Memorandum by the Adviser on Political Relations (Murray)47

On the ground that this Government should by purchase directly participate in, if not actually control, petroleum companies holding reserves abroad in order to protect the oil concerned and thus assure supplies when needed for security reasons, the Petroleum Reserves Corporation has conducted negotiations through three stages with the California-Arabian Standard Oil Company, which holds great reserves in Saudi Arabia. First, the Corporation endeavored to take [Page 949] over the entire holdings of the company in Saudi Arabia; next, the Corporation discussed the acquisition of majority stock control; and finally, the negotiations contemplated that the Government own one-third of the stock of Casoc, the present joint owners of that company, Standard Oil Company of California and the Texas Company each also to own one-third. These negotiations are suspended. The Minutes of the last meeting of the Directors of the Petroleum Reserves Corporation, which was held on November 3, state: “The Board was unanimously of the opinion that the interests of the people of the United States and its foreign oil industry required the participation of the United States Government or an agency thereof in the protection of American oil reserves. The Directors expressed deep regret that the Casoc representatives had been unable or unwilling to appreciate the urgency of and need for the assistance of this Government”.

These same Minutes also state “The Board of Directors authorized the President to continue negotiations with the Gulf Oil Corporation, which owns or controls one-half of the stock of the corporation owning the concession in the Sheikdom of Kuwait”. The Gulf Oil Company’s partner in the Kuwait concession is the Anglo-Iranian Oil Company, the majority of which is owned by the British Government.

The over-all objective of any discussions with the British is development of Middle Eastern oil as a result of cooperation between the two Governments on oil in that area. The purpose of that oil development is to make supplies available for long-range peacetime needs as well as for security purposes. The joint cooperation of the two Governments in the development of the oil will result in benefits to the countries in which the oil is located. This will undoubtedly go far in itself to safeguard the concessions in the area since no country will precipitously endanger the source of its prosperity. Furthermore, the establishment of cooperation between the United States and British Governments with concurrent elimination of rivalry will be an added stabilizing influence on the concessions.

Thus, the conversations with the British are designed to accomplish on an international basis, among other things, the purposes which the Petroleum Reserves Corporation’s negotiations with the oil companies were designed to further by unilateral action. However, the Petroleum Reserves Corporation’s aims are only a part of the general objective of the conversations with the British.

Until we can discern clearly the outlines of the results of the conversations with the British, it is impossible to determine whether a unilateral course by this Government of the nature of that followed by the Petroleum Reserves Corporation in the matter of the negotiations for participation in the companies, would be in line with those [Page 950] conversations. In fact, it is feared that such a course might actually prove to be inconsistent with or even in conflict with the results we may wish to attain in collaboration with the British. Moreover, the Petroleum Reserves Corporation’s course leaves out of account larger issues, particularly and most relevantly the question of the character of the post-war security system which may be developed as a result of the Moscow agreements.48

Accordingly, it is strongly recommended that the Petroleum Reserves Corporation be advised that the Department is of the opinion that no further negotiations be conducted at this time regarding Government participation in American companies holding reserves abroad. A draft letter to Secretary Ickes as President of the Petroleum Reserves Corporation so advising him is attached for your consideration.49

Wallace Murray
  1. Addressed to the Secretary of State and the Under Secretary of State (Stettinius).
  2. For correspondence on the Moscow Conference of Foreign Ministers held October 18–November 1, 1943, see vol. i, pp. 513 ff. On November 1, an Anglo-Soviet-American communiqué was released to the press; for text, see ibid., p. 741.
  3. Not attached to file copy of this document. A letter to this effect was sent on January 5, 1944.