133. Circular Telegram From the Department of State to Certain Diplomatic Missions 1

63. Joint State/USIA message. Department concerned by reports from Near East of certain increasingly prevalent attitudes in Arab states toward production and transit of oil. Some Arab leaders inclined believe oil resources so vital they can increasingly force Western nations and companies make substantial concessions to retain rights. Further some regard West’s role in production as that of mere agent, not partner.

Depcirtel 282 discussed rights at Dhahran Airfield. Similarly we desire place in proper perspective relations between states involved in production and transit of petroleum on one hand and states consuming petroleum products and the producing and transit companies on other. Principal element these relationships we wish strongly emphasize is mutuality of interests.

You authorized your discretion as question arises and to extent following applies your country emphasize to local government US views. Following for background in informal talks with local officials and other leaders; we do not desire formal representations.

In complex petroleum industry states possessing oil resources and those providing transit rights, companies developing and marketing oil, and states consuming petroleum all play important roles in cooperative partnership; none should consider its position gives it right or power dictate to others.

Essential principle present 50-50 relationship current in industry is partnership in which Near Eastern state provides resource to be developed and Western companies supply four essential elements: capital, technical and organizational skill, markets, and transportation facilities. Working together they make possible wider prosperity and development Middle East and contribute vitally [vitality?] Western Europe.

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Continuance this relationship especially important to producing states. Companies and governments outside Western community not capable operating petroleum industry on level required maintain present output and incomes Middle Eastern states. Soviet bloc self-sufficient in oil production at relatively low level and consequently unable absorb any significant quantity Middle East oil. Bloc also lacks excess refining capacity, has almost no tankers, and no established marketing organizations in principal consuming areas for Middle East oil, notably Western Europe.

Curtailment production in any one country Middle East can be made up by output elsewhere in world. Witness Iranian experience 1951–1953. Arab states today provide approximately 21 percent total world consumption petroleum products. Flexibility industry in making up any curtailed portion this percentage by increasing off-take from other producers in area or outside area clearly established. Likewise in field transport, consuming countries able adjust in time to loss pipeline transport facilities in Middle East or loss transport capacity through Suez Canal or both. Any interruption supply would give considerable impetus consumption other forms energy and development further oil resources and new forms energy.

Government operations and development producing states heavily dependent income from oil. Saudi Arabia derives 85 per cent its government revenues; Iraq two-thirds. Syria obtains one-fourth government revenues from transit. Nearly all current Iranian development program financed by oil. Sheikdoms even more dependent on petroleum. Curtailment output or transit likely have immediate serious economic social effect in contrast benefits these revenues now bring. Loss could not be offset by local operation petroleum industry.

Near East states, Iran and West work as inseparable partners. To use relationship extract political, financial, or other concessions would work detriment of both. West would not be greater loser from action any producing state in curtailing production or transit oil.

  1. Source: Department of State, Central Files, 880.2553/7–2556. Secret. Sent to Baghdad, Beirut, Cairo, Damascus, Jidda, Tehran, Aden, Amman, Basra, Dhahran, Khorramshahr, Kuwait, Tel Aviv, and Tripoli. Repeated to Bonn, London, Paris, Rome, and The Hague.
  2. In circular telegram 28, the Department of State instructed certain Middle Eastern and European posts to emphasize to their host governments the advantages to Saudi Arabia and other countries hosting U.S. military installations. The Department noted reports indicating that certain Arab countries had the impression that Dhahran was so vital to the United States that the United States was willing to make exorbitant concessions to retain its rights. It also affirmed that Dhahran and similar installations were of little value to the United States unless they had local acceptance. (Ibid., 711.56386A/7–1456)