Communist Party in Iran - was in its ascendancy and Mossadegh had
taken over the government. The Shah had fled, the Anglo-Persian
Oil Company - now British Petroleum [BP] - had been unsuccessful
in its efforts to get the International Court of Justice to take
jurisdiction over its dispute with Iran involving the confiscation
of their great oil concession, and things were rapidly going
downhill.

There were a series of preliminary meetings, with which I had
nothing to do, in which Follis participated with the other heads of
the American oil companies and BP and Shell. Those meetings took
place in London, and Follis was accompanied by Ted Lenzen and
Turner McBaine - Turner can give you that whole story and probably
has .

Well, he has told me about the negotiations that went on in Iran
and meanwhile, you were in London -

Well, my participation came later, after they had sort of agreed in
principle on the structure of some new deal under which the
American oil companies would acquire a substantial interest in the
Iranian concession of BP. They would buy out BP's interests under
a so-called compensation agreement. Within that structure, a team
was formed of legal representatives headed by an Exxon executive to
go to Iran and negotiate with the Iranians, and Turner McBaine was
a member of the team of lawyers that went out there.

When the whole process had reached that stage, I was suddenly
asked - I was the antitrust lawyer, but I was suddenly asked to
put on my hat and go with Fred Boucke to London to work with the
other lawyers and executives in London, who were beginning the
process of trying to work out what sort of an internal arrangement
they would have among themselves to own and operate these interests
in Iran if eventually a deal could be struck with the Iranians.



129



Hicke: Could I interrupt a minute? First of all, it's very interesting

they chose an antitrust lawyer, because certainly there were a lot
of antitrust implications in this.

O'Brien: Veil, there were. After all, the cartel case was pending and now

suddenly the United States government came forward and implored and
commanded the American oil companies to get their heads together -

Hicke: To form a trust?

O'Brien: - to form some sort of a new apparatus and structure to operate
the Iranian oil industry.

Hicke: So was that important in your being chosen?
O'Brien: Veil, I don't know whether it was or not.

Hicke: And the other thing was that you were on top of all the Standard
affairs .

O'Brien: I had been involved in their affairs to a considerable degree. But
I really had had no experience in the negotiation - nobody had
really had experience in the negotiation of a monster deal like
this. So Boucke and I left on very short notice. I had just one
conversation with Mr. Follis before I left, for about fifteen
minutes .

Hicke: Vhat kind of preparation did you have to do?

O'Brien: I didn't really. Ve had a few papers that had been put out by an

informal kind of drafting group that had been formed in the offices
of Britannic House - BP in London - as this was in its earliest
stages and just beginning to emerge.

Hicke: Did the State Department make available any of its papers?

O'Brien: Veil, there were some conversations with the State Department, but
I don't recall that I was involved in those. Herbert Hoover, Jr.
of the State Department was the guy who was ramrodding this around
and insisting that the American oil companies must come to the aid
of the party.

So Boucke and I rocketed off to London to get into what was a
vast unknown. It was the worst carborundum process I've ever
gotten into in my life. In the first place, the negotiators on
this team in Iran were having tremendous difficulty with the
Iranians, who were just as bad then as they are today.

Hicke: I was going to say, probably a continued tradition.



130



O'Brien: So it was extremely difficult to formulate principles around which
a deal could be made. They of course had expropriated BP's
concession and they were not about to give it back. There were
national sensibilities of that sort that had to be dealt with.
Within the framework of their new ownership of their oil rights in
the name of the Iranian nation, some way had to be worked out of
giving us - even if we didn't own the concession in the
traditional sense - the assurances that were needed to assure we
would have the exclusive right to explore and produce and
manufacture and distribute the oil of Iran and operate the great
refinery at Abadan and the pipelines and the distributions system.

And at the same time, we had to do this in such a way that it
would be compatible with U.S. antitrust laws. So while we could
operate through a jointly owned company the exploration, producing,
manufacturing activities, once the crude oil had been produced as
crude oil and was to be shipped out of the country, that had to be
done by each individual company, and each separate company had to
decide the price at which it was going to sell that oil in its own
markets to its own customers. Ditto in respect to the products
that were produced by the Abadan Refinery.

