Foreign Relations of the United States, 1955–1957, Foreign Aid and Economic Defense Policy, Volume X

232. Memorandum of Discussion at the 303d Meeting of the National Security Council, Washington, November 8, 1956¹

Washington, November 8, 1956

[Here follows a paragraph listing the participants at the meeting.]

1. European Oil Supply Position in View of Developments in the Near East

Upon taking his place at the table, the President informed the Council that the first item on the agenda was a discussion of the European oil supply position. Mr. Robert B. Anderson, former Deputy Secretary of Defense, would make a report to the Council, but wished to leave the meeting after this subject had been discussed.

Mr. Anderson stated that he would discuss three major aspects of the subject, beginning with an analysis of the precise oil supply situation as of today. He informed the Council that the Suez Canal was now thoroughly blocked by at least eight or nine ships which had been sunk in it.² The Iraq pipeline had been sabotaged and three of its pumping stations destroyed. The Aramco tapline was still intact, but it was touch-and-go as to how long it would remain in operation. In the light of these developments, Mr. Anderson said that our first requirement will be for 350,000 barrels of oil a day to be delivered from the Gulf Coast to the East Coast of the United States. In addition, there will be a requirement of 450,000 barrels daily from Venezuela and from our Gulf Coast for Europe. Only approximately 700,000 barrels of oil a day can be generated from the Gulf Coast. With maximum use of all free world shipping, perhaps 800,000 barrels of oil can move each day from the Middle East around the Cape to Europe. Even if all these potentialities are realized, Europe would still be faced with a deficit of between 10 and 15% of its requirements. On the other hand, if we lost control of the Aramco tapline or fail to secure oil from the Middle East in the amounts mentioned above via the Cape route, the deficit in Europe would increase rapidly above the 10 to 15% level.

Mr. Anderson, who had been working with the oil companies, then informed the Council of the availability of crude and refined products in Europe at the present time. There was approximately two weeks’ crude supply, and approximately a month to six weeks’ supply of refined products on hand. The American oil companies estimate that it will take something between six months and a year to rehabilitate the Iraq petroleum company’s pipeline, including the destroyed pumping stations. The British believe that this task can be accomplished sooner.

The second major aspect of Mr. Anderson’s report concerned the dollar problem. If the European nations were to secure oil from the United States and Venezuela to make up the deficit, this will require the generation of dollars. Prices for crude oil are rising rapidly, but not as rapidly as prices for shipping oil in tankers.

Mr. Anderson then reminded the Council that some months ago the Middle East Emergency Committee of industry personnel had been set up under the Office of Defense Mobilization, to make plans for the control of shipment of oil from the Gulf Coast to Europe in the event of an interruption of normal Middle Eastern supplies. There were British and French counterparts to the Middle East Emergency Committee. Mr. Anderson added that the Organization for European Economic Cooperation (OEEC), composed of seventeen European countries, had recently met and made the following four recommendations to the seventeen member governments:

1. A recommendation for equitable sharing of shortages among the European countries.

2. A recommendation for the equitable distribution of such petroleum supplies as were on hand at a given time.

3. A recommendation that rationing machinery be set up in each of the member countries.

4. A recommendation that each country establish a petroleum advisory committee to advise each government on the relevant problems.

Mr. Anderson then informed the Council that differences of opinion existed among the heads of our American oil companies with respect to the best means of dealing with the present crisis. Many believed that the United States Government should not act in the matter of assisting to get oil to the European countries until the situation in the Suez Canal had been clarified. Others were concerned that U.S. Government participation in getting oil to Europe would be regarded by the Arab nations as tantamount to U.S. support for aggression against Egypt. To make matters worse, as of yesterday the Government of Saudi Arabia had prohibited the offloading of any ships with oil destined for the United Kingdom or for France. This government was also planning other measures with respect to Bahrein Island, which was under a British mandate. Accordingly, Mr. Anderson pointed out that if we now proceeded to implement the program developed by the Middle East Emergency Committee, such action would be regarded by the Arabs as U.S. participation in the aggression against them. While there was little doubt that we could get oil to Great Britain and France by the simple collaboration of the American oil companies without invoking the program outlined by the Middle East Emergency Committee, this course of action might invite difficulties under the existing anti-trust laws of the United States. In essence, said Mr. Anderson, this constituted the issue which the Council would have to consider.³

The President first inquired whether any oil could be got from Sumatra or elsewhere in Indonesia. Mr. Anderson replied that some oil was produced from Sumatra, but most of the 350,000 barrels a day which landed on our Pacific Coast came from the Middle East.

