890g.6363 T 84/162a: Telegram
The Secretary of State to the Ambassador in Great Britain (Kellogg)
331. 1. The Department has been informed by representatives of the American group of oil companies that according to advices from London it is probable that a conclusion will soon be reached in the negotiations now pending at Bagdad by which the interests represented by the Turkish Petroleum Company hope to obtain the grant of a concession from the Government of Iraq. The Department is also informed that the terms upon which the American group is to [Page 233] participate in the company have not yet been fully agreed upon. Obstacles to an agreement have been created recently by Gulbenkian, an Armenian naturalized in Great Britain, who holds a stock interest of five per cent in the company as organized in 1914. The position taken by Gulbenkian has apparently prevented an arrangement for the division of any crude oil which the Turkish Petroleum Company may produce in Mesopotamia under the new concession which it may obtain. Gulbenkian’s position is considered unreasonable by the American group. The latter have indicated that during more than two years of negotiation with the Turkish Petroleum Company they have steadily maintained that their object is to obtain their proper share of the actual oil produced, and that a mere stock participation in the Turkish Petroleum Company does not interest them. They have further stated that their British and French associates understood this position perfectly and had accepted it before the late difficulties arose with Gulbenkian in arranging a settlement. Apparently those difficulties have brought up again the question of participation through stock ownership between the American and foreign groups. The American group has indicated that if this position is insisted upon by the other interests they may themselves withdraw from participation.
2. The Standard Oil Company is instructing Mr. Wellman, who is representing the American group in London, to explain the situation fully to the Embassy.
3. In matters of business negotiation the Department could not, of course, properly intervene, and with regard to the negotiations of the American group this principle has been consistently maintained. The American group has, however, kept the Department in touch with the course of affairs. The position of this Government has been already fully communicated to the Embassy in the pertinent correspondence, and is briefly recapitulated below:
- (a)
- This Government has contributed to the common victory, and has a right, therefore, to insist that American nationals shall not be excluded from a reasonable share in developing the resources of territories under mandate. In this view the British Government has concurred.
- (b)
- In Mesopotamia the principle of equality of commercial opportunity and of the Open Door should be maintained. The British Government does not dissent from this view.
- (c)
- This Government regards as invalid the alleged rights of the Turkish Petroleum Company as based on negotiations before the war. If claims should be advanced on the strength of those negotiations, it has been suggested by this Government that they be submitted to arbitration for settlement.
- (d)
- More than two years ago the Department was informed that the American group included all American companies which wished [Page 234] to participate. The Department felt, therefore, that, having regard to the practical requirements of the case, it should not oppose an attempt of the Turkish Petroleum Company to obtain a new concession provided that under the new arrangement a fair participation should be accorded to the interested American companies.
4. The sole object of the Department in concerning itself with the negotiations of the American companies has been to secure recognition of the principles for which this Government has stood throughout. Since the negotiations among the various groups interested in the Turkish Petroleum Company have looked toward arriving at a basis for American participation in Mesopotamian development, the Department has felt that if the arrangements arrived at were properly drawn up progress would have been made toward meeting the views which this Government has steadily advanced in its representations to the British Government regarding the rights of American nationals.
5. It is possible, however, that these negotiations may break down through no failure of the American companies to accept reasonable terms of participation. And inasmuch as the British interests hold a special position in negotiating with Iraq, since the British Government is the mandatory there and possesses special prerogatives in Iraq under treaties concluded with the Government of Iraq, it is also possible, therefore, that the British interests may try to obtain concessionary rights in Mesopotamia without according a fair share in them to the American companies ready and willing to participate. In that case the Department would carefully consider what steps it should take under the altered circumstances in order to protect American interests. This Government might be compelled to revert to the position it assumed in correspondence with the British Government, and to oppose resolutely any plan which did not give adequate recognition to the principle of the Open Door and which did not afford an application of this principle in the treatment of American companies which for more than two years have shown a steady and serious desire to participate on any just and reasonable terms in the development of Mesopotamian oil fields.
6. You should bring at once to the attention of the Foreign Office the views set forth in the three preceding paragraphs. This may be done orally, but you should indicate that while the Department contemplates addressing the British Government formally on the subject, you have been instructed to discuss it informally in the first instance as it is the belief of this Government that the British Government has no desire to see anything done which might end in an attempt to exclude American interests from a proper participation in developing Mesopotamian resources.
[Page 235]7. The outcome of your interview, as also the precise status of Wellman’s negotiations with the Turkish Petroleum Company, should be promptly telegraphed to the Department. As soon as the Department has received your report it will consider what further steps should be taken. If a satisfactory agreement can be reached in consequence of the representations you make and without resorting to more formal measures, it would, of course, be a source of gratification to the Department. But it is very important that matters should not be permitted to arrive at the stage at which we would be faced by the accomplished fact of an agreement between the Turkish Petroleum Company and the Government of Iraq before the American companies have secured their own interests under a proper agreement.
8. You should read again the Department’s instructions 630 of August 31, 1922, and 809 of February 10, 1923,61 as also the Monthly Political Reports of April, November, and December, 1923, and of February, 1924, for their references to Mesopotamia.62