Foreign Relations of the United States, 1952–1954, The Near and Middle East, Volume IX, Part 1

886A.2553/5–752

No. 255
Memorandum of Conversation, by the Officer in Charge of Arabian Peninsula Affairs(Awalt)

confidential

[Washington,] May 7, 1952.

Subject:

• British Inquiry on Current Saudi Arabian Oil Negotiations.

Participants:

• Mr. Denis Greenhill—British Embassy
• NE—Mr. Jones
• NE—Mr. Kopper
• NE—Mr. Awalt

Summary:

Mr. Greenhill called at his request to say that he had a telegram from the Foreign Office reporting information received in London that in the current SAG–Aramco negotiations the SAG was demanding various additional rights which might upset the oil stability of the Persian Gulf. The Foreign Office wished to ascertain whether there was any truth to the reports. In particular the telegram said that Saudi Arabia was asking for 50 percent membership in the Board of Directors; relinquishment of one-half the Aramco concession area by the end of five years; a penalty on non-production of oil; and Saudi Arabian operation of the oil company in time of war.¹

Mr. Greenhill was told that there was some substance to some of these points but that we knew of no demand on the part of the SAG that it should operate the oil fields in time of war. Mr. Jones added that there was nothing in the current negotiations which would upset in any way the 50–50 division of profits and if a demand for a greater Saudi Arabian share should develop, we would certainly know about it well in advance. Mr. Greenhill said he hoped that advance information would be available so that other oil interests would not be caught by surprise as they were in December 1950.² He added in this respect that that had much to do with their difficulties in Iran. Strong exception was taken to this statement by Mr. Jones, and Mr. Kopper pointed out that Mr. McGhee had warned the Foreign Office over a year before this agreement of the probable trend of events in Iran and Saudi Arabia. Mr. Kopper also pointed out that the 50–50 Aramco arrangement was not a precedent but was the only reasonable arrangement that could be made in the face of the Venezuelan and Indonesian concession arrangements. In so far as the other demands reported by the Foreign Office were concerned, it was suggested that they might well constitute asking points of the SAG and Aramco might be expected to argue them firmly before making compromise settlements, if any.

Mr. Jones suggested to Mr. Greenhill that he should get in touch with Mr. Duce of Aramco for a fuller discussion of the present negotiations and Mr. Greenhill said that he would endeavor to do so.

1. See Longanecker’s memorandum of conversation of Apr. 21, Document 252.
2. For documentation on the Aramco–Saudi Arabian agreement of Dec. 30, 1950, see Foreign Relations, 1950, vol. v, pp. 9 ff. and ibid., 1951, vol. v, pp. 268 ff.