Foreign Relations of the United States, 1949, The Near East, South Asia, and Africa, Volume VI

501.BB Palestine/7–1249

Memorandum by the Chief of the Division of Near Eastern Affairs (Mattison) to the Deputy Director of the Office of Near Eastern and African Affairs (Hare)

[Washington,] July 12, 1949.

In exploring the files, the following appear to be the main threads of negotiations regarding the Haifa Refinery and pipeline:¹

1. April 13, 1948 (Cairo’s teleg. no. 416, April 24, to Department²). Strike by Arab workers forces shutdown of refinery.

2. April 24, 1948. Pipeline temporarily closed, following refinery shutdown.

3. May 4, 1948 (Cairo’s teleg. no. 462, May 4, to Dept²); Iraqis cut pipeline following failure of British negotiations in reaching Jewish-Arab accord to reopen Haifa Refinery.

4. June 18, 1948 (teleg. no. 2702, from London³). British express views to Mediator, suggesting possibility getting Arabs and Jews to agree to establishment of Haifa as international port under Mediator’s or UN auspices.

5. August 7, 1948 (Baghdad’s teleg. no. 480 to Dept⁴). Iraqi Director General of Economics said Iraq would resume pipeline exports only if Haifa under international control, and under the following conditions:

(1) Not one drop of oil must pass to Zionists;

(2) Arab States must have sufficient guarantees in this respect.

6. August 9, 1948 (London’s teleg. no. 3593⁴). Shertok⁵ says PGI would not accept anything in the nature of international control over the Haifa Refinery or pipeline terminals.

7. August 17, 1948 (London’s teleg. 3739 to Dept). Goldmann⁶ states informally that PGI willing to establish free zone Haifa for Arab use in future, but this to be a bargaining point when talks with Arabs begin.

8. Sept. 18, 1948. Bernadotte plan⁷ announced containing recommendations that a free zone be established to include the Petroleum Works at Haifa (see UN Document A/648, Paragraph 4 (c)):

“(c) The port of Haifa, including the oil refineries and terminals, and without prejudice to their inclusion in the sovereign territory of the Jewish State or the administration of the city of Haifa, should be declared a free port, with assurances of free access for interested Arab countries and an undertaking on their part to place no obstacle in the way of oil deliveries by pipeline to the Haifa refineries, whose distribution would continue on the basis of the historical pattern.”

The Bernadotte Report was rejected in toto by both the Arabs and Israelis, but our files reveal no specific rejection of the Bernadotte free port proposal per se, either by Israel or by the Iraqi government. Neither, however, were favorable reactions reported, the French partners in the IPC having indicated they had sounded the Israeli Government on this matter and met with a negative response on the free zone idea. Meanwhile the French Government broached a new approach for reopening the Haifa pipeline for export of crude only. The principal developments of that approach were as follows:

(1) Oct. 18, 1948, following tripartite discussion in Paris, the French presented an aide-mémoire⁴ to the US containing details of a proposal that Baghdad be approached with a suggestion that the Haifa pipeline be reopened for export of crude oil only, appropriate observers to be stationed at check points to assure that none of the oil from the pipeline would be allowed to fall into Israeli hands. Israel, however, was to be supplied with essential refined products based upon an “historical pattern” from other sources. If Iraqi agreement was obtained to this proposal, Israel would then be similarly approached.

(2) Oct. 27, 1948 (Dept’s 390 to Baghdad⁸). Embassy at Baghdad instructed to indicate support of French and British colleagues who will initiate discussions with Iraq along lines of the French “for export only” proposal, later approach by the US to Israel to be contingent upon favorable response from Iraq.

(3) Nov. 23, 1948 (Baghdad’s teleg. no. 723 to Dept⁸). Prime Minister Pachachi seems favorable but wants to discuss with Council of Ministers, with Regent, and with IPC (latter concerning safeguards that oil will not reach Israelis).

