Four Points to Resolve
US, British Officials Iron Out Consortium Wrinkles

Arash Norouzi
The Mossadegh Project
| August 6, 2019                                                          


A Middle East Oil Committee memo on a meeting with British and U.S. officials on the Iran Oil Consortium, covering the question of the nationality (Dutch, British, Belgian) of its various companies.


(THIS DOCUMENT IS THE PROPERTY OF HER BRITTANIC MAJESTY’S GOVERNMENT)
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CONFIDENTIAL

O.M.E.(54.) 28

COPY NO. 42


15TH JUNE 1954

CABINET

MIDDLE EAST OIL COMMITTEE

PERSIAN OIL
Note by the Joint Secretaries


We circulate for the information of the Committee a note of a meeting held on 14th June 1954.

(Signed) T.R.D. BELGRAVE
J.R.D. GILDEA

Cabinet Office, S.W.1.

15TH JUNE, 1954


__________________________________


Mr. Butterworth [U.S. diplomat William Walton Butterworth] and Mr. Hoover, [U.S. Special Envoy Herbert Hoover, Jr.] accompanied by Mr. Wilson, [U.S. Secretary of Defense Charles Erwin Wilson] called on Mr. Shuckburgh on 14th June. [British diplomat Evelyn Shuckburgh] Sir John Maud and Mr. Playfair were present. [British diplomat John Redcliffe-Maud and Edward Wilder Playfair of the British Treasury]

The suggestion for an exchange of letters between each of the four governments concerned in the Consortium and the Persian Government, which will provide for the reference of any disputes under the Consortium Contract to the International Court, was discussed. Copies of the Draft Exchange of Letters proposed by the Foreign Office were handed to the American representatives. They said that at first sight the idea appeared attractive, although they would have to consult their legal advisers.

Mr. Hoover said that he was now satisfied that the Consortium had given sufficient latitude to their negotiating mission for the latter to be able to reach an agreement with Persia. He said that there were four points on which the members of the Consortium were not yet in agreement.

         (a) Nationality of the Operating Companies. The possible choices have been narrowed down to Dutch or Belgian. The United States Companies and Shell preferred Dutch, indeed they thought that for reasons of local Belgian legislation, and of diplomatic protection, Belgium would not be at all satisfactory.

         (b) All were agreed that there should be holding Company in the United Kingdom of British nationality, which (if the Persians showed no violent objection which he thought unlikely) would hold all the shares in the Dutch operating companies.

         (c) There has been a certain amount of argument on the nationality of the senior staff of the Operating Companies. He thought it had now been agreed that the Managing Director and many of his staff should be Dutch, and provided by Shell. The two immediate Assistants of the Managing Director should be one British and one American.

         (d) A.I.O.C. wanted the Managing Director of the Operating Companies to reside in London. [Anglo-Iranian Oil Company] The other companies thought he should be in Persia, and the Persians were insistent on this. The organisation which it was intended to set up would consist of the Holding Company in London which would hold all the shares in the Operating Companies, control their finance and general policy, and appoint five of the seven members of the Managing Board of the Operating Companies, the other two being appointed by the Persians. These five Directors would be the Managing Director, his two Deputies, the Head of the Refining and the Head of the producing Department. The Managing Director would account to the Holding Company in London for his policies and actions. The Holding Company would act as the headquarters of the Consortium, and continuity would be ensured by a Managing Committee. The Holding Company itself would be controlled by eight Directors, appointed by each of the members of the Consortium but voting according to the percentage shares which they held.

Sir John Maud enquired whether it was agreed that the Servicing Company should also be in London. Mr. Hoover said that it was important to distinguish between the functions of the Holding Company which would include an Executive Section, a Budgeting Section and a Legal Headquarters and the functions of a Servicing Company which would include Engineering, procurement and Staff. The latter, in the view of the American companies, should be under the direction of the Operating Company’s Managing Director, and if possible should be a subsidiary of the Operating Companies. Alternatively, it might be a third subsidiary of the Holding Company. He said, however, that the American Companies would be willing to agree that all activities of the Consortium which did not take place in Persia should take place in London, and in particular they would be willing to bind themselves by a group agreement that all servicing should be done through London.

Sir John Maud said that it would not be satisfactory to Her Majesty’s Government if the Persians agreed to the Dutch Operating Companies but not to the British Holding Company. Mr. Butterworth suggested that we should tell the Persians that this was none of their business, and Mr. Hoover concurred, provided that it was clear that the Management of the Operating Companies would reside in Persia.

[Annotations by Arash Norouzi]




Divvying Up the Loot: The Iran Oil Consortium Agreement of 1954
Divvying Up the Loot: The Iran Oil Consortium Agreement of 1954

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Related links:

Basis for the Settlement with Anglo-Iranian Oil Company (March 12, 1954)

Status Report on Iran Oil Negotiations (Donald D. Kennedy, June 16, 1954)

Iran Oil Consortium Nearing Agreement (Anthony Eden, July 1954)



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