229. Memorandum From the Officer in Charge of Economic Affairs in the Bureau of European Affairs (Moline) to Don C. Bliss of the Office of the Deputy Under Secretary of State for Administration1
SUBJECT
- Meeting of the Foreign Petroleum Supply Committee in Room 5001, Department of State, August 13
The subject meeting was held in the Department of State following the initiative of Dr. Arthur Flemming, Director of ODM, who had previously heard the Secretary discuss the question of nationalization and considered it a subject of considerable interest to American oil companies in view of their concern that Egypt’s action on the Suez Canal would give additional impetus to Arab nationalization of oil production in the Middle East.
It was considered desirable, as a matter of form, to let the companies know about the Department’s views on nationalization through the medium of a regular meeting of the FPSC rather than to call senior officials of the oil companies to the Department for the purpose of a briefing discussion with the Secretary. Consequently, the regular membership of the Committee was present. See the attached list for the names of companies and their representatives. Present also were Dr. Flemming, Assistant Secretary of Interior Wormser, Assistant Attorney General Hanson, in charge of the Anti-Trust Division, several members of the Oil and Gas Division of Interior and several members of the Department of State. These also are listed on the attachment.
The meeting was opened by Mr. Stewart who had the roll called by the Committee’s Secretary. He then introduced Dr. Flemming. The latter explained that he had previously asked the Secretary if he would be willing to talk to the group regarding nationalization and that the meeting had been set up following the Secretary’s agreement to do so.
The Secretary opened his remarks by stressing the seriousness of the Suez situation noting in particular the concern of all regarding the oil aspects of the problem. He mentioned his appreciation that a plan of action was being prepared noting that lack of alternatives in a given situation frequently left one awkwardly placed. He noted his own concern of several month’s standing regarding the possible stoppage of transport from the Middle East and the breakdown of [Page 620] production in that area. The Secretary then referred to the nationalization of the Suez Canal Company and the possible ramifications of this action on oil interests in the Middle East. He assured the group that nothing would be done in London on nationalization which would jeopardize the oil concessions. There was no thought, he said, of acquiescing in any right of nationalization which would have unfavorable implications on the properties in which the companies had interests.
He called particular attention to the point in the London communiqué2 in which the view was advanced as an extension of the present international law view on nationalization that it was not applicable to assets which were impressed with an international interest. He described this view as a major extension of the U.S. view on nationalization which, it was hoped, would extend the protection we could give U.S. interests and properties.
By way of explanation, he described the situation in which a government, on the basis of assurance, that for a fixed duration it would have access to specific commodities or facilities had accepted a dependence on another government or had based their economies on lines they would not have followed except for such assurances. In such cases, the country controlling the facility or property should be regarded estopped from nationalizing such facilities or properties. The Secretary said that there must be an abandonment of the right of nationalization in cases of this character.
The U.S. does not intend to concede the right of Egypt to terminate the concessions of the company twelve years ahead of time. However, merely to restore the status quo would not be a satisfactory solution in the circumstances. Expansion of the Canal was clearly needed. It was evident that there would not be a sufficient time in the remaining twelve years to finance the kind of improvements required. Also, something better than the present concession and convention was needed to prevent Egypt using force as her stopping of Israeli bound ships, showed she was clearly capable of doing.
Following the Secretary’s presentations of his views and a short question and answer period relating to nationalization, Dr. Flemming spoke briefly of the assurances he had had from the Attorney General and his confidence that there would be no legal barriers to the kind of consultation and joint planning which the companies intended to do.
[Page 621]- Source: Department of State, Central Files, 880.2553/8–1456. Confidential.↩
- Reference is to the Tripartite Statement on the Nationalization of the Universal Suez Canal Company, issued at London by the Governments of the United States, the United Kingdom, and France on August 2, 1956. See Department of State Bulletin, August 13, 1956, pp. 262–263.↩
- It was noted on the source text that Stewart, Fentress, Lott, Fowler, and Gately were from the Oil and Gas Division, Department of Justice.↩