890g.6363 T 84/128
Memorandum by the Chief of the Division of Near Eastern Affairs, Department of State (Dulles)
When Mr. Wellman called at the Department on January 22nd I took up with him his letter of January 16th which particularly dealt with the reported insistence of the Iraq Government upon the right to approve companies which, under Article 34 of the proposed concession, might desire to qualify as sublessees of the Turkish Petroleum Company. I said that the Department fully appreciated the importance of this question in its bearing on the future of the subleasing plan which had been formulated by the company and that for this reason the Department felt it was wise to take this opportunity to discuss this matter with him informally before making any reply to his letter. It was appreciated that the Iraq Government, jealous as it would probably be of its newly gained or partially gained sovereignty, might take a strong stand in demanding a right to pass upon companies which were to develop its oil resources. At the same time on the rather meager information which was available it was difficult for the Department, and possibly also for the American Group, to judge to what extent the opposition to the unqualified right to sublease was shared by the British interests in the Turkish Petroleum Company and by Mr. Keeling, the negotiator for the company in Bagdad.
The Department did not desire to make unreasonable conditions or to take a position which would render negotiation impossible. At the same time it was necessary to face the facts. If the Iraq Government had the qualified right of passing upon sublessees that government would be in a position to prevent the realization of the subleasing plan which would alter the general understanding upon which the Department’s recent correspondence with the American Group had been carried on.
[Page 225]Mr. Wellman then stated that he had been considering the desirability of action by the American Group to clarify the situation with respect to the attitude of the Iraq Government towards the plan of subleasing. This was a matter in which the companies themselves were deeply interested. If this plan were not carried out it is doubtful whether the proposed 25 per cent. participation of the American Group would justify the initial expenditures which the development of the oil resources of Mesopotamia would require. The various American companies desired to qualify as sublessees as well as to have their percentage participation in the Turkish Petroleum Company. The subleasing plan, under the terms of the proposed concession, might not be put into effect for four years and the companies therefore had a natural interest in satisfactory assurances at the time of their participation that the subleasing plan would be put into effect. To my inquiry whether it was therefore correct that the companies themselves were very directly interested in the realization of the subleasing plan from the practical business standpoint as well as on account of their desire to work out an arrangement which would obviate the monopolistic features of the proposed concession, Mr. Wellman answered in the affirmative.
After further conversation during which the above points were developed, it was my understanding of Mr. Wellman’s views that a telegram would be sent to Mr. Nichols by the American Group indicating it to be the position of the American Group that the right of the Turkish Petroleum Company to make subleases should not be unduly restricted and that the American Group would again suggest the desirability of retaining the present wording of Article 34 and of explaining to the Iraq Government the details of the subleasing plan. The result of this would be to bring to; an immediate issue the question of the attitude of the Iraq authorities towards this plan. While this might result in an interruption of the negotiations and an invitation on the part of the British interests that the American Group should see what they could do through direct negotiations with the Iraq authorities, Mr. Wellman indicated that they would not be unprepared to face this eventuality, although they were not seeking or desiring to eliminate the present British negotiations.
In the light of this conversation it was understood that no immediate reply to Mr. Wellman’s letter of January 16 would be awaited by the American Group and that the latter would inform the Department of the telegram which they would send to the Turkish Petroleum Company outlining their views as above indicated.