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

886D.2553/7–1954: Despatch

No. 352
The Ambassador in the United Kingdom (Aldrich) to the Department of State

limited official use
No. 191

London, July 19, 1954.

Subject:

• Ruler of Kuwait’s Desire to Modify the Terms of the Present Oil Concession Contract

Earlier this year Mr. H. A. Kemp the London representative of the ruler of Kuwait notified the Kuwait Oil Company that the ruler considered circumstances to have changed sufficiently to warrant a modification of terms of the present oil concession in respect to the method of calculating gross revenues. The letter alluded to the ruler’s understanding that the Governments of Iraq and Saudi Arabia had recently agreed with oil companies holding the concessions in the two countries that the 50–50 division of profits would thereafter be on the basis of posted prices. In the case of Kuwait, on the other hand, income was unfavorably affected by the terms of the Gulf–Shell contract. Mr. Kemp asked that the company arrange to meet with him with a view to making changes which Kuwait thought necessary in the present concession agreement. The Department was notified of this letter from Mr. Kemp by Mr. S. A. Swensrud who wrote to the Deputy Under Secretary of State to inform him of the ruler’s request.¹

After considering the letter from Mr. Kemp for several weeks, the Kuwait Oil Company with the approval of the Gulf Oil Corporation and the Anglo-Iranian Oil Company sent an aide-mémoire to Mr. Kemp on June 15 which in effect acknowledged the willingness of the company to meet with the representatives of the ruler of Kuwait on any matter at any time but denying that circumstances had so changed as to warrant a meeting for the specific purpose of modifying the method of calculating gross revenues in accordance with the undertaking in the company’s letter of December 30, 1951 dealing with this particular matter. As for the comment that similar changes had been made in concession agreements in the case of Iraq and Saudi Arabia the company said there had been no change in the percentage of profits divided which continued to be 50–50 and that as far as the company understood there had been no changes in the method of calculating the division of profits in the two countries. It was suggested, therefore, that it was premature to meet to discuss a different means of calculating gross revenue and that the proposed meeting should be postponed until the results of negotiations now going on in the area were known. The company indicated its readiness to consider the matter in its relation to Kuwait should such negotiations result in changes subject, of course, to the understanding that any changes which might later be negotiated would not result in any retroactive payments.

In a letter dated July 9 Mr. Kemp replied to the aide-mémoire.² In his reply he said that the aide-mémoire was not responsive. He disputed the company’s interpretation of the situation in the other oil producing countries of the Middle East contending that the other countries were in fact deriving a greater income than Kuwait by virtue of the higher price at which their oil was sold. He said that the aide-mémoire was of such a character that he felt it would serve no purpose to send it on to the Ruler and he asked that the matter be reconsidered.

The Gulf Oil Corporation representative in London said that the Kuwait Oil Company in consultation with Gulf and AIOC was now reconsidering its position but unquestionably some discussions would have to be held with Kuwait.

For the Ambassador:
Edwin G. Moline
Petroleum Attaché

1. A letter to Deputy Under Secretary of State Murphy from Chairman of the Board of the Gulf Oil Corporation Swensrud, dated May 17, not printed, enclosed a copy of Kemp’s letter of May 4. (886D.2553/5–1754)
2. David Proctor, Executive Vice President and General Counsel of Gulf, wrote to Assistant Secretary Byroade on July 29 and enclosed a copy of Kemp’s letter of July 9. (886D.2553/7–2954)