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

Eisenhower Library, Eisenhower papers, Whitman file

Memorandum of Discussion at the 146th Meeting of the National Security Council on Wednesday, May 27, 1953¹

top secret
eyes only

May 27, 1953

Present at the 146th meeting of the National Security Council were the President of the United States, presiding; the Vice President of the United States; the Acting Secretary of State; the Secretary of Defense; and the Acting Director for Mutual Security. Also present were the Secretary of the Treasury; the Secretary of the Interior; the Secretary of Commerce; the Director of Defense Mobilization; the Chairman, Atomic Energy Commission (for Item 3); Dr. Vannevar Bush (for Item 3); Dr. Robert Oppenheimer (for Item 3); the Chairman, Joint Chiefs of Staff; the Director of Central Intelligence; Robert Cutler, Special Assistant to the President; C. D. Jackson, Special Assistant to the President; the Secretary of the Navy (for Item 2); J. Ed Warren, Deputy Administrator for Petroleum Administration (for Item 2); W. Y. Elliott, ODM Planning Board Member (for Item 2); Earl W. Clark, Deputy Maritime Administrator (for Item 2); Robert B. Murray, Jr., Under Secretary of Commerce for Transportation (for Item 2); Charles J. Hedlund, Director, Program Division, Petroleum Administration (for Item 2); Robert L. Finley, Office of Defense Mobilization (for Item 2); W. G. Donley, Petroleum Administration for Defense (for Item 2); Brig. General A. H. Johnson, Chairman, Joint Petroleum Committee, Munitions Board (for Item 2); the Military Liaison Officer; the Executive Secretary, NSC; and the Deputy Executive Secretary, NSC.

There follows a summary of the discussion at the meeting and the chief points taken.

[Here follows an oral briefing by Director of Central Intelligence Dulles regarding significant world developments affecting United States security.]

2. A National Petroleum Program (NSC 97/3; Memo for NSC from Executive Secretary, same subject, dated May 26, 1953)²

Mr. Cutler sketched the history of the Council’s efforts to develop a national petroleum program, and then introduced to the Council Mr. Robert Finley of the Office of Defense Mobilization, who, with the aid of the various experts present, briefed the Council on the content of NSC 97/3.

At the conclusion of Mr. Finley’s presentation, the President stated that he had a number of questions which he wished to put to Mr. Finley and the experts. Noting that the requirements for aviation gasoline were estimated to be rising continually, the President asked if allowance had been made for the replacement of conventional aircraft by jet aircraft, which would normally reduce the requirements for aviation gasoline. Mr. Finley replied in the affirmative.

The President then inquired the length of time it would take to activate tankers which had been placed in storage. Mr. Finley replied that to “de-mothball” the 175 tankers in question would require 50 days.

The President then asked whether, in view of the tanker situation, we and our allies would pool their tanker resources and whether the present report took account of this possibility. The answer was in the affirmative.

The President followed with a question as to whether there was not a conflict between the recommendation that more wells should be drilled in the United States, on the one hand, and the recommendation for increased imports of oil into the United States, on the other. Wouldn’t the increased import of oil have an adverse effect on our own oil industry?

Mr. Warren thought that this was unlikely in view of the steadily increasing rate of drilling in this country in recent years, although, if there were a flood of oil imports from the Eastern Hemisphere, the effect could be serious.

The President expressed the hope that the 175 new tankers would be fast enough to evade enemy submarines. He was informed by Mr. Clark that their speed would range between 15 and 18 knots.

Secretary Anderson stated that the Navy Department was not only very much concerned with the tanker program which was set forth in NSC 97/3, but also with the larger problem of shipbuilding capacity in the United States. The situation was serious, and Secretary Anderson was convinced that whatever course of action we followed, to maintain our shipbuilding capacity would require some kind of subsidy. Since the last real study of our national shipbuilding policy, both public and private, had been made in 1947, Secretary Anderson strongly recommended the creation of a new group to restudy this whole problem.

Secretary Wilson informed the Council that he had very serious doubts as to the current validity of the assumptions on which NSC 97/3 had been written. Accordingly, it was his recommendation that the Council postpone any decision on the report at this meeting while a new look was taken, over the next month, at the assumptions which underlay the report and the most recent data available in the Department of Defense.

The President reacted by expressing the view that those who had prepared the present study had had access to all the pertinent information to date.

