does not commit itself to a specific percentage rate of growth. However, for 1967 and 1968 the Consortium had in fact told the Iranians what exports would be on a volume basis which worked out for 1967 to a percentage rate of growth of about 13%. The Secretary commented to Ambassador Dean that he assumed the Foreign Secretary did not refer to the “windfall” increase Iran and other Middle East countries had obtained as a consequence of the Syria-IPC dispute when he spoke of increases in Iranian production and exports. The Ambassador confirmed that the temporary benefits arising out of the IPC case were not a part of the Foreign Secretary’s presentation. The Secretary said the Department would consider the matter.

  1. Source: National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967–69, PET 6 IRAN. Confidential. Drafted by Oliver on March 8, cleared by Eliot, and approved in S on March 11.↩
  2. Attached to a March 3 memorandum from Borg to Handley, Leddy, and Solomon. (Ibid., PET 12 IRAN)↩