It was an extraordinarily complex situation. No sooner would
they get going in Iran and come up with a tentative draft than it
would fall out of bed and we would tear up all the papers that we'd
been drafting in London and start over. I think we made something
like fifteen separate beginnings to try to shape the internal
mechanics of operating this great concession with eight companies.
As it turned out, we had the five American companies: Exxon,
Texaco, Gulf, Mobil, Socal, and BP and Shell and the French.

So we landed in London - Boucke and O'Brien. Texaco was of
course there, and I met with Texaco 's representatives the afternoon
that we arrived, a Sunday afternoon, lurching around after flying
from San Francisco.

But I could see even before the meeting that there were going
to be some tremendously important problems of English corporate
law. Already it was being envisaged that there would be maybe
French companies or Dutch companies or something else that would
operate aspects of this deal, but at the top of the pyramid there
would be an English company that would control the whole thing, and
the members of this consortium would be shareholders in that
organization and in the other corporate organizations. By then the
deal was beginning to take shape so that it was understood that BP
would have 40 percent of the new company; it would no longer have
control.



Hicke: This was before you got there?



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131



O'Brien:



Hicke:
O'Brien:

Hicke:
O'Brien:



Yes, as I recall now, that was pretty well understood. Each of the
American companies would have 8 percent, that was another
40 percent - that made 80. Shell would have 14 percent and the
French would have 6.

Now you can think of mutations of that structure, and who was
going to really control this deal. The only thing that Mr. Follis
said to me before I left - mind you, the Standard Oil Company of
California itself had never played ring-around-the-rosy with these
people. We were the maverick; we had discovered the huge oil
resource in Saudi Arabia which shook the whole oil world. And the
British in Persia and Iran and the owners of IPC were horrified -

You were outside the Red Line Agreement.



Yes, we were outside the Red Line,
waltzing party.



We were outside of the whole



How was Standard chosen as one of the consortium companies?

We had the Saudi Arabian concession. We had a major interest in
the Middle East, ditto, Texaco. So it was inconceivable that they
could go forward without us, and it was barely conceivable that we
would sit down at a table with them.



Mr. Follis said to me before I departed, and this was the only
specific instruction I had, "The British have blown this thing in
Iran and we must not let them take it over again." I mean, he
conceived of the fact that the cause of all this - in part at
least, and I shouldn't speak for him; he can speak for himself -
was the British intransigence. We had already agreed to a 50/50
tax arrangement in Saudi Arabia, which meant that we were sharing
the producing profit of that great concession on a 50/50 basis with
the Saudi government. But the British didn't make such a deal in
Iran, and resisted such a deal. And that of course fueled a great
deal of the difficulty that they had.

Hicke: I read that Sir William Fraser was very conservative. Do you
attribute a lot of this to him?

O'Brien: He was, he was, right. I don't think I ever met Sir William; I

might have. But I do know that I practically lived with his son.

Hicke: Who was different, I think, from his father.

O'Brien: Billy Fraser, yes - Lord Strathalmund later - was a British

barrister who had also practiced with one of the big firms in New
York. A charming guy and came to be my principal antagonist
throughout the whole negotiation in London of the '54 agreement.



132



He was a very skillful manipulator, playing on his own field, and I
was young but energetic.

Hicke: That helped didn't it?

O'Brien: And determined not to let the British take the thing over again.

So we began our meetings with all of these companies. The
French company was represented by a very distinguished British
solicitor, and all of the British companies had both inside and
outside counsel, solicitors and barristers there. I retained an
eminent British firm that had already done some work for us -
principally for George Parkhurst, who had originally made the
contact with this outfit.

Hicke: You don't happen to recall the name?