Secretary Humphrey agreed with Secretary Wilson, particularly in view of the desirability of proceeding with Secretary Anderson’s suggestion for a new over-all study not only of the tanker situation but of shipbuilding in the United States generally.

Mr. Cutler then stated his emphatic conviction that the authors of the present report had carefully gone into all the relevant problems, all the pertinent data, and that their assumptions with respect to petroleum requirements in the event of war had been given to them by the duly constituted military authorities. He was, therefore, he said, at a complete loss to understand Secretary Wilson’s proposal for postponing consideration of NSC 97/3 pending a review of requirements and assumptions. Mr. Cutler added that he did not believe that the staff of the Council could possibly perform its function if, when it presented its reports to the Council, members of the Council questioned the reliability of the information which their own departments had given to the staff.

The President expressed sympathy with Mr. Cutler’s point, but said nevertheless that the Council was entitled to ask questions about reports it was considering. He then said that he desired to look at the cost estimates of this proposed program, and this was followed by a lengthy discussion of the several items relating to costs.

In the course of this discussion Secretary Weeks stressed the value of the proposed tanker program as a means of keeping our shipyards busy. In most instances they were faced by the prospect of a complete shutdown, and this program might prevent this serious development. Secretary Weeks also noted that the Department of Commerce, together with the Department of Defense and other agencies of the Government, was engaged in studying a ship subsidy program which covered all kinds of shipping and which he indicated would be ready in three months’ time.

Secretary Humphrey expressed the view that in the construction of tankers it would be well to consider the availability of shipyards in such foreign countries as England and Japan, as well as in the United States. He pointed out that the ships could be built abroad for half or less of the cost of building them in this country, and he recommended this fact to the Mutual Security Agency as a means of effecting a useful offshore procurement program.

Mr. Rand inquired whether the authors of NSC 97/3 had included the availability of foreign ships in their consideration of the tanker program. He was informed that all free world tanker shipping had been taken into account.

The President then stated that the hidden subsidy involved in the proposal that the Government purchase existing tankers in order to stimulate the construction of 175 new ones, did not cause him to shudder as did many other subsidy proposals. It seemed to the President very clear that this operation was in the interest of our own national security and to the advantage of our allies. He believed, nevertheless, that our allies ought to build a certain proportion of these tankers. There were many yards available in Europe, and the Russians certainly would be unable to bomb them all.

Secretary Smith then informed the Council of a new source of anxiety with which he felt they should be acquainted. In recent months the tight situation with regard to the tanker fleet of the free world had eased so much that many tankers were now available at very low rates. This fact, taken together with the disposition of Iran to dump oil at a 50% discount, raised the possibility of complete chaos in the world market for crude oil. Secretary Smith asked the opinion of the experts present as to the likelihood that large amounts of Iranian oil could be presently lifted.

The President was inclined to doubt that the Iranians were capable of producing any significant quantity of oil even if tankers were available to carry it.

Secretary Humphrey felt that any move by United States companies to buy Iranian oil would mean the loss of our most effective ally the minute it happened. In effect, said Secretary Humphrey, these companies would be buying stolen goods, and he, for one, was strongly opposed to any such procedure.

Secretary Smith replied that it would certainly be difficult to prevent the Japanese, the Italians, and the Argentines from lifting Iranian oil, and he said he had also heard that several small U. S. syndicates were preparing to move into this field.

If that were so, replied Secretary Humphrey, it would be the beginning of a development which could very well spell the doom and confiscation of all United States investment abroad. If the Iranians managed to get away with this breach of faith and contract, the example of their success would be followed in so many other areas as to pose a fearful threat to the whole future of world trade.

The President inquired despairingly what could conceivably be done with Mossadegh. He thought it might even be necessary to ask Congress to enact legislation to embargo imports of Iranian oil if, as seemed to be the case, this oil was stolen goods.

The President then went on to inquire what was needed to make the present report complete.

Mr. Finley believed that it was complete and ready for consideration in its present form, though Secretary Wilson reiterated his belief that the assumptions and the requirements needed to be reviewed. To illustrate his point, Secretary Wilson observed that if it was no longer proposed to reach an Air Force strength of 143 wings, the figures in the present report for fuel requirements would be lower.

After further discussion the President stated his belief that, in principle at any rate, the program set forth in NSC 97/3 would have to be followed. He suggested that while Secretary Wilson was reviewing requirements, Secretary Weeks should proceed to get in touch with the owners of tankers in order to sound out their reaction to the proposal that the Government purchase a certain number of ships in the existing fleet.

