780.022/2–1654

No. 1544
The Petroleum Attaché in the United Kingdom (Moline) to the Chief of the Petroleum Policy Staff (Eakens)

confidential
official-informal

Dear Bob: By the time you receive this letter you may have seen a copy of despatch 2768,1 written by Evan Wilson and transmitting a memorandum from the United Kingdom Government with regard to its proposals for going to arbitration on the Buraimi dispute. His despatch was sent before I had returned from a discussion with Belgrave2 who had asked me to stop down for an explanation of the proposal. I send this information along because I think it amplifies the despatch somewhat though perhaps not sufficiently to warrant a separate one.

I suggested to Belgrave that it seemed to me that the British were running a considerable risk insofar as their relations with Abu Dhabi were concerned if IPC continued its work and was successful in finding oil only to have the area in question found later to belong to Saudi Arabia. He agreed this was at least an outside risk but thought there was little or no chance that arbitration would give the area of immediate concern to SAG.

Another point about which I inquired was why the British felt it necessary to refer to the possibility of IPC getting a concession from Saudi Arabia covering any territory which Saudi Arabia might acquire as a result of the arbitration. He explained that this was purely a face saving suggestion.SAG has stated publicly that IPC must stop working in the disputed area. To climb down from this position SAG must have some excuse. According to Belgrave Saudi Arab representatives have, on three or four occasions, said that they might be prepared to countenance continued work by IPC if IPC were to be given a concession on Saudi Arab account in any disputed territory acquired by the Saudi Arabs. Belgrave says further that Terry Duce said two years ago the Aramco was not interested in the territories, a statement which the British seemed to be interpreting as indicating Aramco willingness to see some other company taking a concession there.

My own view is that this is probably a misunderstanding of the Aramco position. It seems to me that there are two entirely different [Page 2579]considerations involved in the statements that Aramco is not interested in the area and, therefore, is willing to see amother company take it over. I remember that Aramco, even while it has been describing the huge reserves it has, has usually been opposed to having another company operating in Arabia. I remember too that when we urged that there might be protection in numbers, Aramco used to argue that Saudi Arabia did not want to deal with any one else than Aramco.

Whatever the situation may be, the British feel that they will be successful in one of their main objectives, namely to keep IPC operating on its present program since either SAG will accept the proposition or would be embarrassed to such an extent by turning down a proposal which it has itself suggested that it will not continue in its objection to IPC working in the disputed territories. It is said that IPC is anything but enthusiastic about the possibility of taking a concession from Arabia, whose recent actions they consider augur no good for oil company operations in Arabia. How true this is I don’t know. I am somewhat inclined to add a grain of salt to the statement.

In any case, it seemed to me you should have this background for whatever it is worth and particularly to enable you to check Aramco’s view of such a proposition if an appropriate opportunity for doing so should arise.

There are two other items I might as well dispose of in this letter. The first concerns the next meeting with the British on Middle East oil policy. As I remember it, it was suggested that such a meeting be held six months from the date of the last one and therefore it would be due about now. I believe the British propose suggesting such a meeting to discuss various problems other than Persia. One such matter will be the reported Onassis deal with Arabia which hit the headlines here last Saturday under a Washington dateline.3 Incidentally, anything you may have on this point would be of interest.

I also wanted to let you know that Paul Frankel will be in the States for about three weeks from February 15 and hopes to have a chance to talk with you before he returns.

Best wishes,

Sincerely,

Ed
  1. Despatch 2768 is not printed, but it transmitted the memorandum by the British Foreign Office of Feb. 15, supra .
  2. Thomas Robert Belgrave, British Foreign Office.
  3. For documentation on the Middle East oil meetings with the British and the Onassis contract with Saudi Arabia, see Documents 242 ff.