FOREIGN RELATIONS, 1949,ý VOLUME :VI


   British Ambassador states AIOC production is at peak level and
 Iran Government is devising every possible means to cash in. It has
 made some 20 to 25 specific demands, including Iranization and
 modification of arbitration clause. Moreover, Iran Government de-
 sires 50% gross profits. British Ambassador states that so many ele-
 ments enter into gross profits that this presents an impossible condi-
 tion. Moreover, he says, Board of Directors AJOC almost entirely
 Scotch and will, under no circumstances, accept conditions which
 would deprive them of control. British Ambassador says way things
 now stand Company is prepared raise royalties and make other-con-
 cessions which would substantially double under present circum-
 stances Iran revenue from A bOC. AIOC is in fact subject to very
 exacting regulations by British Government. For -example of its profits
 last year 11 million pounds have had to be turned over to Treasury
 as reserve. This is source of lively complaint on part Iran Government.
 But, says British Ambassador, AIOC is ready hereafter to turn over
 whatever part of reserves accrue to Iran Government in accordance
 with contract. British apparently hope that negotiations will be con-
 cluded within next fortnight, but:
 Thoroughly competent and entirely reliable American source in-
 timately acquainted with course of petroleum matters here has in-
 formed me as follows: informant believes that one might mistake
 tactical moves on Iran's part for objectives actually sought. For
 example, according to informant, the 25 specific demands cited repre-
 sent only catalog of sources of dissatisfaction for discussion. Also he
 believes that Iran has no present intention demanding Iranization
 of Company. Also that Iran does not demand 50% gross profits but
 insists only that principle of equal division of benefits established
 Venezuela 19422 be used as criterion here in appraising equitability
 of revised royalty. Iran negotiators have insisted that this principle
 be accepted before any discussion other issues and until accepted have
 stubbornly refused yield on any point.. Informant believes Iran pre-
 pared accept 21/½ to 3 times present revenue per ton as representing
 equitable share on Venezuelan basis continuing same simple-type
 formula as in past and providing for rescision if warranted by either
 party after 5 years. AIOC negotiator, Gass, has apparently not been
 authorized make such settlement hence dispute has been confined to
 subsidiary issues without progress. Chairman Fraser's arrival to-

 2 Jor documentation on discussions between the United States and Venezuela
 regarding proposed legislation for control of the petroleum industry in
Venezuela,
see Foreign Relations, 1942, vol. vi, pp. 743 ff.


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