The Ambassador in Great Britain (Davis) to the Secretary of State
[Received 8:20 p.m.]
1205. Your 474, May 10th, 4 p.m.76 and 785, July 26th, 7 p.m. Following note dated August 9th, 1920, received from Foreign Office this morning.
“Your Excellency: I have the honor to refer to the notes dated the 12th May77 and 28th ultimo which you were good enough to address to me and in which Your Excellency, referring to the mandates assigned to Great Britain had occasion to point out the general principles stated to be advocated by the United States Government and agreed to by the Allied Powers which should be adopted and applied to mandates over former Turkish treaty [territory].
- You at the same time drew my attention to the existing vested rights of the United States citizens in this territory and to the impression which had arisen in the minds of the American people that the authorities of His Majesty’s Government in the occupied territory of Mesopotamia had given advantages to British oil interests which were not granted to American companies and that His Majesty’s Government were taking steps calculated eventually to bring the oil resources of Mesopotamia under their exclusive control. Instances of activities in various directions were quoted which had led to such conclusions. In view of this impression and of the necessity for the adoption of careful measures which would insure the practical fulfillment of the principles enunciate you put forward certain proposals which the United States Government would be glad to see applied in the mandated territories and explained the necessity for giving practical consideration to certain concessions in those regions granted by the Turkish Government in some of which United States citizens claimed vested rights.
- The various points and suggestions which have formed the subject of your note have had the careful consideration of His Majesty’s Government and I desire to furnish you in regard to them with the following observations.
- I would wish at the outset to refer to the last sentence of the first paragraph of your note of May 12th, to the effect that the assignment to Great Britain of the mandate for Mesopotamia was made subject to a friendly arrangement with the Italian Government regarding economic rights and to state categorically that the assignment of the mandate has been made and accepted subject to no friendly arrangement whatever with any Government regarding economic rights.
- I will next deal with the alleged action of the authorities of His Majesty’s Government in the occupied territories in giving facilities to British oil interests which it is contended were denied to United States companies. The matter as you will recollect, has [Page 664]formed the subject of previous communications between us and the hope was entertained that whatever doubts had existed in regard to the attitude of His Majesty’s Government in the matter had been satisfactorily dispelled. The authoritative statements to which you have alluded in the third paragraph of your note of May 12th, and which would appear to be the basis for the reports that actual work has been undertaken in Mesopotamia are not founded on fact. Such reports would lead to the assumption that the development of the oil fields has already been taken in hand which is not the case. No pipe lines or refineries for dealing with Mesopotamian oil have been constructed. In fact the only existing work of this nature is a small refinery now in course of erection at Bagdad which was started for purely military requirements and is intended to deal with oil obtained from the Persian oil fields.
- The difficulty and cost of conveying supplies of oil by river from the base at Basra to the military stations situated north of Bagdad and in the Mosul region have compelled the military authorities in that region to consider the problem of securing sufficient supplies locally and have led to the working of an oil well which had been partially developed by the Turkish authorities previous to and during the war. The operations at this well have been conducted for purely military purposes under the immediate supervision of the Army authorities and at Army expense and no private interests whatever are in any way involved.
- In regard to the building of railways and dockyards, I need hardly dwell upon the imperative necessity for providing every possible means of transport during the period of military operations and facilities of every kind at the ports for the landing of troops and stores. The construction of railways in a country utterly destitute of any properly organized means of communication has, throughout the period of the war and since the cessation of hostilities, been of paramount importance from the military as well as from the administrative point of view.
- The suggestion that Great Britain during the period of military occupation of the mandatory territories, has been preparing for exclusive control of their oil resources is equally devoid of foundation and the claims of British commercial interests in those regions, whatever they may be, are today no stronger as they are no weaker than they were at the outbreak of war.
- I would like, I beg to say, to make a passing reference to the very mistaken impressions, which appear to be current in the United States in regard to the oil policy of His Majesty’s Government. The output of oil within the British Empire is only about 2½ per cent of the world’s production and if the production of Persia be included in virtue of certain oil fields in that country being owned by a British Company, the total amounts to about 4½ per cent. Against this small percentage the United States produces some 70 per cent of the world’s output besides which United States companies who own at least three fourths of the Mexican output are estimated to produce a further 12 per cent of the world’s output. This overwhelming proportion, over 80 per cent of the petroleum production of the world, is under American control and the predominance of the United States in regard to oil production is assured for many years [Page 665]to come. There is, in any case, no justification for supposing that Great Britain, whose present oil resources are altogether insignificant in comparison, can seriously threaten American supremacy and any prophecies as to the oil bearing resources of countries, at present unexplored and quite undeveloped, must be accepted with reserve.
- The nervousness of American opinion, concerning the alleged grasping activities of British oil interests, appears singularly unfortunate in view of these facts. And yet it is notable that the United States, notwithstanding their assured supremacy, have taken powers to reserve for American interests the right to drill for oil on United States domain lands and have, on various occasions, used their influence in territories amenable to their control with a view to securing cancellation of oil concessions previously and legitimately obtained by British persons or companies. Thus, on the occupation of Haiti by United States forces in 1913, the United States Administration refused to confirm an oil concession which had been approved by the Haitian Government and Legislature and for which the caution money had been deposited in the Republic, and more recently the United States representative at San José urged the present Costa Rican Government to cancel all concessions granted by the previous Government, the only concession in question being an oil concession granted to a British subject.
