Foreign Relations of the United States, 1952–1954, General: Economic and Political Matters, Volume I, Part 2

800.2553/3–3152

Memorandum by the Assistant Secretary of State for Economic Affairs (Thorp) to the Secretary of State ²

secret

[ Washington ,] March 31, 1952.

• Subject:
• Federal Trade Commission Report on the International Petroleum Cartel

Problem:

To determine a Department position in regard to publication of the Federal Trade Commission report entitled Report on the International Petroleum Cartel.³

Background:

The report was completed in November 1951 as one of the regular economic studies of the Commission. It was classified secret and about fifty copies were distributed within the Government. Previous studies in the same series on such subjects as the sulphur cartel, the aluminum cartel and others, have been published as soon as completed.

The report is a historical study of the cartel practices of the international oil companies. It is based on company records which it quotes at length. These records indicate that the oil companies, among other things, retarded development of oil in certain Middle East countries and purposely drilled dry holes to comply with the legal technicalities of their contracts and in the 1920’s and 1930’s endeavored, through company agreements, to control and divide the world oil markets. Many of the objectional practices have been discontinued or are being corrected, but the report concludes that in principle they are still in effect. It contains some inflammatory language and in general is very damaging to the oil companies.

In December 1951, the Department asked the Federal Trade Commission for an opportunity to express its views regarding publication of the report prior to its being published.⁴ Publication is now being seriously considered.

Discussion:

Complete suppression of the report is impossible. Its existence is widely known in Government and the oil industry. The question is really when and how it can be published with the least damage to the national interest.

It must be recognized that there is danger in the suggestion for delay. It might become a cause célèbre like the Wedemeyer report,⁵ with Congressional and public demands for its publication. Speculation about an unreleased report may be more dangerous than a published reality. That the subject of the report is the past behavior of the big oil companies, would not help the situation.

There is, of course, serious danger of the report eventually leaking by one means or another. However, leakage of parts of it on an unofficial basis would not be nearly as damaging as the official publication of the report since it would provide a less authentic propaganda weapon.

Publication now could seriously undermine the position of the oil companies as well as the whole United States-United Kingdom position in the Middle East. Opponents of the oil companies, advocates of nationalization and the Communists would have a substantial amount of material in the report indicating that the oil companies had acted contrary to the best interests of the countries concerned. The fact that these charges could be documented from an official United States Government report would make them doubly effective. A United States Government report of this type would be highly embarrassing to the British. Iraq’s Prime Minister Nuri⁶ is mentioned in the report in a manner which could be used against him in the elections which will shortly be held in Iraq.

From the legal standpoint, there is no precedent for suppressing publication. The Federal Trade Commission is an “independent agency” with statutory authority to investigate practices of American corporations and to make public information obtained (except trade secrets) as it shall deem expedient in the public interest. L/E believes, however, that the President would be upheld if in the national interest he required suppression of the publication. L/E considers such action to be fraught with danger unless the foreign policy considerations were overwhelming, when balanced against public interest in favor of publication and the fact that the Government does not want to appear to condone any questionable practices of the oil companies. (Annex I⁷ sets forth L/E’s views.)

Recommendation:

That since our security interest in a highly critical area is involved, the Department ask the National Security Council for a judgment as to whether publication now would be contrary to the national interest.

If the National Security Council decides that publication would be contrary to the national interest, the Department ask that publication be deferred, subject to review at the end of four months, if the Commission so desires.

If a contrary finding is made by the Council, the Department inform the Commission that it takes no position on the question of publication of the report.

2. Drafted by the Chief of the Petroleum Policy Staff, Robert H.S. Eakens, and by Assistant Secretary Thorp.
3. The two-volume report was in response to a resolution passed by the Federal Trade Commission on Sept. 19, 1944, directing its economic staff to conduct a long range investigation of international cartels, and to a supplemental resolution passed by the Commission on Dec. 2, 1949, directing that an investigation of the international oil cartel be carried out. A copy of the completed report, which was circulated within the U.S. Government in November 1951, is in the library of the Federal Trade Commission.
4. This is presumably a reference to a letter of Dec. 27, 1951, from Under Secretary of State James E. Webb to the Chairman of the Federal Trade Commission, James M. Mead, which is in the files of the Bureau of Industrial Economics, Federal Trade Commission.
5. Lt. Gen. Albert C. Wedemeyer’s report on China to President Truman, dated Sept. 19, 1947, the text of which is in United States Relations With China (Washington, 1949), pp. 764–814.
6. Prime Minister Nuri Said.
7. Not printed; it is a four-page undated memorandum from Stanley D. Metzger, Deputy Assistant Legal Adviser for Economic Affairs, to Eakens.