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PROPER

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(THIS DOCUMENT IS THE PROPERTY OF HIS BRITANNIC-MĀ JESTY'S GOVERNMENT)

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SECRET

C. P. (51) 114

20TH APRIL, 1951

CABINET

31

COPY NO,

PERSIAN OIL

Memorandum by the Secretary of State for Foreign Affairs

Since the Defence Committee meeting on 2nd April, 1951,

at which my memorandum D.O. (51) 38 of 29th March was considered (D. O. (51) 7th Meeting, Minute 1), the Persian Government have replied to our Note of 14th March; there have been constant talks with the Anglo- Iranian Oil Company (A.I.O.C.) on the form that a new agreement with the Persians might take; a United Kingdom delegation, headed by His Majesty's Ambassador at Washington, has been discussing Persian affairs with the State Department in an attempt to work out a common policy; and rioting has broken out in the South Persian oilfields. I do not propose however to consider that last development in this paper: we are watching matters closely, and I shall at once consult my colleagues should the situation deteriorate.

2. PERSIAN NOTE. A copy of this is annexed.. Having regard to the earlier nationalist emotion in Tehran it is mild enough, and calls for no reply.

3. FORM OF NEW AGREEMENT. It is, I suggest, a fundamental fact that, if the Persians "nationalise" their oil industry, they will not be able, at their present stage of development, to operate it efficiently without foreign assistance. We must try to meet their national aspirations; but, in so doing, we must bear in mind the following considerations to which, in my view, His Majesty's Government should attach importance:-

(a) The maintenance of an independent Persia.

(b) The maintenance of our oil supplies from Persia (this is of great

strategic as well as economic importance).

(c) The control over the distribution of Persian oil that is so

important to our balance of payments.

(d) His Majesty's Government's revenue from A.I.O.C. by means of

taxation and dividend.

(e) The repercussions of any settlement with Persia on the interests

of British Companies operating in other countries.

These all demand that our primary object must be to ensure that effective control of oil operations in Persia remains with the Company.

4.

Various proposals have been examined in the light of these cons 22587hey are listed below in descendingagerence from the point of view of His Majesty's Government.

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