The Secretary of State to the Chargé in Egypt (Winship)

No. 343

Sir: There is enclosed, for your information, a copy of a memorandum of a conversation, dated November 7, 1927, between Mr. P. N. Macdonald and Mr. F. H. Henry of the Vacuum Oil Company and an officer in the Department’s Division of Near Eastern Affairs with reference to the question of petroleum storage in Egypt and other matters in which it is believed your office will be interested.

I am [etc.]

For the Secretary of State:
Nelson Trusler Johnson

Extract From a Memorandum by Mr. George Wadsworth, of the Division of Near Eastern Affairs, of a Conversation With the Managing Director for the Near East (P. N. Macdonald) and the Egyptian Manager (F. H. Henry) of the Vacuum Oil Company

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(2) Petroleum Storage in Egypt.

Mr. Macdonald and Dr. Henry were pleased to be able to state that this matter (see I. B. File 883.6363/24 and related papers) was well on the way to satisfactory settlement. They were convinced that Lord Lloyd’s refusal to join with Dr. Howell in representations in this matter to the Egyptian Government (see despatch No. 968 of March 8, 1927 from Cairo) had been motivated largely by his personal feelings with respect to Dr. Howell; that prior to his departure for Egypt last June he had directed Acting High Commissioner Henderson to investigate what might be done in the matter; that following Dr. Howell’s departure on July 6 Henderson had called a meeting of representatives of the interested oil companies and of the appropriate officials of the Egyptian Ministry of the Interior; and that as a result of this discussion it had been decided that no further licenses should be granted for storage of petroleum in floating barges in the Alexandria harbor and that the two companies now operating under such permits would be afforded the opportunity to lease from the government desirable water-front property whereon to construct storage tanks in accordance with the prevailing Egyptian regulations, it being provided that should they not accept this offer their permits would be withdrawn.

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With respect to the general question of new Egyptian petroleum storage regulations, Mr. Macdonald pointed out that such regulations had been issued by the Egyptian Ministry of the Interior to take effect on November 1st of this year; that the Ministry’s authority flowed from an old law authorizing it to control throughout the country the storage of petroleum products; and that the regulations had been drafted in consultation with the principal companies marketing petroleum in Egypt, and were in general satisfactory to those companies. He pointed out, however, that compliance with the new regulations would entail the expenditure of approximately $1,000,000 by the Vacuum Oil Company in the remodeling or moving of certain of its storage stations. The company has approximately one hundred distributing stations of this character. It was prepared and willing to make the necessary expenditure but it felt strongly that if it was required to live up to the regulations and to make this large capital expenditure certainly the smaller operators should be required with equal strictness to live up to the new regulations. It was therefore a question primarily of principle which had led the company to press so strongly its point of view with respect to the storage of petroleum in open barges in the Alexandria harbor.

In conclusion he stated that he would keep us informed of developments in the matter and that for the time being further representations by this Government were, in his opinion, unnecessary.