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

887.2553/9352: Telegram

No. 264
The Secretary of State to the Embassy in Iraq¹

confidential

Washington, September 4, 1952—1:21 p.m.

249. Embtel 102 Jul 24² and 296 Sept 3.³ Brit Emb Rep reported that Brit Emb Baghdad was approached by Iraq min econ re extension. “Haifa” pipelines⁴ from Mafrag, Jordan to Sidon, Leb. Iraq Min planned approach company but desired Fon Office views before hand.

Brit FonOff preliminary position is that it will not take sides in controversy, will not press IPC to comply and will answer that matter subj for Iraq discussions with company which may strongly object on econ grounds.

Dept preliminary views which follow wld tend to support project on grounds of practicability but oppose project on principle:

(a) Completion of old twelve-inch line and unfinished sixteen-inch line to Leb coast wld utilize over one thousand miles of idle pipeline, increase Iraq revenues by some twenty million dols annually, improve IPC public relations in Iraq at time of FTC report, settle pipeline issue which has no appparent chance of settlement thru Israel in foreseeable future.

(b) This development which first raised by Fr in 1948 has seemed to Dept almost inevitable unless gen Arab–Israel rapprochement cld be effected. Unfortunately econ boycott does not appear to be decreasing in intensity with time.

(c) Econ grounds might not offer conclusive opposition to diversion. IPC is considered heavily extended financially in current expansion program which does not include “Haifa lines”. Company also reported anxious recoup dividends before further commitments. However, diversion wld utilize two 550-mile pipelines which have been standing idle for four years with only a 75-mile stretch to sea uncompleted. Distance from Mafraq to Sidon is only 20 miles longer than from Mafraq to Haifa. Harbor facilities and mountainous terrain wld increase IPC costs which however shld quickly be amortized when line in operation. Brit partners in IPC wld thus find their Haifa refinery permanently dependent on tankers but this situation normal in oil industry and in any case appears only alternative available.

(d) Israel reaction wld presumably be strong altho they may be somewhat resigned to development at this point. Perhaps recent Israel claims re their own indigenous oil resources will serve to decrease importance this issue or cld be so utilized if necessary. Dept unaware that Israel Govt prepared or able make any concessions which wld reopen Haifa flow.

(e) Most important consideration in Dept’s view is however that such diversion wld constitute blow to Dept’s efforts reduce Arab–Israel enmity and its hopes to develop rapprochement in long run. Pipeline diversion wld fix positions, firmly establish Arab policy of long-term econ boycott, and futher insure isolation of Israel from ME to obvious detriment of peace in area. This unfortunately appears to be precisely what Arab states desire. Such condition might encourage Israel extremists to endeavor break econ boycott by force fol historic pattern.

Interested posts are requested to comment re this problem and particularly re practicability of (a) impressing Arab leaders with historic fact that danger of aggression may be increased if Arab imposed econ pressures become really effective; and (b) impressing Israeli Govt with argument that more efforts are needed on their part avoid provocative acts and to reach understanding with Arabs if pipeline diversion thru Arab territory is to be prevented. (a) raises question of over-all US policy re boycott which is currently under review.⁵

Problem will be discussed with oil companies to see if project can or shld be delayed further without jeopardizing IPC relations with Iraq Govt.

Acheson

1. Drafted by Funkhouser and cleared in draft by PED, BNA, and WE. Repeated to London, Paris, Cairo, Jidda, Moscow, Tel Aviv, Damascus, Beirut, Amman, and Jerusalem.
2. Not printed; it reported the French Minister had told an Embassy officer Iraq was formulating a proposal to the IPC to build the extension from the Haifa pipeline to the coast of Lebanon. The Iraqi Under Secretary for Foreign Affairs told the French Minister the time had come for IPC to either abandon the idea of using the Haifa pipeline or to divert it through Arab territory. (887.2553/7–2452)
3. Not printed; it informed the Department of State that the Minister of Economics, on instructions from the Prime Minister, asked the IPCs Baghdad Manager to consider diverting the Haifa pipeline to the Mediterranean coast outside Israel. His argument was that settlement of the Jewish-Arab controversy was unlikely in the near future, and the Haifa pipeline, which was lying idle, could accommodate exports of 7 million tons of crude oil. The Embassy considered the proposal fraught with political implications, especially in view of Israel’s inclination to nationalize the Haifa refinery. (887.2553/9–352)
4. For documentation on the suspension of crude oil movement through the Haifa pipeline in 1948, see Foreign Relations, 1948, vol. v, Part 1, pp. 4 ff.
5. The Ambassador in Iraq, Burton Y. Berry, recommended that if diversion of the Haifa pipeline were economically feasible, the United States should not oppose it on political grounds since U.S. prestige in the Arab world already suffered from the Arab conviction that this country favored Israel. The Embassy believed any attempt to use the Haifa pipeline as leverage in bringing Arab-Jewish rapprochement would probably backfire. (Telegram 340 from Baghdad, Sept. 11; 887.2553/9–1152) Telegrams 1543, Sept. 17, and 1660, Sept. 11, from London, reported the most persuasive economic argument against diversion of the Haifa pipeline was the fact that the immediately anticipated Kirkuk production and the contemplated Mosul production together would probably not produce oil at a sustained rate beyond the capacity of the already existing northern lines. Documentation is in Department of State file 887.2553.