880.2553/12–2153
No. 323
Agreed Minutes of the Fourth Session of
the United States-French Talks on Middle East Oil
Present:
- French
- M. Clauzel
- M. Maillard
- M. Blancard
- M. Benard
- M. Carraud
- M. Queuille
- Department
- NE—Mr. Hart
- NE—Mr. Gay
- OMP—Mr. Armstrong
- PED—Mr. Eakens
- L/E—Mr. Czyzak
- NE—Mr. Fritzlan
- PED—Mr. Miller
Fourth Meeting, December 21, 1953, 3:00 p.m.
This final meeting began with a discussion by the group of the Iranian oil problem focusing attention primarily on the possible impact of its return to the world markets.
M. Clauzel outlined the French attitude concerning this problem. He noted that the most desirable solution would be for AIOC and the Government of Iran to negotiate a settlement between themselves. This would serve to uphold the important principle of the sanctity of contracts. M. Clauzel observed that the orderly return of Iranian oil to the world markets might require international cooperation. If a consortium should prove necessary then CFP believes it should be represented.
M. Blancard mentioned a few additional points of concern to France. He expressed the hope that any new solution proposed would not adversely affect existing concessions in neighboring countries. He noted that any additional advantages accruing to Iran under the settlement are sure to be requested by the neighboring countries. With respect to the marketing of Iranian oil, M. Blancard stated that the ideal solution would be for the oil to return to the world markets at a pace that would allow the increased production to be absorbed by the steadily increasing world consumption. However, if cutbacks in production in other countries should prove necessary, then they should preferably be applied world-wide rather than just in the Middle East. He noted that the [Page 763] cutbacks would be negligible on a world basis, but could be troublesome if confined to the Middle East.
Mr. Armstrong stated that the U.S. is interested in a prompt solution to the Iranian oil problem primarily because of strategic considerations. He observed that the current government in Iran is better in our view than any other that might replace it, but we cannot expect it to remain in power unless it manages to export some of its oil. Mr. Armstrong, however, recognized the British reluctance to agree to any arrangements without receiving just compensation for their properties. He agreed with the French that a solution should not endanger neighboring concessions. He also agreed that it would be preferable for the Iranians and the British to reach agreement themselves.
Mr. Armstrong continued by reporting that he had no information as to the specific compensation and marketing proposals being considered in London. He believed that a combination of increased world demand and cutbacks in the production of other Middle East countries would probably be necessary to allow Iran to resume exporting its oil. Mr. Armstrong concluded by noting that the domestic import problem will have to be taken into account by the U.S. Government in considering any solution. The domestic producers are gravely concerned over any international arrangements that might possibly lead to increased imports.
The group then agreed to turn the discussion to the problem of the appearance of Soviet oil on the world markets. M. Clauzel stated that for the first time since World War II, France has received offers of Soviet oil. Recently France was offered 400,000 tons of crude under the Franco-Russian Trade Agreement. Finland offered to resell to France 1,000,000 tons of Russian oil. Similar offers have been received from Israel and Austria. In addition, that Argentina, Uruguay, Italy and India also have been offered oil from the Soviet Bloc. M. Clauzel concluded that these Soviet attempts to increase exports could represent an effort to release a temporary surplus, an effort to gain long-term foreign markets, or an effort to disrupt the oil markets of the free world. If they represented either of the latter considerations, they would be of concern to the West and should be carefully watched.
Mr. Eakens noted Russia is committed to export about 3,000,000 tons of oil in 1953 as compared to 500,000 tons in 1952. He added that it was doubtful if Russia could fulfill all of its commitments for the year. Even so, their exports of only 60,000 barrels daily are very small as compared to the world consumption of 13,000,000 barrels daily.
Mr. Armstrong observed that up to now the Russians have generally attempted to obtain as much for their exports as possible and [Page 764] have avoided upsetting outside markets. He concluded that a danger signal to watch for would be Russian offers at a level under the current market prices.
In discussing the petroleum price situation, M. Clauzel noted that recent price behavior did not appear normal. At a time when large offerings of oil are on the world markets, prices should show a tendency to decrease. However, contrary to the laws of supply and demand prices have recently increased. M. Clauzel believed this tendency stemmed from the demands of the local rulers and the lack of solidarity on the part of the companies.
M. Blancard reiterated Western Europe’s need for lower and more stable prices for oil. He pointed out that oil ranks with wool and cotton as the principal commodities requiring payment in dollars or sterling. He stated that he firmly believed that it is in the best interests of all concerned that the future consumption of petroleum products should not be retarded by too high a price level.
Mr. Eakens agreed that low oil prices were desirable in Western Europe. He stated that the recent increases in petroleum prices in the Middle East prevented those prices from becoming out of line with the prices prevailing in Venezuela and the U.S. Mr. Eakens added that the domestic producers justified their increases on the grounds that there had been no increase since 1948, while the costs of producing oil had risen markedly since that time. The domestic producers also claimed that increased prices were necessary to assure continued exploration and development in the U.S.
Mr. Hart began the group’s discussion of existing government attitudes towards guiding or interfering in oil companies’ negotiations with the ruling governments. He noted that Aramco has, from the beginning of its operations in 1933, dealt with the Saudi Arabian Government on its problems. During this time, the U.S. Government has not found it necessary to intervene on behalf of Aramco, although there have been frequent discussions between Aramco and the U.S. Government concerning those cases where U.S. interests are involved. Mr. Hart concluded by stating that he believed this has proved to be a particularly healthy situation.
M. Clauzel commented briefly on the French attitude as follows. He agreed that the companies should be given as much latitude as possible in their negotiations with the local governments. However, he noted that the companies, in view of their specific responsibilities, are mainly guided in their negotiations by mercantile considerations. Yet negotiations between the local governments and the oil companies usually involve problems that transcend purely mercantile interests and should not properly be left entirely up to the companies. M. Clauzel suggested that current problems should be discussed on a governmental level from time to time. The individual [Page 765] governments concerned could then make their viewpoints known to the companies, who in turn would negotiate within the framework of their governments over-all objectives. M. Clauzel then questioned whether the U.S. would agree to meet with England, France and Holland to discuss current petroleum problems.
Mr. Hart noted that such a meeting would have the danger of appearing to the Middle Eastern countries as though we were ganging up against them. Mr. Armstrong recalled the strong domestic reaction to the Anglo–American oil agreement and questioned whether the domestic reaction to a quadripartite meeting might not be so severe as to defeat its objectives.
M. Clauzel observed that the group agreed that such a meeting would be valuable, but that any publicity could be harmful. He therefore proposed that the meetings be confined to the usual diplomatic channels in an endeavor to avoid publicity.
Mr. Hart replied that we would have to defer an answer as to our position concerning the proposed quadripartite discussions. He then stated that Mr. Eakens had agreed to draft a paper setting forth the ideas expressed by the members of both delegations on each of the problems discussed. It was agreed by the group that the contents of these papers would not necessarily represent the official positions of the respective governments.
The group agreed to meet at 11:00 a.m. the following morning to discuss the draft papers.