Foreign Relations of the United States, 1964–1968, Volume XXXIV, Energy Diplomacy and Global Issues

204. Letter From the Ambassador to Iran (Meyer) to the Country Director for Iran (Eliot)¹

Tehran, March 16, 1967.

Dear Ted:

John Oliver’s Memcon of Sir Patrick’s talk March 3 with the Secretary only arrived this morning.² Meanwhile, we had had our post mortem with the Consortium fellows at the Residence last night. A summation is going in today. You will note the overlifting agreement bugaboo did not come up.

Quite clearly my respected British colleague here, in league with Walter Levy, is determined to beef up the secret overlifting agreement into a major issue. You may recall he pushed this matter strongly last fall during the Consortium crisis.³ But, as we surmised, that agreement is relatively insignificant as long as the total offtakes here are acceptable. What I am trying to say, is that Iran is only interested in results, not in formulas utilized in their attainment.⁴

Denis⁵ really has a thing about that overlifting agreement. Obviously he pressed London to send Sir Patrick in to see the Secretary. It fits in, incidentally, with several recent evidences that Denis is making real headway with his thesis, which has almost become a fixation, that the UK should put all its Mideast chips on the Shah.

For example, I noted that when our Bahrein memorandum was presented to the Sheikh, the reporting telegram told of British reluctance to take certain steps because HMG’s Ambassador in Tehran does not want anything to disturb the Shah. Similarly, when Luke Battle and I chatted briefly with Denis at Alam’s dinner for the Consortium representatives, Denis again made crystal clear that as far as he and his country are concerned all interest is centered in keeping the Shah happy.

With this background, the worrisome thing is that Sir Patrick’s approach may presage later efforts by our British cousins to blame the American companies if there is any Iranian disappointment re crude liftings here. I remain convinced that the agreement per se will not be a major issue, unless the British build it up to be one. If they do so they will expect to improve their stock here at our expense.

The opportunity to do so can come earlier than we might think. From telegrams to and from Baghdad, I sense widespread interest in making up to the Iraqis for the three months’ reduction in their production.⁶ Obviously this can only be done at the expense of Iran and other Gulf producers. As our telegram reports, the IPC partners are already anticipating this. The best we could get out of the Consortium group was clear assurance that they would stand by their commitment of last fall re liftings for this calendar year, i.e. 675–685 million barrels. The excess liftings, due to the IPC-Syria crisis, which brought production up to around 2.6 million bpd, may not be an extra windfall beyond the 1967 commitment. On this point we may see some reaction from the Iranians.

While we do not deny that there may be troubles ahead, the alarm bell sounded by Sir Patrick was at least a bit premature and certainly out of tune with the harmony which characterized the Consortium pilgrimage the past two weeks.

Sincerely,

AHM

1. Source: Department of State, E Files: Lot 71 D 84, PET—Petroleum Iran 1967. Secret; Eyes Only. An attached March 20 covering memorandum from Eliot to Oliver reads: “As the attached is ‘Eyes Only’, I would appreciate your showing it only to Messrs. Solomon and Fried prior to the talk with the British this week on the Iranian oil situation. The letter provides evidence of the necessity for Mr. Solomon to indicate forcefully to the British that we must present a ‘united front’ to the Iranians. Please return the letter after the three of you have seen it.”
2. Document 203.
3. As Meyer reported on November 10, 1966: “In talks with Amb. Wright and me Levy stressed his long-standing anxiety re secret arrangement of Consortium members which in his view tends to keep total annual program for Iranian offtake at lower figure than desirable and which discourages oil-short companies like Shell from taking additional quantities they would otherwise take. Levy is thoroughly convinced that if this secret arrangement ever becomes known to Iranians it will precipitate explosion because of sensitive political implication that Iran’s welfare is decided by self-interested foreign oil moguls behind closed doors.” (Telegram 2090 from Tehran, November 10, 1966; National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1964–66, PET 7 US)
4. For a description of the secret agreement, see Document 192.
5. Sir Denis Wright, British Ambassador to Iran.
6. According to an item by Oliver for a report to Katzenbach, March 16, oil began flowing through the IPC pipeline through Syria by mid-March. (Department of State, E Files: Lot 71 D 84, FSV Facilitative Service—1967)