THE COMING OF THE BRITISH CONSERVATIVE PARTY TO OFFICE IN 1951 AND THE NATIONALISATION OF THE ANGLO-IRANIAN OIL COMPANY’S CRISIS.

McGhee and Musaddiq eventually, after a lot of effort, worked out a proposal to solve the impasse. The McGhee-Musaddiq proposal included the following points:

1. A national Iranian oil company would be established and would be responsible for the exploration, production and transportation of crude oil.
2. The Abadan refinery would be sold to a non-British firm which would select its own technicians.
3. The AIOC would establish a purchasing organisation to buy, ship and market Iranian oil.
4. The contract would be in effect for 15 years and would provide for a minimum of 30 million tons of oil a year.
5. The price of petroleum would be determined through negotiations between Iran and Britain and would not exceed $1.10 per barrel.²¹

The $1.10 per barrel was 65 cents less than the Persian Gulf price of $1.75. This was regarded as compensation for the nationalisation of the Anglo-Iranian Oil Company. ‘The final result of this pricing scheme would in fact have closely approximated the fifty-fifty profit-sharing arrangement then in effect in Saudi Arabia.’²² The United States officials were optimistic that the terms would be an acceptable foundation for negotiation to the new Conservative Government in the United Kingdom.  Anthony Eden, the British Foreign Secretary, met on five separate occasions with American officials to discuss the proposal. The British Foreign Secretary found the nationalisation principle unacceptable. The exclusion of British technicians from Iran was another requirement that upset the British. Nevertheless, Acheson still urged settlement, but Eden contended that it had to include the principles of

(1) fair and full impartial compensation;
(2) security for effective payment;
(3) comparability of contractual terms; and
(4) no discrimination.²³

Musaddiq’s attitude was that,

there could be no employment of a foreign organisation en bloc to handle any of the processes involved in the oil industry; nor could anyone organisation have a monopoly of the marketing of Persian oil. To give way on either of these points would be to betray the whole principle of nationalisation.²⁴

on the other hand the British

were equally intransigent in their determination not to share the handling of Persian oil with any other group except under controlled conditions satisfactory to themselves. Least of all were they prepared to compete in the open market with other distributors of oil from the same source.²⁵

These two views were irreconcilable, and neither side saw any particular reason to make concessions. Dean Acheson, the United States Secretary of State, telephoned the Department of State from Paris after his final meeting with Anthony Eden, and asked to inform Dr. Musaddiq who was waiting in the US for results of talks with Eden, that the British had rejected the proposal. Dr. Musaddiq was informed on 8^th November 1951 that the basis for a settlement had not been agreed.

At the same time in London, the Secretary of State for co-ordination of Transport, Fuel and Power, announced:

At the Prime Minister’s request the latest American proposals for a settlement of the Anglo-Persian oil dispute, which the United States Secretary of State put to the Foreign Secretary in Paris has been examined. These had been formulated after discussions with the Persian Prime Minister in Washington. They would provide a wholly inadequate financial return on the capital which we had invested in Persia, and they contained no assurance that the refinery at Abadan would be operated by British technicians. Alternative proposals had therefore been formulated for discussion with Mr. Acheson in Paris. These were based on the principle that the US oil companies should join with us in operating the refinery at Abadan and should, in return, give us some share in the operation of their oil concessions in Saudi Arabia. The American proposals could not be accepted as a basis for renewed negotiations with the Persian Government.²⁶

On 13^th November the State Department declared that its efforts to mediate in the oil dispute had fail and no new basis for a settlement had been reached during Dr. Musaddiq’s visit to the United States.

21. J. A. BILL and W.R. LOUIS, Musaddiq, Iranian Nationalism and Oil, (London: I.B. Tauris & Co. Ltd., 1988), p. 272.
22. Ibid.
23. Ibid, p. 187.
24. L. P. ELWELL-SUTTON, op. cit., pp. 272-273.
25. Ibid.
26. PRO, London, CAB 128/23 CC (51) 1^st Conclusions, Minute 7, 8^th November 1951, p. 28.

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