891.6363 AIOC/2–347
Memorandum of Conversation, by the Assistant Chief of the Petroleum Division (Eakens)
| Participants: | Mr. Orville Harden, Standard of New Jersey |
| A–T—Mr. Thorp1 | |
| U–E—Mr. McGhee | |
| AP—Mr. Rayner | |
| NEA—Mr. Robertson | |
| IFI—Mr. Levy2 | |
| PED—Mr. Eakens |
This discussion with Mr. Harden covered the various aspects of whether the joint pipe line to be built by Standard of New Jersey [Page 640] and Anglo-Iranian would be an American or a British corporation. Department officials had previously taken the position in discussions of this matter with Mr. Harden that, all things being equal from a commerical standpoint, we would like to see the pipe line company an American corporation.
In reiterating this view, the reasons which were advanced were that: (1) having the pipe line company as an American corporation would enhance the prestige of the United States in the Middle East; (2) having the pipe line company an American corporation would free it from many difficulties to which it might be subject as a British corporation—among these, there might be mentioned that it is contemplated that the pipe and other equipment and materials will come from the United States, and procurement in this country would be subject to the usual difficulties, obstacles and controls with which the British corporation would have to contend; (3) as an American corporation the pipe line would be more efficiently operated; and (4) there may be some security grounds for having an American registered company. The pipe line company would be subject to American direction, could be utilized in an emergency primarily for U.S. strategic purposes, and its use could be denied to the British (who control all production in Iran and Kuwait) unless satisfactory working agreements were reached. Mr. Harden agreed that if the pipe line were American, it would definitely give the United States an important bargaining position with the British in case of an emergency.
Mr. Harden pointed out that AIOC had made concessions in connection with every commercial reason which Standard had advanced in favor of the pipe line company being American. AIOC had conceded that the operation of the pipe line would be under Standard’s direction, that a Standard man would be in charge of the joint venture, and that the home office of the pipe line company would be located in the United States. Standard convinced Anglo-Iranian, which reluctantly agreed, that the pipe line company should be operated by Americans in order to take advantage of the great superiority in American pipe line technique over British technique.
British companies recognized that locating the headquarters of the company in the United States would make it easier for the company to secure the necessary American personnel. Moreover, locating the office of a British registered company in the United States would give Anglo-Iranian and Standard the advantages of the British tax laws, while at the same time would provide essentially all of the commercial advantages which would accrue to the company from being British in view of the concessions made. Mr. Harden contemplates no difficulty with British government restrictions or currency controls, and stated [Page 641] that Standard will obtain the necessary assurances from AIOC and British government officials prior to concluding their arrangements with AIOC.
Mr. Harden stated that Anglo-Iranian stressed the prestige argument most of all as the reason they felt the company should be British. Anglo-Iranian pointed out that they had been operating in the Middle East for more than thirty years, and that still they did not have a pipe line in the area. AIOC also pointed out that British prestige in the Middle East had suffered in recent years, and that they felt it essential at this opportunity to bolster the British prestige. A further point which they made in connection with the prestige argument was the fact that the pipe line from Saudi Arabia would be American, and that the establishment of the Standard–AIOC pipe line as a British corporation was needed to keep in balance the prestige of the respective countries. Another argument advanced by Anglo-Iranian in favor of making the line British was the fact that the oil to be transferred is supplied by the British companies from predominantly owned British concessions, and British companies have a permanent interest in the matter whereas Standard has only a contractual interest for a period of twenty years.
Mr. Thorp mentioned that should the company be finally established as a British corporation, it would be desirable that the name of the company be as neutral as possible. Mr. Harden replied that this already had been agreed with AIOC, and that a name similar to the Near East Pipe Line Company had tentatively been agreed upon. Mr. Thorp also pointed out that there was an area of minor problems, any one of which might be serious to the company, in connection with which the Department could assist an American company but not a British company, even if the latter were one-half American owned.
Among the other matters discussed were:
- (1)
- Ownership of the oil supplied by AIOC to Standard will pass to Standard at the point where such oil enters the jointly owned pipe line and not at the Mediterranean terminus.
- (2)
- It is contemplated that the jointly owned pipe line would start at a point in Iraq, gathering lines being run from that point to the producing fields of Iran and Kuwait.
- (3)
- AIOC has had for many years, and still has, a concession to build the pipe line across Iraq to transport Iranian oil, but the concession does not cover oil produced in any other country.
- (4)
- Mr. Harden stated that he thinks a factor in a pipe line concession being granted to the joint company across Iraq will be that the company offer to transport Iraq oil to the extent of its ability to do so, and he considers that from the joint companies’ standpoint, this is [Page 642] good business because it is expected that a profit would be made on the operation.
- (5)
- Mr. Harden thinks the arguments in favor of operating the pipe line on a tariff profit basis possibly are overriding, since there is a possibility that owners of Iraq, Kuwait, and Iranian oil may all desire to use the pipe line, and that in transporting oil for other than the owners of the lines the company would, of course, expect to make a profit.
Mr. Harden stated that Standard had advanced to AIOC all of the arguments that it could in favor of making the pipe line company American, and that he would like to be informed by the Department whether it considered its desires to have the pipe line company American sufficiently important for him to so inform AIOC, and then, if necessary, let the matter be decided at a government level. Mr. Thorp said that he felt such a position as this would have to be made at a higher level in the Department, and that he would, after further appropriate consideration within the Department, inform Mr. Harden of the Department’s wishes on this point.
After the meeting, Mr. Thorp informed the Department officers present
that it appeared necessary that the following two questions be presented
for resolution at a higher level: