501.BB Palestine/8–2049
Memorandum by the Chief of the Petroleum Division (Eakens) to Mr. John R. Barrow of the Division of Near Eastern Affairs
Subject: Attached Cable on Reopening of Haifa Refinery.
As you and I discussed yesterday, the attached cable1 deviates considerably from the general agreement which you, Harlan Clark2 and I previously reached on what should be said in the cable.
As I have indicated to you in our discussions of this problem, it seems to me that the primary interest in the reopening of the Haifa refinery is British and not ours. I therefore feel that it is up to the British to take the lead in this problem and that it should be clear at all stages that we simply support the action. As I have indicated before, I believe the British have not been too interested in reopening the pipe line for the export of crude oil unless this could be used to get the refinery reopened. The French are of this opinion also, yet our primary interest as well as that of the French is in the reopening of the pipe line. It seems to me from an oil and an economic standpoint that such interest that we have in the reopening of the Haifa refinery stems primarily from this fact.
What I do not understand in the attached cable is the indicated interest in supporting the British in getting the refinery and ancillary works set up if [in?] a free trade zone. It seems to me that this does not have anything to do with the reopening of the pipe line for the export of crude oil and the reopening of the refinery on the basis of tanker shipments. I therefore strongly believe that we should leave the question of whether Haifa is to enjoy a privileged position which may well not be enjoyed by any other refinery in the world to the [Page 145] British to work out if they wish to try to do so since the refinery is 100 per cent a British-owned facility.
Another thing which we should bear in mind is that the reopening of the Haifa refinery may give rise to more problems for us than its reopening solves, if there are any it does solve. Today one of our greatest problems in regard to oil is in the threat that British oil production is going to make it impossible for American companies producing oil in the Middle East to sell their output. The reopening of the Haifa refinery is going to make it more difficult for ARAMCO to maintain its production in Saudi Arabia than is now the case. While we do have a secondary interest in the reopening of Haifa to the extent that it may contribute toward an improvement in the British balance of payments, our interest in helping their balance of payments problem cannot go so far as to wreck American oil operations in the Middle East. I believe the maintenance of those operations is of greater importance to us than going much further in regard to oil in helping to improve the British balance of payments.
In brief, therefore, my view in regard to the attached cable is that it should be clear throughout that we support the British and French in regard to this problem, that our interest in reopening Haifa is secondary, and that as far as we are concerned whether or not the refinery is set up in a free zone is irrelevant to the question of reopening the refinery.