The Ambassador in Italy (Kirk) to the Secretary of State
[Received June 24—11:20 a.m.]
1729. With reference to my note verbale of May 7 submitting to Ital Govt the statement contained in Dept’s 263, Feb. 10, 1 a.m. (see my 1202, May 8, 10 a.m.)47 I am in receipt of a note verbale from F. O. dated June 18, the essential points of which are contained in the following summary:
It does not appear that the policy which the previous Ital Govt adopted in the period before hostilities actually created an illegitimate discrimination against foreign oil companies or that the principle of freedom of commerce was violated. It cannot be held for example that there could be advanced a complaint against the system whereby the supplying of the requirements of the state is reserved to the state petroleum companies. Nor can it be considered that the treatment [Page 1312] raising [arising?] from Itals pre-war policy of quotas was preferential. In both cases the measures were of a general character and such as had been taken by various other countries in the exercise of their full independence as well as by Italy.
As regards the quota policy this was rendered indispensable because of the abnormal situation of international trade and production. With regard to these measures it is to be noted that no complaints were raised by the foreign enterprises at the time of their application.
Ital. Govt. does recognize, notwithstanding, the foregoing that measures were taken after the war which may appear capable of having caused damage to the oil companies controlled by Brit, and Amer. Such damage if it has actually existed will in any case be found to have been much less grave than might have been supposed by the interested companies. Moreover, it will be found that even the transfer to any of the companies plants has, by keeping those plants in use, prevented the greater damages which would have resulted if they had been left inactive.
The Ital. Govt, undertakes in any case, and independently of the question of eventual damages to restore to the rightful parties all of their assets and is prepared to proceed to a settlement of accounts with the interested enterprises in such manner as to reestablish the legal and de facto situation with respect to them existing in Italy before war was declared.
In addition, the Govt declares that it does not have the intention of modifying the existing situation as regards the oil enterprises controlled by the state. Therefore, the Emb. may be relieved of its preoccupation over the possibility of modifications in this regard to the further detriment of Amer. interests.
When decree No. 36 of Feb. 1 of this year regarding the desequestration of enemy assets enters into effect it will render possible the settlement of the question which interests the Allied petroleum companies by an integral restitution of their installations.
Demands could not be taken into consideration by the Ital Govt that indemnification be made for damages through the cession to the companies mentioned above of petroleum properties which the state controls. The damages as already indicated, will be much smaller than supposed by the interested parties but whether they are large or small, indemnification for them will be effected in money. Consent would in no case be given by the Ital Govt to a form of indemnification which would deprive the economy of Italy of its distributing apparatus and industrial plants and would prevent the collaboration among Allied and Ital oil companies through which alone can there be assured within certain limits a competitive regime which corresponds to the desire of the Allied Govts and to the interests of Italian economy.
The critical and disastrous situation of Ital economy is known to the Allied Govts who will agree that the matter of petroleum policy has too deep repercussions on the economic life of a nation for it not to ensure the best conditions or [for] the purchase, elaboration [transformation],49 sale and distribution of petroleum products avoiding measures [Page 1313] which it would be difficult for any govt responsible to public opinion to adopt.
Confidence is held by the Ital Govt in the high sense and justice which the Allied Govts have shown hitherto and it is felt that they will desire to prevent a solution with regard to the question of petroleum which is not just and consistent with the interests of a co-belligerent which has made such large sacrifices for the victory of the Allies. The Ital Govt trusts that when restitution of the plants which belong to the British and Amer enterprises is provided for it will be possible to arrive at a loyal and complete understanding between those enterprises and the Italian concerns which will lead to collaboration for supplying oil products to the Ital market under sound and reasonable competitive conditions. End summary.
Brit Emb reports that it also received a note similar to the one summarized above and that it is recommending to London that it be authorized to acknowledge receipt thereof in a note which would not enter into a discussion of the points advanced by the Ital but would state that the Brit. Govt reserves its position as set forth in its Emb’s. previous note on the subject. I feel that we should reply to Ital note in similar vein adding reference to our observations contained in aide-mémoire which, in pursuance of Dept’s 675, Apr. 20 7 p.m., I submitted to Min of Foreign Affairs bringing to Ital Govts attention the additional points contained in Dept’s 552, March 22, 1 p.m. I would appreciate receiving Dept’s instructions in this connection.
American civilian oil advisers West and Frothingham have been informed of the various points of the Ital note and have indicated their intention to submit to Emb their considered comments.50 These will be duly communicated to Dept for its consideration in examining the note in question. Text and translation of letter are being forwarded by pouch.