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


Subject: French Scheme to Divert Haifa Pipeline

Participants: NEA—Assistant Secretary McGhee
Mr. de Metz, Compagnie Française des Petroles
Mr. Benard, French Embassy
Mr. Vandenpeyre, French Oil Mission, N.Y.C.
ANE—Mr. Funkhouser

Mr. de Metz reviewed the French proposal to divert the unfinished 16-inch IPC pipeline from the Israel border to Lebanon in exchange for Iraq approval to reopen the southern 12-inch line to Haifa. He stated that a distance equivalent to Rouen-Paris separated the French from one-quarter share of 5,000,000 tons of crude oil per year. This loss caused a $25,000,000 drain on the French balance of payments at a time when the French economy could ill afford it.

Both British and American partners in IPC were unenthusiastic about the French diversion scheme according to Mr. de Metz; he stated he realized that they had adequate supplies of oil whereas his French company did not.

Mr. de Metz stated that if British and American partners could not agree to the diversion scheme, the French would have to consider completing the 16-inch line to Lebanon on their own. Mr. McGhee asked if the terms of the IPC Group Agreement allowed the company to proceed unilaterally. Mr. de Metz replied that the Agreement was indefinite as to whether IPC partners would be allowed to take their share of production at a designated land spot instead of the Mediterranean coast, since the existing situation had never been anticipated.

Mr. McGhee stated that the US Government was fully sympathetic with the position in which the French company found itself and could understand French impatience with the 18 months closure of the two southern pipelines. However, Mr. McGhee added that, unlike the French and UK Governments, the US Government was not directly involved in IPC and that the Department felt the decision to undertake a new pipeline route should be properly left to the companies, particularly in view of the added expenditures and risks involved. Mr. McGhee stressed the Department’s continuing interest in cooperating with the French on Near East problems and mentioned past joint efforts to open the line as well as effective support of French best interests by the US Government at the time the IPC Group Agreement was drawn up.

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Mr. McGhee agreed that no early solution to the Israel-Iraq impasse appeared imminent and stated that Iraqi opinion seemed more intransigent than ever. He thanked Mr. de Metz for coming to Washington to present French company views on the IPC situation and expressed the hope that the partners in IPC could work out a mutually satisfactory solution to this difficult problem.