Memorandum of Conversation, by Mr. Richard Funkhouser of the Office of African and Near Eastern Affairs


Subject: Socony Near East Operations

Participants: NEA—Mr. Hare1
Mr. Brewster Jennings, President of Socony Vacuum
Mr. Charles Harding, Director of Socony Vacuum
ANE—Mr. Funkhouser

Problem: Socony not in favor of diverting Haifa 16-inch line. Sterling oil problem and danger of US import restrictions will affect Socony’s Iraq and Saudi Arabian investments before their Venezuelan operation; however, Socony contracts to buy oil from Iran unaffected.

Mr. Harding stated that the American partners in IPC were not in favor of the French proposal to divert the Haifa pipeline. He felt that the diversion scheme entailed risk to the Haifa refinery, that it would be illogical to expect to trans-ship crude from Lebanon to Haifa if Arab States opposed direct flow and that neither British nor American companies had any use for further supplies of crude oil.

Socony lawyers held the opinion that the French had no legal case for building the diversionary pipeline unilaterally. Mr. Harding felt that British companies would fight any such unilateral French action violently. He, however, stated he had not been in London for three months and that it was conceivable that the British companies, in view of the changed circumstances and the premature French approach to Iraq, might feel that diversion of one of the pipelines would present the only opportunity for moving the oil from Iraq.

Mr. Harding added that it was particularly unfortunate the Iraq Government had learned of this diversion scheme since it would probably ruin any immediate chances the company might have of opening the lines without such diversion.

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The general aspects of the dollar sterling oil problem as it affected the Near East were discussed. Mr. Jennings and Mr. Harding agreed that balance of payments reasons were responsible for British moves to displace dollar oil rather than any long term British plan to force American oil companies out of the Middle East. Mr. Jennings also agreed that if current US–UK negotiations were fruitless and if the threat of American import restrictions was not overcome, the suggestion of a price war by American companies with surplus overseas oil would be a powerful argument to convince the British that it would pay them to keep American companies in business. Mr. Jennings added that this, of course, was a last resort to which no oil company would want to be forced.

Mr. Harding stated that restrictions on imports in the United States and British restrictions on dollar oil would fall most heavily on Socony’s Iraq and Arabian production. He continued by saying that reductions in operations of partly-owned companies were less serious than reductions in 100% controlled operations. Socony’s Venezuelan production was 100% owned as against an 11.875% share of IPC production and 10% share of Aramco production.

Mr. Harding mentioned that Socony was drawing approximately 40,000 b.p.d. from Iran through the terms of a short-term contract ending in 1952. This agreement was for oil imports in the US only. The 20-year contract with Anglo–Iranian, which Mr. Harding said was binding, called for Socony purchases of approximately 75,000 b.p.d. of Anglo–Iranian crude starting in 1952. Mr. Harding added that this oil could be used in Socony’s worldwide markets. On the subject of Standard and Socony contracts with Anglo-Iranian to purchase crude and build the Middle East pipeline, Mr. Harding initimated that existence of surplus oil would be insufficient reason to allow cancellation of either contract.

  1. Raymond A. Hare, Deputy Assistant Secretary of State for Near Eastern, South Asian and African Affairs.