Foreign Relations of the United States, 1946, Eastern Europe, The Soviet Union, Volume VI

740.00119 Council/8–2246: Telegram

The Acting Secretary of State to the American Delegation at the Paris Peace Conference

secret
us urgent

Washington, August 29, 1946—6 p.m.

4487. Secdel 781. Following is point by point reply data requested urtel 4184 Aug 22 (Delsec 845):¹⁷

1. Rum 1942 mining law containing 293 articles designed primarily impose restrictions on foreign cos and grant privileges and benefits to oil cos 75% capital owned by Rum nationals. While foreign cos are placed on equal footing among themselves, law is complex and imposes such restrictive and discriminatory measures on foreign cos vis-à-vis Rum cos, it destroys foreign co incentive for new exploration and development additional reserves during critical period declining production. Large foreign cos primarily responsible for major portion exploration activities and discovery new production in past. They no longer feel warranted invest new capital since are largely deprived fruits new discoveries under 1942 law.

In particular law creates mining districts and provides where three oil bearing structures are discovered in one such district, first structure belongs to discovering co or cos; second or third structure taken over by Rum Govt as duration reserve and allotted 50% to Rum cos and 50% to any cos having suffered financial losses in exploratory operations other mining districts; remaining structure allotted 25% Rum cos and 75% co or cos holding exploratory rights to mining district involved. If only two structures discovered in mining district, first structure belongs to co or cos holding exploratory rights therefor and other structure declared duration reserve subject to foregoing allotment procedure.

Furthermore, 1942 law adopts principle exploration and exploitation for oil in Rum (outside existing producing fields) must be done in associations which must include, in case of exploration work, all parties with oil rights in area concerned and, in case of exploitation, owners of surfaces covering given proved structure. Private concession holders are required join associations or give up their interest therein in return for royalty payment. In no case may private concession holder develop his own concession.

Am cos object to associations principally (1) they contain numerous members and are unwieldy, (2) membership may be acquired irrespective solvency individual members with inability pay proportionate expenses, and (3) previous geological knowledge and development technology must be shared with small Rum cos contributing little if anything. Association procedure similarly applies extensions to proven areas of existing fields and to discovery new zones beneath those presently exploited.

Although 1942 law contains restrictive features applicable foreign cos, there is no evidence German influence. Conversely, law appears aimed insuring greater participation Rum cos in ownership and development indigenous petroleum resources.

Outstanding example discrimination against Brit and Am cos is Rum Govt declaration new joint Sov-Rum co (Sovrompetrol) as Rum co; therefore it is eligible benefits and advantages accorded Rum cos under above law.

2. Extent Am co problems under 1942 law met by Rum Peace Treaty¹⁸ agreed provisions. Although Dept believes Am oil cos (principally Romana-Americana) prefer acceptance Brit position calling for repeal 1942 mining law, Dept’s view is agreed provisions (para 1, 2, and 6 Article 24) Rum Peace Treaty provide sufficient protection restore Am property rights as existed prior enactment 1942 law.

3. Furnishing price data later.

4. Petroleum annex proposed by Brit Govt apparently designed cancel Rum Govt actions detrimentally affecting Brit oil interests without yielding benefits obtained thereunder. US Govt unable support this position and therefore concurs action taken by Amdel.¹⁹ Also see para 2 above.

5. US-Sov Oil Commission established under Potsdam²⁰ to investigate facts and examine documents as basis settlement questions arising from removal oil equipment from warehouses Romana-Americana in Rum. Commission met seven times beginning Aug 20, 1945. Amrep submitted detailed list of equipment removed at second meeting, including where and when equipment purchased, whether new or used, extent depreciation, and in some cases railway car numbers in which Sovs loaded material for removal. Amrep also furnished procès-verbal listing materials lifted. These prepared by Romana-Americana engineers and signed by minor Rum officials but Sovs in lifting materials signed no documents. Amrep further offered furnish documentary proof US ownership equipment removed, but Sov-rep constantly evaded issue by demanding documents not only on materials lifted but also on all materials on hand Jan 1, 1942 and purchased by Romana-Americana between that date and Aug 1944.

Dept considers Sov request as outside terms of reference Commission and further evidence Sov policy delaying and preventing Commission’s performing assignment. This view Dept borne out by actions Sov members similar UK-Sov Commission as after UK members met similar Sov demands, latter countered with request for still further details and reasons for inability proceed work of Commission.

Accordingly, Dept requested US side US-Sov Commission to (1) take position that evidence materials removed clearly US owned had been supplied Commission; (2) submit factual report stating Commission’s terms of reference, its operations to date and conclude with statement that unless Sov side submits evidence refuting US ownership of equipment removed then US side would consider report, final report of Commission;²¹ (3) indicate to Sov side that copy report may be published, and (4) state if Commission cannot agree case would be pressed diplomatic level. Dept has not been informed any developments subsequent to despatch foregoing message.

6. Annex II of Article XX of Secret Potsdam Protocol²² (agreed to in principle by Sov, UK and US reps Potsdam) states principle burden reparations and war trophies should not fall on Allied Nationals and states para 3 while US not opposed reparations from current production Allied National properties, (1) satellite country must provide immediate and adequate compensation Allied Nationals including sufficient foreign exchange or products so they can recover reasonable foreign currency expenditures and transfer reasonable return on investment, and (2) such compensation must have equal priority with reparations. Accordingly, Dept requested AmMis Bucharest support thru FonOff Romana-Americana’s request Rum Govt for permission export sufficient portion its oil output to obtain foreign exchange needed purchase replacement equipment and supplies not available Rum and for servicing investment. AmMis also requested keep Amrep ACC informed developments on request and if Rum Govt did not act favorably thereon Amrep ACC should request ACC support and assistance. Only response Rum Govt thus far is promise make 4 million dollars available petroleum cos, against latter’s stated needs 8 million dollars to purchase equipment in US. Detailed plan how dollar availability affect Am co needs requested but not received.

Acheson

17. Not printed; in this telegram the American delegation at the Paris Peace Conference requested information on the difficulties being encountered by American petroleum companies in continuing their business operations in Rumania (740.00119 Council/8–2246).
18. For text of the Draft Peace Treaty with Rumania, as approved by the Council of Foreign Ministers on July 18, 1946, see vol. iv, p. 63.
19. In the June 4 and June 26 meetings of the Economic Committee of the Council of Foreign Ministers, the British delegation proposed a special annex on petroleum to the Draft Treaty of Peace with Rumania. The American delegation opposed the British proposal on the grounds that the problems sought to be dealt with were adequately covered in other provisions of the Draft Treaty. The British and American positions were detailed in a Report by the Economic Committee, C.F.M. (46) 157, June 27, 1946, not printed.
20. For the decision on oil equipment in Rumania by the Potsdam meeting of Heads of Government, July–August 1945, see part XIII (XIV) of the Protocol of Proceedings of the Conference, Foreign Relations, The Conference of Berlin (The Potsdam Conference), 1945, vol. ii, p. 1496.
21. Text of the Report of the American Representatives on the Joint United States-Soviet Oil Commission in Rumania was transmitted to the Department as an enclosure to despatch 1100, August 19, 1946, from Bucharest, neither printed. The report was presented at the eighth meeting of the Commission, October 8, 1946. Much of the substance of the report was included in the statement issued by the Department of State on July 21, 1947, on the occasion of the dissolution of the Commission. For text of that statement, see Department of State Bulletin, August 3, 1947, p. 225.
22. Foreign Relations, The Conference of Berlin (The Potsdam Conference), 1945, vol. ii, p. 1498.