121. Editorial Note
In December 1955 the Government of Lebanon opened negotiations with the Iraq Petroleum Company (IPC) to establish a new pipeline transit rate agreement. IPC wished to determine the rate on the basis of pipeline mileage; Lebanon wished to receive the same share of profits as Syria, regardless of pipeline mileage. Negotiations reached an impasse by January 1956, but discussions continued.
On June 29, 1956, the Lebanese Parliament unanimously passed a tax measure imposing income taxes, retroactive to January 1952, on foreign companies previously exempt under special agreements. This law affected other concessionary companies, including the Trans-Arabian Pipeline (Tapline) and the Mediterranean Refining Company (MEDRECO), as well as IPC. The Embassy presented a note to the Lebanese Government on July 25, expressing its regret at the measure, and predicting the impairment of confidence on the part of foreign investors in Lebanon’s international reputation for fair treatment. (Telegram 240 from Beirut, August 1, 1956; Department of State, Central Files, 883A.112/8–156) Chamoun signed the measure on July 25, 1956, and it became law on August 1.
Tapline and IPC then refused to pay income taxes. On October 14, 1956, IPC and Chamoun reached a truce agreement, under which Chamoun agreed to instruct Finance Minister Georges Karam not to attempt to collect the income tax from IPC or Tapline. (Telegram 897 from Beirut, October 19; Ibid., 883A.2553/10–1956) This arrangement improved the atmosphere, and after an interruption due in part to the Suez crisis and the impairment of IPC’s pipelines in Syria, negotiations resumed in January 1957. However, the strained relations among Syria, Jordan, and Lebanon delayed an agreement by those three nations on profit-sharing. (Despatch 493 from Damascus, [Page 181] June 15, 1957; Ibid., 883.2553/6–1557) Information concerning the negotiations is Ibid., 883A.2553 and 883A.112.