Created: 2/7/1973

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MQfORANDtm FOR: The Honorable Williecretary o* Stats

discussion Monday of the

waa oa point riAoh ha^VafJaaJeaTJaVundarstcnd very clearly- t'i?*

that ha hadinsare

Shah -ea outlined be chare iivelv, add





Wtndawry Senaw



fcr their investriint. Also, ths purchaser-cslier relationshipestablished, wold eliminate for allha kind ortyps negotiations which have characterised ths Iran-consortiur.and hava oa occasion lederious erosion or tba relationship of his country to its Vies torn friends,

. aaaa*1 he Shah whether hs could

ect3 or the purchaser-aslier relationship were giving tha ompanies trouble. The Shah said he thought it had something to do with taxes, at least in the case of tha United States contanies. If taxes were injor problen, he could not see Whymodifications could not be mads to the United States tax structure. After all, the energy problem of the United States and tha world is clear enough. Iran can and vill provide oil at reasonable cost and with greater predictability than most other producers. Iran cannot, howsvar, take care of problems which are proparly those of the United States Government.

5. Tho Shah wont on to say that to equate Iran and Saudi Arabia in terra of their respective abilities to manage their oil rssourcee is both absurd and confusingealistic asstssnsnt. of his position. "Participation" is both appropriate and rscessary to Saudi Arabia given her present stage of development. Certainly the Saudis recognize this. On'the other hand,s neither appropriate nor necessary to Iran. Iran would retaintechnicians" presently employed by the consortium and perhaps hire others. Kowerer, tha number required is in no way comparable to Saudi Arabia's requirerieatsto say nothing of tlie requirements of Kuwait and Abu Dhabi. To argue* then that for the consortium to take advantage of hisuld ba to risk upsettingents reached with Arab producers is, in his view, specious. So, too, he thought, vould be any legalistic argument to the effeot that he was arbitrarilyontractual agreement to which the other parties had rigorously- adhered. Ha had frequently nada tha point to the companies that appropriate steps had to be taken to inplensnt secondary recoverytherasures. That they would do so was explicit in last year's agreement. To date they had not taken such steps, aa ha had "told hisn hi3 speech.

6. The Shah said that he had no intention of coming out second best to Dr. Yanani. He said that the companies had seriously misled hia last year during discussions in St. Korits when they

ffext they would not go above tuanty ptrcwt partis!. Ths Saaii want on to aay that ha was conriaced troths

tai way of the"

contractual ar* alraady

anachronistic in aaaa instance and wiu bans* increasingly ao.

h tha Shah's ? r-espective positions thatGovernment through Ambassador Farland hasthe Shah that this would not be tha case,not cone off second best.

8" aF3 worth not^his point that in recent wUJi. Sliah int8nds tosomething which he considers axjni tcan- in terns of his Csoaawhat different) ralationshioa with tne United States and Britain, he has taken oains to aeka his intension clearas on tha whole dona what he has said neo. Kot long before his occupation of the Tunbs and Abu Kusa he remarked that he had rade every effort toituation in .rtuchafter he had done what he said he would dothe

fhyS i'oa vareto d0

position to

believes that since the Shah has statedeople and both the Senate and Kaills have etheror not ist is vary difficult to see howor for that Ratter whyhehould change it.


J?'that the Shah is saying that wrule hia basic position is not negotiable and ha will findhing that savors cf jovernrent intervention to change itthere are areas within the basic fraaework which are

price index relationship, bases of reimbursement ofof ccopany personnel on contract to *noc, amounts There nay be others. In any ease, it

xo inareas that productive discussion's. between tha Shall and the companies appears possible.

Copies of this remorandun have been sent to Mr. John ?f u asistant to tho President for Domestic. Henry Kissinger, Assistant to the President for 'rational Sacurity Affairs,. Peter Flanigan.^Ascistant to thcfor International Econsaie Affairs.


Richard Relaa

Original document.

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