The President then asked Mr. Anderson whether he could take any action to increase U.S. oil production for a period of six months, making it perfectly clear that there would be a cut-back after this interval. Or, asked the President, would the independent oil companies make a terrible fuss when the cut-back was instituted at the end of the six-months period? Mr. Anderson replied that this would be very difficult indeed to do, and suggested that it would be better for the oil companies, rather than the Government, to call for an increase in U.S. production.

The Vice President inquired how the oil companies were in a position to make a significant increase in oil production in as short a time as six months. Mr. Anderson replied that in point of fact the increase could be achieved very promptly. The President agreed, but wondered whether, if this were done and the price of oil rose, there wasn’t danger that the stripper wells would come back into production. Mr. Anderson answered that in any event we could anticipate that the independent oil operators would charge that the Government always bailed out the big companies whenever they got into trouble. Moreover, he added, the independents would be airing this complaint at a time when the Congress would be in session.

The President suggested that what Mr. Anderson was looking for was some means by which to secure an increase promptly in U.S. oil production without at the same time getting the United States in a position, in the eyes of the Arab world, of bailing out the British and the French. Mr. Anderson agreed, and said that the real question was simply whether we invoke the program drawn up by the Middle East Emergency Committee or not. The President stated that as he saw it, just as soon as a cease-fire was achieved in Egypt the Arab states will all be eager to sell their oil again, since this was the main source of their revenues. The President then inquired whether anyone else around the Council table had any different ideas to contribute.

Secretary Wilson observed that no matter what happened there was bound to be an oil shortage of some months’ duration in Western Europe. It was his suggestion that we set about ensuring increased production of oil in the United States without immediately disclosing what we propose to do to assist Great Britain and France.

Mr. Anderson prophesied that the rationing of petroleum may soon be required in Great Britain. Both the British and the French are extremely anxious to know what the United States proposes to do. If we do not inform them, the British and French may insist on holding on to every bit of oil available to them, and permit the shipment of none of this oil to other European nations to whom they normally would make such shipments. The President wondered whether it would not be possible to ensure the shipment of necessary oil to the neutral nations of Western Europe (excluding Great Britain and France) without arousing the wrath of the Arabs. Mr. Anderson replied that this would be very difficult because most of the other European nations do not have sufficient facilities to receive and store large amounts of petroleum at any one time.

Secretary Hoover commented that the Department of State had a very vital concern in this whole problem. In fact, hours and days are vital in getting this operation started. Even if we begin to increase U.S. oil production right now, it will still be very difficult to move that oil earlier than a period of fifteen to thirty days. Secretary Hoover predicted that there was going to be harsh rationing in Europe, which was bound to give rise to extreme anti-American feeling there on the ground that we will not seem to have done what is plainly in the vital interests of Western Europe.

The President interposed the observation that anything that succeeds in stopping the present hostilities in the Near East was very much in the vital interests of Great Britain and France. In reply, Secretary Hoover pointed out that the British and French have agreed to get out of Egypt as soon as the UN police forces move in. Moreover, the United States is ready, as Ambassador Lodge had stated in the UN, to transport the UN police forces to Egypt. Accordingly, it was absolutely crucial, in Secretary Hoover’s opinion, to get the necessary increase in U.S. oil production. He then advocated use of the OEEC machinery just as soon as possible. Use of the OEEC machinery would, he believed, avoid the appearance that the United States was focusing attention on oil supplies solely for Britain and France. Furthermore, it should be possible for us to go to King Saud and promise him that none of his oil would go to France or Great Britain and that no British or French ships would go into his ports. In conclusion, Secretary Hoover again suggested that operations start immediately.

Dr. Flemming informed the Council that if the program devised by the Middle East Emergency Committee should now go into operation, it will operate under the approval of the Secretary of the Interior. Accordingly, the U.S. Government would be provided with an opportunity to control the schedules of shipments. We could, furthermore, use the OEEC machinery to guide us in making decisions as to the appropriate distribution of oil going to Europe.

