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

880.2553/2–154

Intelligence Report Prepared by the Office of Intelligence Research ¹

secret
No. 6104

[ Washington ,] December 17, 1952.

Foreign Impact of Recent United States Actions in the Field of Petroleum

part i—summary and conclusions

Recent U.S. Government actions bearing on the international activities of the oil industry could evoke reactions abroad affecting U.S. foreign policy with respect to petroleum. These actions include the Federal Trade Commission’s report on an alleged international oil cartel, the anti-trust suit of the Department of Justice against certain oil companies, the Mutual Security Agency’s suit through the Justice Department against certain American oil companies for overcharging on Middle East oil sales and the decision by that agency to cease financing most purchases of crude oil. Accordingly inquiries were addressed to 54 U.S. foreign service posts instructing them to report responses of governments, the business community and foreign government officials to these actions. The posts were specifically directed to report only upon information acquired in the ordinary conduct of business and not to initiate any inquiries. Most of the posts reported either no reaction at all or only limited straight news coverage in the local press. Those responses which contained significant information have been summarized individually in Section II of this paper and an evaluation of the effects of these activities summarized for the major geographic regions is in the following paragraphs.

The responses indicate that the aforementioned U.S. actions apparently have not thus far evoked any marked reaction outside of the United States. However, a number of posts and various of their sources of information believe that further reactions may come later, after the FTC report achieves wider circulation and possibly depending on the handling of these matters by the new Administration.

Nature of Reactions

The repercussions have principally been in the nature of comments in the foreign press or reactions of oil company officials abroad. No significant official comments have been reported in any of the countries canvassed except the United Kingdom, the Netherlands and Saudi Arabia. These related to the submission of company records in foreign countries in response to subpoenas issued in the U.S. In addition the French Government expressed concern over the possible effect of the anti-trust suit on the operation of companies in which the French have interests. Even in the press active interest in the several U.S. actions has been restricted to a relatively few countries—mainly Venezuela and the United Kingdom—and in none of these do the reactions appear to have affected U.S. interests adversely so far.

Attention has focused mainly on the release of the FTC report and on the anti-trust suit. The MSA suit and the termination of oil financing have attracted less notice. The FTC report is generally considered to be an official U.S. Government pronouncement and in many instances no distinction is made between the report and the Justice suits. Interest in the several actions has generally been closely correlated with, and to a great extent can be traced to press coverage of the topics in the United States. The foreign reaction to date has apparently been inspired more by U.S. news accounts, disseminated abroad via wire services, than by the FTC report per se. These news accounts, many of which have apparently been inspired by statements from the oil companies in the U.S. have undoubtedly contributed to some of the unfavorable comments. The reactions of the oil companies in the U.S. to to the FTC report, the MSA and Justice Department suits; attempts to quash subpoenas directing companies to produce documents in the anti-trust suit; predictions of unfavorable foreign reactions; etc., have been widely quoted abroad and appear to have been accepted at face value. On the other hand, the contents of the FTC report have yet to figure prominently in press analysis in any of the oil producing countries abroad. Except in the United Kingdom and Venezuela, there have been virtually no instances reported to date where portions of the document have been specifically quoted in the press.

Middle East

In the Middle East, possibly the most sensitive area involved, repercussions have been neither highly significant nor altogether unfavorable to the U.S. Whereas the issues have been featured as straight news coverage in some countries, only sparse editorial comment has been noted. The Communist, left-wing and extreme nationalist newspapers have provided some unfavorable comment but for the most part have failed to sensationalize the issues. Some apprehension has been expressed in the Middle East that successful anti-trust action against the companies might result in a decrease in oil revenues to the Arab States. On the issue of petroleum prices the Arab press is inclined instinctively to side with the companies. However, no official reaction has yet been reported from any of the Middle East countries, other than an expression of concern by the Saudi Arabian Ambassador in the U.S. over the submission of documents in the anti-trust suit.

Western Europe

In Western Europe reaction has been principally confined to the United Kingdom, France and the Netherlands. In the other countries the Justice suits and the release of the FTC report have been given varying degrees of straight news coverage but virtually no local comment, press, official or otherwise, has been reported.

In the United Kingdom, both the anti-trust action and the FTC report have been thoroughly covered in the press—generally in an unfavorable vein. The report has been summarized in the British petroleum journals and quoted in the press. Much of the local comment reveals a lack of sympathy for U.S. anti-trust laws and current U.S. actions against the companies—particularly where British companies are involved.

