890G.6363/12–346
Memorandum of Conversation, by Mr. George C. McGhee, Special Assistant to the Under Secretary of State for Economic Affairs ( Clayton )
| Participants: | Mr. Harden | —Standard Oil Company of New Jersey |
| Mr. Clayton (in part) | —UE | |
| Mr. McGhee | —UE | |
| Mr. Henderson (in part) | —NEA | |
| Mr. Merriam (in part) | —NE | |
| [Mr. Russell34] |
Discussion
Mr. Harden stated that he and Mr. Holman of his company had recently called on the Department with respect to a proposed pipe line from Saudi Arabia to the Mediterranean. They were received by Mr. Donald Russell, in Mr. Clayton’s absence, and advised Mr. Russell of a proposed joint purchase by Standard Oil Company of New Jersey and Socony Vacuum Oil Company of 35, possibly 40 per cent stock interest in Aramco, a company owned 50 per cent by Standard Oil Company of California and 50 per cent by the Texas Company. Aramco included in its assets all oil concessions and physical properties owned by these two companies in Saudi Arabia. In the event a 35 per cent interest was acquired, 25 per cent would belong to Standard and 10 per cent to Socony. In the event 40 per cent could be acquired, Standard would get 30 per cent and Socony 10 per cent. In the event this deal was consumated, it was planned that Aramco would build a 24-inch to 30-inch pipe line from the oil fields in Saudi Arabia to the Mediterranean going through Trans Jordan and with the outlet possibly in Lebanon. This pipe line would be capable of carrying up to 500,000 barrels a day, although operations in excess of 300,000 barrels a day are not now contemplated.
Mr. Harden explained that his Company’s desire to acquire an interest in Aramco and build the pipe line was part of a long range plan to obtain all the oil for their European and other Eastern Hemisphere markets from the Middle East, retaining Western Hemisphere oil exclusively for their Western Hemisphere markets. He stated that even with their Iraq production, the proposed interest in Aramco was not adequate to supply the needs for their European market and that they had entered into discussions with the Anglo-Iranian Oil Company regarding the purchase of a specified amount of oil at a specified price over a period of 20 years. Standard proposed to transport this oil to the Mediterranean through another pipe line which it would build on a 50–50 basis with Anglo-Iranian. Standard’s interest in the oil and line would be shared with Socony on an 80–20 basis.
This oil would be delivered by Anglo-Iranian at Abadan, in Iran, and would be transported to the pipe line terminus across the river in Iraq. The line would pass just north of Kuwait and Saudi Arabia into Trans Jordan and Palestine, with an outlet possibly at Haifa. The line would be similar to that described above from Saudi Arabia and would cost an estimated $100 million to $120 million. The British would use half of the capacity of the pipe line for transporting their own oil and provision could be made for carrying any production which Gulf might wish to transport.
Mr. Harden requested the approval of the Department in principle to the oil purchase and the construction of the pipe line in partnership with the Anglo-Iranian Oil Company. He asked whether the [Page 42] Department had strong views as to whether or not the company which would build and operate the pipe line for the partnership should be domiciled in the U.S. or the U.K. Mr. Clayton replied that he saw no objection to the proposal, and that he had no strong views as to whether or not the pipe line company should be American or British. He said, however, that the Department would look into the matter further and advise Mr. Harden if there were any objections.
Subsequently Mr. Harden presented the question of the Iraq pipe line to Mr. Henderson, NEA, and Mr. Merriam, NE, both of whom were familiar with the proposed Saudi Arabian pipe line. Mr. Henderson advised that the Iraq pipe line raised no new political issues and that he saw no reason why the Department should object to the proposed deal with Anglo-Iranian and the construction of the pipe line.
As to the question of whether the pipe line company should be domiciled in the U.S. or the U.K., Mr. Henderson stated a strong preference for the company being a U.S. company. He said that British control might result in restrictions on participation of American personnel and in other ways. He urged that Standard attempt to obtain an agreement from the British on this point if there were no commercial considerations to Standard to the contrary.
Mr. Harden replied that he did not know to what extent Standard would be able to enforce their wishes in this matter since he assumed Anglo-Iranian would have to obtain approval from the British Foreign Office. In the event there are no commercial considerations to the contrary, Standard would make every attempt to get agreement on the company being a U.S. company and Standard would consult the Department before agreeing to operation of the pipe line by a British company. He stated that the British had indicated that a British company might secure the pipe line right-of-way more easily, since right-of-way had already been secured for the Anglo-Iranian Oil Company along the same route.
Conclusion
The Department advised Mr. Harden tentatively that it raised no objection to the proposed oil purchase from Anglo-Iranian Oil Company34a and the pipe line from Iraq to the Mediterranean which Standard proposed to construct in partnership with Anglo-Iranian, and agreed to advise Standard if it saw any difficulties after further consideration. [Page 43] Mr. Harden agreed that if commercial considerations to the contrary were not overriding that Standard would press for construction and operation of the pipe line by an American company, and that Standard would not agree to operation by a British company without consulting the Department.
- Donald S. Russell, Assistant Secretary of State for Administration.↩
- Mr. Henderson informed Mr. Loftus on the morning of December 11 that a simple purchase and sale arrangement for crude oil from Iran, such as that proposed between Standard of New Jersey and Anglo-Iranian, “would not be in conflict with the Department’s policy of not seeking oil rights for American nationals in Persia at the present time and of not permitting American nationals to seek such rights themselves.” (Memorandum of December 11 by Mr. Loftus to Mr. Henderson, 891.6363/12–1146)↩