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

867N.6363/12–2349: Telegram

The Secretary of State to the Embassy in the United Kingdom

secret

Washington, December 30, 1949—6 p. m.

4648. Dept comments FYI. In view current Iraq attitude re Haifa pipeline, Iraq control of situation due ownership source of oil, and premature French approach to Iraqi officials with diversion scheme,¹ Dept considers problem reopening IPC pipelines through Israel increasingly difficult. Dept feels reopening must await either gen Iraq–Israel rapprochement, considerably greater inducements by Israel or IPC offer of attractive quid pro quo. Since first two contingencies not at hand, Dept feels diversion proposal worthy consideration. It offers definite opening 16-inch line, continued pipeline operation outside influence of changes Arab–Israel polit situation, possible means of impressing Israel with need for negotiating differences with Iraq and opportunity, admittedly slim, for reopening Haifa 12-inch line. Diversion further warrants study by companies since Iraq already approached and may now refuse consider reopening southern lines without diversion.²

However, unlike Brit and Fr Govts, US Govt not involved in IPC³ and thus even more reluctant than UK (ref London 5112 Dec 23⁴) to urge any course of action on US companies, Brit, Fr or Near East Govts in this matter. Dept appreciates significance to Brit and Fr of southern line operation but with oil no longer in critical short supply as in 1947 and 1948 and with ECA considering action to cut back European overexpansion of oil facilities, Dept’s active participation less urgent.

US companies expressed preliminary objections to diversion on polit grounds but have not requested Govt intervention. They informed Dept that Fr, with possible Iraq financial support, considering proceeding imilaterally. Under terms IPC Group Agreement, each partner allowed finance own oil requirements. Anglo-Iranian reported considering legal action if Fr proceed.

Re Paris 5356 Dec 21, Dept not prepared support principle producing countries have no voice in determining end-users of national resources as stated by US companies, since inconsistent with US action re export controls. Fail understand reported Brit view expressed Paris 5356 that they regard surplus undesirable since Brit claim in current oil talks⁵ surplus vital in reducing UK dol drain. Dept does not understand reference para 4 Paris cable as basis Brit opposition. Dept assumes Brit opposition principally due interest in Haifa refinery.

Assume Israeli officials wld be approached by company before news diversion plans recd from outside sources in order avoid provoking Israel into precipitant action. If Israeli react to plan with threats against refinery, cld Brit interests remove themselves from role in diversion leaving responsibility to Fr? In any case, Dept feels that Israel objections and/or reprisals might best be avoided by maintaining Haifa operations on Caribbean crude until Iraq crude available. Recent shutdown refinery considered unfortunate, particularly since US oil company informs Dept that at current prices Haifa shld operate profitably on Caribbean crude. Shutdown may convince Arabs blockade worthwhile and make solution more difficult.

Dept agrees that prospect of Iraq firmly committing themselves reopen Haifa line dubious. However, in view great attraction diversion presents Lebanon and Iraq, company might gain success by bargaining successively for (a) Iraq commitment reopen Haifa line, (b) Lebanese commitment permit tanker movement Haifa, (c) tacit agreement with Iraq and Lebanon overlook destination Lebanese tanker movements. Wright suggestion that Iraqi might agree to scheme if Brit imported Caribbean crude to cover Israeli consumption might also be worked in with this proposal since 12-inch line wld only half fill refinery capacity.⁶

Acheson

1. As explained in telegram 5356, December 21, from Paris, the scheme involved diversion of the 16–inch pipeline terminal from Haifa to Sidon, in Lebanon. The French anticipated that with such diversion, the Iraqis might be persuaded to reopen the 12-inch pipeline to Haifa. The British group in Iraq Petroleum Company were said to be cool to the French proposal “as plan would only increase sterling oil surplus.” The American group was also said to be in opposition on the ground that “diversion would constitute submission to Iraqi pressure and violation principle that no government has right to dictate where crude oil shall go after domestic requirements met. They fear that diversion would set dangerous precedent not only in Middle East but possibly elsewhere.” (867N.6363/12–2149)
2. London, on December 14, had reported that the Iraq Petroleum Company had recently discussed the French suggestion. “French interests IPC were for it, but US and UK interests opposed, not on economic but on political grounds, since it was thought that diversion of pipeline would be interpreted as un-neutral act favorable to Arabs. IPC has therefore shelved proposal for present.” (telegram 4952, 867N.6363/12–1449)
3. This reference is to the absence of any direct interest in the Iraq Petroleum Company by the United States Government. Private American interests owned 23¾% of the company’s capital stock.
4. Not printed.
5. According to a memorandum of October 14 by the Director of British Commonwealth and Northern European Affairs, the twin objectives in these talks of the United States agencies concerned, except for the Treasury Department, were to reduce the dollar drain on the sterling area and to protect the United States national interest. The text of this memorandum is printed in vol. iv, p. 845.
6. This telegram was repeated to Paris, London, on December 30, reported that Alan M. Williams, “who handles Iraq in Eastern Department, said today Foreign Office felt it had gone as far as it could in efforts solve Haifa pipeline and refineries problem without resort to ‘big stick’ and danger upsetting political balance in countries concerned, which it does not wish to risk. Foreign Office adverse making further representation to recalcitrant governments, at least until elections settle new administration in Egypt and strength and attitude recently-formed cabinet Iraq better known. In replies to proposal for shipping oil by tanker from Tripoli [Lebanon] to Haifa (Embtel 4952, December 14) Arab governments unanimously opposed this measure. Foreign Office feels that for moment nothing further can be done to overcome Arab resistance to flow of oil to Haifa.” (telegram 5157, 867N.6363/12–3049) Telegram 4952 is not printed.