The British Appointed Ambassador (Grey) to the Secretary of State

No. 805

Dear Mr. Secretary: In the course of the debate which took place in the Senate in August and in the following months regarding the so-called “Aliens Clause” (Section 40 [1?]) of the Oil-land Leasing Bill (S. 2775)61 certain criticisms were directed at the policy of Great Britain in respect of petroleum and petroleum properties. It was stated, or suggested, that we were endeavouring to secure a world-wide control of oil while refusing equal rights to foreigners in British territory, and that American nationals has [had?] allowed themselves to be out-distanced by foreign competitors in obtaining concessions abroad.

I am sure you will appreciate that the real cause of the state of affairs indicated has been the extraordinary productivity of the oil fields of the United States. It has been unnecessary for American citizens to go beyond their own borders while such immense opportunities existed at home. Even now when experts claim to foresee the early exhaustion of supplies in the United States, new areas are being opened up and development is proceeding with tremendous energy. On the other hand British companies interested in oil production have been compelled, owing to lack of supplies at home, to find their spheres of action abroad. The British Empire produces only 2½% of the world’s output of oil and the fields from which this comparatively small quantity is derived are scattered over the world. Unless they are under British control and management it would be impossible to rely on supplies from them being available in time of emergencies. The United States on the other hand produce within their own borders 70 per cent of the total for [Page 169] the world and this vast quantity is directly under their control and can be seized and worked by the United States Government at any moment such a step proved necessary. The fact that small sections may be worked by foreigners does not involve any practical risk to the United States and this is a conclusion which must have been reached long ago by your Government. It has been attempted in the debates in Congress, to draw a parallel between cases which are completely and fundamentally different.

On the detailed statements made by Senator Phelan it may be mentioned that

American interests have conducted active searches for petroleum outside the United States. In Roumania, Turkey, Palestine, China, Borneo, Cuba, Costa Rica, Mexico, Venezuela, Colombia, Peru, Ecuador, Trinidad, Canada and possibly elsewhere American companies have either secured production or done extensive prospecting work. The statement that the attractive oil-producing regions of the world have been closed to the entry of America is obviously untrue.
On any figures so far published the United States are not consuming more oil than they produce. The exports for 1918 were double the imports and when allowance is made for reduction of stocks the excess of production over consumption for the year may be put at 20 million barrels. Mr. Phelan’s suggestion that the principal exportations are by American companies from Mexican fields betrays misinformation regarding the facts as the exports of oil produced in the United States in 1918 were about 75 million barrels or about 22 per cent of the production.
The British Petroleum Executive has not hitherto been constituted as a permanent department and the statement as to this and its power is therefore at least premature.
The shareholding in the Royal Dutch Shell Group is, as indicated in the Bureau of Mines Report, 60 per cent Dutch and 40 per cent British. Mr. Phelan’s suggestion that a majority of the shares is owned by the British Government is entirely baseless.
In the case of Persia to which reference is made more than once by Mr. Phelan, the concession was originally obtained from the Persian Government by a private British group many years ago. American interests might equally have secured the rights in that country, just as they subsequently did over large areas in China. As regards Peru, so far from ‘British nationalistic sentiment having been dominant on the control of oil areas’ in that country, the Standard Oil Company, through a subsidiary has absorbed British oil concerns in Peru until there is only one really British company now operating. In Canada by far the strongest petroleum concern is the Imperial Oil Company a Standard Oil offshoot, which is carrying on extensive prospecting work at the present time.
The exclusion of the Anglo-American Oil Company from the Petroleum Pool Board in the United Kingdom during the war was never contemplated. The suggestion that it was only admitted because of the necessity of obtaining supplies from America is unfounded.

I gather that Senator Phelan called attention to a speech made by Mr. D. E. Alves at the meeting of the British Consolidated Oilfields Limited and I therefore desire to make it clear that this is a private company which has secured concessions in South America by its own efforts in competition with representatives of other countries.

It appears that Section 40 of the Bill (S. 2775) already referred to was amended in the course of its passage through the House of Representatives and now reads as follows:

Provided further that citizens of another country the laws, customs, or regulations of which deny similar or like privileges to citizens or companies [corporations] of this country, shall not, by stock ownership, stock holding or stock control own any interest in any lease acquired under the provisions of this Act.”

This clause though apparently comprising only a simple reciprocity provision would seem to place it in the power of any interested competitors to block the issue of a lease on the public domain to any foreign applicant or even to any American corporation having a single foreign shareholder by merely alleging upon information and belief that the country of which such foreigner was a citizen did either by law, custom, or regulation, discriminate against the United States. If (as might easily be the case under the provision) applications from foreign individuals or companies were to give rise in each instance to a lengthy diplomatic discussion involving the determination of the effects of foreign municipal laws, customs and regulations, the practical result of the provision would be to completely exclude foreign investment in American oil lands and perhaps also to render it difficult for foreigners to invest in shares of American oil companies.

The Bill, I understand, is now being considered by both Houses in Conference and I venture to express the earnest hope that the Section in question may be either eliminated or amended.

Believe me [etc.]

(For H. M. Ambassador)
R. C. Lindsay
  1. See Cong. See, vol. 58, pt. 4, pp. 4112 ff.