- Very different has been the attitude of the British Government. In assuming the administration of the occupied Turkish territories they have remained fully alive to their obligation as a temporary occupant to protect not only the natural resources of the country against indiscriminate exploitation, but also the absolute freedom of action which the authority to be created eventually for administering those regions would have rightly expected to enjoy.
- Mindful of this obligation, His Majesty’s Government have found it necessary to suspend, during the period of occupation the grant of facilities and opportunities to British as well as to other private interests to investigate the natural resources of the country with the view of acquiring new claims or strengthening old ones and there is no reason for assuming that the administration either of Mesopotamia or of Palestine, has at any time failed to carry out the policy which has been laid down by His Majesty’s Government.
- I will now refer to the propositions enumerated by you on which discussion is invited, and which have been put forward with the object of guaranteeing to the commerce of all nations the practical fulfillment in the mandated regions of the principles of equal treatment in law and in fact. Reference is made in this connection to the desirability of the adherence of the mandatory power to the principles expressed and agreed to during the peace negotiations in Paris, as well as to principles embodied in Mandate A, prepared in London by the Commission on Mandates for adoption by the League of Nations.
- I would first point out that in consequence of a divergence of views, the Commission on Mandates proceeded no further with the draft of the mandate form, “A”, which was consequently abandoned.
- The draft mandates for Mesopotamia and for Palestine, which have been prepared with a view to secure equality of treatment and [Page 666]opportunity for the commerce, citizens and subjects, of all states who are members of the League of Nations, will when approved by the Allies interested, be communicated to the Council of the League of Nations. In these circumstances His Majesty’s Government, while fully appreciating the suggestion for discussing with the United States Government the various propositions mentioned by you, with which they are in full sympathy, are none the less of the opinion that the terms of the mandates can only properly be discussed at the Council of the League of Nations by the signatories of the Covenant.
- In the matter of concessions granted in the mandated territories by the Turkish Government his Majesty’s Government fully agree with the views of the United States Government that due consideration must be given to all rights legally acquired before the outbreak of hostilities. Provision for the consideration and recognition under certain conditions of concessions situated in territories detached from the Turkish Empire has, moreover, as you no doubt know, been made in the treaty of peace with Turkey. His Majesty’s Government are aware that certain rights were acquired in Palestine before the war by American citizens while British interests, such as the Turkish Petroleum Company and other groups, claim similar rights either in Mesopotamia or in Palestine. These claims will naturally have to be given practical consideration and receive equitable treatment consistent with the interests of the mandated territory.
- As part of the administrative arrangements under the treaty of peace with Turkey and the mandate, the oil deposits of Mesopotamia will be secured to the future Arab state, but it is far from the intention of the mandatory power to establish on its own behalf any kind of monopoly.
- In view of long standing interests which the French Government possessed in the Mosul district, arrangements were made whereby the French Government should, on renouncing those interests, be assured of a certain participation in the Mesopotamia oil production. It was accordingly decided that in the event of the Mesopotamian oil fields being developed by the state, France should be entitled to purchase 25 per cent of the oil production at ordinary market rates or in the alternative of the oil fields being developed by private enterprise that French participation should not be less than 25 per cent in the share holdings while provision was made that the Mesopotamian administration should likewise have a certain share.
- In consideration for such participation, the French Government agreed to permit the laying of a pipe line from the Mesopotamian oil fields through Syria, besides providing for other facilities these arrangements including others for mutual cooperation in other countries were embodied in an agreement which has been published. The practical outcome of the arrangement so far as Mesopotamia is concerned is that while France secures a share in the output of oil at ordinary market rates the Mesopotamian state is afforded in return, facilities for placing the production of the oil fields within easy reach of the world’s markets. The agreement aims at no monopoly. It does not exclude other interests and gives no exclusive right to the mandatory power while the Mesopotamian [Page 667]state is free to develop the oil fields in any way it may judge advisable consistent with the interests of the country.
- I feel bound to observe that even if any special privileges were assigned to France under this agreement, such a proceeding would be consistent with the interpretation consistently placed by the United States Government on most favored nation clauses in treaties namely, that special privileges conceded to particular countries in return for specific concessions cannot, in virtue of such a clause, be claimed by other countries not offering such concessions. The United States Government have indeed recently taken a further step in the case of the “Jones” Act, and have taken powers actually to withdraw treatment secured by treaties which in some cases contain no provision for denunciation.
- As regards the alleged action of the administration of Tanganyika Territory referred to in the penultimate paragraph of your note of the 25th [28th], ultimo, I should be obliged if you would furnish me with the names of any persons who have been refused privileges granted to British subjects and the dates of their applications.
I have the honor to be with the highest consideration, Your Excellency’s most obedient, humble servant, Curzon of Kedleston.”