O'Brien: Yes, I do, very well - Coward Chance & Co. Almost at once I
called up the firm and asked to speak to one of the senior
partners, Tim Tyler was his name. It turned out he was in Rhodesia
or some other outpost of the Empire, so I spoke with a young
partner by the name of Tom Johnson-Gilbert - a hyphenated name,
Johnson-Gilbert. He showed up at the Savoy [Hotel] one evening
very soon after I'd arrived.

Boucke and I had got ourselves a big suite with a big living
room and two bedrooms down the hall. We used our hotel suite as
our working space. The company didn't have an office in London, we
didn't have any of the normal facilities, and with Tom's - Coward
Chance's - assistance, we hired a secretary who used to come about
5 or 6 o'clock in the evening when we'd take a break from the
meetings - although we often met in the evening as well. 1 Boucke
and I would sit there then and dictate cables to San Francisco to
try to keep them abreast of what was happening, but it was almost a
hopeless task.

Although we were very faithful about it, we had to decide
things in the London meetings before they could really react in San
Francisco. If they had thought we were way off the track they
might have intervened and said something, but otherwise it was
pretty much giving them information on what had happened. The
British are very skillful at this. Here we were, two green peas
from San Francisco a long way from home. There was no way of
communicating by telephone in those days. There was a
radio- telephone, but whenever I tried to call Mr. Follis - which



1. Her name was Margaret. She stayed on with Iran California
Corporation and retired twenty- five years later.



133



meant I had to sit up until 3 o'clock in the morning or

something - I'd hear about one word in ten. It was a most

frustrating thing to try to give him any coherent report and get
any ideas or instructions.

Hicke: You were really on your own.

O'Brien: Oh, yes, we were. I felt very isolated. And more than that, the
meetings had hardly begun when it became apparent that just what
Mr. Follis had said was very much in BP's mind: they really
intended to get a rope on this whole thing all over again and to
structure the new deal in such a way that their 40 percent in the
new arrangement would really be a controlling interest, because
here they would be faced with four or five companies, American
companies, each owning only 8 percent and Shell owning 14 percent
and the French owning 6 percent. They intended just -

Hicke: Divide and conquer.

O'Brien: to strike up the music the way they had before. I was bent on
frustrating that. I agonized over this, but I had really to do it
for better or for worse. I don't want to make it sound too
dramatic .



Hicke:
O'Brien:

Hicke:
O'Brien:



We met for about four or five days. The first meetings were
at Britannic House, which was the headquarters of BP. The American
companies quickly decided that we wanted some separate headquarters
outside of BP's offices. For the sake of appearances with the
Iranians, we didn't want to be seen as doing all these negotiations
under the aegis of British Petroleum Company after it had just been
expropriated by the Iranians. The Brits and the Iranians were at
each others' throats. So we rented a big share of the Grosvenor
House in London, in the West End. We had a couple floors of
Grosvenor House, as I recall, for offices.

This was for the meeting place?

For offices, for the meeting places. We had secretaries and
conference rooms, even cots where we could go lie down once and a
while .



Could I interrupt with one more question?
position with the company?



What was Fred Boucke ' s



At that time Lenzen was the vice president in charge of these
foreign affairs under Mr. Follis, and Fred Boucke was his
assistant.



Hicke:



I see.



134



O'Brien: Fred had been the head of the foreign staff; I believe that was his
official job. He then became Lenzen's assistant, and he and Ted
kind of ran the foreign business out of their hats. They really
roared around the world a lot.

Ted Lenzen was on the road all the time. He was the Caltex
director, and he was in charge of Indonesia. He was a very busy
man, and he had absolutely enormous capacity to sit down no matter
where he was - I've been in Lagos with him, or Tripoli, or Tehran,
or London - to sit down at the end of the day and write a long,
coherent message, which he would dispatch to Mr. Follis regularly
after coming out of these meetings. Gee, I've been in I don't
know, a hundred meetings with Lenzen when he'd sit down immediately
afterwards and send a succinct, coherent message about what had
happened that day.

