The Acting Secretary of State to the Minister in Egypt (Tuck)
3147. The following represents the views of interested divisions in the Department and of FEA26 with respect to the policy to be recommended in conversations with both the British and Egyptian authorities, on the question of ownership and administration of the Cairo-Suez Pipeline. It is transmitted for the information of the Legation and Landis.27 A formal instruction will be drafted after Landis has reported the results of his discussions in London.
- Ownership: It is not desired that there should be any discussion at this time of any arrangement whereby the ownership of the pipeline would pass from British and American hands. The division of ownership as between the US and UK Governments shall be determined on a basis of proportionate contributions to its construction made by each Government when a definitive accounting of such contributions is available.
- Right-of-way: The Egyptian Government will agree to the utilization of the present right-of-way in return for a suitable rental which could be on the basis of an agreed minimum with or without a share of the profits resulting from operation of the line.
- An operating company will be formed to operate the pipeline and will be composed of oil companies which are now using or may in the future desire to use the line. It is understood that the pipeline will be open for the transportation of petroleum products on a common-carrier basis.
- Policy: The determination of pipeline tariffs, the allocation of its capacity in the event that petroleum tendered for transportation exceeds the line’s capacity and other basic policy matters will be determined by a standing joint commission on which representatives of the Egyptian Government, British Government and the United States Government will sit.
- Alternatives: Should the Egyptian Government prefer the operation of the pipeline on a cooperative basis under which net profits would be divided among the shippers in proportion to the quantity of petroleum products transported through the line, there would be no objection on our part. Other modifications which do not disturb the principle of maintaining present ownership by the British and American Governments and joint control of policy matters can be discussed on an ad referendum basis.
You will wish to discuss the foregoing with appropriate British officials and obtain their concurrence in order that a joint approach to the Egyptian Government can be made.
Please report the results of any conversations you may have in line with the foregoing.