890g.6363 T 84/136
The Associate General Counsel of the Standard Oil Company of New Jersey (Guy Wellman) to the Chief of the Division of Near Eastern Affairs, Department of State (Dulles)
[Received January 30(?).]
Dear Mr. Dulles: This will confirm my reading to you over the telephone this morning a telegram from Mr. Nichols of the 28th instant as follows:
“Keeling reports Iraq Government committee have commenced by rejecting Article 34 even with Sassoon amendment. Without disclosing open door formula April 12th57 he argued power sublet usual and absolutely essential for attaining maximum development. Committee adamant however saying essence preference exploitation by Turkish Petroleum Company was belief adequacy its resources etcetera. Committee strongly objected sub-lessee except for drilling contracts. Keeling adds: ‘I will make effort persuade King Feisal veto opposition and if you can suggest other argument or find alternative formula telegraph promptly.’ We have reached temporary impasse and shall appreciate any suggestions regarding solution.”
While this message contains the words “commenced” and “temporary”, and therefore lacks finality, it indicates a possibly serious situation so far as the Open Door Policy of the State Department regarding Mesopotamia is concerned. The subleasing plan of the Turkish Petroleum Company Limited, which is the practical application of the Open Door Policy of the Department, would be made impossible of operation by the Turkish Petroleum Company Limited if Article 34 is rejected by the Iraq Government. On the assumption that this proposed convention would constitute a new grant by the Iraq Government to the Turkish Petroleum Company Limited, the question of the invalidity of the Turkish Petroleum Company claims founded on the Turkish grants would seem to be eliminated.
We have just telegraphed Mr. Nichols asking him the meaning of the phrase “except for drilling contracts,” and pointing out to him that in this country the phrase has two meanings, one which is that of the independent contractor who engages to drill wells upon a property and has no interest in the oil production from the wells, and the other, which contemplates that an operator will take a contract to drill wells and have the right to take a share from all of the oil produced from the wells.
In order to facilitate the acceptance of Article 34 by the Iraq Government, we may suggest to Mr. Nichols on behalf of the American Group, subject to the approval of the Department, that the [Page 227] American Group would approve Article 34 with a reservation to the Iraq Government of the right of disapproval as to any particular sublessee where his financial responsibility is not adequate to develop and operate a sublease, or where, after determination by arbitration if necessary, the sublessee is found to be undesirable from the standpoint of the Iraq Government owing to past or anticipated political activities hostile to the Iraq Government. However, this suggestion would not meet the position apparently taken by the Iraq Government committee, which is that its preference for exploitation by the Turkish Petroleum Company is based upon its belief in the adequacy of that company’s financial and technical resources.
The American Group will appreciate having the Department’s views on the subject matter of this letter, with any additional suggestions that may occur to it, to the end that the Open Door Policy of the Department may be adequately realized through the pending negotiations.
I shall get in communication with you tomorrow.
Very truly yours,