Trouble for Aramco (Monday, Jan. 28, 1952)

[SoCalDem]

Trouble for Aramco
Monday, Jan. 28, 1952
http://www.time.com/time/magazine/article/0,9171,806272,00.html

Nothing was too good for old Ibn Saud, monarch of Saudi Arabia. Did he want a railroad? The Arabian American Oil Co. began a standard-gauge, 350-mile Arabian railroad, though convinced that highways would be more practical. Did he consider eight seats on the regular U.S.-bound T.W.A. plane too few to set aside for one of his 30-odd sons? A special plane was wheeled up. Aramco tried its best to anticipate Ibn Saud's every wish, from arranging lend-lease for Saudi Arabia and a cowboy outfit for one of the young princes to furnishing limousines, sweet water and gleaming refrigerators. U.S. technicians headed for duty in Saudi Arabia were assiduously schooled in Arab courtesy. No Christian chapel was built on the Aramco concession for fear of offending Ibn Saud's hard-shell Moslem subjects. The company wanted no trouble; it wanted to be allowed to stay around and get out the oil.

For His Majesty. For its pains, Aramco (owned by California Standard, Texaco, New Jersey Standard, Socony-Vacuum) got 440,000 square miles of Ibn Saud's domain, the world's largest oil concession, the most productive (866,000 barrels daily) and one of the most profitable. Last year, when the Middle East blazed with disputes between oil companies and kings over royalties, Aramco announced a 50-50 profit split with Ibn Saud, increasing his 1951 oil royalties from $60 million to $100 million. Other oil companies, particularly Anglo-Iranian, privately deplored such generosity, but belatedly offered to do likewise. American-British-owned Kuwait Oil Co. had to give Kuwait's Sheik an even better split, and American-British-Dutch-French-owned Iraq Petroleum topped that by agreeing to bring Iraqis into the board of directors.

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New Home. Jittery over what happened in nearby Iran, Aramco wasted no time arguing. The company promptly announced that it was moving its operating headquarters from New York to Dhahran. Board Chairman W. S. S. Rodgers, who is also chairman of the Texas Co., resigned. Into office as chairman went old Middle East Hand F. A. Davies, veteran oil diplomat, who has been serving as Aramco's executive vice president. The new chairman and other top executives would henceforth live in Saudi Arabia. But the grizzled old warrior wanted more. By week's end, four directors, two vice presidents and two legal counselors converged on Riyadh and began soothing Ibn Saud.

Before they are through, Aramco may have to:
1) admit Saudi Arabians to its board,
2) agree to pay more of Ibn Saud's royalties in dollars, less in sterling,
3) finance the Gulf-to-Mecca railway.

Said a vice president, mopping his brow: "It's a crisis, but not the really bad one. The bad crisis will come later."


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http://countrystudies.us/iran/17.htm

MOSSADEQ AND OIL NATIONALIZATION


From 1949 on, sentiment for nationalization of Iran's oil industry grew. In 1949 the Majlis approved the First Development Plan (1948-55), which called for comprehensive agricultural and industrial development of the country. The Plan Organization was established to administer the program, which was to be financed in large part from oil revenues. Politically conscious Iranians were aware, however, that the British government derived more revenue from taxing the concessionaire, the Anglo-Iranian Oil Company (AIOC--formerly the Anglo-Persian Oil Company), than the Iranian government derived from royalties. The oil issue figured prominently in elections for the Majlis in 1949, and nationalists in the new Majlis were determined to renegotiate the AIOC agreement. In November 1950, the Majlis committee concerned with oil matters, headed by Mossadeq, rejected a draft agreement in which the AIOC had offered the government slightly improved terms. These terms did not include the fifty-fifty profit-sharing provision that was part of other new Persian Gulf oil concessions.

Subsequent negotiations with the AIOC were unsuccessful, partly because General Ali Razmara, who became prime minister in June 1950, failed to persuade the oil company of the strength of nationalist feeling in the country and in the Majlis. When the AIOC finally offered fifty-fifty profit-sharing in February 1951, sentiment for nationalization of the oil industry had become widespread. Razmara advised against nationalization on technical grounds and was assassinated in March 1951 by Khalil Tahmasebi, a member of the militant Fadayan-e Islam. On March 15, the Majlis voted to nationalize the oil industry. In April the shah yielded to Majlis pressure and demonstrations in the streets by naming Mossadeq prime minister.

Oil production came to a virtual standstill as British technicians left the country, and Britain imposed a worldwide embargo on the purchase of Iranian oil. In September 1951, Britain froze Iran's sterling assets and banned export of goods to Iran. It challenged the legality of the oil nationalization and took its case against Iran to the International Court of Justice at The Hague. The court found in Iran's favor, but the dispute between Iran and the AIOC remained unsettled. Under United States pressure, the AIOC improved its offer to Iran. The excitement generated by the nationalization issue, anti-British feeling, agitation by radical elements, and the conviction among Mossadeq's advisers that Iran's maximum demands would, in the end, be met, however, led the government to reject all offers. The economy began to suffer from the loss of foreign exchange and oil revenues.


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