Memorandum by the Acting Director of the Office of Near Eastern and African Affairs (Hare) to the Under Secretary of State (Lovett)


On Thursday, August 26th, Mr. James Terry Duce, Vice President of the Arabian-American Oil Company, and Mr. Philip C. Kidd, Manager of the Washington Office of that firm, have an appointment with you. Their reason for requesting this meeting is to review the development programs of the Arabian-American Oil Company, Trans-Arabian Pipeline Company, and the Mediterranean Refining Company which is jointly owned by the California Texas Company and Socony Vacuum.

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You will recall that it was decided in June to defer granting further export licenses for the steel needed in the Trans-Arabian Pipeline. One of the factors affecting this decision was instability in the Middle East because of disturbances in Palestine. Certain persons in the Department of Commerce and more particular, Sentaor Wherry of Nebraska, had expressed the opinion that an equivalent amount of steel (about 217,000 tons is now involved) should either be used for tankers or for stimulating oil production in this Hemisphere.

The officials of Aramco have brought out that the Mediterranean Refining Company is ready to start work on a refinery at Sidon in Lebanon, and the Trans-Arabian Pipeline Company wishes to continue with the construction of its proposed pipeline from the oil coast in Saudi Arabia to Sidon. The officials of the company also point out that the oil companies operating in the Middle East will make available approximately one billion dollars of foreign exchange to that area over the next five years in the form of taxes, payments to local labor, total purchases, royalties, transport charges, etc. They feel that this constitutes a virtual “Marshall Plan for the Near East”, to be paid for by American business rather than the American tax payer. In their opinion this very substantial influx of foreign exchange into the Near East should go a long way toward stabilizing the area.

It is believed that Mr. Duce and Mr. Kidd will expound this thesis to you and propose it, along with various other arguments, as a reason for the Department of State supporting the request of these oil companies that the licencing of steel for their Near Eastern requirements be approved early in September.

In the recent setback suffered by all American interests in the Near East as a result of our stand on Palestine American business firms have seemed to suffer less than either US Government or American cultural interests in the area. It may well be therefore, that the oil companies are in a position to recover lost ground in the Near East sooner than US Government or other private interests.

Although we will probably not be in a position without further study to reply to any specific proposals which may be brought up, it is suggested that we should be receptive to any ideas which Mr. Duce and his colleagues may put forward that would result in improving the economic situation in the Middle East and thereby strengthen the position of the United States in the area.1

  1. Mr. Lovett: conversed with Messrs. Duce and Kidd on August 26 on the application of Tapline. Mr. Duce handed an Aramco letter dated August 25 to the Under Secretary in support of the application, Mr. Mattison’s memorandum of conversation states that the Department promised careful consideration of the letter in any recommendations that the Department might make to the Deparment of Commerce (890F.6363/8–2548).