Oil Again

It seemed to be a victory for everybody. Iran regained its main source of revenue; Britain salvaged a handsome reward from what once seemed a total loss; the U.S. found itself participating for the first time in one of the world's richest oilfields. More than that, a strategic chunk of the globe's surface was made safer from Communist penetration. Last week, in the cool garden of Elah-yeh Palace outside Teheran, Iran's Finance Minister and a U.S. oil negotiator put their initials on a settlement of the vexed Anglo-Iranian oil dispute. A formula had at last been found by which a combine of eight of the world's largest oil companies (TIME, Aug. 9) will operate Iran's nationalized oil industry, splitting the profits on a 50-50 basis with the Iranian government. "Indeed gratifying," said President Eisenhower. "A major contribution," said the British government.

Mossadegh's Folly. It had been more than three years since the wild man of Iranian politics, Mohammed Mossadegh, nationalized his country's oil industry and started his country on the road to economic and political ruin. Undoing the mischief and getting the disputants back together took skilled diplomacy. Iran's young Shah and his strongman Premier, General Fazlollah Zahedi, had to operate in an ugly, xenophobic climate created by demagogues and Communists. Anglo-Iranian Oil Co. (owned 53% by the British government) was unwilling to assent to any agreement that seemed to reward illegal seizure, for fear of the effect it would have on other Middle East rulers.

Mediators, led by Engineer Herbert

Hoover Jr., found a happy solution. Last week's pact in effect recognizes the transfer of full title of the British-built billiondollar industry to the Iranian government, at a cost to Iran that is a fraction of its real value. This should mollify Iranian nationalists. For giant Abadan, the world's largest refinery, and its huge network of affiliated production facilities, the Iranians will pay Anglo-Iranian a mere $70 million in compensation.

Britain's Reward. But in fact, Britain will get a lavish return for its lost oil investment. The real compensation to Anglo-Iranian will be borne by the other seven oil firms joining the consortium. For the privilege of a share in exploitation of Iranian oil, the seven (including America's Jersey Standard, Gulf, Texas, Socony Vacuum and Standard of California) will pay Anglo-Iranian about $600 million. In addition to this compensation, Anglo-Iranian, with a 40% interest in the new consortium, will still be the dominant oil operator in Iran. So Anglo-Iranian has cause to be reasonably content.

When Abadan shut down, there was a world shortage of oil. Since then, other producers have more than made up Iran's loss, and currently there is a market surplus of oil. Some of the nearby oil-producing countries will have to cut back production to make room for Iran. Most of the Iranian production will go, as it did before, to Asian markets, not the U.S.

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