The only official action to date has been the British Government’s instruction on October 2, 1952² to British oil companies under U.S. subpoenas not to submit records of their operations “which are not in the United States of America and which do not relate to business in the United States, or to give information which does not relate to business in the United States without in either case the authority of Her Majesty’s Government”. The British Government on November 29 specifically confirmed that the letter of instruction to the Anglo-Iranian Oil Co. was an official act of the British Government.

In the case of France there has been straight news coverage of the issues but only limited local comments. The French Government on November 12³ informed the State Department through the French Embassy that the French Government is concerned over possible consequences of the anti-trust action as they might relate to companies in which French interests are involved—especially the Iraq Petroleum Company. The opinion was advanced that the suit may jeopardize existing agreements between companies in the Middle East, including French companies, as well as disturb the political and economic equilibrium of that region. The French indicated that they would welcome a decrease in petroleum prices.

The Government of the Netherlands notified the Department of State on December 3, 1952⁴ that it considers subpoenas that would in effect collect evidence from Netherlands companies in a suit against American companies, an infraction of Netherlands sovereignty. That Government further indicated that it will not allow any documents listed in the subpoena to be removed from the country and that Netherlands companies would be held accountable under Netherlands law for their actions in this respect.

Western Hemisphere

In the Western Hemisphere the most significant reaction outside of the United States has come from Venezuela where the release of the FTC report and the anti-trust suit have caused considerable unfavorable press comment. Our Embassy believes that the operations of the companies have not been affected thus far; However, it may be that the several U.S. actions will touch off a government investigation of company activities, especially in the pricing field. Elsewhere in the Western Hemisphere there have been no significant repercussions although the issues have been carried in the press of a number of countries as straight news items with occasional local comment. There has been no official reaction reported anywhere in Latin America to date.

Soviet Bloc

Reports were not requested from posts in the Soviet Bloc countries, but the usual intelligence sources have not yet revealed that the USSR or any of the satellite countries have played up the cartel theme propaganda-wise to any appreciable extent. A survey of material monitored by the Foreign Broadcast Information Service has uncovered only two articles by TASS on the alleged cartel and one propaganda broadcast beamed to the Middle East from Radio Baku. The Communist, left-wing and extreme nationalist press outside of the Soviet Bloc have generally not given the cartel issue more than nominal attention.

Prospects for Further Reaction

Despite the mild foreign reaction so far it cannot be assumed that no further repercussions will take place. When the FTC report has been more widely disseminated throughout the world and its contents digested it may evoke considerably more response official or otherwise than it has thus far—especially in the oil producing countries. Oil company officials abroad are generally reported as feeling that there is nothing in the FTC report that is not already known to the governments of the countries where they are located. However, oil men in some producing countries in Latin America and the Middle East have expressed the opinion that the adverse publicity occasioned by the release of the FTC report and by the anti-trust and MSA suits may cause some of these countries to undertake an investigation of the activities of the industry in their respective areas. They also fear that some governments may attempt to use the cartel issue as a lever to extract more advantageous financial concessions and that the trend toward nationalization in some countries may be stimulated. Reports from France and Israel indicate that some oil consuming countries may attempt to use the FTC report and the Justice Department suits to substantiate charges that the companies are charging exorbitant prices for petroleum imports. Press comment in a number of countries has implied that the release of the FTC report and the instigation of the Justice Department suits were politically inspired and that the issues would probably be dropped by the incoming administration in the U.S. Meanwhile both the private and official attitude in many countries appears to be to wait for further developments in the United States. It is believed that if the Justice Department continues to press the several suits after January 20, official reaction, which to date has been conspicuously absent in the major oil producing countries, may begin to manifest itself. Experience thus far suggests that the intensity of foreign interest in future developments in the Justice Department suits, as well as in the cartel issue in general, will probably continue to be greatly influenced by the degree and nature of coverage of these topics in the U.S. press.

[Here follows Part II, a 21-page analysis on a country-by-country basis.]

1. The following statement appears on the title page of the report: “This is an intelligence report and not a statement of Departmental policy.”
2. A copy of the letter sent by the British Minister of Fuel and Power to certain British oil companies on Oct. 2 is in file 800.2553/10–752.
3. An unofficial translation of the informal aide-mémoire of Nov. 12 from the French Embassy is in file 800.054/11–1252.
4. A copy of the aide-mémoire, dated Dec. 4, 1952, is in file 800.2553/12–452.