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

217. Telegram From the Embassy in Iran to the Department of State¹

Tehran, February 23, 1968, 0940Z.

3441. Subj: Iran Oil. Ref: London 6620,² 6655.³

1. Alam says Shah hopes for significant increase in Abadan refinery uplift which when coupled with other indicated increases will net Iran an additional $280 million this year. However, this is still $100 million short of Shah’s primary objective, which remains “money.”⁴ Alam Nohzd Reza Fallah currently in States exclusively to discuss these matters with American members of Consortium.

2. When I noted unlikelihood of Consortium’s being able to reach 2.8 million bpd level demanded by Shah or to provide shortfall in “cost oil,” Alam recognized Consortium’s inveterate opposition to providing oil which would be competitive. He also acknowledged GOI would have no ready markets if cost oil were made available.

3. According to Alam, Shah hopeful inter-participants agreement, as revised or revisable, will increase total Iranian offtake.

4. Comment: As Department knows, Embassy has consistently taken position that inter-participants agreement per se not as politically explosive as British and Walter Levy been insisting. Our point has been Shah could not care less re formula provided production makes gains he desires. Now, however, issue seems increasingly to be focusing on what appears to be deliberate effort by certain Aramco companies to prevent other Consortium members, some quite oil hungry, from taking oil they might otherwise wish to tap.⁵ French in particular are attacking this vulnerable point, and CFP apparently has made clear to Iranians it prepared to lift sizable additional quantities of crude, were it not for penalties re which certain Aramco companies remain insistent.

5. If our impression is correct, certain Aramco companies are manifesting “restraint of trade” which would cause Teddy Roosevelt to turn over in his grave and which more pertinently is contrary to spirit if not letter of American law. While we hold no brief for Shah’s unrealistic demands, and while we believe in friendly informal cooperation between companies and USG, we wonder whether time may not have come for USG to caution companies against such “restraint of trade”. Unless CFP and other oil-hungry companies (probably including Shell, Mobil and Iricon) are permitted to lift Iranian crude beyond their quotas without prohibitive restrictions, we see real trouble ahead. Thus we share concerns expressed by British in reftels.

Meyer

1. Source: National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967–69, PET 6 IRAN. Confidential; Priority. Repeated to Paris and London.
2. Dated February 21. (Ibid.)
3. Dated February 22. (Ibid.)
4. See Document 215.
5. Before leaving for Tehran, the Consortium’s shareholders met in London to discuss revisions to their overlift arrangements. As the Embassy reported, “Jersey Standard Oil softening, but Socal still resisting and Texaco adamant (under Consortium voting procedures any two of these three can prevent agreement).” Representatives from BP told the Americans that if agreement could not be reached, the American companies could travel to Tehran alone to explain the situation to the Shah. (Telegram 5913 from London, January 26; National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967–69, PET 6 IRAN) After further consultation, the Americans backed a Jersey proposal which the other companies considered inadequate: “FonOff Oil regards Jersey as equally villains of this piece along with Socal and Texaco, and apparently some shareholders have similarly sour reaction as result this past week’s negotiations. One shareholder put it to EmbOff only half jokingly ‘facade of unity only precariously preserved.’” (Telegram 6051 from London, January 30; ibid.)