867N.6363/3–2146: Telegram

The Acting Secretary of State to the Chargé in the United Kingdom (Gallman)

secret
us urgent

2624. Conference Dept with Duce, Aramco, indicates Lenahan’s instructions to drop transit tax in favor of flat payment for security (first para Urtel 3105 Mar 18) were predicated on assumption pipeline convention impossible of negotiation with transit tax included and did not anticipate strong US Govt intervention such as proposed in Deptel 2352.12 Accordingly, Dept understands that Lenahan’s principal’s still favor payment of transit tax if Brit Govt can be persuaded through diplomatic representations to agree. If Lenahan’s principals confirm this point to him you may proceed along lines of Deptel 2352 as modified by additional considerations in following paras of this message.

Dept assumes from Urtel 322913 that Brit Govt’s attitude and procedure are based on its present status as Mandatory and that discussions between Aramco and Transjordan Govt will relate solely to relatively unimportant details. If this is so, Dept feels strongly that an American company should not in declining days of mandate be party to abuse of mandatory power which would be involved if Brit influence were used to compel payment to Transjordan Govt lower in amount and less equitable in character than company willing to pay.

In direct answer to your question Dept is of opinion that unless Brit Govt wishes to waive its rights as Mandatory it is obligated to assist Aramco to obtain concession on terms not less favorable to Aramco than IPC terms if such are the terms which Aramco wants. This, however, would not preclude Aramco voluntarily offering non-generalized benefit to Transjordan in excess of IPC terms and/or in different form; and British Govt would not be justified in using its mandatory position to prevent the offering and acceptance of such more beneficial terms.

Emb should discuss foregoing points and sense of Deptel 2352 with Foreign Office and Colonial Office informally but at sufficiently high level and should endeavor to press on appropriate officials that US Govt feels very strongly the importance of liberalizing concession arrangements such as this in Middle Eastern area in order to stabilize and secure American oil position there. US Govt believes Brit Govt would be wise to follow same course but in any case would view with concern any Brit, effort to prevent implementation this American policy.

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In view complexity of payments problem Dept would appreciate opportunity to review any definite payment agreement contemplated in view of advice already given Transjordan by Colonial Office and in view observations on IPC contracts adopted by Permanent Mandates Commission in 1931.14

Acheson
  1. March 16, p. 23.
  2. Supra.
  3. An undated “Review by the Permanent Mandates Commission of the 1931 Pipeline Concessions of the Iraq Petroleum Company in Palestine, Syria, and the Lebanon: Summary” was prepared, presumably in the Department of State, and was attached to the Loftus-Levy memorandum of February 4 to Mr. Henderson (see footnote 3, p 18). The Review noted that the Permanent Mandates Commission of the League of Nations had considered at its 20th session from June 9 to June 27, 1931, whether the IPC agreements with the British Government on January 5, 1931, and with the Lebanese and Syrian Governments on March 25, 1931, were compatible with article 18 of the Mandate for Palestine and article 2 of the Mandate for Syria and the Lebanon. “These articles specified that the mandatory Powers should not discriminate against the nationals of member states of the League of Nations as compared with the nationals of the mandatory Power or any foreign state with regard to matters of taxation, commerce, navigation, etc., and that they should take all necessary steps to promote the development of the natural resources of the mandated territories and to safeguard the interests of the population. Following detailed study of the agreements and the Mandates, consideration of testimony from representatives of the Powers concerned and prolonged discussion before the Commission, the Commission concluded that there was nothing in the Mandates which prevented the granting of the advantages and privileges conferred by the concessions but that it appeared doubtful whether proper balance between benefits granted to the company and those which would accrue to the territories had been kept. A note containing the conclusions of the Commission and mentioning the ‘doubts’ of certain of the members was sent to the Council of the League of Nations, following vote as to whether such a notification was justified. While reaching final agreement on the form of the note to be submitted to the Council, the Commission was equally divided on a question or [of] whether or not censure of the mandatory Powers of Palestine, Syria, and the Lebanon was also called for. The note which was sent did not indicate the extent of the objections of the dissenting members of the Commission, and it is not known what action, if any, was taken by the mandatory Powers after the Council of the League forwarded to them the observations of the Commission.” (890F.6363/2–446) For text of Part B (Special Question) of the Report of the Permanent Mandates Commission submitted to the Council of the League of Nations on September 4, 1931, see League of Nations, Official Journal, September 1931, p. 2177.