242. Memorandum of a Conversation, Department of State, Washington, January 25, 19571
SUBJECT
- Current Petroleum Problems
PARTICIPANTS
- Sir Harold Caccia, British Ambassador
- The Under Secretary
- BNA—Mr. Parsons
- RA—Mr. Moline
Sir Harold Caccia said that he had two questions relating to oil which he wished to discuss with the Under Secretary. The first had [Page 654] a bearing on the document regarding long-term requirements for the transport of oil from the Middle East which had been left at the Department on January 42 and the other related to the present oil situation.
Transport of Middle East Oil
The British paper, minus two paragraphs, had been given to the Shell Petroleum Company and the British Petroleum Company for their information and views. Shell’s initial reaction had been one of some concern that the British Government felt the matter required government interest in a subject which the company considered to be within its competence. Shell had told the British Government that invitations had gone out to American companies to come to London to discuss the problem of transport of oil in the Middle East. It was the hope of the British Government that the U.S. Government would give any necessary green light to permit American companies to participate in the discussion and that antitrust questions would not stand in the way.
Mr. Moline said that he thought the meeting in question was to discuss only a pipeline from Iraq to Turkey and in this case would involve only the Iraq Petroleum Company. The Under Secretary said he thought that consultation should be limited to the companies having interests in IPC, in which case no antitrust problems seemed to arise. In his view it would be a mistake to widen the number of participants beyond those having a direct interest in the immediate IPC project.
The Under Secretary referred to a previous conversation with Sir Harold and said that while he had previously considered the desirability of bringing in an individual who might work solely on the question of pipelines in the Middle East, he now believed it would be better to handle the matter in diplomatic channels and to approach Iraq and Turkey with the idea of some kind of treaty cover for a pipeline convention which might be worked out between the pipeline company and the governments concerned. He suggested that British Government and Departmental legal experts might consider the question of an appropriate treaty. It was clear that some kind of treaty cover would be necessary if the company were to invest the very large sum which would be required in the project in question and others which might follow. It was his view that the pipeline itself should be a common carrier and have some kind of public utility aspect even though as a practical matter the only oil available [Page 655] in the near future to be carried in the line would be IPC oil from Iraq.
U.S. Oil Exports
Sir Harold noted the fact that the most recent figures of U.S. oil exports to Europe had fallen sharply from the previous week’s level and were most disappointing both in total and in crude oil content. The Under Secretary said that he fully appreciated Europe’s concern in this regard but that the problem was a very difficult one. He referred to the fact that serious difficulties with respect to oil imports were in prospect and that these were certain to be intensified if U.S. production should be sharply expanded and then cut back drastically. He referred to the efforts which had been made to solve the import problem on a voluntary basis but noted that one or two companies do not subscribe to our efforts to limit imports in this fashion. Other considerations, particularly affecting Texas and related to its production capacity, also complicated the problem. Nonetheless the U.S. Government was seeking to take steps which could result in the export of more crude oil even though the steps would not be as dramatic as a Texas decision to increase production. Such moves might reduce crude runs and modify product yields. Companies had more than adequate stocks of gasoline to draw on and it was hoped to use U.S. Naval reserve stocks to guarantee the companies against fuel oil shortages, thus permitting them to draw down fuel oil stocks below the levels which would be considered prudent to cope with an unexpected cold snap.
The Under Secretary said that Naval authorities in the U.S. were of the opinion that British Admiralty stock might also be used in the same fashion to permit a greater stock drawdown than might otherwise be possible in the United Kingdom. Sir Harold said he would look into this matter and would have his Petroleum Attaché inform the Department of the results of this investigation.
- Source: Department of State, Secretary’s Memoranda of Conversation: Lot 64 D 199. Confidential. Drafted by Moline and initialed by Hoover.↩
- See Document 240.↩