Secretary Humphrey agreed with Dr. Flemming, but warned that we could not start this kind of operation without clearly indicating that the United States was right in the middle of it. Accordingly, Secretary Humphrey said, he was opposed to doing anything more than taking the steps which Mr. Anderson had earlier suggested. Mr. Anderson pointed out that the United States and Canada were, so to speak, associate members of OEEC. Any way you looked at it, he went on, there was bound to be a shortage of oil in Western Europe. The real question, therefore, was whether we prefer to let this shortage increase over a period of time, or immediately involve the United States Government in the problem by putting into action the program devised by the Middle East Emergency Committee.

The President reiterated his point that the vital problem now was to induce Egypt to agree to a cease-fire. To do this will be much more difficult if we presently announce that we are going to get oil to Great Britain and France. While this was very hard on the State Department, it was true just the same. Secretary Hoover replied that we had just sent a message to President Nasser through Dag Hammerskjöld last evening, a message which we do not believe Nasser is in a position to turn down.⁴ Accordingly, we believe that we will have the Egyptian situation under control within the next 24 to 36 hours. In view of this, Secretary Hoover stated his belief that the program of the Middle East Emergency Committee should now be predicated on the likelihood of immediate success for the UN action.

Secretary Wilson took a different position, and recommended against any move involving the U.S. Government which would impair this Government’s bargaining position at the present moment. Secretary Humphrey agreed with Secretary Wilson, who went on to state that the situation should be left alone for a little while. He warned that the British and French will soon be urging that the United States ration petroleum supplies as only fair if these countries have to resort to rationing. This would cause a lot of trouble for this Government.

Secretary Humphrey said he was sure that the committee of private oil industry people would secure greater efficiency in the matter of shipping oil. On the other hand, he believed that the most unfortunate aspect of this whole crisis was the clarity with which it pointed to a serious lack in the logistics system of the Western powers. It indicates to the Arabs what a singularly strong position they are in by virtue of their control of so much oil in the world. Accordingly, the United States would have to do what it could for Europe in the near future, but not at the present moment; that is, not until the British and French Governments have got back into a position of compliance with the directives of the United Nations.

The President pointed out that if we really get the Arabs sore at all of us, they could embargo all oil, which would ruin our present Middle East Emergency Committee plan which still counts on some 800,000 barrels of oil daily front Middle East sources. Mr. Anderson agreed, and said that furthermore, if the Arabs got sore enough, we could also lose what we are now getting from the Aramco tapline. Mr. Anderson thought it would not be amiss if the State Department talked to Ibn Saud and asked him to what countries he was willing that his oil be sent. After all, Saud is, in a certain sense, cutting off his nose to spite his face when he threatens to cut off oil presently going to Bahrein. The British and French get very little of their oil from Bahrein Island. Secretary Hoover commented that he had received another useful suggestion from Mr. Anderson, namely, that if our European friends come here to Washington in the next ten days, we should invite King Ibn Saud to visit us after their departure. The President expressed approval of this proposal, and pointed out philosophically that the way of the peacemaker is proverbially hard. For this reason he believed that the first thing to do is to try to avoid aggravating either side in the controversy any further. If all of this was an hour-by-hour proposition, the President believed we would be best advised to let our Middle East Emergency Committee study further action. With a smile, the President added that despite his stiff-necked Attorney General, he could give the industry members a certification that what they were planning and doing was in the interests of the national security. This might assist them with respect to any involvement with the anti-trust laws.

The President asked Secretary Humphrey if he had any objections to such a course of action. Secretary Humphrey replied in the affirmative, and said that he would prefer to see us do only what Mr. Anderson had earlier suggested, namely, to open up our coastwise shipment of oil to all foreign-flag vessels and to undertake to increase oil production in the Gulf area. For the time being, however, he would oppose programming oil shipments to Europe. The Emergency Committee’s program could be got in readiness to move just as soon as the gong sounded and the British and French evidenced compliance with the orders of the United Nations.

Secretary Hoover stressed the matter of timing, and said our decision would have to be based primarily on a feel for public relations; that is, on when this Government believed it could move with due regard to Arab opinion on the one hand and the British and French viewpoint on the other.

Dr. Flemming stated that he would put the machinery into operation. He pointed out that foreign-flag tankers could then carry oil from the Gulf Coast to the East Coast. Thereafter, when the UN police force has been installed in Egypt, we will go on from this point to effectuate the program of the Middle East Emergency Committee. Dr. Flemming followed up his proposal with a statement of the crude oil inventory of the chief Western European nations.

