800.6363/1515a: Telegram

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

437. There is given below in substance the press release of February 6, issued by Secretary Ickes regarding the construction of a pipe line in the Middle East:

“An Agreement in Principle with the Arabian American Oil Company and the Gulf Exploration Company was signed by Secretary Ickes with the approval of the President and of the State Department and upon the recommendation of the War and Navy Departments, the Joint Chiefs of Staff and the Army-Navy Petroleum Board, the purpose of which is to make provision for the construction of a pipe line from the Persian Gulf area to a point on the Eastern Mediterranean and to provide for United States Naval and Military forces a reserve of one billion barrels of oil. The Government will determine the most feasible plan for operation of the facilities and will retain supervision thereof. The entire cost of construction plus interest, estimated to be between $130,000,000 and $165,000,000, is guaranteed by the companies and will be returned to the Government within a period of 25 years.

The pipe line facilities, subject to certain stipulated obligations, will be available to other oil producers and shippers in addition to those signing the Agreement.

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The companies agree to maintain a crude oil petroleum reserve of 1 billion barrels or 20 percent of the total crude reserve if they [there] are less than 5 billion barrels to be available for Government purchase for military or naval use at 25 percent below Persian Gulf area market price or of price of similar United States crude oil, whichever is the lower. The Government is not obligated to take any of this oil but has right to do so at any time for a period of 50 years and also has an option to purchase all crude petroleum and petroleum products thereof produced by the companies in times of war or other national emergency.

Further, the Agreement provides that the companies will not sell petroleum or petroleum products to any Government or nationals of any Government when, in the opinion of the State Department, such sales would be unwise in the light of United States foreign policy and requirements of collective security. The companies also agree that they will give notice to the State Department and Petroleum Reserves Corporation before negotiating with governments of any foreign countries for the sale of petroleum and petroleum products from their concessions in Saudi Arabia and Kuwait.

The Petroleum Reserves Corporation does not propose to compete with private oil industry of the United States. Its purpose is to promote that industry, to further the interests of the people of the United States, and to promote the interests of the governments and of the peoples of the areas concerned.

The agreement is conditioned upon obtaining the sanction of the rulers of Saudi Arabia and Kuwait. In addition, the sanction would be obtained of other interested foreign governments, including those of Trans-Jordan and Palestine.”27

Repeat to Jidda, Jerusalem and Baghdad.28

Copies of press release and the Outline of Principles of Proposed Agreement have been sent air mail.29

  1. For comments on the proposed pipeline made before the House of Commons by the British Secretary of State for Foreign Affairs (Eden) on February 9, March 1, and April 26, 1944, see Parliamentary Debates, House of Commons, 5th series, vol. 396, col. 1744, vol. 397, col. 1434, and vol. 399, col. 785. In telegram 561, March 9, 5 p.m., the Minister in Egypt reported a statement by the Egyptian Minister of Commerce and Industry before the Chamber of Commerce the previous night that the Egyptian Government had not been officially informed of the project and that there had been no negotiations on the subject between the Egyptian and American Governments (800.6363/1522).
  2. Also repeated to Tehran with the following added: “Referring to your 122 of February 23, the foregoing may be brought to attention of Prime Minister.” (800.6363/1515a) No. 122 stated: “Would appreciate being informed of nature of reply which may be made to Prime Minister in response to his request for information concerning proposed new oil pipe [line] from this area to Eastern Mediterranean.” (800.6363/1501)
  3. Instruction 697, February 19, not printed; copies of the enclosures were also transmitted the same day to Jidda and Baghdad in instructions 115 and 142, respectively.