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Iran Oil Agreement

The sales and sales contract. Apart from the fact that the 1954 agreement did not achieve the main objective of the 1951 oil nationalization, namely the complete control and management of the oil industry by the NIOC, there were many weaknesses and shortcomings in the agreement, many of which were inevitable due to serious economic problems in the country, the weakness of Iran`s negotiating position. , and dominant strategies and practices in the international oil sector. In early 1973, the NIOC issued an ultimatum to the oil consortium that Iran would not extend the 1954 oil deal beyond 1979 (the original 25 years) and then treat the consortium members as ordinary buyers of Iranian oil. Under these conditions, the members of the consortium opted for a new agreement to become preferred customers of Iranian oil, in exchange for abandoning the management and control of the oil industry in the area of the agreement. Subsequently, on 19 July 1973 (retroactively from 21 March 1973), a 20-year sales contract was signed between the parties, replacing the 1954 oil agreement. From the point of view of Iran and even in the last years of the Qajar dynasty, the main vision of oil activities within the country was purely economic and the government was primarily interested in revenues from oil operations. In this regard, differences of opinion developed during the early years of oil operations between the government and APOC. Disagreements focused on the company`s calculation of 16 percent of its net profit, which served as the basis for the annual payment to the Persian government. At the heart of the problem was the definition of benefits, on which the opinions of the experts were different. For example, profits from APOC subsidiaries operating abroad were excluded and the rebate on tankers sold was deducted to the British Navy. Negotiations between the parties eventually led to the conclusion of the 1920 Armitage Smith "interpretive" agreement, named after Sydney Armitage-Smith, the British treasurer, and financial advisor to the Iranian government during the negotiations. Concession agreements, which were the legal basis on which the oil industry was managed in most oil-producing countries until the early 1970s, can be summarized as an agreement under which a government grants exclusive rights to a company or individual to conduct oil operations in a specified area for a limited period of time.

The concessionaire bears the burden of financial and commercial risks, but acquires the right to freely dig up and dispose of oil in exchange for payment of certain sums to the government as the owner of the resources (Parra, p. 8-10). Sirip agreement. This agreement was designed according to the joint organisation model in which a new legal entity SIRIP (Iranian-Italian Oil Company) was created, with the equal participation of NIOC and AGIP Mineraria.