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

880.2553/1–1354

No. 325
Memorandum by the Assistant Secretary of State for Near Eastern, South Asian, and African Affairs (Byroade) to the Consultant to the Secretary of State (Hoover)¹

top secret

[Washington,] January 13, 1954.

Replies have come in from five of the eight posts addressed.² Several reactions run consistently throughout these replies. In general there is doubt and skepticism in respect of the specific proposal. All recognize the needs and dangers in the present situation but tend to feel that a formal treaty is not, at least at this time, the best way to meet these needs and dangers. There is a fear it is too rigid and might bring more politics into petroleum matters.

There appears in several of the replies a preference for some kind of an international petroleum forum or council for advisory and study purposes which might evolve into a more formal relationship. The details vary but all picture something informal, free of any coercive arrangements, something along the lines of the Rubber Study Group.

The idea that the Arab countries are ganging up against the oil companies and the Western Governments tends to be discounted. There is, in fact, frequent recognition of the continuing lack of identical interests among the producing countries and the consequent possible advantage in pursuing our objectives on a country-by-country basis. It is admitted that conditions may get worse but feared that formal injection of Western Governments into the picture might hasten undesirable trends.

There follows a brief synopsis of the several replies that have come in:

1. Mr. Penfield—London³

Mr. Penfield and his associates consider any formal treaty premature—too much tension in Middle East for present launching of such an undertaking. Instead he sets forth the advantages of some kind of petroleum council along the lines of the Rubber Study Group which would publish statistical bulletins and various studies. Such an international forum would stimulate attention on common problems such as consumers trends, prices, transportation, etc. He thinks this would meet two of Mr. Beeley’s three points and that London would view it with sympathy. He is not worried that a council of this type would stimulate “ganging up” on the part of Arab Governments.

2. Mr. Moose—Damascus⁴

Ambassador Moose doubts if the proposed treaty is the best means of achieving U.S. objectives since the Near Eastern countries resist efforts to organize them; it is more difficult to deal with them collectively than individually. He feels that bringing in the transit states would not provide a helpful influence on producing states. He thinks government-to-government action tailored to each government is the best means towards fending off any trend toward nationalization. He sees need for more consultation all along the line but thinks that a treaty would add too much rigidity and formality. He recognizes, however, that our antitrust legislation limits less formal methods of consultation. He does not place great importance on the Petroleum Committee of the Arab League pointing out that much of the “ganging up” is done by newspapers and certain other elements which a treaty would not touch. Mr. Moose does not think Syria would be a party to any multilateral treaty.

3. Mr. Caffery—Cairo⁵

Ambassador Caffery does not think the Arab States would buy the treaty in the form proposed but only if it were set up in a way that would enable them to manipulate to their own advantage. Like Ambassador Moose he does not see the Petroleum Council as a great menace. He emphasizes the difficulties the Arab States have in achieving coordination. Egypt might like the treaty idea if it could be top dog or if it felt the treaty would enhance its relative position among petroleum states.

4. Mr. Berry—Baghdad⁶

Mr. Berry thinks IPC’s relations with the Iraqi Government are as good as they have ever been; they have enjoyed a two-year honeymoon. The current pricing problem has been held to the technical level. He fears the proposed treaty would project oil into the political picture with potentially grave dangers. He notes that the Middle Eastern leaders have tended to shun partnerships with the West and that efforts toward cooperation have been singularly unsuccessful. He suggests as a possible alternative proposal some kind of an advisory group to study problems and make recommendations—a sort of international oil conference, meeting at a neutral place and having broad membership. He conceives of it as a technical forum with a limited advisory role which might reduce friction and help well intentioned governments resist undesirable local pressures. Such a scheme could evolve into a more binding arrangement.

5. Mr. Henderson—Tehran⁷

Ambassador Henderson sees problems in the proposed treaty yet conceives it possible that some kind of a form for advisory purposes might be useful. The treaty, he thinks, would increase the likelihood of Arab Governments consorting against the governments representing concession interests and thinks emotional and political factors would come more into the picture. The treaty would tend to align the United States back of the companies of other Western powers. If the proposal served an educational purpose, he is afraid the increased knowledge would be used against us. He recognizes the weaknesses in the present situation and the limiting nature of our antitrust legislation, but feels that the companies are in a fairly strong marketing position and that the Iranian nationalization episode may provide a lesson to other governments. The Arab Governments may eventually come together, yet their interests are not identical; they would tend to be coy in respect to an international treaty and suspicious of foreign governments injecting themselves into oil disputes. He surmises that Iran in the present state of affairs would not likely be able to participate. He suggests the safest long-range method of meeting the inevitable and formidable ganging together of the oil producing countries to be in the direction of probing other areas for new sources of petroleum thus making the United States and Europe less dependent on the Arab region.⁸

1. Drafted by Gay.
2. This reference is to the NEA Staff Study on an International Treaty in Respect to Middle East Oil Disputes, transmitted on Oct. 21 to the Embassies in Amman, Baghdad, Beirut, Cairo, Damascus, Jidda, London, and Tehran. See Document 315.
3. Letter from Penfield to Jernegan, Nov. 16, not printed. (880.2553/11–1653)
4. Letter from Moose to Jernegan, Nov. 13, not printed. (880.2553/11–1353)
5. Letter from Caffery to Jernegan, Nov. 2, not printed. (880.2553/11–253)
6. Letter from Berry to Jernegan, Nov. 4, not printed. (880.2553/11–453)
7. Letter from Henderson to Jernegan, Nov. 12, not printed. (880.2553/11–1253)
8. In a memorandum to Byroade, dated Jan. 19, not printed, Hoover agreed with Byroade’s analysis of the problem. Hoover’s reply stated that a situation existed which made the operations of American oil companies difficult in the Middle East, but he did not believe an International Petroleum Treaty as proposed in the Staff Study was the practical answer to the problem, and he agreed with the arguments against it. (880.2553/1–1954)