Foreign Relations of the United States, 1950, The Near East, South Asia, and Africa, Volume V

641.87/2–250

Memorandum by the Ambassador in Iraq ( Crocker ) to the Assistant Secretary of State for Near Eastern, South Asian, and African Affairs ( McGhee )¹

secret

Baghdad , January 30, 1950.

Subject: Forthcoming Discussions Between the Department and the British Regarding Iraq (Department’s telegram No. 22, January 24, 1950)²

Most educated Iraqis, and many foreign observers, believe that it can be demonstrated that the British through their acknowledged special political position have in the past, and do now, control many aspects of Iraq’s economy,—and that in their economic operations they have been more interested in developing profitable enterprises than in ensuring that the Iraqis, who have been for years under their tutelage, should themselves receive a fair share of the wealth accruing from the exploitation of the country’s natural resources. I believe, however, that no useful purpose would be served, in the forthcoming discussions, by bringing up the past either in a general way,—or by enumerating debatable examples of such exploitation.

I recommend that the Department’s approach be concentrated on five matters of outstanding importance,—all of them crucial to the basic problem of furthering Iraq’s economic and social development:

1. The question of foreign exports;

2. The IBRD loan;

3. The Iraq Petroleum Company;

4. The attitude of ruling class Iraqis toward economic development and social reform; and

5. British-American cooperation in Iraq.

1. The Question of Foreign Experts

I heartily concur in the Department’s suggestion (Department’s telegram 22 of January 24) that in the forthcoming discussions the proposal be made that our relations with the British in Iraq should be in accordance with the more liberal spirit of the Portsmouth Treaty rather than the existing Anglo-Iraqi Treaty. In particular, the relevant new factor, for present purposes, is the absence in the Portsmouth Treaty of the stipulation which limits foreign officials and experts in Iraq to those of British nationality.

On page 4 of the enclosure to our London Embassy’s despatch No. 72, January 12, 1948,³ the Embassy’s note commenting on Article 5 of the Portsmouth Treaty concerning the Railway Agreement of 1936 states that “The Railway Agreement provides for the employment of British railway experts by the Iraqi Government. It was dropped because, in Wright’s words, ‘things like that are out of date’”.

I believe that it should be made crystal clear to the British that we feel that the whole conception of limiting foreign experts to those of any one nation is now out of date. The sole criterion now, when our joint efforts are directed to encouraging Iraq’s development should be the experts’ technical and personal fitness for their jobs.

As Iraq development plans go forward, and “Point IV” becomes a reality, the Iraqis, with advice from ourselves and the British, should be free to seek qualified experts from any member state of the United Nations.

Oral assurances have been given both by Michael Wright⁴ to you, and by British Embassy officers here to officers of my staff, that Britain’s exclusive right under the existing Anglo-Iraqi Treaty to provide such foreign experts as the Iraq Government may need will be waived with respect to United States citizens, provided that prior notification in each case is given by the Iraqis. I believe this oral understanding should be put in writing, deleting the requirement of prior notification,—perhaps by exchange of letters—and that if possible it should be expanded to cover citizens of all other member states of the United Nations.

2. The IBRD Loan

I believe it needless to review past difficulties encountered in the course of the IBRD loan negotiations but recommend strongly that every possible pressure be brought to bear to ensure that the British Government (and IPC) facilitate the carrying out such conditions of the IBRD loan (Department’s telegram 24, January 25⁵) as they control.

I regard the successful conclusion of the IBRD loan at this time as of the utmost importance,—if Iraqi economic and social development plans are to go ahead. The British, if they are hesitant, should be persuaded to back the loan in every way, both through fulfilling the bank’s conditions relevant to the British Government and IPC, and through emphatic advice to the Iraqi Government to accept the bank’s conditions and to conclude the loan.

3. The IPC Oil Concession

It would be difficult to find an Iraqi citizen educated in economic matters who does not believe that Iraq does not receive a fair share of the wealth resulting from the development of Iraq’s oil resources.

