887.2553/2–2851: Telegram

The Acting Secretary of State to the Embassy in Iraq 1


372. Dept concerned with unclarified and potentially explosive situation Deptel 341 Feb 82 and urtel 469 Feb 21.3 Action described Deptel, particularly nationalization, wld have unfortunate effects throughout ME oil area at this time. Since IPC denies receipt letter reftel declaring concessions invalid, Ryan interests apparently bid on concession areas validly held by others. Dept wishes forestall any undermining valid concession contracts and make clear its position lest Iraqi interpret silence as tacit approval Ryan actions.

If no objection perceived, you shld hand note to Iraq Govt along fol lines:

USG has been informed that American oil interests have made an offer to Iraq Govt regarding development of Iraq oil resources. This was reportedly done on the basis of official statements to the effect that Iraq Govt considered Iraq Petroleum Company to have defaulted on their contracted obligations and that concessions were therefore invalid. USG is concerned with this report, particularly since American interests are involved in bidding on concession areas which the [Page 285] USG has no reason to believe are not covered by valid contracts. USG wld appreciate clarification of this situation by Iraq Govt.”4

  1. This telegram was drafted by Funkhouser and cleared by Moline.
  2. Not printed; it reported information given to the Department of State by a member of the Ryan Oil Company on February 6. He told the Department the Iraqi Government planned to cancel the Basra Petroleum Company concession held by the Iraq Petroleum Company because of a breach of contract, and then form a national company, under the management of the Ryan Company, to develop the Basra concession. He claimed that even if the company were not guilty of a breach of contract the Government would argue that nationalization was a sovereign right of the state and the solution to the slow development of Iraq’s oil reserves. (887.2553/2–851)
  3. Not printed; it advised the Department of State the Embassy was unable to confirm the existence of an alleged letter, mentioned by the Ryan Company, from the Government of Iraq to the Iraq Petroleum Company in the fall of 1950. The letter supposedly declared the company’s concessions were invalid because it had failed to fulfill its contract obligations. (887.2553/2–2151)

    Later investigation by the Embassy revealed the Government of Iraq did deliver a letter to the company’s chairman in August 1950. Telegram 497 from Baghdad, March 3, reported that during the contract negotiations in London the preceding summer the chairman declared the terms of both the Basra Petroleum Company and the Mosul Petroleum Company were too onerous and were impossible to fulfill. A confidential note delivered to him stated that no one had forced the company to sign those contracts, and the government would be delighted to release the Iraq Petroleum Company from any obligations is considered too onerous. The Director General of Oil Affairs, however, told an Embassy representative the present Government of Iraq had no intention of invalidating the contracts, but he could make no promises regarding the future if the British continued to refuse the just claims of Iraq. (887.2553/3–351) Telegram 499 from Baghdad, March 5, reported the Foreign Minister indicated the Government of Iraq did not consider the Iraq Petroleum Company in default of its contract. The Ambassador’s impression was that the August 1950 letter was an informal communication, written largely for effect; but at the same time the activities of the Ryan Company were not unwelcome to the Government of Iraq, which hoped to profit from their effect on the Iraq Petroleum Company. (887.2553/3–551)

  4. Despatch 2084 from Baghdad, May 9, enclosed a copy of the note given to the Government of Iraq on March 3 and the answer received on May 9, which said the authorities had no information on any official contacts on the matter. According to the Ambassador, the evasive answer was based on the theory that conversations with members of the Ryan Company were informal, rather than official. (887.2553/5–951)