867N.6363/3–1146: Telegram
The Secretary of State to the Chargé in the United Kingdom (Gallman)
2352. Arabian American Oil Company has informed Dept they are willing to pay reasonable transit tax to Transjordan Govt in consideration of granting of pipeline concession, amount of tax to be negotiated directly between company and Emir. Dept endorses this desire of company and requests you to discuss matter with Colonial Office (which is opposed to payment of such a tax and which is reported so to have advised Emir) in the following sense:
- 1.
- US Govt feels that whatever may be historical precedents, Transjordan is entitled to receive determinate and proportionate compensation for transit privileges granted to company in any pipeline concession. Accordingly US Govt strongly supports desire of Aramco to offer payment of transit tax as consideration for obtaining pipeline concession.
- 2.
- US Govt therefore assumes that Colonial Office will facilitate free discussion between company and Emir with respect to such arrangements and that Aramco will enjoy full freedom to accord in a commercial contract any non-generalized benefit to Transjordan Govt which it voluntarily chooses to accord without reference to terms and provisions of previous or other comparable contracts.
- 3.
- US Govt further feels that existing and future pipeline and refinery concessions in Near and Middle Eastern countries should reflect full recognition of principle that countries which contribute in any way to development and commercialization of petroleum resources should receive fair and reasonable compensation for such contribution. Accordingly, US Govt is requesting the American interests in IPC to bring this matter to attention of IPC management and to urge modification of existing contracts which do not conform to above stated principle.
- 4.
- This Govt might not consider that a contract provision for a benefit to Transjordan, in this instance a transit tax, would be in derogation of American rights under Palestine Convention of 1924, even though not generalized by corresponding amendment in IPC contract, if said provision resulted from voluntary offer by Aramco. Nevertheless strong criticism might arise if, because of a technicality,. Aramco alone should contract to provide fair and reasonable contribution to country of transit and thereby be competitively disadvantaged.
Dept further requests you inform Emir of Transjordan while he is in London9 that:
- 1.
- US Govt endorses desire of company to pay reasonable transit tax.
- 2.
- US Govt however does not thereby waive any of its rights under Palestine Convention of 1924 which, of course, remains in force until direct negotiations between US Govt and Transjordan Govt result in reciprocal acceptance of some alternative basis for determining the rights of nationals of each Govt in the country of the other. Aramco offer to pay transit tax is purely voluntary and without derogation of American rights to most-favored-nation treatment in Transjordan.
- 3.
- US Govt assumes that negotiations between Emir and Aramco will be predicated on recognition of need for reasonableness in determining level of compensation payable to Transjordan Govt and upon recognition of need for safeguarding competitive position of Aramco oil vis-à-vis oil from other Middle Eastern sources.