Memorandum by the Economic Adviser of the Department of State (Millspaugh)

Ambassador Child in his telegram No. 19 of May 2, 5 p.m. states that he desires instructions with regard to the monopoly of petroleum transportation and sales reported to have been given to the Royal Dutch-Shell in Russia. As I understand that Mr. Bedford13 will visit the Department to-morrow, I think that we shall be in a better position to draft instructions after we get his information and views. As of possible assistance to you in your conversation with Mr. Bedford, I am summing up the oil situation in Russia, particularly as affecting the interests of the Standard Oil Company of New Jersey.

In the latter part of July, 1920, the Standard Oil Company of New Jersey acquired from the Nobel family, Swedish subjects, an equal interest in their Russian oil holdings, i.e., in companies which own about one-third of the Russian production, about 40 per cent of the Russian refining business, and about 60 per cent of the distributing business. These properties are at present nationalized.

In the latter part of 1920, there were persistent reports that Krassin was negotiating with the Anglo-Persian Oil Company with a view to giving to that company concessions and possibly a monopoly in the Baku and Grosny districts. It was also reported that Krassin had approached the Royal Dutch. In the House of Commons on February 21, 1921, the Chancellor of the Exchequer said, with reference to these negotiations, “So far as is known, however, nothing has resulted from these negotiations, which, so far as they apply to lands already held by British interests, could not be countenanced by His Majesty’s Government”.

In April, 1921, Dr. John Bassett Moore stated at the Department that the Anglo-Persian Oil Company had received an offer from the Soviet authorities, by which the latter would enter into a contract to supply oil obtained from nationalized properties in the Grosny oil field. Dr. Moore stated that the Anglo-Persian had offered to take the Standard Oil Company into the deal on a fifty-fifty basis.

On January 20, 1922, Krassin indicated to Consul General Skinner14 that Russian oil territory could not be restored to the original owners but might be parcelled out among a small number of very large concessionaires, preferably some American concerns, who might reimburse the original owners by distribution of shares or payments in cash.

[Page 774]

During a call at the Department on January 31, 1922, Mr. Bedford referred to an offer which had been made to the Standard Oil by Krassin. A copy of Mr. Dearing’s memorandum of his conversation with Mr. Bedford is attached.15

It appears from the information in the Department and from the most recent newspaper despatches that the Anglo-Persian Oil Company is not involved in the present concession, if one has been granted. It is also of interest to note that, according to Standard Oil information, the Royal Dutch-Shell approached Nobel prior to the Genoa Conference with the proposition that Nobel go with the Royal Dutch Shell people to the Conference for the purpose of insisting upon the return of all Russian properties to private owners regardless of nationality.

Mr. Bedford presumably will have more information than the Department, and, judging from the attitude which he has previously taken, he will probably endeavor to ascertain what the position of the Department would be (1) in case the Allies were to recognize the Soviet nationalization of properties or (2) in case the Royal Dutch-Shell were to receive a concession which would conflict with the Standard Oil–Nobel properties.

A[rthur] C. M[illspaugh]
  1. Chairman of the Board of Directors of the Standard Oil Company of New Jersey.
  2. Consul general at London.
  3. Not printed.