871.6363/6–2945: Airgram

No. 323
The Secretary of State ad interim to the Ambassador in the Soviet Union (Harriman)

A–276. According to information from Bucharest the Soviet military authorities in Rumania have recommended removal of oilfield equipment from premises of certain British-owned oil companies on pretext it is war booty. British in Bucharest have protested to ACC citing Soviet Government’s assurance given last January that there would be no further removals.

British Government contemplates instructing British Embassy in Moscow to protest strongly to Soviet Government on ground that Soviet action (1) disregarded Soviet Government’s assurances of last January, (2) directly injures an indisputable British interest, and (3) could not fail to have damaging effect upon production capacity of Rumanian oil fields and therefore upon world oil supplies. In making last point British Government favors pointing out to Soviet Government that the fact that USSR has been obtaining considerable supplies of oil products from British and American sources makes it impossible to be indifferent to actions which must inevitably reduce capacity of important oil fields now under Russian control.

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British Government has also been considering whether Soviet action in Rumania should be raised by British delegate on reparation commission at Moscow. When and how it is raised would be matter for determination of British and American delegates.1 British suggest trying to secure at Moscow Allied agreement on definition of war booty and on retroactive application of that definition to goods Russians have already removed from Rumania.

British Embassy has requested Department’s views suggesting you be instructed to support Clark Kerr’s representations.

Department’s views on general questions raised by removal of equipment last November and December have already been presented to Soviet Government (ReEmbs 4979, December 24 and [Embtel 439,] February 162). However, since the last communication from this side, your note of February 16, apparently has remained unanswered, Department believes it would be timely if you should now take the opportunity provided by recent removals to re-state our view that equipment taken from American oil companies in Rumania cannot properly be considered war booty and to remind the Soviet Government of its pledge (ReEmbs 55, January 53) that no more equipment would be taken. You may also inquire whether the Soviet Government has returned or intends to return any of the equipment already taken.

Department does not think it necessary that you support directly Clark Kerr’s representations since it is preferable to take parallel rather than joint action and further we are not entirely sure that equipment taken from British-owned companies in April has actually been moved to USSR.

In view of the important and difficult task before the Reparations Commission in formulating policy with respect to Germany, the Department does not agree with the British that it would be desirable to bring Rumanian and other satellite problems within its scope at this time. It therefore believes that satellite reparations matters should continue to be handled directly by you and your British colleague with the Soviet Government.

As policy decisions are reached by the Reparations Commission with respect to Germany on subjects such as reparations and war booty, they can be applied to satellite situations. Ambassador Pauley has been instructed to seek agreement on the scope of war booty in relation to reparations and restitution deliveries, and Luthringer has considerable background in the matter. The Department will attempt shortly to provide its further views on the scope of war booty.

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It is requested that American representative on Reparations Commission be informed concerning this message.

There follows a discussion of the prime factors regarding the oil situation emphasizing the inseparable relation between the rapid rehabilitation of the petroleum industry and maintenance of maximum production in Southeastern Europe and global production required to meet the enormously expanded military and essential civilian needs. You may use in your discretion any of this information in future discussions with the Soviet authorities.

Russians have unduly delayed granting permission for entry of American oil representatives into Rumania and Hungary to step up production.

It is becoming evident that the USSR seeks to obtain a predominant, if not exclusive, control of petroleum industry and trading position in Rumania by negotiation of economic treaty which in effect provides (1) that virtually the entire exportable surplus of petroleum be delivered to the Soviet Union (in addition to substantial portion taken by Soviets as reparations), (2) that extensive petroleum concessions be placed under Soviet control, and (3) that Soviet-controlled petroleum monopoly be established which existing petroleum companies are invited to join. It is anticipated that Soviets will endeavor to negotiate similar petroleum agreement in Hungary and other producing areas.

Department considers satisfactory solution of these problems should be obtained in conversations with Soviets and believes following subjects of considerable interest to USSR (1) supply of petroleum to USSR from US sources, (2) allocation of oil well drilling, refining, and marketing equipment to USSR from US sources, and (3) interchange of information, technical data and processes relating to the production, refining, marketing and transportation of petroleum and associated hydrocarbons.

American people have accepted fuel oil and gasoline rationing substantially restricting their use for domestic military, industrial, and civilian consumption as a means of creating large exportable surplus to meet the critical shortage created by an expanding global demand including needs of USSR. USSR has been allocated aviation gasoline and components at expense of U. S. military and essential industrial requirements. Soviets continue to obtain critical supplies from U. S. sources and there is under consideration for shipment during the last half of the calendar year 1945 the sum of 410 thousand tons of petroleum products.

The U. S. Government allocates oil well drilling, refining and marketing equipment on the basis of global needs in which USSR is beneficiary and [there] has been allocated to date, inter alia, 6 refineries [Page 426] for high octane gasoline and other products. Owing to the rapid depreciation of petroleum equipment USSR may realize short-term gains from the seizure of Rumanian and other equipment but stands to lose on a long-term basis if such seizures exclude future allocations in their favor. American petroleum industry has accepted substantially curtailed drilling programs at home and abroad to make equipment available on a global basis.

In the past Soviet missions have been shown many U. S. petroleum war plants and have been given the benefit of considerable petroleum engineering technique, refining processes, and other data. Presumably USSR is anxious to obtain best information available for use in building Soviet petroleum industry as number of requests for refining processes, petroleum technical data, and inspection of petroleum plants have been received and are under consideration.

Rumanian-Hungarian oil picture is but one aspect of a worldwide problem and arbitrary measures taken by the Soviet authorities in former satellite states, such as removing equipment, monopolizing petroleum supply, and delaying entry of petroleum experts which result in decreased production and jeopardy of American interests, may have an adverse effect on the willingness and ability of the U. S. to furnish to Russians petroleum technical data, producing and refining equipment, or such petroleum products as Soviets may need; and may require appropriate adjustments in policies of this Government which heretofore have been extremely sympathetic to Soviet needs.

J[ohn] A. L[oftus]4
  1. Sir Walter Monckton and Edwin W. Pauley, respectively.
  2. Neither printed.
  3. Not printed.
  4. Loftus’ initials are not in his own handwriting on the file copy.