Foreign Relations of the United States, 1969–1976, Volume E–4, Documents on Iran and Iraq, 1969–1972

87. Telegram 144737 From the Department of State to the Embassy in Iran¹ ²

Washington, September 3, 1970, 2142Z

REF:

• Tehran 3696 and 3703

1. Fully endorse your remarks to Hoveyda that attempts to whip up national sentiment against oil companies would almost certainly be resented abroad and would do nothing to improve Iran’s credit rating. Indeed, if such attempts were successful, as we assume they would be if instigated by the Shah, we fear it possible that they could create a climate in which the oil companies might carried only so far before counterreaction sets in and they themselves are not without options. Quite frankly, we feel we and the GOI have pushed the companies about as far as they will go on the offtake question. As you know, the pressure has been insistent and virtually unremitting for almost a year.

2. We assume that the GOI is fully conversant with the physical limitations the current tanker shortage puts on any immediate, dramatic increase in Persian Gulf offtake. We assume also that it recognizes that Iranian oil and Libyan oil are of different qualities and therefore not interchangeable in meeting specific European market requirements. We note also that offtake for the first seven months of the current year as compared to the first seven months of last year indicate an 11.2% increase for the Middle East generally, a 12.5% increase by the Consortium and a 14.2% increase for Iran. This compares with a decrease of 0.3% for Abu Dhabi. Nevertheless you may assure the GOI that we will continue to be alert to opportunities that may occur which would help increase Iranian offtake and that we will urge the oil companies to act on these opportunities when they occur.

3. We found your remarks about the need for Iran to tailor its security and development needs to its financial cloth most timely and relevant. They might bear repeating in the near future. We were gratified at Hoveyda’s response and indications that he may have taken them to heart in cutting back and/or stretching out some of the government’s programs now underway or contemplated. We hope that it is coming home to the GOI that it has pretty well wrung out all possible sources of external assistance be it the Consortium, special deals with oil independents, the international financial community or the US Government. Further pressures, therefore, are unlikely to result in anything other than irritation and increased questioning of what Iran itself is doing to restrict its expenditures to strictly essential programs.

4. We appreciate fully the difficulties the GOI faces in making hard judgments on this score. Nevertheless, evidence that they are doing so will doubtless bolster the confidence and faith of its friends as they continue to try and be helpful. Certainly evidence of our good faith in this respect was clearly demonstrated most recently by our willingness to consider financing Iran’s military requests through the Eximbank because we appeared to be stymied on FMS legislation.

5. We are informing the British here of the general tone of the foregoing and expect that they will be advising Ambassador WRIGHT in Tehran along similar lines.

End

Johnson

1. Source: National Archives, RG 59, Central Files 1970–73, PET 6 IRAN. Secret; Exdis. Drafted by Miklos, cleared by Davies, Clark, Murphy, and Robert C. Brewster, and in S/S; approved by Samuels. Repeated to London.
2. The Department agreed with the Ambassador that any attempt by the Shah to rally nationalist feeling against the oil companies would only produce a backlash.