The Secretary of State to the Secretary of Commerce (Sawyer)

Dear Mr. Secretary: In Mr. Thorp’s letter of June 11, 1948 to Mr. Blaisdell1 it was recommended that the consideration of export licenses sought by the Trans-Arabian Pipeline Company for the shipment of main line pipe to Saudi Arabia during the second and third calendar quarters of 1948 be postponed until the first week of September 1948.

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The Department suggested postponement of consideration of the licenses at the time because of the disordered situation in the Middle East. There was, as you may recall, heavy fighting then going on between the regular forces of the Jews and Arabs in Palestine and it was not known whether the proposed temporary truce would be accepted or, if accepted, whether it would become effective.

Notwithstanding the foregoing circumstances, it appeared that it would be possible to continue construction of the pipeline, using the pipe on hand in the area, provided necessary materials other than main line pipe could be exported from the United States to Saudi Arabia. It was recommended by the Department of State, therefore, that the postponement of consideration of the export of main line pipe not prejudice the project license earlier renewed or applications by the company for licenses to export material other than heavy pipe which would be required to continue the construction of the pipeline.

The Department of State was gratified to learn that the recommendations of the Advisory Committee of the Department of Commerce were substantially in accord with those made by the Department of State and that the Secretary of Commerce, acting on the advice of the Advisory Committee approved the Committee’s recommendations.

In these circumstances the Department of State, with the concurrence of the other interested government agencies, felt that the postponement of decision regarding heavy pipe exports would be the proper course to follow until the situation clarified. As you may recall the Jews and Arabs subsequently agreed to the temporary truce; the United Nations assigned the role of Mediator to Count Bernadotte; the United Nations Security Council ordered the Jews and Arabs to cease fighting and an indefinite truce is now in effect.

It is now evident that additional tonnage of main line pipe must be exported in the fourth calendar quarter of 1948 if construction of the Trans-Arabian pipeline is to be continued and completed in 1950. Failure to approve export licenses for pipe to be shipped during this quarter will mean the disbanding of the pipeline organization which it has taken two years to assemble and will entail the cessation of construction work on the project. Work could not be resumed anew until a new organization is assembled, contractual arrangements concluded for sources of pipe and equipment and shipping schedules arranged, with accompanying costly and indefinite delay.

In light of the developments pertaining to the effectuation and maintenance of an indefinite truce and because of the importance of the project, it is believed that steps should now be undertaken which [Page 47]will prevent the abandonment of the project in terms of disbanding the construction organization and the indefinite cessation of construction work.

The oil of the Middle East is an important factor in the success of the European Recovery Program and in the continued prosperity of Europe. This project when completed will provide a vital transportation link in moving to Western Europe under the most economic conditions increased quantities of Middle East oil of which production is rapidly being expanded. The failure to provide exports of heavy pipe in the last quarter of this year would undoubtedly prevent the completion of the project until after the period of the Recovery Program. The project when completed will also be of substantial benefit in relieving the demand on the oil resources of the Western Hemisphere.

An important additional consideration is that the completion of the project would provide the area with substantial revenues to be derived from the construction and operation of the pipeline and of the proposed refinery at the Mediterranean terminus. These revenues would constitute an important financial stabilizing factor to the relatively limited economies of the countries in the area. Furthermore, the continued construction of the pipeline might be expected to create an atmosphere which would contribute to the maintenance of the truce and a peaceful settlement and also off-set certain disruptive tendencies conducive to the spread of communism.

In view of the foregoing and bearing particularly in mind the benefits to the United States and Western Europe, as well as to the Middle East which would derive from the completion of the pipeline, it is the opinion of the Department of State that the abandonment of the project would not be in the national interest. It is therefore recommended that applications for the export of main line pipe to Saudi Arabia for the Trans-Arabian pipeline be approved for the fourth quarter of 1948.

The Department of Interior and the Economic Cooperation Administration concur in this recommendation. The National Military Establishment is presenting its views to the Department of Commerce under separate cover.2

Faithfully yours,

G. C. Marshall
  1. Not printed; but see footnote 2, p. 23. Thomas C. Blaisdell was Acting Assistant Secretary of Commerce.
  2. In an attached memorandum of September 8 to the Secretary, Messrs. Satterthwaite and Brown made known that the Department of Defense would support the export of pipe through a, separate letter to the Department of Commerce.