File 1421/1908 Pt 3 'Persia: oil; negotiations between the Shaikh of Mohammerah and the Anglo-Persian Oil Co.' [‎266r] (97/338)

[This Document is the Property of His Brita nnic Majesty’s Goveramem;.]
PERSIA.
CONFIDENTIAL.
[December 19.]
Section 14.
\
[43455]
No. 1.
<Sir Edward Grey to Sir G. Barclay.
,<&' I
(No. 201.)
Sir, Foreign Office, December 19, 1910.
I HAVE received your despatch No. 209 of the 12th ultimo, relative to the
proposal of the x\nglo-Persian Oil Company to bore for oil in the territories of
the Sheikh of Mohammerah, and to transmit to you herewith copies of a letter from the
company and of a private communication addressed by their managing director to
Mr. Mallet setting forth their views on the subject.*
You will observe from a perusal of these papers, which reached this Office some
few days later than your despatch above referred to, that the company are prepared to
treat the sheikh in a more generous and conciliatory manner than the tone of the
letters addressed to the acting British consul at Mohammerah by their local agents
would appear to indicate.
The situation which has given rise to this question has been produced by the past
action of the Persian Government.
In 1901, as you are aware, that Government granted to Mr. W. K. D’Arcy the
exclusive right to bore for oil in certain parts of Persia, including the region in which
the territories of the Sheikh of Mohammerah are situated, but subsequent!}^, in a
firman A Persian word meaning a royal order or decree issued by a sovereign, used notably in the Ottoman Empire (sometimes written ‘phirmaund’). granted to the sheikh by Mozaffer-ed-Din Shah in January 1903, used language
by which they admitted, at least by implication, that, in conferring these privileges on
Mr. D’Arcy, they had exceeded their powers, since the lands in question had belonged
in the past to the sheikh, his tribesmen, and their ancestors.
The Anglo-Persian Oil Company, as the legal successors of Mr. D’Arcy and his
associates, are bound by the terms of the concession of 1901 to pay to the Persian
Government a certain proportion of their profits, but are not bound to make a similar
payment to any other person, and they are naturally anxious to avoid diminishing
their profits by exposing themselves to any such necessity. The sheikh, however, is
likely to insist on such a condition, especially in view' of the terms of the agreement
concluded in 1905 by Mr. D’Arcy with the Bakhtiari Khans. (It is pointed out,
however, that this agreement, having been extorted from Mr. D’Arcy by the Bakhtiari
Khans in special circumstances, ought not to be used as a precedent.)
The company then, anxious as they are to avoid, as Mr. Greenway puts it, paying
for their oil twice, have two courses open to them.
They can insist on the letter of their rights under the concession of 1901. This
course would involve a settlement of the question whether or no the Persian Government
exceeded their powers in granting that concession, and would moreover certainly bring
the company into conflict with the sheikh. The settlement of the legal question, if
possible at all (and it is not clear by v r hom it could be decided) could not be effected
without endless delay and difficulty, and the interests not only of the company
themselves but of His Majesty’s Government in those regions could not fail to be
adversely affected by any dispute with the sheikh. His Excellency could in practice
make all operations impossible, and it would be in the highest degree embarrassing
for His Majesty’s representatives to be obliged to support the company against him
and thus risk the loss of his goodwill.
The company are therefore disposed to follow' the alternative course wdiich is to
agree to pay the sheikh, should he demand it, a proportion of the profits derived from
oil obtained in his territories, and to deduct an equivalent sum from the amount due to
the Persian Government under that head.
The necessity for doing this is unlikely to arise for some time, since at least a year
or two must elapse before oil can be extracted from any point in the sheikh’s territories
in paying quantities, but when the time comes, if it ever does, for this step to be taken,
the company will hope to receive the support of His Majesty’s Government in inducing
the Persian Government to acquiesce in it. .
I am disposed to consider that, in view of the fact that the responsibility for the
* Anglo-Persian Oil Company, December 5; Mr. Oreenway to Mr. Mallet, December 5, 1910.
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