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(i) A Company incorporated in the United Kingdom with 100% A.I.O.C.
shareholding; some Persian directors on the Board (but not enough to give the Persians control of the Company);
•
an equal sharing of the profits between the Persian Government and
the Company; and the transfer to another (purely Persian) Company of the distribution of oil products within Persia itself,
(ii) A minority Persian shareholding, or a holding which did not give the
Persians equality of voting rights, in a United Kingdom incor- porated Company, and an equal sharing of profits. (The difficulty here would be to hold the position against a demand for voting parity.)
(iii) A 50% Persian shareholding in a United Kingdom incorporated
Company, and an equal sharing of profits. (This would give no means of ensuring that effective control remained with the British directors, and at worst would produce stalemate.)
(iv) Vesting, without payment, the Company's assets in Persia in the
Persian Government, who would in compensation lease them free of rent for 42 years (the remainder of A.I.O.C.'s present tenure) to a United Kingdom incorporated Company entirely owned by A.I.O.C.; and an equal sharing of profits. (Apart from diffi- culties over financing new development, this arrangement would almost certainly involve the abrogation of the existing concession, thereby subjecting the Company to the jurisdiction of the Persian Courts and invoking the Majlis resolution of 1947 which prohibits the granting of a new concession to a Company with foreign shareholders. It would evidently demand also a lease in the firmest terms.)
(v) A Company incorporated in Persia, with 100% A.I.O.C, shareholding
and an equal sharing of profits. (This would put the Company at the mercy of Persian law.)
(vi) Expropriation of the assets in Persia, followed by a management
contract with A.I.O.C. (This would make the A.I.O.C. the servant of the Persian Government.)
With the exception of (vi), each of these proposals contemplates a new Company formed to operate in regard only to Persia, on a basis of an equal sharing of profits with the Persians and with Persian directors on the Board. Under the existing concession, however, the Persians participate in the world-wide prosperity of A.I.O.C. They are unlikely to be willing to surrender this benefit, and would certainly claim that it is from the profits of Persian oil that A.I.O.C. have developed their world-wide operations. There are strong objections to making this concession over and above an equal sharing of Persian profits, since it would give Persia substantially more than she could claim on any basis of equity and would create a dangerous precedent for all Companies operating oil (or indeed any other) concessions abroad. The possibility of making specific allowance for participation in the general prosperity of the Company in the composition of the 50% share of Persian profits is under consideration. This might be a useful negotiating point.
6.
THE WASHINGTON TALKS. The Americans agres that it iff 5871.0.c.:
3
essential for control of the Persian oil industry to remain with the A.I.C
to rent but opinions differ about what the Persians mean by "nationalisation"
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(they thePage1324 bf8hever defined it). The AmericanBand 24 afs58me that the Persians will not be satisfied without some degree of ownership of the Company's assets in Persia, in addition to the oil in the ground which they own already. H. M. Ambassador at Tehran, on the other hand, believes that the Persians are already having second thoughts and realise that full "nationalisation" is impracticable. He considers that for us to accept Persian expropriation at the outset would be interpreted as a capitulation, severely damaging to our prestige; and he suggests that the Persians would be satisfied with a 50:50 profit-sharing arrangement, garnished in such a way as to permit the Persian Government to claim that it met Persia's national aspirations.
7.
Owing to this basic difference of opinion (which still persists) between ourselves and the Americans the course of the talks in Washington was not altogether smooth. In the result, however, the Americans agreed that the first proposal at paragraph 4 above "made some accommodation to nationalisation", but recommended us to consider
"an additional facade" which, while providing yet further accommodation, would still maintain our effective control. They themselves would give us, at a minimum, benevolent backing and would take a stronger line if they felt our discussions with the Persians were going well.
8.
The way is therefore open, if my colleagues agree, to our putting the first proposal in paragraph 4 above to the Persians. I do not think that at this stage we should, merely in deference to the Americans' opinion, go further than that. We must however recognise that this proposal may not satisfy the Persians, who may well put forward their own proposition. I would not suggest that we need now consider hypothetical cases; but I would note that, of the proposals in paragraph 4, only (iv) and (vi) can be said to provide for full nationalisation, if by that the Persians mean an outright transfer to them of ownership of the Company's assets in Pèrsia.
9.
FUTURE TACTICS.
H. M. Ambassador at Tehran has reported
evidence that the extremist National Front are becoming apprehensive of the possible results of their "nationalisation" policy, and might be prepared to agree to a new arrangement with the Company. He believes also that Persian opinion might welcome a strong lead from us, and be glad to have official discussions at governmental level. There is the danger also that the Majlis Oil Commission may hasten their investigations, already begun, into the practicability of "nationalisation" and commit themselves to an extreme course; this I feel we should try to forestall. It may well be therefore that the initiative in seeking negotiations should come from us.
10.
I would accordingly suggest that H. M. Ambassador at Tehran should at the earliest appropriate moment be instructed to sound the Persian Prime Minister informally, to probe his reaction and to determine an appropriate basis for opening negotiations. The line he might take would, I think, be:
(a) To point to the mutual interests of Persia and the United Kingdom
in Persian oil, to explain that His Majesty's Government had been considering how the natural desire of the Persian people to play a more direct part in the Persian oil industry might be harmonised with the legitimate rights of the A.I.O.C. and the interests of the United Kingdom, and to go on to outline our proposal for a new agreement.
(b) Page3pdf 58xchange of notes between His Mega LA of 58chment
and the Persian Government which would serve as a basis on which future negotiations were to be conducted and provide for
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11.