Memorandum by the Adviser on International Economic Affairs (Feis)

Memorandum for the Files

I have just been informed it was decided to issue today the letter of intent in which the Petroleum Reserves Corporation would authorize [Page 938] the California-Arabian Standard Oil Company to proceed with the construction of a very large refinery in Saudi Arabia.35 This refinery project will be undertaken in order to assure adequate supplies for operations in the Far East. The letter of intent merely authorizes the company to undertake certain expenditures; the method of finance, and relationship between the United States Government and the Company, are to be determined by future negotiation.

In view of the importance of and interest in the project, the question of notification to the Saudi Arabian and British Governments presented itself. On the basis of discussions held at the last meeting of the Board of Directors of the Petroleum Reserves Corporation, and subsequent clearance with Mr. Wallace Murray, the following procedure has been decided upon:

That the first notification shall be made to Ibn Saud by the representatives of the California-Arabian Standard Oil Company in the light of their close and satisfactory relationships with Ibn Saud, and the fact that the refinery will be constructed under their concession, and the fact that they will carry out the construction.
Almost immediately thereafter, by instruction from the Department, our Legation will similarly discuss the project with Ibn Saud.
Notification to the British shall be made through the War Petroleum Board. This method was selected as the way most calculated to have the project accepted as a military project. It will be made clear that in the event the British Government wishes to discuss the matter with the State Department, our doors are open.

H. Feis
  1. Extensive discussions regarding this subject had taken place during the summer between officials of the Departments of State, War, Navy, Commerce, and Interior, and the Director of War Mobilization and the Petroleum Administrator for War.