890F.6363 Standard Oil Co./129

Memorandum of Conversation, by the Assistant Chief of the Division of Near Eastern Affairs (Alling)

Mr. Thornburg7 opened the conversation by saying that the company had been receiving reports recently from its representative in Bahrein indicating a rapidly worsening of the situation in that part of the Near East, particularly in Iraq. Mr. Thornburg said that their General Manager, from whom these reports were received, was a person of great calm and judgment and therefore they had been [Page 630]considerably worried, not to say alarmed, by his reports. I asked Mr. Thornburg what sort of communications they had with their representative, and he said that they had two methods of sending telegrams, one through the usual commercial company which went through London and was usually delayed five or six days in transit and also was subject to censorship. The other method was by direct communication between a radio station which the company had on a motor launch and the Mackay Radio Company in New York. This channel was not subject to censorship and messages came through at once, being only occasionally delayed by weather conditions.

Among the suggestions which their General Manager had made in his recent reports was one that an American naval vessel should visit Bahrein and other Persian Gulf areas. The General Manager felt that such a visit might go far toward stabilizing the situation.

Mr. Thornburg then turned to a discussion of the situation in Saudi Arabia and asked what action had been taken on the proposal of Mr. Moffett for an advance of funds to King Ibn Saud. Mr. Thornburg stated that although Ibn Saud had been loyal to the British and would doubtless continue so as long as he felt that his interests lay in that direction, there could be no doubt that his own interests came first and that if he saw it was to his advantage to play along with the Axis powers he would undoubtedly do so. Certainly he would probably have to do so unless funds were forthcoming to enable him to feed his people in the patriarchal economic structure which had been set up in the country. I told Mr. Thornburg that all we knew of the matter was that this Division had been asked to prepare a memorandum for the use of the Secretary8 and that that had been done last week. Since then I had heard nothing about the matter and I assumed that any information regarding developments would have to be obtained from the White House. For background purposes I inquired whether the company had in mind that the extra oil which it proposed to produce would be consumed entirely by the United States Navy. Mr. Thornburg said that that was their idea, and that even if the Navy had to obtain bids, as he understood was the case, the price at which this oil was being offered was so low that the purchases would undoubtedly be made from his company. I asked him if he felt that the Navy could absorb all of the oil which they proposed to produce, and he said there was no question at all about that. As a matter of fact the Navy used petroleum products far in excess of the proposed production. However, Mr. Thornburg felt that the Navy might wish not to take these products immediately but to have them kept as a reserve for future requirements since it was well known that oil supplies and reserves on the Pacific Coast of the United [Page 631]States were definitely limited and would within the next few years be entirely exhausted.

I told Mr. Thornburg that the practicability of his proposal was of course not a matter for this Department to decide; that it was up to the Navy Department and other agencies. I added, however, that in the event it should be decided that financial support ought to be given to King Ibn Saud another method by which that support might be given would conceivably be under the terms of the Lend-Lease Act. I explained that as conditions were at present the mere granting of financial aid of ten did not solve the problem in a country suffering economic distress since the matter of obtaining supplies was also difficult even if the money was available. Mr. Thornburg said he appreciated that point and that so far as he could see the situation in Arabia might be handled by a combination of the two methods, that is, part financial aid and part direct shipment of supplies under the Lend-Lease Act.

Mr. Thornburg said that he felt he should also mention that his company had had in mind that any financial or other aid granted might necessitate the appointment of a financial control officer of American nationality, probably under the title of Financial Adviser. Mr. Thornburg said that this probably would be a difficult matter to handle with Ibn Saud, but that if large sums were going to be granted certainly some financial control should be established. He said that his own company had endeavored to find out what use was made of the advances on royalties which the company had made. It had been impossible, however, to obtain any definite and satisfactory information since money was paid out to a large extent by subsidies to the various tribal leaders and sheiks through the various wakfs. I told Mr. Thornburg that this was the first intimation we had had that a financial adviser was envisaged. He replied that the company had even gone so far as to try to locate possible candidates, and among such candidates suggested was the name of Mr. McCaskey,9 who had been with the Millspaugh Mission in Persia.10 I told Mr. Thornburg that subsequently Mr. McCaskey had also served as financial adviser in Liberia, but that he had had to retire largely because of his health. I also pointed out that in a country where no language but Arabic was spoken it would seem to be essential to obtain the services of a man who had a thorough knowledge of that language. Mr. Thornburg agreed and added that this presented obvious difficulties.

In leaving Mr. Thornburg said he hoped that the Department might be in a position to ask the Navy Department to endeavor to expedite [Page 632]the arrival in Bahrein of Commander Grove, the new naval observer at that post. He said that Commander Grove had sailed yesterday from San Francisco but that unless he could be intercepted at Honolulu and induced to continue by air he might arrive in Bahrein too late to be of great service to this Government. I told Mr. Thornburg that we would be glad at least to make inquiries of the Navy Department.

  1. Max W. Thornburg, vice president, Bahrein Petroleum Co.; appointed Special Assistant to the Under Secretary of State, July 7, 1941.
  2. Supra.
  3. Charles I. McCaskey.
  4. For correspondence regarding the Millspaugh Mission, see Foreign Relations, 1927, vol. iii, pp. 523 ff.