McGhee Files: Lot 53 D 468: Petroleum

Memorandum by the Director of the Office of British Commonwealth and Northern European Affairs (Labouisse) to the Deputy Assistant Secretary of State for Near Eastern, South Asian and African Affairs (Hare)

confidential

Subject: US–UK petroleum talks

As I believe you know, during the course of our discussions with the British on petroleum matters we have taken the position that US political and strategic considerations are involved, and that consequently the British should not govern their actions with respect to US companies solely on “dollars and cents” grounds. Representatives of NEA, as well as from the Departments of Defense and Interior, have urged this line, and I have tried my best to employ it during the discussions. The main difficulty with this line of approach is that the US could presumably maintain its overseas production at higher levels if we were to import petroleum into this country in substantial quantities. It is therefore difficult to persuade the British that it is the action of the British which is threatening our overseas concessions.

I have discussed this matter from time to time in the past with representatives of NEA including Mr. Funkhouser and Mr. Deimel, pointing out the importance of our being able to support our position. We are now faced with the necessity of doing that for the British have expressly requested us to “analyze the alleged damage to the concession interests of US oil companies and to US strategic and political interests, distinguishing between that attributable to actions of HMG and to other causes such as the general dollar shortage”. I have said to the British that I did not believe it would be possible to make any more distinction between British action and other causes. Such questions as the relative rates of production in Saudi Arabia, Iran and Iraq are involved, and it is hard to fix any precise action as to the entire [Page 34]cause. Nevertheless, it is important that we prepare as strong a paper as possible on this point. I hope that NEA can prepare a memo on the Middle Eastern aspects of the situation by next Thursday, March 9.2

  1. For the reply, see the memorandum of March 15, infra.