890g.6363 T 84/123

The Secretary of State to the President of the Standard Oil Company of New Jersey (W. C. Teagle)

Sir: I have received your letter of December 10, 1923, transmitting a copy of the draft concession (as of November 16, 1923)52 now under discussion between the Turkish Petroleum Company and the Iraq Government and I have given careful consideration to the question which you have raised.

Your letter does not indicate the ground for possible objection on the part of the Iraq Government to the amendment suggested by the American Group to Article 34 and it is not entirely clear to the Department why this amendment should occasion serious difficulty in the pending negotiations in Mesopotamia.

The Department would not desire to insist upon any particular phraseology provided the substantial principles for which it has stood are fully safeguarded; namely that the oil resources of Mesopotamia should not be monopolized and that American interests should not be subjected to injurious discrimination. This principle under the circumstances could not be given practical application if the Turkish Petroleum Company did not have the authority to sublease oil lands without implied or actual restrictions as to the nationality of the lessees or, if having that authority, it did not exercise it.

In the opinion of the Department therefore it is highly important that every precaution be taken against future misunderstanding as to the authority and purpose of the Turkish Petroleum Company to carry out the subleasing plan along the lines heretofore discussed between the American group and representatives of the Turkish Petroleum Company and communicated by you to the Department. The inability or failure of the Company to put the proposed system into operation would materially alter the understanding on which the Department’s recent correspondence with the American group has been based. It is suggested therefore that the American group should obtain assurances and should satisfy itself that, in case the proposed amendment to Article 34 is not included, the operation of the subleasing system will not be defeated by any provisions of British or Iraq law or by any collateral understanding between the Turkish Petroleum Company and the Iraq Government.

I am [etc.]

Charles E. Hughes
  1. Not printed.