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

Truman Library, PSF–Subject file

Memorandum of Discussion at the 127th Meeting of the National Security Council on Wednesday, December 17, 1952¹

top secret

December 17, 1952

The following notes contain a summary of the discussion at the 127th Meeting of the National Security Council, at which you presided. The Vice President was unable to attend the meeting because of his absence from the city. Under Secretary Bruce attended for the Secretary of State, and Deputy Secretary Foster attended for the Secretary of Defense. Mr. Harriman was unable to attend because of his absence from the city.

[Here follows an oral briefing on the military situation in Korea given by Major Richard Rule, USAF.]

2. National Security Problems Concerning Free World Petroleum Demands and Potential Supplies (NSC 138; NSC 97/2; NSC 136/1; NSC 129/1²)

Following the briefing on the situation in the Far East* the President observed that the “oil situation” was the most important matter on the Council’s agenda for this meeting, and asked Secretary Chapman if he had any further comments to supplement his memorandum to the Council.

Secretary Chapman asked leave to give the members of the Council a brief presentation which he had prepared. He first discussed the oil situation in the United States in order to provide a basis for comparison with the Middle East, Latin America, and other large oil-producing areas. Citing figures on United States oil reserves, and citing statistics to indicate the enormous increase in military consumption since World War II, Secretary Chapman emphasized the falseness of any claim that the United States can be self-sufficient with respect to its oil supply. Turning to a map of the Middle East area and its oil fields, Secretary Chapman noted that while the production of petroleum in the United States was still larger than the total production of the rest of the world, there were vast oil reserves in the Middle East which far exceeded what our geologists deduced to be the extent of our own reserves. As an illustration, Secretary Chapman noted that a single 65-mile stretch in this area contained an estimated reserve of 60 billion barrels. To add urgency to the situation he was describing, Secretary Chapman pointed out that the great Abadan refinery was only 650 miles by road from the Caspian Sea. Contrary to views widely held in the past, his geologists were convinced that at least a 14-inch pipeline could be laid between these two points in a matter of months. Thus it would be possible for the Soviet Union to acquire extensive amounts of oil from this region.

In conclusion, Secretary Chapman again stressed the fact that the reserves in this area were much greater than those known in any other part of the world, and that it would be very serious indeed for the free world if these reserves were lost to it. The United States could not, he insisted, supply Europe with what it needed even in peace-time, to say nothing of the intensified demands in the event of war. Thus the current trend toward nationalization of oil industries in the Middle East and Latin America was a serious cause of concern to the United States, and might cost us our concessions.

The President then turned to Secretary Bruce for his views on Secretary Chapman’s memorandum.

Secretary Bruce said he simply desired to endorse heartily Secretary Chapman’s memorandum and the elaboration he had just given. The State Department, Secretary Bruce added, was seriously worried about what is taking place and what may occur in the future. He therefore desired to present to the Council a possible form of action to meet the situation. After reading his motion,³ Secretary Bruce added that it might also be desirable to request the Central Intelligence Agency to prepare a special intelligence estimate on the probable effects of the FTC report, the current antitrust suit, and other developments as they affected the situation abroad.

Secretary Foster said that he also endorsed the Secretary of the Interior’s report, especially as it bore on the problem of military security. He agreed also, he said, with the form of action proposed by Secretary Bruce, but stated his belief that it might be necessary, in view of the seriousness of the situation, for the Council to recommend action prior to the date, January 5, on which the reports envisaged by Secretary Bruce’s motion were to be completed.

Stating his belief that, in the words of Secretary Chapman’s report, the situation could become “catastrophic”, Secretary Foster wondered if it were not desirable to suggest to the Department of Justice immediate steps to put an end to the situation which was being aggravated by the anti-trust suit. In any event, he concluded, we must urgently take a new look at this situation.

The President then asked Mr. Emmerglick to state his views.

Speaking for the Attorney General, Mr. Emmerglick said that he was opposed to the motion which Secretary Bruce had recommended to the Council. Indeed, he continued, the Department of Justice was opposed to any review of the decision which had been taken by the President on June 23, 1952 which had initiated the current legal proceedings against the oil companies. Apart from the propriety of a review of the Presidential order, which could scarcely lead, said Mr. Emmerglick, to anything but a reversal, Justice was opposed to the review and re-examination recommended by Secretary Bruce for six factual reasons.

First of all, said Mr. Emmerglick, he insisted that Secretary Chapman’s report admitted the substantial accuracy of the case presented in the report of the Federal Trade Commission. It was on this FTC report that the Grand Jury investigation was based. A cartel had most certainly been organized, and it was the duty of the United States Government to investigate its development and powers.

