Office of the Historian

886A.2553/5–1254

No. 343
Memorandum of Conversation, by the Officer in Charge of Arabian Peninsula–Iraq Affairs (Fritzlan)

confidential
Washington, May 12, 1954.

Subject:

  • The Onassis Agreement

Participants:

  • British Embassy
    • Mr. Brook
    • Mr. Bailey
    • Mr. Druitt
    • Mr. Bullmore
  • State Department
    • NE—Mr. Mart
    • NE—Mr. Dorsey
    • NE—Mr. Fritzlan
    • L/E—Mr. Metzger
    • PED—Mr. Eakens
    • TRC—Mr. Falck

Mr. Brook opened the discussion by saying that the British Government was most unhappy over the [Onassis] agreement as it was understood from reports and rumors received. He mentioned in this connection that the British shipping interests had made strong representations to the Government. He said it was not entirely clear that any British interest was directly involved, but nevertheless, the British had strong objections to this type of agreement based on:

(1)
The establishment of an undesirable precedent which could be used by other oil-producing countries;
(2)
The agreement as reported was believed to be a breach of unwritten law to the extent that it denied a generally accepted fact that title to oil following production passes to the company concerned which should then be free to dispose of it; and
(3)
The important maritime issue, i.e., flag discrimination is involved and this is of special interest to the U.K.

The Department’s representatives expressed their general concern over this matter and reviewed Ambassador Wadsworth’s recent representations to King Saud made on instruction by the Department and the King’s reaction (Dhahran’s telegram 164 of May 1, 1954).1

Mr. Hart expressed the view that Aramco’s parent companies would refuse to comply with the terms of the agreement and wondered if the economic implications of the agreement could be carefully worked out and brought to the King’s attention in order to show him how implementation of the agreement might well produce severe cuts in sales and hence a reduction in production and royalties.

There was some discussion of the ability of the company to carry out a policy of reducing production in the face of determined opposition of a sovereign government and the various sanctions at its disposal.

It was generally agreed that it would be desirable to have studies made of the legal and economic implications of the agreement and that a renewal of representations to the Saudi Arabian Government should be considered. There was also general agreement that such representations would be more forceful if made simultaneously by ourselves and the British, although perhaps along somewhat different lines.

It was agreed that efforts should be renewed to obtain a copy of the agreement in order to make the necessary studies and that the Department and the Embassy should keep in touch on this matter.

  1. Supra.↩