880.2553/6–953
No. 295
Memorandum of Conversation, by Herbert Liebhafsky of the Petroleum
Policy Staff
Subject:
- Departmental Position on Problem of Furthering Iraq Petroleum Company Transit Negotiations with Syria and Lebanon.
Participants:
- Messrs. Robertson and Funkhouser—NEA
- Mr. Winters—BPT
- Mr. Metzger—L/E
- Mr. Kirk—ED
- Messrs. Eakens and Liebhafsky—PED
The meeting was called by Mr. Eakens to discuss the Department’s position regarding the request of Mr. Charles P. Darlington, representing the Socony-Vacuum interest (11.375 per cent) in the Iraq Petroleum Company, that the Department support IPC’s position in the forthcoming negotiations for pipeline transit agreements between the Company and the Governments of Lebanon and Syria. Copies of the IPC’s negotiating proposals setting forth alternative formulae for computing the amount of payments to be made to each country for transit rights had been distributed in advance of the meeting.
Mr. Eakens opened the meeting by stating the problem briefly. He then called on each member in turn to set forth his views of what the Department’s reply to Mr. Darlington (and the Department’s position on the problem) ought to be.
Mr. Robertson stated that a discussion he had recently with Mr. Saba Habashi, Advisor to the Secretary General of the Arab League, revealed certain points which were pertinent to the present problem. This discussion indicated that the negotiations of Aramco with the Saudi Arabian Government presently underway were being carefully watched by the other members of the Arab League. The terms of the agreement finally negotiated by Aramco with Saudi Arabia would undoubtedly influence the views of the transit countries with respect to the pipeline agreements. Mr. Habashi had pointed out that there were limits on the dealings which private companies could have with sovereign governments. Although Aramco had done much to improve conditions at the grass roots level in Saudi Arabia, it had been opened to attack by the [Page 672] FTC Report. There is a need for a U.S. Government policy statement to counter the bad effects of this Report, which is looked upon as the official U.S. Government position in the area.
Mr. Robertson also pointed out that Aramco was the American company in the area, while IPC is a British company and is looked upon as essentially British even though there are some American interests in it. Consequently U.S. Government support, if any, might more properly be given to Aramco rather than IPC, which should look to the British for its main support.
On the whole, Mr. Robertson thought that in the light of these facts the United States ought to adopt a wait and see policy before actively supporting the current IPC negotiating proposals. He thought any action ought to be delayed at least until the Aramco negotiations are completed.
Mr. Metzger agreed generally with Mr. Robertson’s views. He believed that the essential problem was one of timing. The IPC proposals were merely a basis for negotiating and the United States ought not to identify itself at this stage with a specific proposal which might not be accepted. He thought it would be best if any support which the U.S. Government might give the companies were reserved until the negotiations had developed and sharpened the differences, if any, between the two sides.
Mr. Eakens suggested that it could be argued that there was a disadvantage in waiting if the present IPC proposal were accepted and set a precedent. Since the proposal would probably not actually be accepted, this possible disadvantage probably would not materialize. He also believed that the main responsibility for assisting IPC should rest with the British with the U.S. giving appropriate support.
Mr. Kirk expressed his general agreement with the positions stated by Mr. Robertson and Mr. Metzger. He also pointed out that it would be unwise for the U.S. to agree to support the IPC’s technical proposals without knowing the British reaction to these proposals.
Mr. Winters indicated his general agreement with the foregoing statements but pointed out that he believed the United States ought not to identify itself with any company in the Middle East at this time until the questions raised by the anti-trust action were resolved. Otherwise he felt the United States might find itself supporting the companies on the one hand, and bringing a legal action against them on the other. It would be difficult to argue abroad that the companies had always behaved in a favorable manner towards the countries concerned if at the same time a consent decree should be made in the pending civil anti-trust suit.
[Page 673]Mr. Funkhouser also agreed generally with the preceding statements. He thought there were several reasons for the Department delaying to intervene with Syria and Lebanon at this time: (1) The negotiations between Aramco and Saudi Arabia were not yet completed; (2) The Arab League was considering the whole problem; (3) Neither Syria nor Lebanon has decided its position on the transit question except that they both want more money; (4) Aramco had not yet disclosed its position to the Department; (5) Ambassador Malik of Lebanon was supposed to have been given carte blanche by his government to negotiate the matter with Aramco in the United States—if this was true there were several people with authority to negotiate and the lines of authority ought to be cleared up; and (6) We have not yet learned the British reaction to the IPC proposal which was submitted to the British Foreign Office in April.
After some further discussion of the question it was agreed that the Department would take the following actions on Mr. Darlington’s request:
He would be told by Mr. Eakens that the Department does not believe it would be desirable from its standpoint or that of the American companies to identify itself with the specific formulae set forth in the IPC negotiating paper. Since the paper is a negotiating paper, IPC’s position may well change substantially, or even completely, in the course of the negotiations. In view of the several unresolved but related problems, set out in Mr. Funkhouser’s six points above, it would seem preferable that the U.S. Embassy not intervene in any way at this time. It would also seem desirable that IPC do its best in the negotiations to reach mutually acceptable agreements with Syria and Lebanon. If points should develop on which agreement cannot be reached, that would seem to be the best time for the Department to determine in what way it could best support the American interests involved. Since IPC is a British company, and since the American interest is a minority interest, it is considered that the primary responsibility for support of IPC should rest with the U.K., with the U.S. playing a supporting role.
If Mr. Darlington strongly feels that possible support on the foregoing basis would be completely ineffective, he would be told that the Department would consider informing the Syrian Government (with whom it is expected the negotiations will begin first) at the time the negotiations begin, and after the U.K. had taken the lead, that the U.S. Government considers the negotiations most important, that it will follow them with interest, and that it is hopeful that the parties will reach a mutually acceptable settlement which will enable the pipeline to operate effectively to the advantage of [Page 674] all parties concerned. A similar position would apply to Lebanon. (Most participants in the meeting believed that before telling Mr. Darlington exactly what the Department would be able to do, the Department’s proposed line of action should be cleared with Justice.)
It was also agreed that with respect to the specific formulae contained in the IPC proposals, the Department would not make any formal or official comments or suggestions to IPC. Mr. Eakens would, however, after obtaining the comments of the other interested persons in the Department, transmit such comments to Mr. Darlington on a purely personal and informal basis and for such use as Socony might wish to make of them. These would take into account the comments of Mr. Moline, set forth in Despatch No. 5400, May 11, 1953 from London.2