811.6363/205

The Secretary of State to the Secretary of the Navy (Wilbur)

My Dear Mr. Secretary: I beg to refer to informal discussions which you and officers of your Department have had with officials of this Department in regard to matters pertaining to the naval oil reserves, and to the suggestion that a statement be furnished concerning certain questions involved that are of interest to the Department of State.

The Department of State, in connection with rendering assistance and support to American companies seeking or operating petroleum concessions abroad, is constantly seeking the recognition and practical application by foreign governments of the policy of the open door and equality of commercial opportunity. It is obvious that such a policy can be followed only as long as the United States accords to nationals of foreign countries treatment similar to that sought by this Government for its nationals abroad.

This Department frequently has had occasion to point out that the laws of the United States are very liberal as to access to private oil lands on the part of foreign interests, and that the laws of the United States appertaining to public oil lands do not discriminate against companies owned wholly or in part by foreign nationals as long as the foreign countries of which they are citizens grant reciprocal rights to American interests. I quote below, for your confidential information, a portion of a memorandum on this subject recently communicated by this Government to the Netherlands Government:

[Here follow the second, third, and fourth paragraphs of the informal memorandum transmitted in telegram No. 8, March 2, 4 p.m., to the Chargé in the Netherlands, printed on page 381.]

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The Department of State has sought for American nationals abroad not only equality of treatment with all other foreign nationals, but also treatment equivalent to that accorded to the nationals of the country in question. Representations have been made as to action or legislation by foreign governments by which American interests were discriminated against merely by reason of the fact that such interests were foreign. The basis for such representations is the liberal treatment accorded by the United States to foreign nationals. This Department would obviously be handicapped in maintaining this position were any branch of this Government to take action discriminating against foreign interests as such.

In view of the extent of our probable future dependence upon foreign reserves of petroleum, the importance of keeping the Government of the United States in a position consistently to support and assist American interests will, I am sure, be appreciated. Accordingly, I consider it important that no action be taken in the United States discriminating against foreign interests as such in the oil industry.

The Navy Department, I understand, has been considering the advisability of a general policy of stipulating that nationals of nonreciprocating countries shall not have any interest, either directly or under contracts to be made hereafter, in leases pertaining to naval petroleum reserves. Such a policy would be analogous to the final proviso of Section 1 of the General Leasing Act of February 25, 1920 (41 Stat. 437). I understand that consideration has also been given to the adoption by administrative action of a policy of reciprocity with respect to existing leases in which foreign nationals are interested.

While there may be no objection to the principle involved in this proposal, I feel that its application at this time or under existing circumstances would not be advisable. In the first place, it could hardly be of any great practical importance. It is understood that naval petroleum reserves are less than 1½% of our total petroleum reserves, and that the larger part of the naval reserves has already been leased under long term contracts. Hence the opportunity for foreign-controlled companies to participate in the further development of these reserves is a very limited one. There are, moreover, considerable risks in the proposal. It would be misunderstood abroad and give basis for misrepresentations of our attitude. The present situation is specially delicate in view of our pending negotiations with the Netherlands Government. Also the proposal might tend to increase agitation in this country against the operation of foreign petroleum interests in the United States, and thus tend to make more difficult the support by this Department of American petroleum interests abroad. Besides, attention would be focused on the existence of [Page 398]naval oil reserves, which might thus suggest to foreign governments the desirability of constituting a part or all of their own oil deposits as naval or military reserves to be exploited by the respective governments or their own nationals exclusively. In this connection, it may be observed that Brazil has lately been considering a proposal which would declare all petroleum deposits as well as deposits of many of the most important minerals to be reserved for national security and defense and excluding foreign interests from opportunity to participate in their development.

I wish to take this opportunity to express my appreciation of the informal cooperation which you and officers of your Department have already accorded in this matter, and to thank you for your willingness to take into account the considerations of special importance to this Department.

I am [etc.]

Frank B. Kellogg