Making It Acceptable
Loy Henderson Cables Updates on Consortium Talks

The Mossadegh Project | October 13, 2018                                                          


888.2553/5–1754: Telegram

No. 461

The Ambassador in Iran (Henderson) to the Department of State [Loy W. Henderson to State Dept.]

TEHRAN, May 17, 1954—8 p.m.


SECRET

2347. Noforn. [no foreign dissemination] Limited distribution.

Ambassador Loy W. Henderson 1. On [the] afternoon [of] May 16, shortly after my return to Tehran, [a] meeting was held with [the] consortium group, British Ambassador, Dutch Minister, Hoover, myself and United States-United Kingdom staff members. [Sir Roger Stevens, ___?, Under Sec. of State Herbert Hoover, Jr.] Meeting [was] devoted largely [to] discussion [of] management arrangements. Consortium representatives [were] discouraged as [a] result [of the] meeting with Iranian negotiators [on the] evening [of] May 15, during which [the] Iranians appeared to them to backtrack considerably regarding certain basic aspects, particularly in relation [to] management.

2. Consortium and Iranian negotiators met again [on the] evening [of] May 16, when [the] Iranian delegation tabled [the] memorandum outlining their ideas regarding management and particularly [the] terms of agency arrangement1 under which [the] consortium would operate. Consortium representatives[’] primary concern was related to [the] preamble which indicated [that the] Iranian Government, as principal, would have extensive authority in “supervising” management operations, and that relations between NIOC [National Iranian Oil Company] and [the] consortium would be “normal relations between principal and agent”. During [a] detailed discussion [of] this memorandum, consortium representatives indicated to Iranian negotiators that with some modification, many points enumerated below [the] preamble would be acceptable, although [the] proposal as [a] whole [was] unacceptable. At [the] suggestion [of the] Iranians, consortium representatives undertook [to] revise [the] memorandum in [a] manner which would render it acceptable to them, such revision [is] to be discussed at [a] meeting scheduled [for the] evening [of] May 17.

3. Early on [the] morning [of] May 17, Hoover and I were asked to call on [the] Foreign Minister [Abdollah Entezam] and Minister [of] Finance, Amini. [Ali Amini] They expressed anxiety regarding [the] progress of negotiation and difficulties arriving at [a] satisfactory agreement, particularly regarding [the] management problem. They asked if Hoover would undertake to intermediate and assist both sides in reaching [an] acceptable formula. Hoover replied [that] he [was] most hesitant [to] accept such responsibility as it might be misconstrued, unless he [is] formally requested [to] do so by both sides. Nevertheless, he [was] glad [to] offer suggestion at any time. In [the] ensuing discussion of specific problems, [the] Ministers showed us [a] copy [of the] memorandum mentioned above. We stated that it [was] our belief, [that the] primary difficulty was that of [the] choice of words. In particular, we pointed out, that [the] term “supervising”, used in [the] document in relation [to] NIOC responsibilities, had [the] connotation [of] indicating direct participation in management, and suggested [the] word “inspect” be substituted. We suggested further, that [a] mutually acceptable set of regulations might be agreed upon and that [the] Iranians have [the] full right of inspection to determine if regulations [are] being complied with. We made clear we were prompted [to] make these suggestions by our knowledge that [the] consortium had no objection to reasonable Iranian Government regulations, nor to [an] inspection by [a] competent body for determination of compliance. On [the] other hand, we had understood from what [the] Ministers told [us], not that [the] Iranian Government did not in fact intend [on] injecting itself into [the] details of management, but sought only (a) assurances that proper regulatory functions of [the] Iranian Government or NIOC could be effectively implemented, and (b) wording of [the] agreement which would make it palatable to [the] Iranian Majlis [Parliament] and public. We felt sure that these considerations could be adequately met through [a] wording which would not lead [the] consortium [to] fear they would not retain effective management control. Furthermore, we asked [the] Iranians if it [was] not possible [to] delete from [the] memorandum [the] phrase “normal relations between principal and agent”, as such wording could be misconstrued in existing circumstances. We stated that we planned [to] attend [a] routine meeting of consortium principals, [the] British Ambassador and Dutch Minister shortly and with their permission would explore possibilities of [the] above approach. They acquiesced and it agreed that Hoover and I would meet with them again later in [the] morning to discuss [the] results.

4. At [a] meeting with [the] consortium group, Harden outlined what had taken place on [the] preceding evening, explaining why [the] Iranian proposals [were] unacceptable. [Orville Harden of Standard Oil Company of New Jersey] We reported our conversation of [a] few minutes before with suggestions we had made to [the] Ministers. Consortium representatives agreed this approach [was] acceptable to them and, at our suggestion, said they would modify [the] wording [of the] Iranian memorandum along [the] lines indicated. We said that their suspicions that [the] Iranian delegation was seeking [to] obtain control of management might not be founded on fact and expressed hope [that the] present difficulty might be overcome if revision of [the] memorandum [was] undertaken with great care bearing in mind [the] Iranian Government’s public relations problem. Consortium representatives agreed we should state to [the] Iranian Ministers their belief that such [a] procedure appeared [to] give hope of [a] mutually satisfactory solution.

5. Later in [the] morning we resumed discussions with [the] Foreign Minister and Finance Minister, who appeared much encouraged by [the] manner in which [the] consortium had received [the] suggestion. Consortium representatives are now preparing [a] modification of [the] Iranian proposal for discussion with [the] Iranian delegation at [a] meeting this evening.

HENDERSON


[Annotations by Arash Norouzi]

• Source: Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989). Telegram also copied to London.

1 “This document, entitled “Memorandum on Agency”, dated May 16, is in the folder entitled “Documents Relating to Negotiations With Iran, Apr. 14, 1954 to May 18, 1954,” in file 888.2553/4–1454.” — U.S. State Department Office of the Historian



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Related links:

Loy Henderson Discusses Compensating Britain With Premier Mossadegh (Jan. 28, 1953)

Statement by Amb. Loy Henderson on Iran Oil Deal (Aug. 5, 1954)

Sec. of State John Foster Dulles Advises British on AIOC Legalities (Jan. 26, 1953)



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