The Ambassador is calling at his request. He has indicated that he has
two things on his mind: oil and any late developments on the
Arab-Israeli situation as a result of the President’s trip to Europe. I
have told him, on the second subject, that I was sure you would tell him
what you could.
Regarding oil, I had a good talk with him yesterday evening, the record
of which is attached. He appears to be as eager as we are to have this
year’s problem settled. He feels that the Consortium’s justification of
its inability to meet Iran’s demands is weak, especially concerning its
failure to give Iran increases which at least match the average increase
for the area and concerning its member companies’ activity in the
Sheikhdoms. He has instructions to make a formal demarche to the
Department.
Attachment
Memorandum of Conversation
Washington, March 5, 1969
SUBJECT:
PARTICIPANTS:
- His Excellency Hushang
Ansary, Ambassador of Iran
-
Theodore L. Eliot, Jr.,
Country Director for Iran
I called on the Ambassador at his request to discuss the current
dispute between the Iranian Government and the Oil Consortium. The
Ambassador inquired about the position which the Consortium
delegation will take in its talks in Tehran next week.
I told the Ambassador that I did not know what position the
delegation would take. From the talks we have had with the
companies, however, it seems clear that they will not be able to
meet the Iranian request for $1 billion in revenues for the next
Iranian year (1348). In fact, nothing that I had heard led me to
believe that the Consortium could improve on its current offer of
$900 million in any significant way. I said that different company
officials say different things, with a range in outlook from those
who hope to keep the door open for further discussions in order to
avoid a blow-up to those who are tired of the constant pressure from
the Iranian side and believe the time has come for a showdown.
The Ambassador said that he could not understand this talk about
pressure from the Iranian Government. If the Iranians had put on a
lot of pressure last year, why was it that Iran’s offtake increase
by the same amount as Saudi Arabia’s? If Iran had put pressure on
the companies, it certainly didn’t appear to have produced any
results. In addition, he was not convinced by another company
argument to the effect that threats of unilateral action by Iran
force the companies to diversify their position and to expand their
operations
[Page 3]
in the
Sheikhdoms. How can the companies, after so many years of good
relations with Iran, feel that their investment will be safer in
Arab countries who less than two years ago acted against the
companies? Finally, and most importantly, he could not understand
the Consortium’s argument that Iran would be treated equitably when
in fact offtake from Iran was increasing at a slower rate than that
of the area as a whole. In short, the Government of Iran was willing
to discuss this matter with the companies, but the companies had to
have more credible justifications for their positions than they have
so far put forward.
I said that the companies make the point to us that over the years,
and especially during the past two years, they have increased their
liftings from Iran at at least the average rate of increase for the
area as a whole. In 1968, this did not happen, partly because of the
economics favoring full use of the reopened IPC pipeline. The Ambassador noted that the companies
made good in one year production in the Arab countries whose own
actions had disrupted their activities, whereas it had taken 17
years for Iran to recover from the Mosadeq era.
I told the Ambassador that it is my hope that both sides would want
to keep the discussions going and that next week’s meetings in
Tehran would not result in hasty or rash action by anyone. At the
same time, it was clear that such a discussion was going to be
difficult because the companies find Iran’s demand for $1 billion
out of the question. I asked if the companies could expect any give
in the Iranian position.
The Ambassador noted that the Prime Minister had told Ambassador
Meyer that the Government
of Iran is willing to grant any request by the companies for an
extension of time and for further discussions. If the companies were
to request such an extension, it would not be taken to mean that
they were planning to improve their offer.
I mentioned to the Ambassador that one of the problems is that, given
the figures for oil revenues in Iran’s Fourth Plan, the situation
will become worse in each of the next three years. This aspect of
the matter disturbs the companies too.
The Ambassador agreed that this was a problem. We both agreed that
this year’s dispute and any similar disputes in future years could
have repercussions on other aspects of our bilateral relations. We
[Page 4]
agreed further that the
time had come for all concerned to think seriously about how such
disputes can be avoided. The Ambassador expressed the hope that not
only could the dispute this year and the next three years be
resolved but that the overall relations between Iran and the
Consortium could be put on a firmer foundation for the next several
years ahead so that neither country would have to worry about this
problem.
