August 6, 1954

Statements on Iran Oil Accord

Following are the texts, as supplied by The Associated Press, of a joint statement in Teheran by the Iranian Government and the consortium of oil companies that will operate Iran's oil industry; of a statement by the British Government on the Iranian oil agreement and of a message from British Foreign Secretary Anthony Eden to Iranian Foreign Minister Abdullah Entezam.

Joint Statement

The Iranian Government, the National Iranian Oil Company and the negotiators representing a consortium of eight oil companies have reached accord on necessary points of an agreement which will restore the flow of Iranian oil to world markets in substantial quantities. An essential part of the consortium agreement was settlement of the question of compensation to Anglo-Iranian Oil Company. A separate announcement has been made in this respect.

The agreement must now be put into proper legal form, approved by the boards of directors of the participating companies, and signed by the parties concerned. It will then be submitted for enactment as part of the law of Iran and for formal approval of the Shah. It is estimated that these requirements can be concluded in about two months, after which large volumes of Iranian oil will once again be loaded at Iran's great oil ports at Abadan and Bandar Mashur bound for the consuming and refining centers of the world. In the interim period, preparations for resumption of activities will commence.

Two operating companies will be formed to operate the oil fields and refinery. These companies will receive the necessary rights and powers from the Government and the National Iranian Oil Company and exercise them on their behalf to the extent specified in the agreement. The consortium companies will pay the National Iranian Oil Company for all the oil required for export, and sell the crude and products exported.

Provision is made for the National Iranian Oil Company to take crude oil in kind, in lieu of payments, up to 12.5 per cent of total exports. Products for consumption within Iran will be available to the National Iranian Oil Company at substantially their cost. The agreement covers a period of twenty-five years, with provisions for three five-year extensions.

Income Is Estimated

Through payments to the National Iranian Oil Company and application of Iranian tax laws, it has been estimated that total direct income to Iran from increased scale of operations for the first three full years, following a starting-up period of three months, will be 150,000,000 on the basis of present prices and costs. The estimated figures begin at 31,000,000 for the first full year of operation, increasing to 67,000,000 for the third.

The National Iranian Oil Company will continue to operate the Naft-i-Shah oil field and Kermanshah refinery to produce a part of Iran's own oil needs, and will continue to handle the distribution of oil products in Iran.

The National Iranian Oil Company will also be responsible for all facilities and services not directly a part of producing, refining and transportation operations of the operating companies. These will include such functions as industrial training, public transport, road maintenance, and facilities such as housing, medical care and social welfare. The National Iranian Oil Company will be reimbursed for a major part of the cost of such facilities and services by the operating companies, with whom close cooperation will be maintained.

Production of crude oil from Iran, following a starting-up period of three months, will be increased progressively, bringing total exports of crude and products to a minimum of 80,000,000 cubic meters (78,000,000 tons; 500,000,000 barrels) for the first three-year period. In addition, some 5,000,000 cubic meters will be produced for internal consumption.

Supply and Demand

Following the third year it would be the policy of the consortium companies to continue taking quantities of crude oil which would reasonably reflect the supply and demand trend for Middle East crude oil, assuming favorable operating and economic conditions in Iran.

Large-scale operations at the Abadan refinery will be resumed as quickly as possible. It is expected that, again following the initial period of three months, a total of nearly 35,000,000 cubic meters (30,000,000 tons; 220,000,000 barrels) of crude will be processed for export during the first three years of operation. Of this, some 15,000,000 cubic meters (13,000,000 tons; 94,000,000 barrels) will be processed during the last three years, a rate which will once again establish Abadan's output as the largest in the Eastern Hemisphere, despite sharp increases in refinery capacity in that area during the last three years.

The two operating companies will be organized by the consortium and will carry on operations in Iran within a specified area. One of the companies will deal primarily with exploration and production, the other with refining. The companies will be registered in Iran and have their management and operating headquarters there. They will be incorporated under the laws of the Netherlands. There will be seven directors of each company, two of whom will be named by Iran and five by the consortium. Operating data and records of the companies will be available to Iran and the National Iranian Oil Company.

The consortium is expected to consist of the Gulf Oil Corporation, Socony Vacuum Oil Company, Inc.; Standard Oil (New Jersey); Standard Oil Company, California; the Texas Company; the Anglo-Iranian Oil Company; Compagnie Francaise des Petroles and Royal Dutch Shell.

British Statement

Details have been announced today in Teheran of the arrangements to be made between the Persian [Iranian] Government and the consortium of oil companies with the object of restoring the oil industry in south Persia and providing an outlet for Persian oil.

The consortium, in which the Anglo-Iranian Oil Company will have a 40 per cent holding and Royal Dutch Shell 14 per cent, the remainder being held by American and French companies, will form two companies, incorporated in the Netherlands, for the purpose of carrying on producing and refining operations in Persia, where they will have their operating headquarters. The shares of these companies will be held by a company incorporated in London with its headquarters here. The consortium will also form a company in London to undertake procurement and servicing for the operating companies.

As part of a general settlement, agreement has also been reached on payment of compensation by Persia to the Anglo-Iranian Oil Company, as announced separately in Teheran. A statement on this subject is also being issued by the company.

An announcement has also been made in Teheran about the conclusion of payments arrangements between Her Majesty's Government and the Persian Government which will come into force on ratification of the oil and compensation agreements. All transactions, including those of the consortium with Persia, will normally be settled in sterling.

Boon to Area's Stability

When the oil and compensation agreements have been signed and ratified in Persia, the dispute between the Persian Government on the one hand and Her Majesty's Government and the Anglo-Iranian Oil Company on the other will have been resolved. Her Majesty's Government warmly welcome this development as a major contribution to the stability of the whole of the Middle East area. They hope and believe that it will mark a new stage in the history of Anglo-Persian relations.

Her Majesty's Government wish to pay tribute to the realism which the Persian Government and the company have displayed in the interests of a settlement. They are also glad to acknowledge the helpful and constructive part played by the United States Government and its representatives.

No settlement, however, would have been possible without the participation of the other major oil companies which can help to provide an outlet for sufficient quantities of Persian oil. The agreement demonstrates the genuine identity of interest between Persia and the Western powers and shows that the oil companies have an essential part to play in cooperation with the Governments and peoples of the Middle East.

Her Majesty's Government, for their part, will do all in their power to insure the smooth working of the new agreement, which they regard as consistent with the present pattern of the oil industry in the Middle East and from which they believe that Persia will secure substantial and lasting benefit.

Eden's Message

I send you my warmest congratulations on the announcement that agreement in principle has been reached on all aspects of the oil problem.

I am convinced that a settlement on the lines that have been negotiated will be in the interests of Persia and can bring great benefits to her. I am particularly glad to know that it has been possible to satisfy both Persia's aspirations and the practical requirements of the oil industry. I see in this the best assurance that the agreement will endure.

We have now the opportunity of restoring relations between our two countries to their traditional friendship. You know how much I have desired this and I know full well how hard [Premier] General Zahedi and you have worked for the same cause. I am sure that our two countries can now go forward together in confidence and good-will.

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