Secondly, continued Mr. Emmerglick, Secretary Chapman, on November 12, and his Deputy Administrator for Petroleum, had made speeches,⁴ from which Mr. Emmerglick quoted, to indicate the insufficiency of United States oil reserves. It seemed quite likely to Mr. Emmerglick that the reason our reserves were so inadequate was because the world cartel was deliberately slowing up the development of United States resources in order to obtain advantages to itself by the importation of foreign oil supplies. At any rate, said Mr. Emmerglick, he was sure that a Grand Jury investigation was necessary to determine the relationship between our own inadequate reserves and the operations of the cartel.

Furthermore, continued Mr. Emmerglick, he was aware of no new facts set forth by the Secretary of the Interior which seemed to recommend any reversal of the President’s early decision.

Finally, said Mr. Emmerglick, it was the vigorous opinion of the Attorney General that the President should not be placed in a position of reversing himself.

In reply, Secretary Chapman reiterated his strong belief that the United States must obtain oil from areas outside the country.

Mr. Emmerglick did not deny this contention, but insisted that the prosecution of the anti-trust suit would not prevent this.

Secretary Chapman said he felt compelled to disagree, and that the present suit was obviously giving impetus to difficulties this country was facing abroad. He was not objecting, he said, to the Government’s oil suit, but he insisted that it could be carried on at a more suitable time and that he was more interested in the national security aspect of this problem than in the Government’s suit.

In answer to Secretary Chapman, Mr. Emmerglick stated that the Justice Department was trying to emphasize the relationship between the operations of the cartel and the apparent drying up of incentive in this country for exploiting our own oil reserves. It seemed very significant to him that in 1948 the United States abruptly ceased being an exporter of oil products and became an importer. Justice believed that this phenomenon required investigation, since it was quite possible that the sudden switch, and also the lack of facilities for the production of aviation fuel, was the result in good part of an agreement by this cartel not to duplicate facilities among its members.

Called upon for his opinion, Secretary Sawyer said that he strongly supported the recommendation which Secretary Bruce had placed before the Council. If he had any quarrel with it, he said, it was because it probably did not go far enough. Moreover, said Secretary Sawyer, he could not be convinced that because authority for the institution of the anti-trust suit came from the President, this precluded any review of the situation by the National Security Council and the possibility of a recommendation to the President for a reversal. If he understood the arguments of the Justice Department, said Secretary Sawyer, we shouldn’t import oil because it would be more desirable to obtain it from our own reserves.

At this point the President interposed to state that he did not feel that this was the essence of the Justice Department view. It was rather, said the President, that we should not cease exploring possible oil fields in the United States and that the oil cartel might be responsible, in part at least, for impairing the incentive to do this.

Secretary Sawyer then observed that his European trip had confirmed his fears that the present anti-trust suit was creating a serious situation for this country abroad. He emphatically urged that something be done now to counteract its adverse effects both in Latin America and in the Middle East. He simply could not convince himself that there was any comparison between the importance of this suit and the loss of the great oil supplies upon which this country depended. Continued attack on these oil companies, he concluded, could be nothing but “bad public policy”.

Mr. Foster then stated his desire to support the motion made by Secretary Bruce, which, so far as he could see, was simply designed to clarify the situation, to illuminate the problem, and to provide the basis for a sensible action later. It was a question, as he saw it, of balancing the factors on both sides from the national security point of view and from the domestic legal point of view. The preparation of the reports suggested by Secretary Bruce, he continued, would not necessarily mean that the President would be faced with the necessity of halting the suit. He believed it quite possible that there were other methods than that of the criminal suit for getting from the oil companies the information desired by the Government. At the very least, Secretary Bruce’s motion would give us the information on the issues which the National Security Council required. Accordingly we had everything to gain and nothing to lose by following Secretary Bruce’s proposal.

The President then asked Mr. Gorrie if he desired to comment.

Mr. Gorrie asked permission to address certain questions to Secretary Chapman, the answers to which he believed would help to clarify the problem. Mr. Gorrie then inquired what percentage of exploration of new fields in this country is carried on by the major companies involved in the present suit, and what by the so-called independent group.

The lion’s share, said Secretary Chapman, was in the hands of the major companies. While it might be possible for the smaller companies to do a good deal more of this work, Secretary Chapman said he felt he must point out that the main factor which had prevented the major companies from developing their exploration activities was the steel shortage. If Mr. Fowler could spare them the steel to build their machinery, they would take all they could get and push their exploration activities to the limit.

Mr. Gorrie then inquired of Secretary Chapman his views as to the adequacy of our own oil reserves to meet the problems which confronted us in peace and in war.

Secretary Chapman replied that he could not be very hopeful because in spite of the great development of fields in this country and also the importation of large supplies of oil from abroad, the increased demand both in this country and in Europe had the effect of maintaining a precarious balance between supplies and reserves. In short, our reserves have not increased in anything like the ratio which our security requires.

