Tactical Plans of AIOC to face Iranian accusations: Empirical Evidence

From “Oil Nationalisation and Managerial Disclosure: The Case of Anglo-Iranian Oil Company, 1933-1951”

Chapter 4: Profit distribution by the AIOC


Gass and other AIOC representatives attended the meetings in which the contents of the government‟s Memorandum were discussed and each party kept its own record of the detailed minutes of each meeting. The different items discussed in the Memorandum were grouped broadly by subject, by Gass[620]. It is important to note that the company was annoyed by the Memorandum, and that Gass was astonished when he learnt that the full version of the Memorandum occupied fifty pages. Gass pointed out that the summary was compiled from some fifty pages of detailed grievances against the company, including views expressed from time to time by deputies, the press and others. These grievances were symptomatic of the strong feeling of nationalism that had arisen in the country. It is a struggle which would unfold through the coming years[621]. In a similar vein, Gass highlighted that acceptance of some of the novel
interpretations within this Memorandum would amount in fact to drastic revisions of the concession. He indicated that the AIOC should make it clear that it would not accept any novel interpretations of the concession or any suggestions of claims in regard to the past[622].

It is worth noting that Gass communicated with Fraser immediately after the 25point Memorandum had been handed to him, asserting that It is a summary comprising 25 points for discussion and is a very rambling Memorandum drawn up in a rather rudimentary way. Some of the points for discussion are of a trivial and departmental nature such as payment of income tax by foreign contractors employed by us [AIOC] and safeguarding Iran‟s rights in respect of Naft-i-shah in view of its contiguity to Naft Ehaneh. Others are very radical and novel interpretations of the concession and comparisons between present concession and D‟Arcy concession. Question of gold premium and taxation payable to the British government are prominent items[623].
Gass feared the dangers that could be brought up by the press and the consequent feeling of insecurity that might be created in the minds of shareholders. As a result he told the Prime Minister that the sense of antagonism between the government and the company portrayed to the rest of the world by the press could be responsible for the future insecurity of the company[624]. In the interim, he was aware that the Memorandum attracted nationwide attention not only from Iran and that many staunch friends and supporters of the company in Iran shared the same belief, even if to a lesser degree[625]. Therefore, Gass and the other AIOC representatives had clear aims and objectives in mind to justify the existence of the company‟s operations and they set a tactical plan. They started by convincing the Iranian government that it was in their interests to adhere to the existing methods of payments and principles established in the present concession. Moreover, they planned to resist retrospective claims, arguing that they had observed the terms of the concession and intended to decline to discuss legal or accounting questions[626]. The company planned to adopt a two-stage negotiation as a matter of caution, and
advised Gass to act accordingly. From the tactical angle a two (or more) stage negotiation meant treating the discussions throughout as exploratory, extracting from the Iranian Government as much information as possible, to gauge its mood, whilst not revealing what the company might be prepared to do. The company could then use all its persuasive powers to convince the Iranian government that the principles and the methods in the existing concession were in the latter‟s best interests[627]. One of the tactical methods adopted by the AIOC management was to have a
government which could be assured of a following in the Majlis, and a Minister of Finance who had the advantage of continuity of knowledge of the company‟s affairs[628]. Consequently, Gass maintained a close relationship with the British ambassador, Sir John Le Rougetel, who had been helpful and gave constructive suggestions on the current issues and who critically analysed political affairs[629]. He also maintained good relations with Abdul Husayn Hazhir, Prime Minister of Iran, June-November 1948, who declared to Gass that he had been most careful, whilst Minister of Finance, to deal departmentally with any differences with the company and to keep them away from the press[630]. After the removal of Hazhir as Minister of Finance, who was succeeded by Forouhar, the company made all efforts to keep in touch with the new Minister of Finance and to remain informed of committee proceedings. Forouhar met Northcroft weekly to give him the details of the discussions raised in the Majlis and of the personal views of Musaddiq that emerged during the meeting[631]. For instance, when Forouhar had been asked by Musaddiq about his opinion on the losses incurred by the AIOC in the 1933 concession and whether he would carry on with such losses or whether the concession should terminate, Forouhar had already discussed the matter exhaustively with Northcroft, to tell him privately whether he was in favour of any alterations, deletions or additions[632]. Forouhar distorted facts and defended the operations of the company, with the aim of getting the Supplemental Agreement ratified in the next Majlis. He told Northcroft that the deputies were now in a highly excitable and nervous state and he proposed to procrastinate a little[633]. Firstly, he claimed that the D‟Arcy concession had been cancelled by Iran and replaced by a new agreement which left no opportunity for compromise regarding the means to be adopted in assessing the Iranian government‟s share[634]. With regard to the Admiralty contract, Forouhar claimed that it was universal business practice to refrain from giving advantage to competitors by disclosing detailed figures of sales contracts entered into with other parties. Finally, he defended the performance of the company by claiming that the company‟s affairs were conducted in the interests of all the beneficiaries by the shrewdest judges in the world and it would be ridiculous to suppose that a management with such a record would conclude contracts at unjustifiably low rates, even if this would not have been to Iran‟s disadvantage[635]. Forouhar could be regarded as a puppet for the AIOC as he frequently updated the company with the news of the Majlis and asked the former‟s advice on what to do and say. Consequently, Musaddiq commented in the Iranian newspaper “ITTILA‟AT” on Forouhar‟s misleading and incorrect attitude by asserting that: The Supplemental Agreement does not vindicate the rights of the nation. Not only does it not secure Iran‟s interests, but it will also deprive the nation of its rights. In spite of its defects and disadvantages in reply to my question, the Minister of Finance gave a misleading and incorrect reply in order to satisfy opponents and to deceive some of the members of the committee. As his reply could be used as evidence by those who are not competent to perform their national duties, and as I was ill and could not attend today‟s committee meeting for giving oral explanations, I wrote down my opinion for the information of committee members. In order that the nation may be aware of my last defence before the committee, I give the full text of my explanations for publication in your paper[636].
The AIOC management adopted various tactical plans to achieve their own
interests and get the Supplemental Agreement Bill ratified in the next Majlis, to the detriment of Iranian rights.

620. BP 126407, Report on visit to Tehran 31st August to 26th October 1948, 24.

621. Ibid, 42.

622. BP 071181, Reference no. 8585 A, Gass to Fraser on 29th September 1948, 1.

623. Ibid.

624. BP 126407, Report on visit to Tehran 31st August to 26th October 1948, 44.

625. Ibid, 33.

626. Ibid, 25.

627. Ibid, 18.

628. BP 126407, Supplemental note on report on visit to Tehran 31st August to 26th October 1948, 4.

629. Ibid, 5.

630. BP 126407, Report on visit to Tehran 31st August to 26th October 1948, 11.

631. BP 126349, Reference No. 465, Northcroft to Rice on 15th November 1950, 1.

632. Ibid, 2.

633. Ibid, 2.

634. Ibid, 1.

635. BP 126349, Reference No. 465, Northcroft to Rice on 15th November 1950, 1.

636. BP 126349, press extracts No. 816, Dr. Musaddiq‟s letter to ITTILA‟AT on 20th November 1950,

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