The Secretary of the Interior (Ickes) to the Secretary of State

My Dear Mr. Secretary: Your letter of January 5 takes the position that the negotiations of the Petroleum Reserves Corporation with the California Arabian Standard Oil Company and with the Gulf Exploration Company, for the purpose of arranging participation by this Government in those companies or their foreign reserves, should be held in abeyance, pending conversations with the British Government. Your letter further states your view that it may be necessary to defer a decision as to the program of the Petroleum Reserves Corporation until the question of the character of post-war security is settled or more clearly defined.

This statement of the policy of your Department is directly opposed to the program to which you agreed some months ago8 and which was approved by the President. As a matter of fact, the State Department was one of the agencies which initiated the interest of this Government in the acquisition of a share in the two companies referred to above, or in their oil reserves in the Persian Gulf area. I think that it is fair to say that the State Department was primarily responsible for the initiation of the conferences among the departments concerned which eventually resulted in the program of the Petroleum Reserves Corporation which you approved and in the [Page 14] carrying out of which your Department has been represented by ranking officials.

It is inconceivable to me that at the time that the program was originated, and during the time that negotiations and discussions were proceeding, the State Department was unaware that discussions and negotiations would be had with the British which would involve world oil problems or that arrangements with respect to Persian Gulf oil supplies would have an important bearing upon post-war security. In addition, I know of no new facts which have occurred upon which a change of position might be based, and your letter refers to none.

Since the program of the Petroleum Reserves Corporation which you now ask be suspended has been approved by the President, I cannot, of course, agree that it be abandoned—which is what your letter really suggests—unless I receive a direction to that effect from the President. Nor can I join with you in a recommendation that the program be abandoned. In fact, I think that it would be a grave error which would prejudice this Nation’s position for generations if this program to strengthen our position with respect to the Persian Gulf oil reserves were not vigorously and promptly prosecuted at this time. I cannot appreciate how the effectuation of the program could adversely affect negotiations with the British or have a bearing upon other international problems. Indeed, it seems to me that the only foreign nations which could assert a legitimate interest in the program are the Kingdom of Saudi Arabia and the Shaikhdom of Kuwait.

The principal reason for participation by this Government in the ownership of the two named companies or of their oil reserves in the Persian Gulf area is to strengthen the position of the companies and of this Government in those oil fields. It is the unanimous judgment of the departments which participated in the formulation of the program that American control of these oil reserves is vital to the security of this Nation, and that this control was imperiled so long as the companies did not have the participation, in an ownership capacity, of the United States Government. This view has been asserted by representatives of the companies themselves, particularly by the Standard Oil Company of California and the Gulf Oil Company. It was most ardently championed by representatives of the State Department. It is my considered judgment that unless steps are taken now—during the war—to achieve this objective, it will not be attained for many years to come; perhaps never. Consideration of the domestic political situation, as well as of our bargaining position internationally, supports this conclusion.

If this Government should acquire an interest in the companies or in the reserves, it would merely be placing itself upon a par with the [Page 15] British. As a matter of fact, it is doubtful whether this Government, as a result of the negotiations, would acquire as full a degree of ownership and control as the British Government has in its companies operating in the Persian Gulf area. In view of the participation of the British Government in the Persian Gulf area, I cannot see that they would have any basis whatever for objecting to American participation in the ownership of American companies or of reserves controlled by them. Certainly, we should give no weight to such an objection by the British Government. In fact, it seems to me that, unless this Government places itself upon a basis in the Persian Gulf area which approximates the position of the British Government, our position in the negotiations will not be as good as it should be.

It seems to me that the only relevant question of international policy is whether prosecution of the program would prejudice the relations of this Government with the Kingdom of Saudi Arabia and the Shaikhdom of Kuwait. The State Department has on several occasions, as well as by your own approval of the program, indicated that such prejudice need not result. I do not understand that you have changed your position in this respect and I do not know of any facts which might justify a change of position. Furthermore, I am advised that King Ibn-Saud has indicated to representatives of the Standard Oil Company of California that he would welcome participation by this Government in the California Arabian Company.9

Accordingly, I propose to call a meeting of the Board of Directors of the Petroleum Reserves Corporation to consider your suggestion that negotiations be suspended. I hope that you will find it possible to attend this meeting, and I should be glad to arrange it to suit your convenience. It is my thought that the Board should consider the points which you make in your letter and should advise the President of its conclusions and recommendations.

Sincerely yours,

Harold L. Ickes
  1. See joint letter of June 26, 1943, to President Roosevelt by the Secretary of State, the Secretary of War, the Acting Secretary of the Navy, and the Secretary of the Interior, Foreign Relations, 1943, vol. iv, p. 924.
  2. See telegram 172, November 3, 1943, from Jidda. Foreign Relations, 1943, vol. iv, p. 941.