Hicke: If those were collected somewhere, they would make a remarkable
story of the foreign operations of the company.

O'Brien: Yes. Because they would provide the details of many of the major
negotiations that went on in the company's foreign business.

Anyway, Lenzen appeared from time to time in the course of our
deliberations in London. There were supposed to be legal meetings
and meetings of principals - those were the executives that were
supposed to be meeting at the same time that the lawyers were
meeting trying to put together an agreement covering the
arrangements. The principals were supposed to be negotiating the
substantive aspects of what the deal would be among themselves.

Hicke: Was Fred Boucke then representing the principals?

O'Brien: Yes, he was representing the principals but Lenzen showed up with
considerable frequency.



The Issues: British Control



O'Brien: Almost at once the issue of who was going to run this thing came
up. It could have come up in any one of a number of ways, but
almost the first thing we attacked was drafting the articles of
incorporation. That's not what you call them in English law, but
that's what they are - the basic document for this top British
company that would be the controlling mechanism for the whole
arrangement.

Hicke: Would it be similar to a holding company?



135



O'Brien:



O'Brien:



Hicke:
O'Brien:



Well, kind of a holding company. It would have a whole series of
subsidiaries that managed exploration, production, and so forth and
so on. Obviously, there had to be a huge supply company to buy and
ship to Iran the materials needed - so-called country goods and
all the apparatus and tools and so on to run one of the largest
refineries in the world, pipelines and all that. So there would be
a huge company to operate that concession.

Almost at once, the issue of how to do all this arose. By
then I had invited Johnson-Gilbert to come sit with me at the
meetings, and every time he would interject any remark, he would
get absolutely spanked by all of these great mandarins of the
British bar - he being only a young partner in a solicitor's firm.
But he is a very bright, able fellow. He doesn't look as though he
could punch his way out of a paper bag, but it turned out he was a
mountain climber, a direct descendant of Dr. Samuel Johnson. And
he really hung in there. He ' s a marvelous draftsman, an Oxford
graduate who is now the senior partner of this firm, which has
recently merged to become one of the very largest, if not the
largest firm of solicitors in London, and therefore in England.

We became great friends through all sorts of other
negotiations that followed the Iranian Consortium.

II

The issue arose over British control almost at once in the drafting
of these articles of incorporation. The British wrote a set of
articles of incorporation that empowered this new British
corporation that was to be created with every power known to the
world. It could operate in all countries, it could do everything.
I said, "No way. We couldn't conceivably agree to that. In the
first place," I reminded them, "this agreement would have to be
cleared with the attorney general of the United States." I argued,
"He is not going to approve of some formulation that would give
this new English corporation the power to hold properties or
explore, produce, refine or sell oil in all the countries of the
world." I said, "We're not going to create some superpower in the
oil business. What we want is a company that is strictly limited
to rescuing the Iranian properties and operating them, and we must
draw the articles of incorporation as narrowly as possible."



That wasn't what they had in mind?

No. They accused me of waving the
antitrust laws . "



'bloody shirt of the American



Hicke: Did they have antitrust laws?



136



O'Brien: No, not really. They subsequently had some that have become more
rigorous as the years have worn on. They don't have anything that
compares with criminal investigations or criminal indictments nor
do they have treble damage suits or anything like that. They have
a Restrictive Practices Commission to which agreements which
conceivably are in restraint of trade must be reported. And they
can make you dissolve those agreements if they violate the
Restrictive Practices Act.

Anyway, this started out in kind of a gentlemanly way. We sat
around the lawyers' meeting, and I kept making my point, and they
kept drafting something that was just as bad, from my point of
view.

