The President of the California Arabian Standard Oil Company ( Davies ) to the Adviser on Political Relations ( Murray )
My Dear Mr. Murray: As you are aware, the Standard Oil Company of California and the Texas Company have equal interests in certain oil concessions and operations in the Near East, notably in Bahrein and in Saudi Arabia. The concession in Saudi Arabia is held and operated by the California Arabian Standard Oil Company, whose shares are owned by the two companies equally. Hitherto, the principal outlet for oil from Saudi Arabia has been to the East, that is by tanker via the Persian Gulf to the consuming areas generally east of the Suez Canal. It is expected that production in Saudi Arabia will be greatly increased early in the post-war period in order to serve consuming areas which were formerly supplied from the western hemisphere. For this reason, we believe that a pipe line of large capacity will be necessary for the economic delivery of crude oil from the producing fields in Eastern Saudi Arabia to an appropriate seaport and future refinery location on the Mediterranean. Contingent upon political and other circumstances favorable to operations of this type being established among the nations concerned, at the peace table or prior thereto, it is contemplated that we would undertake the construction and operation of such a pipe line and related facilities. The pipe line, however, would not necessarily be restricted solely to the transportation of the company’s own oil.
While California Arabian Standard Oil Company enjoys adequate rights under its present concession in Saudi Arabia to construct such a line through that domain, it would be necessary to cross other territory, for example Transjordan and Palestine, and perhaps Egypt, in order to reach a suitable terminus on the Mediterranean. This would entail negotiations with the governments having jurisdiction in those territories.[Page 9]
In addition, to provide such an outlet for Saudi Arabian oil to the Mediterranean sea, and therefore to the western world, would introduce a new factor of high importance into the political and economic problems already facing the governments which are vitally concerned in the development and world-wide distribution of Near East oil.
Moreover, we are aware of the great strategic importance which, under certain conditions, might attach to such a project.
Chiefly for the foregoing reasons we desire to inform the Department of State concerning our plans and intentions in connection with such a pipe line, even in their present preliminary stage, and to invite such comment as the Department may wish to make. This letter is for that purpose, and will be supplemented, at the Department’s convenience, by whatever additional information is desired.
In addition to informing the Department concerning this project, we would like to know from the Department whether it perceives any objection to our proceeding in the near future with the concessions and other arrangements which will be necessary; whether the Department chooses to have prior conversations with the other governments concerned for the purpose of resolving any political issues before we undertake such negotiations; and, in the event that it neither perceives objections to our going forward, nor chooses to deal in a prior manner with the other governments affected, whether and to what extent we might expect the Department to facilitate and assist us in securing the necessary rights and safeguards from those other governments.
We believe that the Department will not need to be reminded of the importance which Saudi Arabian oil, available in large quantities in the Mediterranean and completely under the control of American nationals, would have as our own domestic oil reserves decline; nor that the best efforts of private American companies, without the assistance of their government, might not be successful in reaching a satisfactory and secure arrangement in the face of possible opposition in which other governments took an active part.
It is hardly necessary to add that we have every desire to conduct the enterprise alluded to in complete harmony with the established policies of our government and with full regard for any relevant agreements which may be reached between our government and others.
In view of the fact that the project outlined herein is in its formative stage, and that our present questions are entirely political in nature, copies of this letter are not being furnished to other departments of the government which might become interested later.
Preliminary to taking our next steps we would appreciate having the Department’s comments concerning this proposal.
Very truly yours,