The Secretary of State to the Secretary of the Interior ( Ickes )2

My Dear Mr. Secretary: I refer to the negotiations which the Petroleum Reserves Corporation recently undertook with the California Arabian Standard Oil Company, for direct governmental participation in, or control of, that company’s oil holdings in Saudi Arabia, and to similar negotiations which were initiated with the Gulf Oil Company relative to the latter’s holdings in Kuwait.

It is understood that the above-mentioned negotiations have been based on the view that this Government should participate in companies holding foreign oil resources in order to protect the American interest in those resources and assure this country supplies in emergencies.

As you know, we are planning to undertake exploratory conversations with the British Government on questions of mutual interest regarding Middle Eastern oil. Our intention is to determine the possibility of achieving close cooperation between the United States and British Governments in developing oil in the Middle Eastern area, and the manner in which such cooperation would be effectuated. Hence, the purpose of the conversations is to ensure that this country will have access to supplies of Middle Eastern oil to meet peace-time as well as security needs. At the same time, of course, the conversations will seek to assure that supplies of Middle Eastern oil will also be available, in accordance with the principles of the Atlantic Charter,3 to meet the similar needs of other friendly countries. Thus the broad objectives of the proposed conversations with the British Government include the purpose intended to be accomplished by the Petroleum Reserves Corporation negotiations with the California Arabian Standard Oil Company and the Gulf Oil Company.

However, the Department believes that, until the outlines of our conversations with the British Government take shape, it is not possible to determine whether direct participation of this Government in petroleum companies holding foreign oil reserves will prove consistent with the steps we may wish to take to attain our objective. In fact, there is a danger that such an arrangement made now between this Government and the oil companies holding reserves in the Middle Eastern area might even adversely affect the course we may decide upon as a result of the conversations. Moreover, the question of the needs for assuring foreign oil reserves for security reasons must take [Page 11] into account the larger question of the character of the post-war security system growing out of the Moscow agreements.4

Accordingly, the Department is of the firm opinion, with which I believe you will agree in view of the above-mentioned considerations, that negotiations of the Petroleum Reserves Corporation with the California Arabian Standard Oil Company and with the Gulf Oil Company, for the purpose of arranging participation by this Government in those companies or their foreign reserves, should be held in abeyance, and that no similar negotiations should be undertaken with any other company at this time. If developments growing out of the forthcoming conversations with the British Government should indicate that negotiations of the aforementioned nature should be again considered or that some alternative course might be advantageously examined as being within the scope of operations of the Petroleum Reserves Corporation, the Department, of course, will be glad to discuss the subject through its representative on the Board of Directors of the Corporation.

Sincerely yours,

Cordell Hull
  1. This letter was addressed to Mr. Ickes in his capacity as President of the Petroleum Reserves Corporation.
  2. Joint statement by President Roosevelt and British Prime Minister Churchill, August 14, 1941, Foreign Relations, 1941, vol. i, p. 367.
  3. Reference is presumably to the Declaration on General Security issued on November 1, 1943, at the Conference of Foreign Ministers of the United States, the United Kingdom, and the Soviet Union, which was held at Moscow from October 18 to November 1, 1943; for text of declaration, see Foreign Relations, 1943, vol. i, p. 755.