890g.6363 T 84/236: Telegram

The Acting Secretary of State to the Ambassador in Great Britain (Houghton)

[Paraphrase]

5. Embassy’s No. 5 dated January 8, 4 p.m. As you are aware, the Department has consistently and firmly maintained that under the pre-war negotiations of the Turkish Petroleum Company no vested rights were acquired. At the same time, the Government of the United States has never interposed any objection to the Turkish Petroleum Company’s proceeding to negotiate for a new concession, as they have done, with the understanding that such new concession should be in keeping with the principle of the Open Door and equality of opportunity as applied to mandate territories.

Unless the entire question of the validity of the 1914 Turkish Petroleum Company claim is revived, the Department does not see upon what basis Gulbenkian can now claim rights in addition to those of other stockholders. As you know, the Department as far back as 1921 proposed to the British Government that that issue be settled by arbitration.6 To this the British Government would not consent. At a later date British interests, seemingly with the approval of the British Government, took an entirely different course, it being clearly understood that in any new concession a fair share of American participation would be provided. Now that it is asserted that the Bagdad Cabinet has granted that new concession to the Turkish Petroleum Company,6a Gulbenkian, a British subject, has come forward apparently in the desire to assert his claims both under the new concession and under the alleged pre-war grant to the Turkish Petroleum Company. It would be inconsistent with our earlier correspondence with the British Government to admit legal foundation of Gulbenkian’s claim.

It is the understanding of the Department that the contemplated purchase of proffered stock in the Turkish Petroleum Company by the American Group was conditioned upon advance arrangements to put the Working Agreement into effect. The object of the proposed arbitration appears to be the settlement of differences between present stockholders in respect to the nature of such advance arrangements. These differences seem to have come about as a result of Gulbenkian’s claims. The American Group has indicated to the Department that [Page 364] if the other groups should arrange with Gulbenkian on a basis which should impose onerous obligations upon the prospective stockholders of the American Group, it may decide that it is not worth while for it to go ahead with the project. It is the feeling of the American Group that it should not properly become involved as a party to the proposed arbitration, because by so doing it would commit itself beforehand to assuming onerous obligations if Gulbenkian’s claims should be admitted. You appreciate of course that Gulbenkian is closely associated with British petroleum interests.

The Department summarizes its position as follows:

(1)
It is not disposed at this time to acquiesce in the view that Gulbenkian on the basis of the alleged pre-war concession to the Turkish Petroleum Company can properly assert rights.
(2)
It can see no reason why it should urge the American Group to enter an arbitration the outcome of which might be the imposition of heavy burdens of a business nature which would prejudice American interests in favor of British petroleum interests, that is, Gulbenkian interests.
(3)
The position of the American Group, as the Department understands it, is that they can neither participate in nor oppose arbitration. Should the result of any arbitration be to impose additional burdens upon their prospective participation, they would be disinclined to take up their stock interest, and would reserve the right to negotiate separately.

The Department, therefore, does not feel that a refusal to arbitrate by the American Group would have the implications you have indicated. Nor does the Department feel that it can acquiesce in Gulbenkian’s assertion of legal rights based on an alleged pre-war concession to the detriment of American interests. The Government of the United States has consistently denied the validity of this claim. It had been believed that the Government of Great Britain was not disposed to revive the matter at the present time.

Grew
  1. See note, Nov. 17, 1921, to the British Secretary of State for Foreign Affairs and the memorandum transmitted in Department’s telegram No. 448, Aug. 4,1921, Foreign Relations, 1921, vol. ii, pp. 89 and 106.
  2. Turkish Petroleum Company, Limited, Convention with the Government of ’Iraq, made the l4th day of March, 1925 ([London,] Blundell, Taylor & Co. [1925]).