890g.6363 T 84/48

Memorandum of Negotiations in London between American Oil Interests and the Turkish Petroleum Company 66


Open Door Policy

The first three or four meetings were devoted entirely to a discussion of whether or not a formula could be arrived at to give full effect to our State Department’s views as to the open door policy in Mesopotamia which would be acceptable to the present partners in [Page 341] the T. P. Co., Limited. As a result of these discussions a memorandum was prepared, dated July 21st, copy of which, marked “Exhibit A”, is annexed. This document was in the main drafted by me and discussed prior to its presentation to the partners in the T. P. Co., Limited, with Ambassador Harvey, who rendered me most valuable assistance by his suggestions and advice during my sojourn in London. This document is acceptable to the present partners in the T. P. Co., Limited, and I venture to express the hope that it may also be found acceptable to our State Department.

. . . . . . . . . . . . . .

It was made perfectly clear to the partners in the T. P. Co., Limited, that the acceptance of this memorandum, or some other formula to give effect to the open door policy, must of necessity be obtained prior to any commitment on the part of the American group as to a participation in the T. P. Co., Limited.

[Annex—Exhibit A]

The development of the Oil resources of Mesopotamia requires the installation of an extensive pipeline gathering and storage system, which can only be accomplished by enterprise of more than ordinary dimensions, and in order to bring together all interests so as to ensure the provision of ample capital and the most economic and efficient administration, the Turkish Petroleum Company was established. The participation in the Turkish Petroleum is now as follows:

Anglo-Persian Oil Co. Ltd. 50%
Shell 25%
French interest 25%

the capital of the Company being £160,000, fully subscribed and paid up.

It is now suggested that American interests join the Turkish Petroleum Company—with a participation of %—the shares being provided by the original holders in proportion to their holding, or by a proportionate increase of Capital.

To establish the open door policy for others desirous of developing in Mesopotamia, it is proposed that the following general principles be adopted:—

That the royalties payable to the Iraq Government under the various concessions and rights held by the Turkish Petroleum Company, including the Petroleum Eights in Iraq acquired by them from the Bagdad and Anatolian Railways be agreed with the Iraq Government at the earliest possible date on the basis of a fixed and definite amount per ton of oil produced and saved.
The Turkish Petroleum Company, Ltd., future operations in Iraq to be, inter alia, as follows:
Own and operate pipe line systems from the various fields to tidewater, either as a common carrier at published tariff rates, or else as a common buyer in the fields of crude oil.
Select for their own exploitation within two years from the date of the confirmation of the concessions by the Iraq Government a total not to exceed 12 blocks, the area of each block not to exceed 16 square miles.
The oil rights for the balance of the territory covered by the concessions, totalling some 150,000 square miles, to be opened for sub-lease to any responsible individual, firm or corporation who may be interested in developing oil production in Iraq.
Operate refineries to supply the internal consumption of Iraq and such other trade as the Company may decide.

The method of procedure in the granting of these sub-leases to be as follows:

A standard form of sub-lease to be adopted and published, and all sub-leases to be made on the basis of this standard form. Such standard form to contain, in addition to the usual lease clauses, definite provisions for the starting of work or the payment of a uniform rate of rental by all sub-lessees.
Each sub-lease to cover single areas of as nearly as possible 16 square miles.
Prior to January 30th of each year until the entire area has been sub-divided notice to be given by publication in official Gazette of Iraq and in the leading oil trade papers in Holland, France, Great Britain and the United States of the particular district which has been sub-divided into blocks of as nearly as possible 16 square miles each. Each one of these blocks to be designated and individually numbered.
One year after the publication of the particular district which has been sub-divided and is, therefore, open for leasing, a public auction shall be held in Bagdad and the various leases sold to the buyer who is prepared to pay to the Turkish Petroleum Co., Ltd., the highest royalty in crude oil.
The Turkish Petroleum Co., Ltd., not to become a bidder for any of these sub-leases.

  1. Left with the Department by Mr. Bedford, Aug. 16, 1922.