Foreign Relations of the United States, 1951, National Security Affairs; Foreign Economic Policy, Volume I

S/S–NSC Files, Lot 63 D 351, NSC 97 Series

Memorandum by the Assistant Secretary of State for Economic Affairs ( Thorp ) to the Acting Secretary of State ( Webb )

top secret

[ Washington , December 11, 1951.]¹

Subject: Briefing Memorandum on Petroleum for NSC Meeting, December 12, 1951

Problem

To determine a Department position in the NSC in regard to the Recommendations in a draft Interim Report on a National Petroleum Program dated November 27, 1951.

Recommendation

It is recommended that the proposed Recommendations in the Interim Report be adopted if the other Council members and invited representatives of interested agencies raise no objections (Interior and Justice will participate in the Council action).

Cleared by

• EUR
• NEA
• ARA
• FE
• C
• R

Background

At the direction of the President, the proposal by the Acting Secretary of Defense on December 27, 1950, relating to a national petroleum program was referred to the Director of Defense Mobilization for the development of a program which would lead to the complete supply of allied petroleum requirements (NSC 97). Subsequently, at the request of the Director of Defense Mobilization a report on “World-Wide Demand and Supply of Petroleum in Event of a Major War,” (dated July 20, 1951), together with a “Tanker Transportation Supplement,” (dated September 25, 1951),² was prepared by the Petroleum Administrator for Defense (PAD) for use in the development of a national petroleum program.

The NSC Staff has on several occasions considered the PAD reports, and other data submitted both orally and in writing, with a view to determining, pending completion of the National Petroleum Program,

a) what measures to better our oil situation can be taken without policy decision on a national level; and,

b) what measures, to the same purpose, requiring such policy decisions, should be recommended to the Council.

Certain measures have been assigned to, and accepted by, the Department and have in some instances been initiated. The recommended policies now submitted to the Council, however, in no instance involve implementation by the Department.

I do not believe it necessary that you read the entire report. It should suffice if you looked at paragraph 1, the Problem; paragraphs 2, 3, 5 and 6 of Section 1, Background; paragraphs 7b, 8a, b, c and d of Section 2, Action Underway or Under Study (involving the Department); paragraphs 23, the Tideland Oil Fields, and 24, Other Preparatory Steps, which may involve some questions on which the Attorney General may speak; and paragraphs 27–34, the Interim Recommendations.³

For your convenience, the main points of the report are summarized:

1. During the first six months of a major war commencing in mid-1952 there would be a critical shortage of petroleum. This shortage could only be eliminated by construction of more refining capacity than now planned by the industry, and, in addition, (a) by holding Saudi Arabia, Bahrein, Qatar and Indonesia, or (b) by taking certain emergency measures, including stockpiling, overproducing domestic crude oil resources, reducing sabotage and other losses from enemy action, and prompt elimination both here and abroad of all non-essential petroleum consumption. Since it would be physically impossible, even with unlimited materials, manpower, and every other necessary facility, to construct the deficient refining capacity by mid-1952, it is not possible to compensate for the prospective oil shortage by that time. This renders it all the more important that measures be initiated promptly.

2. The principal interim recommendation (paragraph 27) is that the current petroleum program be accelerated beyond the limits now imposed by the currently accepted principle of partial mobilization and that this program for the two-year period beginning in mid-1952 should be as large as is compatible with the quantities of steel that can be made available without disrupting other aspects of the mobilization effort. A number of other recommendations are made in regard to certain specific projects for improving the oil position. An example is that the national security interest requires the resumption of full-scale development of tidelands oil, under temporary arrangements if necessary.

3. The most important of the measures already underway, or under study, covered in the report but not requiring Council action, concern the study of the feasibility of ensuring the availability of oil from the Saudi Arabia-Bahrein-Qatar area, and of the feasibility and economic cost of offsetting elsewhere the loss of oil from that area. In addition to these a number of other actions have been assigned to particular agencies, including development of a domestic standby rationing plan by ODM. Those for which the Department has been requested to take on responsibility are the following:

(a) Developing standby oil rationing plans in foreign countries. (Subject to amendment discussed below)

(b) Studying the possibilities of organizing and placing in a state of readiness for areas not under Allied military occupation rehabilitation teams for the prompt repair of damaged oil facilities.

(c) Jointly with CIA studying measures that could be taken to counter and reduce the sabotage of oil installations abroad. Steps are being taken to develop countersabotage plans for the protection of critical oil facilities abroad using the machinery of NSC 29 “Security of Strategically Important Industrial Operations in Foreign Countries.”⁴ Furthermore, the report also suggests the desirability of an analysis by the Department of the political implications involved in diverting new refining construction from unsafe areas abroad to safe areas (a study assigned to ODM).

Presumably when the studies are completed further recommendations will be developed for the Council.

In regard to (a) above, in Senior Staff December 11, we proposed the following amendment to paragraph 7b which was accepted:

• “b. The Department of State is taking steps [to secure standby oil rationing plans in other countries, including the proposed establishment of] to establish an oil planning group in NATO [and] which will study the minimum essential civilian requirements of NATO countries as a basis for allocations in case the need arises. The D of S is also planning, on a selective basis, direct approaches to certain Latin American countries[.] for the same purpose.⁵

The new language is recommended in order to give recognition to the fact that our primary interest is related to equitable allocations, rather than to the question of how the Latin American Governments divide their reduced supplies internally.

1. Originally drafted on December 10, 1951; revised on December 11, 1951, to reflect the decisions taken in the NSC Senior Staff meeting that day.
2. Neither printed.
3. The paper under reference is NSC 97/1, “A National Petroleum Program,” a report to the National Security Council by Executive Secretary Lay, November 27, 1951. For text of NSC 97/2, a slightly revised draft of NSC 97/1, see p. 978.
4. Not printed.

5. According to a memorandum for the National Security Council by Executive Secretary Lay, December 11, 1951, the textual changes recommended by the Department of State in paragraph 7b were accepted in the NSC Senior Staff meeting held that day (S/S–NSC Files, Lot 63 D 351, NSC 97 Series).

   The original draft of paragraph 7b, as it appeared in NSC 97/1, was as follows:

   • “The Department of State is taking steps to secure standby oil rationing plans in other countries, including the proposed establishment of an oil planning group in NATO, and direct approaches to certain Latin American countries.” (S/P–NSC Files, Lot 61 D 167)

   All brackets appear in the source text.