890b.6363 Gulf Oil Corporation/56

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

No. 2

Sir: I have the honor to refer to the Embassy’s telegram No. 140, April 11, 12 noon,14 relating to the Koweit oil concession, and to [Page 14] forward herewith a copy of the Foreign Office note, addressed to Mr. Atherton, Chargé d’Affaires, referred to therein.

Respectfully yours,

(For the Ambassador)
Ray Atherton

Counselor of Embassy

The British Secretary of State for Foreign Affairs (Simon) to the American Chargé (Atherton)

No. E 1733/121/91

Sir: With reference to your Note No. 1696 of the 29th March regarding the application of the Eastern and General Syndicate for an oil concession in Koweit, which they propose, if granted, to transfer to United States interests, I have the honour to inform you that His Majesty’s Government have given careful consideration to the representations made by General Dawes and yourself on this subject and I am now in a position to return you a reply.

Your Government will appreciate in the first place that the Sheikh of Koweit, though an independent ruler, is in special treaty relations with His Majesty’s Government and enjoys their protection. These special relations lead him to seek their advice on important matters of policy, and place His Majesty’s Government under an obligation to watch over his interests. Many years ago the predecessor of the present Sheikh gave an undertaking that he would not grant an oil concession in his territories without their consent.
In paragraph 2 of your note of the 29th March you mention that your Government are informed that the Sheikh is agreeable to the “entry of the Eastern Gulf Oil Company and to the granting on behalf of that Company of an oil concession without the inclusion of the ‘nationality Clause’”. As was explained to you in a semiofficial letter of the 22nd December last from my Department15 His Majesty’s Government on learning this, felt some doubt as to the correctness of this interpretation of the Sheikh’s attitude, since the Sheikh had consistently expressed himself emphatically to the local British authority as desirous of confining any oil concession to entirely British interests. In your letter of the 30th December you were good enough to transmit for my information a copy and translation of a letter from the Sheikh to Major Holmes, the representative of the Eastern and General Syndicate, on which the American interests apparently based the information on this point given to your [Page 15] Government. His Majesty’s Government have caused enquiry to be made of the Sheikh, who replied that he was still averse from receiving in his principality a company other than an entirely British one and that he did not consider himself as in any way committed by his letter to Major Holmes to grant the Eastern and General Syndicate the concession which they seek. It will be observed from a reference to the Sheikh’s letter that its final sentence only expresses a readiness to discuss the matter further with Major Holmes after agreement has been reached between the Syndicate and His Majesty’s Government.
When examining the necessity for the continued insistence on the inclusion in any oil concession in respect of Koweit of a clause confining it to British interests, His Majesty’s Government have been concerned not only with their own interests in the matter, but also with their duty to secure the best terms possible for the Sheikh of Koweit, and in particular, have had regard to the possibility that it would be less difficult for the local British authorities to control the activities of a purely British concern and to reconcile them with the Sheikh’s interests. On a balance of all the conflicting considerations, His Majesty’s Government are, however, now prepared, for their part, not to insist in this case that any concession must contain a clause confining it to British interests, if the Sheikh for his part is willing to grant a concession without such a clause.
I wish, however, to make it clear that this decision does not imply agreement in the immediate grant of the proposed concession to the Eastern and General Syndicate, to which the Sheikh, as stated above, considers himself in no way committed. His Majesty’s Government indeed do not consider that they could properly advise the Sheikh to give prior or preferential treatment to the Eastern and General Syndicate, but hold it to be necessary that any application for a concession which may be forthcoming from any quarter be examined with a view to decide which, if any, will best serve the interests of the Sheikh and his principality. I should add that the draft concession submitted to the Colonial Office by the Syndicate would in any case need revision both in respect of the provisos designed to safeguard the interests of His Majesty’s Government (Clause 8) and on many points affecting the interests of the Sheikh.
In paragraphs 4 and 5 of your Note of the 29th March you have referred to the operations now being carried out by the Anglo-Persian Oil Company in Koweit and reminded me of the requests made to my Department that this company should not be permitted to proceed with its operations pending a decision by His Majesty’s Government as to the exclusion of all but British interests. I would [Page 16] explain that the Anglo-Persian Oil Company manifested an interest in Koweit oil, and indeed made a formal application for a concession before the Eastern and General Syndicate had even appeared on the scene, though the negotiations were at that time not brought to a conclusion, chiefly because the terms suggested were not satisfactory. Several months before any representations were made by General Dawes or yourself in the matter, the Anglo-Persian Oil Company made a request for permission to carry out a geological survey in Koweit with a view to decide whether to submit an application for an oil concession. In order to ensure that any oil concession which the Sheikh may grant shall embody the best available terms, it is in the view of His Majesty’s Government desirable and proper that any interested companies be given every opportunity in advance of satisfying themselves whether or not they wish to submit an offer. His Majesty’s Government therefore raised no objection to the grant by the Sheikh of the application of the Anglo-Persian Oil Company. I understand that their present activities in Koweit are confined to such a geological survey.
The position therefore is that His Majesty’s Government for their part are prepared to agree to the omission from any oil concession, which the Sheikh may be prepared to grant, of a clause confining it to British interests. If therefore the Eastern and General Syndicate desire to renew their application to the Sheikh for a concession, which they would subsequently transfer to the Eastern Gulf Oil Company, His Majesty’s Government will raise no objection to the application being taken into consideration together with any other applications for oil concessions which may be forthcoming from other quarters.

I have [etc.]

John Simon
  1. Not printed.
  2. See despatch No. 2482, December 29, 1931, from the Ambassador in Great Britain, p. 3.