886A.2553/3–150

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

confidential

Subject: Aminoil Operations in Kuwait Neutral Zone

Participants: Mr. Harley C. Stevens, American Independent Oil Co.
ANE—Mr. Wilkins
ANE—Mr. Await
ANE—Mr. Clark
ANE—Mr. Funkhouser
ANE—Mr. Thayer

Problem: Aminoil reports (a) first well unproductive, (b) arbitration proceeding on Kuwait Oil Company—Aminoil rights to Kuwait Islands, (c) Kuwait–Kuwait Neutral Zone boundary under active discussion, (d) US Consulate in Kuwait highly desired by Aminoil, (e) jurisdictional difficulties becoming evident in Neutral Zone, (f) British Cable and Wireless complaint concerning Aminoil communications

[Page 30]

Mr. Stevens gave the Department the following information:

(1)
First well drilled in the Neutral Zone was “dry and abandoned”. Depth was approximately 5,000 feet; the location was approximately 24 miles south of the Kuwait Neutral Zone northern border on the 48 degree W. Longitude. Mr. Stevens believed that the Kuwait sand was found in this first test well but contained salt water. He indicated that the geological section was considerably thicker than had been anticipated and that the well had been drilled on the eastern flank of the structure. The location had been selected on seismograph evidence which indicated a saddle between the Burghan Field and the Neutral Zone. Mr. Stevens stated that a second seismograph crew would be dispatched to the Zone immediately and believed that the second test well had already spudded in. It was considered likely that the location would be as close to the Burghan Field as possible. Mr. Stevens stated that Pacific Western Oil Company had been originally in favor of sinking the first well near the Saudi Arabian boundary.
(2)
Mr. Stevens said that the Kuwait Oil Company was protesting Aminoil’s concession covering the islands Kubbar, Maradim, and Qaru. Under the terms of Aminoil concession the former Sheikh of Kuwait made the concession contingent upon the absence of previous claims. Both Kuwait Oil Company and Aminoil had already nominated legal counsel to represent them in this arbitration. They were now trying to agree on the third man; the trio would be charged with settling the issue. Mr. Stevens felt that the company should never have been forced to name the Kuwait Oil Company in the following article in their island concession: “The rights and duties established by the Agreement shall cease and terminate with respect to the defined area or any part thereof in the event that through arbitration proceedings duly instituted under the terms of the Agreement of December 23, 1934 by the Sheikh of Kuwait and the Kuwait Oil Company Limited it should be decided pursuant to the provisions of Article 18 (c) thereof that the said Kuwait Oil Company Limited has a prior right to search for, develop and exploit the petroleum resources of the defined area or any part thereof.” Aminoil had originally been told by the British Foreign Office that no special Article stating Kuwait Oil Company previous claims would be required.
(3)
Mr. Stevens stated that Aminoil, like Aramco, recognized and was urging the adoption of six-mile territorial waters for the Neutral Zone and the Kuwait Islands. Mr. Stevens said, that, since 12 miles had been claimed elsewhere in the Persian Gulf, fewer complications would result if the Neutral Zone followed these precedents. Mr. Stevens, however, intimated that the phraseology of the Saudi Arabian proclamation on territorial waters and submerged areas made the decree inapplicable to the Neutral Zone. Mr. Stevens conceded that the submerged area off the Neutral Zone was still open [Page 31]for concession but he had no indication that either the Sheikh of Kuwait or King Ibn Saud or any other oil companies were actively interested in this area.
(4)
The British asked local Aminoil representatives for their views on the delineation of the Kuwait Neutral Zone northern boundary. Mr. Stevens stated that the British withdrew the request when told it would have to be forwarded to San Francisco offices. Mr. Stevens stated that Aminoil was confident that they could prove the location of the boundary within one-quarter mile. This was of particular interest in that this boundary might bisect one of the greatest oil fields in the world and consequently determine the division of ownership of vast oil resources. Mr. Stevens mentioned, however, that the British felt that Aminoil should not operate nearer than two miles south of Qurain Hill. This advice had not been followed by the company and no protest had been received. He felt that the key to demarkation lay in Qurain Hill specifically mentioned and shown in the treaty of Oqair documents. Since Qurain Hill was an easily identified feature, Mr. Stevens felt that the boundary could be easily established. Mr. Stevens stated that he has seen this original map in the London offices of the Royal Geographic Society.
