Coll 30/216 'Development of oil supplies in the Middle East.' [‎25r] (49/131)

13
Abadan is exported, but some is distributed in Persia. Most of the oil lequhe-
ments of the west, north-west and north of the country are, however met y e
small Kermanshah refinery, which treats crude oil piped from the JNait-i-bnan
field. The company is bound by the terms of its concession to sell products tor
internal consumption at a special basic rate.
110. Royalty is at the rate of 4/- per ton of petroleum sold for consumption
_ in Persia or exported from that country. The company is also bound to pay
.'the Persian Government a sum equal to 20 per cent of the distribution to its
ordinary stockholders in excess of £671,250. The minimum payment under both
these heads is to be £750.000 a year. The company’s royalty payments to the
Persian Government (averaging £4,000,000 a year from 1939 to 1943) aie a, mos
important source of revenue and are likely to become still more important in the
future. ^ ,
111. The A.I.O.C. provides employment for 58,000 Persians, many of whom
have become skilled artisans. _
H2 As soon as the A.I.O.C. had selected its areas for exploitation, it
relinquished the remainder of the territory lying to the south of the line forming
the northern limit of the exploration area. It then became possible for
interests to apply for oil concessions covering the territory in question. In 1944
representatives of the Royal Dutch-Shell group and of certain United States
companies were negotiating in Tehran for the grant of concessionary rights in
the south-east of the country, but these negotiations were broken off when the
Persian Government decided early in September 1944 to grant no oil concessions
during the war.
(ii) Northern Persia.
113. There are many indications of petroleum in northern Persia, but, unt'i
more prospecting and, in particular, test-drilling have been carried out, all that
can be said is that the prospects of finding oil in commercial quantities, though
reasonably good, are speculative.
114. Numerous attempts have been made to secure concessions and exploit
oil in the northern provinces, but they have all, so far, proved unsuccessful. The
main, but not the only, cause for this failure has been the attitude of Russia. In
1901 it was Russian influence which prevented Mr. D’Arcy from securing the
inclusion of the five northern provinces in his concession and which, in fact,
all but brought about the failure of his negotiations for the concession covering
the rest of Persia.
(a) The Khostharia Concession and the A.I.O.C. and S.O.C. Negotiations.
115. In 1916 a Georgian adventurer named Khostharia acquired a small
concession in the province of Mazandaran based upon a farman (royal decree)
granted in 1896. In the same year Khostharia obtained from the Persian Govern
ment a much more extensive concession covering the rest of Mazandaran and
the whole of the neighbouring provinces of Gilan and Astarabad. In 1917 this
concession was extended to cover the district of Ardabil, in Azarbaijan. The
A.I.O.C. acquired this concession in 1920 and formed a company named North
Persian Oils, Ltd., to operate it. The A.I.O.C. thereupon notified the Persian
Government of the completion of the transfer. On the 20th June, 1920, the
Persian Government informed the company that the Khostharia concession was
for several reasons regarded as null and void. The situation took on a new aspect
when the Persian and Soviet Governments signed a Treaty of Friendship at
Tehran on the 26th February, 1921. By article XII of this treaty Soviet Russia
declared that all concessions (with certain exceptions specified in the treaty)
obtained by force by the Tsarist Government and its subjects were null and void,
and that the said concessions were therefore restored “ to the Persian Government
as representing the Persian people.” By article XIII the Persian Government,
for their part, promised “ not to cede to a third Power or to its subjects the
concessions and property thus restored to Persia, and to maintain these rights
for the Persian nation.”
116. In June 1921 the Standard Oil Company of New Jersey applied to the
Persian Government for a concession covering the Khostharia areas. The British
Legation immediately lodged a protest with the Persian Government on behalf
of the A.I.O.C., but was informed in reply that the Khostharia concession was
no longer valid. Meanwhile, the Standard Oil Co. continued to press for its
concession, and in November the Majlis approved the grant of the oil rights
in the northern provinces to that concern. Immediately this action became known,
[63—76] D 2