Secretary Wilson did not disagree with this suggestion, but emphasized the importance, in the course of such negotiations with the shipowners, of securing some assurance that after new tankers had been built in American shipyards, these shipyards would not be closed down and lost to the Government as part of the necessary mobilization base.

Mr. Flemming said he had no objection to Secretary Wilson’s proposal for a review of the assumptions and requirements on which the present report had been compiled, but he noted that NSC 97/3 was concerned with a serious deficiency in our war potential. It furthermore prescribed a program of action which was plainly needed. He therefore urged that Secretary Wilson’s review not be too long delayed, and that we meanwhile go ahead to carry out the other recommendations in NSC 97/3.

The President agreed with Mr. Flemming’s proposal.

Secretary Anderson then explained his anxiety as to the serious effect on the American oil industry of large imports of oil from the Eastern Hemisphere. He believed that this would obviously cut back our domestic well-drilling and exploration programs. It would deprive many States of large incomes which they received from oil enterprises within their boundaries, and might well cause the local authorities to come to the Federal Government for support. He thought that this problem should be kept under constant scrutiny so as not to injure seriously the domestic American oil industry.

The President directed the Secretary of the Interior to keep this problem under review, and also answered affirmatively Secretary Weeks’ query as to whether the Department of Commerce should start talking with the owners of tankers.

Secretary Wilson suggested that Secretary Weeks should begin to negotiate for purchase by the Government of 50 vessels of the existing tanker fleet.

The President further suggested that we should commence to study the problem of securing appropriations for the purchase of such vessels.

Mr. Finley urged immediate approval of recommendation 8–a, pointing out that funds were available for a start on the effort to obtain expansion by private industry of aviation alkylate capacity.

Secretary Humphrey, however, recommended that before final action were taken on this and other recommendations in NSC 97/3, the whole problem be submitted to certain of the Consultants who had earlier advised the Council on other problems.

The President thought that Messrs. Black, Holman and Thomas would have views on this problem which would prove useful to the Council, and accordingly agreed with Secretary Humphrey’s suggestion. Meanwhile, added the President, Mr. Flemming should make himself responsible for following the problem in the light of the Council discussion.

Mr. Flemming agreed to coordinate the implementation of NSC 97/3 with Secretaries Wilson and Weeks, and to provide the Council with a progress report on what had been accomplished in two or three weeks’time.

The National Security Council:

a. Discussed the reference report on the subject in the light of an oral briefing by Mr. Robert L. Finley of the Office of Defense Mobilization.

b. Adopted the statement of policy contained in NSC 97/3, with the exception of paragraph 8 which was adopted in principle on the understanding that the Director of Defense Mobilization will:

(1) Coordinate the implementation of subparagraphs 8–a and –b in the light of a review of the military requirements by the Secretary of Defense.

(2) Coordinate the implementation of subparagraph 8–c in the light of discussions by the Secretary of Commerce with representatives of the tanker and shipbuilding industries.

(3) Submit to the National Security Council a progress report, with particular reference to (1) and (2) above, not later than July 1, 1953.³

c. Agreed that the Secretary of the Interior, in coordination with the Director of Defense Mobilization, should maintain continuous scrutiny of imports of petroleum products with a view to encouraging importing oil companies to exercise industrial statesmanship, in the interest of national security, by voluntarily keeping imports from the Eastern Hemisphere to a level which will not discourage necessary domestic oil exploration.

d. Suggested that NSC 97/3 be referred for comment to Civilian Consultants to be selected by the President.

Note: The action in b above, as approved by the President, subsequently transmitted to the Director of Defense Mobilization for implementation in coordination with the Secretaries of Defense and Commerce. The action in c above subsequently transmitted to the Secretary of the Interior for implementation.

[Here follows discussion concerning armaments and United States policy and the NSC status of projects.]

1. This memorandum of discussion was prepared on May 30 by Deputy Executive Secretary of the National Security Council Gleason.
2. NSC 97/3, dated May 20, 1953, p. 963; the memorandum by Lay transmitted to the NSC a memorandum by Gen. Omar Bradley which contained the concurrence of the Joint Chiefs of Staff in NSC 97/3. (S/S–NSC files, lot 63 D 351, NSC 97 Series)
3. The progress report under reference, dated June 30, 1953, is not printed. It formed part of NSC 97/4, dated July 7, 1953, and was the basis of the Planning Board recommendations which constituted the policy statement portion of NSC 97/4; see p. 991.