Mr. Gorrie then stated his endorsement of the motion of Secretary Bruce.

The President then asked General Smith for his comments.

General Smith reminded the Council of the very adverse effects which he had earlier brought to the Council’s attention when the FTC report had been published.⁵ The effect on United States security interests and on the objectives of our foreign policy had been serious, and the advantages to the Soviet Union, in the Middle East particularly, had been great. He stated he was perfectly prepared to make the special estimate requested by Secretary Bruce, but he believed that it would merely reiterate and emphasize the damaging effects abroad which had been noted earlier.

General Bradley then commented that the present problem was one of the most important issues ever to arise in the NSC. The Joint Chiefs of Staff, he stated categorically, were very worried indeed about the effects of this anti-trust suit in foreign countries. No matter, said General Bradley, how much oil we can find, whether at home or abroad, we can always use more. He also insisted that it was a matter of the greatest importance that we use as much foreign oil as possible in order to save our own reserves in this country against unforeseeable contingencies in the future.

Having thus canvassed the views of the members of the Council, the President stated that he could perceive no harm and much use in the motion which Secretary Bruce had sponsored, although, he added, the Attorney General was correct in his position. The President stated that he had ordered the Attorney General to do what he had done, but even so, there could be no harm in securing the information and accepting the motion proposed by Secretary Bruce. So, he added, the motion was carried.

At this point Mr. Fowler inquired whether it would not be possible for the Department of Justice to indicate, in the report which it would place before the Council on January 5, any possibilities other than criminal proceedings which might accomplish the purposes envisaged in the present suit.

The President said that the Department of Justice report would contain a discussion of such possibilities.

Mr. Lay then inquired whether he should assume that the Department of State would be the coordinator of the report which would be prepared by State, Defense and Interior.

Secretary Bruce said that he would be prepared to undertake this task, and the President confirmed Mr. Lay’s understanding.

The National Security Council:

a. Noted the memorandum of December 8, 1952 by the Secretary of the Interior and Petroleum Administrator for Defense on the subject (NSC 138), and welcomed the initiative undertaken in raising the security and international political problems implicit in the current petroleum situation.

b. Requested the Departments of State (as coordinator), Defense and Interior (Petroleum Administration for Defense), to prepare a study and recommendations on the security and international issues arising from the current situation. This study should, if possible, be completed by January 5, 1953.⁶

1. This memorandum, presumably prepared on Dec. 17 by the Secretariat of the NSC, was addressed to the President. According to the minutes of the meeting, which consist of a list of the participants and a brief list of the decisions taken at the meeting, the following members of the Council attended: President Truman, presiding, Under Secretary of State Bruce, Acting Secretary of Defense Foster, and Chairman of the National Security Resources Board Gorrie. Others present at the meeting included Acting Secretary of the Treasury Foley, Director of Defense Mobilization Fowler, Secretary of the Interior Chapman, Secretary of Commerce Sawyer, Murray and Emmerglick of the Department of Justice, Special Consultant to the President Souers, Chairman of the Joint Chiefs of Staff Bradley, Director of Central Intelligence Smith, J. Patrick Coyne of the NSC Staff, Maj. Richard Rule (USAF) and Cmdr. R. M. Niles (USN) of the staff of the Joint Chiefs of Staff, NSC Executive Secretary Lay, and NSC Deputy Executive Secretary Gleason.
2. NSC 138, a report to the NSC by the Secretary of the Interior and Petroleum Administrator for Defense Chapman on “National Security Problems Concerning Free World Petroleum Demands and Potential Supplies,” is not printed. A summary of NSC 138 is attached as Annex I to the memorandum of Dec. 16 from Linder to Bruce, p. 1291. For text of NSC 97/2, “A National Petroleum Program,” dated Dec. 13, 1951, see Foreign Relations, 1951, vol. i, p. 978. For text of NSC 136/1, “U.S. Policy Regarding the Present Situation in Iran,” dated Nov. 20, 1952, see volume x. For text of NSC 129/1, “U.S. Policies and Objectives With Respect to the Arab States and Israel,” dated Apr. 24, 1952, see volume ix.
3. For a draft of this motion, attached as Annex II to the memorandum of Dec. 16 from Linder to Bruce, see p. 1293.
4. These speeches have not been further identified.
5. This is apparently a reference to the Special Estimate prepared by the CIA on May 6, 1952, SE–28, “Consequences of the Future Revelation of the Contents of Certain Government Documents,” a copy of which was sent to President Truman under cover of a memorandum of May 8 from Smith, p. 1271.
6. This action was designated NSC Action No. 692. (S/S–NSC (Miscellaneous) files, lot 66 D 95, “Record of Actions”)