Finally, the Brits put up to challenge me a British solicitor,
a very fine man, who ostensibly was representing the French, the
CFP [Compagnie Francaise des Petroles]. One day when I walked in
there - I was already tired - he said that I was so obstreperous
and so obstructive that there was no point in continuing the
lawyers' meetings until the lawyers had received instruction from
the principals as to how to do this, that it was outrageous that
they couldn't go ahead and create a normal kind of corporation with
the powers that were needed. They didn't want to be charged at
some subsequent time of doing things that would be beyond the
powers granted to the corporation, what the lawyers called ultra
vires of the corporation. And it was a folly to try to write some
narrow provision restricting the powers of this company in the way
that I had proposed. So, geez, I suddenly had against me the whole
mighty array of British counsel and all the Brits, and I didn't get
one word of encouragement or support from any American company.

Hicke: I was just going to ask what the other American companies were
doing.

O'Brien: They all just sat on their hands. And I was particularly offended
because our partner, Texaco, didn't move a muscle. So that's what
happened.

The legal meetings stopped. An appointment was made for this
gentleman - this English solicitor - and O'Brien to appear before
the crowned heads of the international oil industry and argue our
respective positions. So at two o'clock the same afternoon, this
guy and I waited in the anteroom until we were called in, and there
all these fellows sat at a huge table that extended down this great
room with the chandeliers and so on. We each got up in turn and
argued our position.

Hicke: Was that a little overwhelming?



137



O'Brien: Well, I was a little spooked, because in the first place, Standard
Oil Company of California was not their favorite company. It
wasn't one of the - let's say, in that sense, one of the old boy
network. I was a young partner in PM&S, and I was a long way from
home, and I didn't have any chief executive right at my hand here
to tell me what was right and what was wrong. That was a problem
that came up several times when I was challenged subsequently.
Anyway, we went in there and we argued our position.

Hicke: Most of what you did was on the strength of what Mr. Follis had
told you when you left?

O'Brien: Yes, "Don't let them get it back after they have blown it." When
we had finished arguing there were some questions, and each of us
answered the questions from his point of view. Then they said,
"Thank you, " and we were excused.

We waited outside in the hall for what seemed like an hour to
me. Finally we were called in and the chairman said, "We want to
do it the way Mr. O'Brien is suggesting."

Hicke: Hooray 1

O'Brien: Oh, man, that lifted me up.

Hicke: That indeed was a major victory.

O'Brien: So we marched out of the room. The lawyers had assembled in their
meeting room in another part of the building and were waiting for
me to come back on a stretcher. And I walked in the room - I'll
never forget - and the Texaco lawyer, who was a terribly nice
fellow but not given to sticking his neck out, said to me, "Well,
Jim, do you come home on your shield or with it?" I was followed
into the room by this British lawyer representing the French, and I
said, "Well, I'll let Mr. So-and-so explain." So he did, fairly,
so that we started up this thing again.

Hicke: Who all was in the room with the crowned heads? All the principals
of the American companies and all the companies who were involved?

O'Brien: Yes, or their principal representatives; all of the companies that
were involved.



Hicke: Why do you think that they decided your way?

O'Brien: I made a number of arguments. I can't remember them all, but I

remember two. I made the antitrust argument, certainly, that here
we were in the midst of a lawsuit brought by the United States
government charging that we were party to a worldwide conspiracy
involving just these same companies and now they wanted to write a



138



set of articles - it's called a memorandum of association - that
would confirm the Department of Justice's allegation that here we
were united in a worldwide company that could go anywhere, do
anything. In fact, everybody knew that we were there to try to get
the Iranian concession going again and to work out an agreement to
compensate British Petroleum and to get Iran going.

Then I said, "Suppose that we draft the articles the way they
suggest that they be done, and British Petroleum has 40 percent of
the piece. Any Iranian can go down to the government office and
buy a copy of this piece of paper for a shilling and see that BP
now has got a corporation with worldwide powers. What do you think
that means in terms of Iranian sensibilities? We're having a very
hard time finding any way to shape this transaction that's
consistent with their sensibilities, their ambitions, their great
sense of sovereignty and all that. Here we are saying we're going
to create a corporation that's worldwide and vast and powerful."

Now I think the latter argument persuaded the Shell people; I
don't know. I came to be friends with a lot of these people, of
course, as the negotiations wore on - this was fairly early in the