890F.6363/58: Telegram

The Minister in Egypt ( Kirk ) to the Secretary of State

1327. Personal for the Secretary and Under Secretary. Colonel Hoskins34 tells me that a project is being considered whereby the oil concessions in Saudi Arabia now operated by the California Arabian [Page 936] Standard Oil Company would be taken over by the American Government and although my observations are circumscribed by insufficient knowledge of the details of this project and are limited to aspects affecting its local application without regard to any problems which may exist at home I feel, nevertheless, compelled to submit my views to you.

From the time of my first visit to Saudi Arabia in May 1942, I have been impressed by the high standard established and maintained by California Arabian Standard Oil Company in all its activities in that country as well as by the special regard in which the Company and the representatives were held by the King and his advisors, and this factor has been mentioned by me in reports to the Department. In fact the esteem which America and Americans enjoyed in Saudi Arabia was largely due to the quality of the conduct of business by that Company and the nature of its relations with the King’s Government. The success of the Company in symbolizing in that country the essence of American business ethics and industrial progress may be ascribed, I believe, not only to the modern standard of their installations and operations but especially to their enlightened methods of dealing with the officials and people there. This latter point is especially important in a country such as Saudi Arabia where the full benefit of the Company concessions cannot be obtained without contributing to the development of the country itself and this the representatives of the Company have effected to a high degree by rendering services including building roads, planning irrigation projects, establishing schools, and, even supplying and maintaining the amenities of civilized life for the King and other prominent Saudi Arabians. I submit that under Government administration that elasticity of operation would not obtain which now enables California Arabian Standard Oil Company to secure the results mentioned above.

Another factor which both the King and members of his entourage have repeatedly emphasized in this regard was that a primary consideration in awarding concessions to Casoc was reliance on the absence of ulterior American political motives in respect of Saudi Arabia specifically and Near East generally, as opposed to the suspected policy of certain other governments and the fact that this assumption had been borne out by subsequent developments was mentioned as a source of gratification. Overt American Government intervention in oil operation in Saudi Arabia would tend to tar us with the same brush.

A further consideration may be found in the larger sphere of American economic expansion in the foreign field after the armistice. The conduct of business in Arab countries is a specialized concern. It requires special methods, specialized personnel, competent to cope with the devious business systems prevalent in Near East countries. [Page 937] Above all it requires a system free from direct foreign government control which rightly or wrongly is ever open to the accusation of economic penetration for political purposes. The ideal economic policy for the United States in this area, as no doubt in others, would be more active and consistent governmental support than has generally prevailed in the past of the right kind of private American business enterprise with direct government participation in the national life of the respective countries limited to those fields in which our own enlightened altruism cannot be impugned and which are fertile ground for the development of good will. The government operation of oil concessions would, I submit, run counter to such a plan for the future.

I repeat that the foregoing observations are predicated solely on the consideration of the local aspects of the problem and of course on the assumption that the California Arabian Standard Oil Company as now constituted is capable of satisfying the requirements as to their production. In addition to the objections enumerated I can foresee also serious complications in the transfer of the present concession to direct United States Government control both in relation to Saudi Arabia itself as well as to other governments whose suspicions might be aroused thereby. On the basis of the foregoing, therefore, I believe that unless it can be clearly established that the present situation is actually impeding the immediate prosecution of the war, no steps should be taken to alter the status of Casoc insofar as its identity in Saudi Arabia is concerned.

  1. Lt. Col. Harold B. Hoskins; regarding the visit by Lt. Col. Hoskins to Saudi Arabia, see pp. 796821, passim.