(4) Dec. 3, 1948. Representative Wheatley, who has been endeavoring to reopen pipeline, leaves Baghdad confident that he can “close deal” when he returns six weeks hence.

(5) April 12, 1949 (Baghdad’s teleg. no. 177 to Dept⁸). Wheatley returns, sees Prime Minister (Nuri Said) who seems interested in the proposal for export of crude only, but does not see how he can take action in view of Iraqi public opinion; threatens to break off negotiations if Wheatley presses matter of shipment of IPC oil for use at the Haifa Refinery.⁹

(6) May 5, 1949, British propose approach PCC reverting to Bernadotte free zone idea.¹⁰

It appears that neither the Iraqis nor the Israelis have ever given a categoric rejection to either the Bernadotte free zone plan or the French “export only” plan, but it is evident that the Government of Iraq has evaded a decision on all proposals (save internationalization of Haifa, which the Israelis rejected) in order to assure the Iraqi public that no oil was to flow through the pipeline to territory controlled by the Israelis.

It is just possible, however, that enough time has elapsed and enough royalties have been lost (especially since IPC appears willing to double the royalty rate if the pipeline question can be solved) to cause the Iraqis to accept the free port alternative to full-internationalization.

London’s 2598, July 5,¹¹ reports that the negotiations which IPC is currently conducting in London with the Iraqi Minister of National Economy are “thoroughly stuck” and the Economy Minister has come to the Foreign Office for aid vis-à-vis the IPC.¹²

It is my belief that in view of the above the free port proposal should again be tried, but in the light of the difficulties of working through the PCCI believe direct representations are the most feasible.

It is suggested you send the attached telegram to London.¹³

1. The references are to the Consolidated Refineries, Ltd., a British-owned company operating at Haifa, and to the pipeline of the Iraq Petroleum Company running from the Iraqi oilfields to the Mediterranean, with one of its terminals at Haifa.
2. Not printed.
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3. Foreign Relations, 1948, vol. v, Part 2, p. 1122.
4. Not printed.
4. Not printed.
5. Moshe Shertok, Israeli Foreign Minister.
6. Nahum Goldmann, in 1948, President of the Executive Committee of the World Jewish Congress and representative of the Provisional Government of Israel at London.
7. For the conclusions of the Bernadotte report, see Foreign Relations, 1948, vol. v, Part 2, p. 1401.
4. Not printed.
8. Not printed.
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9. Telegram 177 from Baghdad also noted that “Israel not disposed agree opening line solely for export as Israel is expected insist on obtaining IPC crude for Haifa refinery.” (890G.6363/4–1249)
10. At a conference with Department officers on May 5, Thomas E. Bromley, First Secretary of the British Embassy, and E, E. Jones, Petroleum Attaché of the British Embassy, brought a draft of a proposed note to be submitted jointly to the Palestine Conciliation Commission by the United States, the United Kingdom, and France, regarding the opening of the Haifa refinery and the IPC pipeline. The proposed note concluded “with the suggestion that a free-port area be granted to the Arab countries at Haifa to include the refinery. In the British view such an arrangement need not in any way derogate upon Israeli sovereignty over the area should that form part of the political settlement. It might, however, make it politically easier for Iraq to agree to satisfactory arrangements for the refinery.” (memorandum of conversation by John R. Barrow of the Division of Near Eastern Affairs, 867N.6363/5–549) For documentation on the activities of the Palestine Conciliation Commission, see pp. 594 ff. The draft of the proposed note is dated April 29 and is filed under 867N.6363/4–2949.
11. Not printed.
12. Baghdad advised, on May 5, that the IPC group had left empty-handed for London the previous week (telegram 249, 890G.6363/5–549) and on July 5 that the negotiations had been transferred to London late in June (despatch 219 and enclosure, 890G.6363/7–549).
13. Not found attached; the reference is possibly to an early draft of telegram 2515, July 20, infra.