890b.6363 Gulf Oil Corporation/163

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

No. 516

Sir: I have the honor to refer to the Embassy’s despatch No. 483 of November 12, 1932, with reference to the Koweit oil concession, and to enclose a copy of a Foreign Office note, dated November 23, 1932, on this subject.

The text of this note has been discussed with the representative of the American company in London, who surmises that the terms of the American draft proposals for a concession are more favorable than those of the Anglo-Persian Oil Company.

I shall take occasion when I visit the Foreign Office at a not distant date to make inquiry as to the status of this matter.

Respectfully yours,

(For the Ambassador)
Ray Atherton

Counselor of Embassy

The British Under Secretary of State for Foreign Affairs (Vansittart) to the American Ambassador (Mellon)

My Dear Ambassador: Since I wrote you on November 11th about Koweit oil, I have been considering the question, on which, as you know, I was not in possession of full details at the time of our interview. I have, therefore, come to it with a fresh mind, and one or two points have at once struck me.

The memorandum which you left with me on November 2nd might be interpreted as implying that His Majesty’s Government have been purposely procrastinating in regard to the participation of American interests in the development of Koweit oil for over four years. But, apart from the fact that the Anglo-Persian Oil Company were in the field in Koweit long before the British concern which is now acting for the United States interests, I wish to make it clear that the decision of His Majesty’s Government (which was [Page 25] communicated to the Eastern and General Syndicate in November 1928) that any oil concession which might be granted must contain a clause which would confine it to British interests, was taken on grounds of general policy and before we had heard anything of American participation in the matter. The decision was in fact taken in pursuance of the then existing general policy of His Majesty’s Government which had been in force for many years, and also because the Sheikh of Koweit, whose interests they are, of course, under an obligation to protect, expressed himself as unwilling to grant a concession to any company not under British control. It was not until December 19, 1928, that the Syndicate informed the Colonial Office of their agreement with the Eastern Gulf Oil Company, by which the concession, if obtained, was to be transferred to United States interests. His Majesty’s Government did not however feel able to change their decision until, in December 1931, your Embassy first made representations in the matter. Then His Majesty’s Government, in their desire to go as far as they could to meet the United States Government, reconsidered the question and decided after much deliberation that, while they could not commit the Sheikh of Koweit, they would, for their part, not insist in this case that any concession granted must contain a clause confining it to British interests, if the Sheikh for his part was willing to grant a concession without such a clause, and we so informed your Embassy in April.
Your memorandum also reverts to the representations made in Atherton’s official note No. 231 of the 6th September, to the effect that the American interests concerned are labouring under a disadvantage as compared with the Anglo-Persian Oil Company owing to their ignorance of the provisos which His Majesty’s Government would require to see embodied in the concessions granted, in order to safeguard their own interests. But surely these representations were satisfactorily answered in Sir John Simon’s reply, No. E 4582/121/91 of the 16th September. As I understand it, the “safeguards” are a matter for discussion after the Sheikh of Koweit has made his decision from the point of view of what is to the best advantage of his own State. (I am advised that though no final decision has been taken on the point it is not unlikely that at least some of them would equally have to be embodied in any concession which might be granted to a purely British Oil Company wishing itself to operate in Koweit). As these safeguards are not primarily the concern of the Sheikh, and will not affect the comparison of the two draft concessions on their merits, they do not in our view affect the matter at the present stage.
As you know, that stage is that the latest draft concession submitted by the Eastern and General Syndicate and the draft submitted [Page 26] by the Anglo-Persian Oil Company have been compared in London by the department concerned on the technical side in order that the Sheikh, who is naturally not well versed in such technical matters, may understand what in fact will be the effect of the main provisions of each offer (e.g. the financial side, conditions of working the oil, etc., etc.,). The resulting document is now on its way to the Persian Gulf and we must await the result of the Sheikh’s examination.
The two offers made for the concession are thus being treated concurrently, and that, I feel sure you will appreciate, was the only correct course for His Majesty’s Government to take in order to secure the most acceptable terms for the Sheikh. If only in his interest, His Majesty’s Government were naturally bound, as Sir John Simon informed Atherton in his note No. E 1733/121/91 of the 9th April, to allow any interested company to consider whether they wanted to apply for a concession, and if so to give them time to do so. The Anglo-Persian Oil Company formally renewed their efforts to obtain a concession in Koweit in August, 1931 (not October as mentioned in your memorandum).
I regret that there has been delay in the whole matter; I cannot of course at this stage say exactly when the Sheikh will decide to grant a concession; I do hope, however, that in the light of the preliminary information I have now given, you will be able to assure your Government that there has been no desire on our part to cause them embarrassment by any avoidable delay.

Believe me [etc.]

Robert Vansittart