841.6363/12–646

Record of Informal Anglo-American Oil Talks, November 194638

[Extracts]
secret

A series of informal discussions on oil questions of mutual interest to the British and American Governments took place in London from 19th to the 30th November, 1946, between representatives of the U.S. State Department and officials of the interested U.K. Government Departments.

. . . . . . . . . . . . . .

Middle East

12. I.P.C. and Koweit Inter-Company Agreements.

(a)
The U.S. representatives, after reviewing the present status of the I.P.C. and Koweit intercompany Agreements, and the legal issues involved, expressed the U.S. Government view that
(i)
the clauses of the I.P.C. Agreement prohibiting the partners from separately obtaining concessions and separately purchasing oil in the Red Line area contravened the spirit of the Anglo-American Oil Agreement;
(ii)
paragraph 7 of the Koweit inter-company Agreement was also contrary to the spirit of the Anglo-American Oil Agreement;
(iii)
even apart from the Oil Agreement, these clauses in the I.P.C. and Koweit Agreements appeared to be incompatible with the preservation of competition in the international oil trade, in view of the growing importance of Middle East supplies;
(iv)
the U.S. Government were, therefore, advising the American partners in the I.P.C. that if the I.P.C. Group Agreement needed to be reaffirmed, the restrictive clauses mentioned in (i) should be reconsidered;
(v)
the British and American Governments should urge their respective nationals to cancel paragraph 7 of the Koweit intercompany Agreement.
(b)
The U.K. representatives replied that the view of the British Government was that the “restrictive” clauses referred to in the I.P.C. and Koweit intercompany Agreements were of a type which might impede the achievement of the objectives stated in the Anglo-American Oil Agreement. These company Agreements were, however, freely entered into by the contracting parties. The rights of all interests in the I.P.C. Agreement would have to be considered. The British Government was not in a position to express a view as to the legal validity of the I.P.C. Group Agreement and hoped that the parties to the Agreement would be able to work out a satisfactory solution on their own. The British companies concerned in the I.P.C. were, however, well aware of the British Government’s general views on these clauses. In the case of Koweit, developments appeared to be such as to render paragraphs 7 and 8 inoperative and the British Government did not therefore feel that it would be appropriate for it to intervene at this stage.

13. Pipeline and Refinery Concessions.

The U.S. representatives explained the position of their Government with reference to transit pipelines and refinery concessions, as evidenced in the recent diplomatic exchange over the Trans-Arabian Pipeline Company’s concession in Trans-Jordan. They considered that the country giving such facilities was equitably entitled to payment for them. The U.K. representatives reserved their position on this question but considered that an annual lump sum payment for transit rights in respect of a pipeline was more appropriate than payment based on the amount of oil put through the pipeline.

14. Iraq.

It was agreed that the U.K. Government would advise the Iraq Petroleum Company of the interest displayed by the Iraqi Government in the early development of the Basrah concession and that the U.S. Government would take a suitable opportunity of advising the Iraqi representatives in the U.S.A. of intended developments.

15. Bahrein.

The U.K. representatives advised that H.M.G. considered the claim of Iran to sovereignty over Bahrein was untenable.39

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16. Qatar/Saudi Arabia.

It appeared that no settlement had ever been reached about the Qatar/Saudi Arabia boundary. It was agreed that the two Governments should consult their respective nationals with a view to ascertaining whether operations by either I.P.C. or Aramco were likely in the disputed territory.

17. Iran.

The petroleum situation in Iran was discussed. It was noted that, for the time being, no further concessions could be granted by the Iranian Government under existing legislation. Discussion on the labour situation is covered in paragraph 2.40

18. Continental Shelf.

(a)
The U.K. representatives stated that action was contemplated by the British Government in respect of the Continental Shelf in the Jamaica and Bahamas area on lines similar to that taken by the U.S.G. under President Truman’s Proclamation of 1945.
(b)
The U.K. representatives also drew attention to the possibility that oil companies might wish, in the fairly near future, to undertake submarine oil development in the Persian Gulf, and to the political difficulties which might arise in any attempt to apportion the sea bed of the Persian Gulf. In a limited sphere, this problem had already arisen owing to the desire of the Bahrein Petroleum Company to drill on small islands and reefs in the waters separating the main Bahrein Island from the Qatar Peninsula; the apportionment of the sea bed between Qatar and Bahrein on an equitable basis was under consideration by the British authorities responsible.
(c)
The U.S. representatives stated that the U.S. Proclamation on the continental shelf was issued after prior notice to the directly interested Governments and that it included provisions for reconciling conflicting interests of various countries by negotiation.
(d)
It was agreed that the issue of any general declaration about the division of the sea bed in the Persian Gulf would be undesirable. It was further agreed that a suitable opportunity would be taken by both Governments to indicate to the companies concerned that if they contemplated drilling in the sea bed, they should inform their respective Governments before doing so, and that the latter should consult together, as appropriate, on an ad hoc basis.

. . . . . . . . . . . . . .

  1. Copy transmitted to the Embassy in the United Kingdom on December 6 by K. L. Stock, Assistant Secretary of the Petroleum Division in the British Ministry of Fuel and Power. Mr. Rayner, who left London December 6, transmitted the document to Mr. Clayton and other high economic officers of the Department with a memorandum of January 29, 1947, in which he indicated that British approval of the document had just been received.
  2. For previous documentation on Iranian claims to sovereignty in Bahrein, see Foreign Relations, 1934, vol. ii, pp. 890 ff. For related documentation on the reservation of American rights against Iran’s attempts to extend its exclusive jurisdiction over coastal waters beyond the three-mile limit, see ibid., 1935, vol. i, pp. 916 ff.
  3. This paragraph not printed.