Although I realize that matters of oil concessions and royalty rates are touchy subjects, it seems to me indisputable that the Iraqis (and the Communists who never miss a chance to harp upon the theme) have every reason to believe that their greatest natural resource is being exploited more for the benefit of foreigners than for themselves. If the “Anglo-Americans” (as we are frequently called in the leftist press) are sincere in their statements that they wish to help backward areas develop their natural resources primarily for the benefit of the peoples inhabiting them, the development of Iraq’s oil resources seems to be a notable case when this principle has not been carried out (I refer to pp 6–11 of the Istanbul Conference working paper D.2, “current Petroleum Problems”⁶).

Although not qualified to make recommendations in matters of international oil politics, I feel strongly that the British, Dutch, United States and French interests concerned should, for the sake of the whole Western position in this area, and emphatically in their own interests, give the Iraqis a better deal in the matter of their oil.

I understand (from p. 2 of Istanbul Working Paper, D.2) that IPC royalty rates are $1.60 per ton as compared to $2.40 paid by Aramco, $3.20 offered by Anglo-Iranian Oil Company to Iran in current negotiations—and $5.65 received by Venezuela.

Could it possibly be made joint Anglo-American governmental policy to persuade IPC to give Iraq a larger share of the returns from her oil wealth, perhaps under some agreement whereby the additional returns are earmarked for Iraq development schemes?

4. The Attitude of Ruling Class Iraqis Toward Economic and Social Development

Impartial critics of the British record in Iraq observe that it is sins of omission rather than of commission which mar the record in contrast to what it might have been. Though in all fairness it must be admitted that there has been considerable progress in Iraq since the British occupation in 1917, still the statistics on literacy, standard of living, national income, and its equitable distribution are not impressive.

The British answer, when criticized in this regard, is that in the early 1920’s they withdrew their armed forces and from that date they have had to work with the existing local political forces, and have not been in a position to force the pace of modernization and social development.

While admitting that a reasonable defense of the British record can be made in this sense, I nonetheless feel strongly that the British have been, and still are—if they put their hearts into it—in a position to persuade Iraq’s ruling elements that their own best interests will be served if they embark seriously on a thorough going program of economic development and social reform.

This is no doubt a delicate matter. Nevertheless, we should urge the British to use the leverage of their influence with the controllers of Iraq—the Regent, Nuri Said and the Baghdad politician-landlords, and the tribal Sheikhs—(a) to secure the firm implementation of a positive development program; and (b) to include in Cabinet positions some of the younger, UK or US-educated men who are clamoring for an opportunity to implement a progressive economic and social program. Without such pressure on Iraqi decision-makers (who if left to themselves will in all probability feel their own interests adversely affected by social reform) it is doubtful if needed changes in the land tenure system, taxation, et cetera, and elimination of extreme economic inequalities will ever take place.

I therefore recommend that it be suggested to the British that the possibility of putting strong and constant pressure on the Regent and the Government in this sense be seriously considered. With the example of China before the eyes of all, it may be possible by argument and pressure, to get Iraqis in the seats of power to undertake, as a matter of urgency, a realistic economic development and social reform program.

5. British-American Cooperation in Iraq

In view of the special British position in Iraq, which it is our policy not to undermine, our role in this matter should be an ancillary one.

However, it is essential at least in matters into which we will perforce directly enter, such as the IBRD loan, and the application of the Point IV program to Iraq, that there be the fullest, friendliest and frankest cooperation between the British and American Embassies in Baghdad.

Edward S. Crocker

1. Transmitted to the Department of State in despatch 86 from Baghdad, February 2, not printed. (641.87/2–250)
2. Not printed; it requested the Embassy in Baghdad to recommend to the Department of State particular points which should be discussed with the British in order to arrive at a common policy regarding Iraq. (641.87/1–2450)
3. Not printed. For information concerning the Portsmouth Treaty, see Foreign Relations, 1948, vol. v, Part 1, pp. 202 ff.
4. British Under-Secretary of State for Middle Eastern Affairs.
5. Not printed; it described the requirements that Iraq would have to meet in order to receive an IBRD loan of $8.4 million. (887.10/1–2550)
6. Not printed. For documentation concerning the Conference of American Chiefs of Mission held in Istanbul from November 26–29, 1949, see Foreign Relations, 1949, vol. vi, pp. 165 ff.