890B.6363/1–2549

Memorandum by Mr. Harlan B. Clark of the Division of Near Eastern Affairs to Mr. Gordon H. Mattison, Chief of That Division

Discussion

i. department’s position

Recent telegrams from London in regard to views of the British Government on the 3 islands of Qaru, Kubbar and Umm al Maradim contended by the American Independent Oil Company (AMINCO) to be within its concession area,1 as well as the opposing views of Kuwait Oil Company (KOC)2 in that regard, emphasize the correctness of the Department’s position that its attitude must be one of complete neutrality with respect to the opposing claims. As appears below, the interests of at least 3 and possibly 4 American companies will possibly be affected by any decision that is made in the dispute and any endeavor to influence its settlement in favor of one or the other parties would clearly be out of place. It nevertheless is the duty of the Department to ensure that neither the British special treaty position in Kuwait nor its controlling interest in the British company which owns a one-half share in the Kuwait Oil Company does not operate to the disadvantage of American interests in general, or result in discrimination against the American Independent Oil Company in particular. It must be kept in mind that a delay in settlement of the dispute may operate to the advantage of the British, possibly by embarrassing AMINCO in its relations with the Shaikh of Kuwait or even in producing a de facto breach of its concession agreement should exploratory operations required thereunder to be commenced on or [Page 95]before March 28, 1949 be postponed beyond that date. On the other hand, it may be that in the long run the delay may work to the advantage of AMINCO if in the meanwhile (a) the Shaikh agrees that such delay in exploratory operations was due to force majeure and therefore does not constitute breach of the contract and (b) a concession is granted by SAG for its undivided half interest in the Neutral Zone and the way is thus cleared for AMINCO to make suitable arrangements with the SAG concessionaire to commence operations in the on-shore areas of the Zone.

ii. propriety of british advising shaikh

In directing our attention to the question as to whether there has been undue interference by the British in the relations of the Shaikh with AMINCO, we must examine their cogent arguments, as presented in London’s 267, January 21, 7 p. m.,3 that the British Government is justified in giving advice to the Shaikh because such advice (a) has regard for his best interests and (b) involves the conduct of his foreign relations with the King of Saudi Arabia. In paragraph 3 of this telegram the point is made that the inclusion of the 3 islands in the Neutral Zone concession might encourage Ibn Saud or his concessionaire to claim half interest in them as belonging to the Neutral Zone. According to statements made by Manley Hudson, George Kay and Richard Young, Legal Counselors for ARAMCO, to officers in the Department today the possibility in fact exists that SAG may at some future date extend claim to the two islands of Qaru and Umm al Maradim as appertaining to the Neutral Zone. These statements lend considerable substance to the British contentions and it would seem that the Department must recognize that British advice to the Shaikh regarding the status of the islands may well be in his own best interest and also have a direct bearing on his relations with the King of Saudi Arabia.

This fact, of course, does not in any way diminish the propriety of the Department’s action in insisting that such advice should not operate to discriminate against AMINCO’s interests or prevent it from having direct access to both the Shaikh and the British authorities. We should also continue to ensure that AMINOO has recourse to all legal remedies, unhampered by political interference.

[Here follows Section III of the memorandum, dealing with “Alternatives Open to AMINCO”.]

  1. Regarding the concession granted by the Shaikh of Kuwait to AMINCO covering his undivided interest in the Saudi Arabian-Kuwaiti Neutral Zone, see telegram 2221, June 14, 1948, to London, Foreign Relations, 1948, vol. v, Part 1, p. 19.
  2. The Gulf Oil Corporation had a 50% interest in the Kuwait Oil Company; the Anglo-Iranian Oil Company held the remaining interest.
  3. Not printed.