890b.6363 Gulf Oil Corporation/5: Telegram

The Secretary of State to the Chargé in Great Britain (Atherton)

336. Please refer to the Department’s 61, March 28, 6 p.m., 1929,1 regarding a petroleum concession in the Bahrein Islands. The Department is informed that at the time the Gulf Oil Corporation obtained the option on the Bahrein concession it also obtained from the Eastern and General Syndicate an option on a concession for which the Syndicate was negotiating in Kuwait. The Syndicate has continued its negotiations with the Shaikh of Kuwait who seems to be willing to grant a concession contract on terms acceptable to the American company, but the Colonial Office appears to have intervened and to have insisted upon the inclusion in the concession contract of the so-called “British nationality clause.” As in the case of Bahrein, the insertion of this clause would effectively exclude a company controlled directly or indirectly by American interests from holding or operating the proposed concession in Kuwait. Unless the Colonial Office is willing to substitute for the “nationality clause” a clause similar to that which was finally agreed upon in connection with the Bahrein concession, the Gulf Oil Corporation will be barred from proceeding with the Kuwait development.

From evidence furnished by the Gulf Corporation it appears that it, as well as the Eastern and General Syndicate, has made sincere efforts during the past 2 years to adjust this matter, but it has met with one delay after another. Finally, on August 4, 1931, the Syndicate addressed a letter to the Colonial Office inquiring whether it would now be prepared, in view of the favorable attitude which had been shown by the Shaikh, to notify the Political Resident in the Persian Gulf that the British Government had no objection to the Shaikh granting a concession from which the British nationality [Page 2] clause was omitted. No definite answer has been received to this inquiry, but on November 25, 1931, the Colonial Office informed the Syndicate that it would reply “as soon as practicable.”

In view of the delays which have already occurred in this matter it is desired that you seek an informal interview with the appropriate authorities and express the Department’s hope that it will soon be possible for the Colonial Office to give a favorable reply to the American company through the Eastern and General Syndicate. In this connection you may state that the Department assumes that the Colonial Office has no desire to exclude American interests from participating in the development of any petroleum resources which may exist in Kuwait and that it is hoped there will be no difficulty in omitting from the proposed Kuwait concession the British nationality clause.

You will understand that the principle which the Department wishes to establish in this case is the right of American interests to participate in the development of the petroleum resources of Kuwait upon an equal basis with British interests. The Department does not wish to insist that any particular concession be granted to any particular American company, but it does wish to open the door in Kuwait so that American interests may have an equal opportunity to compete. In this general connection it may be mentioned that the Department is informed that several draft concessions have been submitted to the Shaikh by the Eastern and General Syndicate. Some of these drafts provide for the grant of certain areas for exploitation, such areas to be selected by the Syndicate or its assignees; other drafts provide for an exclusive exploitation concession for the whole of Kuwait. The Department has made it clear to the Gulf Oil Corporation that this Government would not be prepared to ask for any exclusive rights for American interests in Kuwait and that corporation has expressed its willingness to confine its exploitation rights to a reasonable area. In the event that this aspect of the question is raised by the British authorities you may inform them of the attitude of this Government and of the Gulf Oil Corporation.

It is understood that the Ambassador has been informed of the background of this whole situation. In the event that further or more detailed information is needed it is suggested that you consult Major Harry Davis, the London representative of the Gulf Oil Corporation, who is understood to be thoroughly informed in the matter.

Please inform the Department by telegraph of the results of your informal representations.