(5)
The British also asked Aminoil for the terms of their operating agreement with Pacific Western Oil Company. The terms were not divulged. Mr. Stevens was asked why the British were particularly interested in this agreement since the same request had been made to the Department. Mr. Stevens stated that the British attributed their interest to Sheikh of Kuwait’s administrative responsibilities in the Zone. There seemed some indication in Mr. Stevens mind that the British, in accordance with the terms of the treaty of Oqair, might be interested in arranging with the Saudi Arabian Government a division of the Neutral Zone. Mr. Stevens inquired if the Department had any indication that SAG–British talks were proceeding on these issues. He was told that the British Government was reportedly ready to submit their views on the boundary to the Saudi Arabian Government.
(6)
Mr. Stevens discussed the application of the British treaty rights in Kuwait to the Neutral Zone. He felt that the company could make a strong case that the Sheikh’s Neutral Zone rights were not covered by these Orders of Council but that it might be to the company interest not to press the point. Mr. Stevens felt that advantages to the company would be gained if British law prevailed and the Sheikh’s rights were protected in any controversy with the Saudi Arabian Government by the weight of the British. Mr. Stevens was interested in the Department’s views on this point. Mr. Stevens was also interested in progress on establishing a Consulate in Kuwait. He assumed that [Page 32]the authority of the Consulate would also cover the Sheikh’s interest in the Neutral Zone. He urged the utmost speed on this issue.
(7)
Mr. Stevens mentioned that the first indication of jurisdictional troubles had arisen over the passports of the Aminoil drilling contractor, Webb-McGhee. Pacific Western representative, George Getty, had raised the question as to whether the Aminoil contractors should not have Saudi Arabian visas as well as Kuwait visas in the Neutral Zone. Entry of the contractors was thereby delayed for several weeks until Aminoil’s Arab representative went to Cairo and resolved the difficulty with Sheikh Abdullah, SAG Minister of Finance. Sheikh Abdullah had apparently been annoyed that this issue had been raised with Tewfik, PWOC Egyptian legal counsel, instead of with him, but thanks to the able efforts of the Aminoil representative finally waived the necessity for Saudi Arab visas.
Mr. Stevens felt that although George Getty was of exceptional intelligence and ability his inexperience was proving a handicap to Neutral Zone operations.
(8)
Mr. Stevens mentioned that the Saudi Arabian Government was already raising customs issues and was expected to inject itself farther into the administration of the Zone. The former Sheikh of Kuwait was particularly desirous that Aminoil not identify itself in any way with the Pacific Western Oil Company since he had feared that it would put the company under increasing control of Saudi Arabian administration, law, etc. Aminoil explained that their working arrangement with Pacific Western had only been made for practical purposes and that the sovereignty of the Sheikh over the Neutral Zone was in no way impaired. Mr. Stevens added that as long as Mr. MacPherson was in charge of Neutral Zone operations no trouble with King Ibn Saud would be possible.
(9)
Mr. Stevens gave the Department biographical information on the new Sheikh of Kuwait which will be forwarded under separate cover.
(10)
Mr. Stevens stated that Aramco should have no reason to complain of Aminoil high royalty rate since if Aramco had been willing to tip their hand on their relinquishment of the Neutral Zone, Aminoil could have obtained the concession at much lower royalty rate before bidding was opened to all comers.
Mr. Stevens felt some bitterness toward Max Thornburg, former Petroleum Adviser to the Secretary of State, since Thornburg had accompanied the British Political Resident in the Persian Gulf to Kuwait in the Shell Oil Company attempt to get the concession away from Aminoil three hours after bidding had been closed.
(11)
Mr. Stevens reported that Cable and Wireless had complained that Aminoil communications were shortcutting their monopoly. [Page 33] Aminoil can send messages through RCA at 35¢ per word whereas Cable and Wireless charges 85¢. I told Mr. Stevens that the Department did not favor monopolies in this field but that the Aminoil concession appeared to clearly grant the company the right to conduct its own communications; therefore if Aminoil facilities were used solely for company business the problem appeared to be a case of conflict between the terms of the concession and the terms of the Cable and Wireless monopoly.