Secretary Wilson warned that we must avoid thinking that we can deal with the Arabs as we would deal with businessmen. The Arabs are moved by emotion and not by the judgments of businessmen.

Secretary Humphrey pointed out, with respect to the money and dollar aspect of Mr. Anderson’s earlier report, that the French have already come over here some three weeks ago and have arranged with the International Monetary Fund to pull out all their gold and dollars. They have already drawn on these to the limit. Overtures from the British suggest that they will presently follow the French example. To Secretary Humphrey it seemed clear that if the United Kingdom did not look out, it would bust itself to a point of bankruptcy and of no return.

The President remarked with a sigh that he wished we could have a complete history of this cabal in which the British and the French were involved. A step-by-step analysis of what they had done would be very illuminating… .

Secretary Hoover commented that the Anglo-French cabal had not only “kidded” the United States; it had also kidded the nations of the British Commonwealth and, to some extent, the British public too… . The President agreed, and stated that this Government officially should keep out of the oil supply problem until we were assured that the cease-fire was in effect.

Mr. Anderson said that he felt compelled to state that it was difficult to encourage the oil companies to do their best, in view of their great anxiety about violation of the anti-trust laws if they followed a course that we suggested was in the national security interest. The President said with a smile that if the heads of these oil companies landed up in jail or had to pay a big fine, he would pardon them (laughter).

The Attorney General said that at the very least we owed it to these people to have a representative of the United States Government work with them. Mr. Anderson warned that he was not an official of the U.S. Government. To this the Attorney General replied that it would then be necessary to have a representative of the Department of the Interior work with the committee. We owed this, in all fairness, to the committee. The President said that this was OK with him, and asked that ODM or Interior make the necessary arrangements.

The National Security Council:⁵

a. Discussed the subject and possible U.S. actions related thereto, in the light of an oral report by Mr. Robert B. Anderson.

b. Noted the President’s approval of the following courses of action:

(1) Authorize the movement of U.S. Gulf Coast oil to the U.S. East Coast in foreign-flag tankers.

(2) When a cease-fire has been arranged in Egypt and when the UN police force is functioning in Egypt, consider putting into operation the plan of action of the Middle East Emergency Committee.

Note: The action in b above, as approved by the President, subsequently transmitted to the Director, Office of Defense Mobilization, for appropriate implementation.

[Here follows discussion of the remaining agenda items.]

S. Everett Gleason

1. Source: Eisenhower Library, Whitman File, NSC Records. Top Secret. Drafted by Gleason on November 9.
2. On October 29, Israel invaded the Sinai and on October 30, Anglo-French forces bombarded Egyptian installations. Passage through the Suez Canal was blocked on November 1 when the British sank the Egyptian ship Akka and that same day, Egypt broke diplomatic relations with the United Kingdom and France. On November 3, sabotage closed the Iraq Petroleum Company pipelines from Iraq to the Mediterranean.
3. MacArthur met on November 4 with Flemming, Wilson, Seaton, Hoover, Adams, Goodpaster, and several others. It was decided that no initiative should be taken to activate the Middle East Emergency Committee despite the sabotage of three Iraq Petroleum pumping stations in Syria on November 3. MacArthur wrote in part: “The main objection to taking initiative today was that since it would entail close cooperation with the British and French, our moral position might be impaired at a most critical moment and great damage done to our present position, particularly with the Asian and African countries. Furthermore, it was felt that one of the best cards we had to bring the British and French to take a constructive position was the way we handled the oil matter. If we rushed into cooperation with them, we would be perhaps giving away a vital card. The chairman summed it up by saying he understood the consensus of the matter to be that we should play hard-to-get and let the initiative come from the European countries.” (Department of State, Central Files, 840.04/11–455)
4. No copy of this message has been found in the Department of State files. During a conversation with W. Park Armstrong and Henry Cabot Lodge on November 7, however, Hammarskjöld stated that he had that evening sent a message to Nasser concerning the U.N. force.
5. Paragraphs a–b that follow constitute NSC Action No. 1629. (Department of State, S/S–NSC Miscellaneous Files: Lot 66 D 95, Records of Action by the National Security Council, 1956)