283. Editorial Note

On June 30, Deputy Under Secretary of State for Economic Affairs C. Douglas Dillon submitted to Acting Secretary Christian A. Herter a joint U.S.-U.K. report on the transportation of oil from the Middle East to Europe. The report was cleared within the Department and with the following other departments and agencies: Defense Mobilization, Commerce, Interior, International Cooperation Administration, and Defense. The report made the following recommendations:

“17. It is recommended that the two Governments undertake the following measures to reduce the impact on the free world of reduced availability of petroleum caused by a possible future stoppage of Middle East oil transit facilities:

  • “a. Encourage Western European Governments (through the medium of O.E.E.C.) to ensure the provision from internal financial resources of one month’s additional oil stock above the average level in terms of days’ supply normally available for commercial purposes prior to the Suez Crisis. This additional stock may be stored in conventional or unconventional land storage or in floating storage, for example, surplus tankers. The present tanker surplus reduces the urgency of this provision to meet a transit crisis, but plans should be made forthwith and implemented with reasonable speed because (a) the tanker surplus cannot be expected to persist indefinitely and (b) the additional stock would be especially valuable in a production crisis.
  • “b. Maintain stand-by plans covering the organisational measures required on a Government to Government and Government to industry basis to assure speedy and effective re-adjustment of oil supplies in a Middle East emergency. The Government to Government measures should be implemented primarily through the O.E.E.C, and the Government to industry measures in part through O.E.E.C. and in part by each country in association with its national oil industry.
  • “c. Encourage Western European Governments to maintain stand-by plans for the introduction of rationing or other forms of restricting oil consumption in an emergency.
  • “d. Continue to encourage the exploration and development of alternative sources of supply in the free world, particularly West of Suez, by seeking to obtain in promising areas a favorable investment climate and the maintenance or adoption of reasonable legal, financial and concessionary conditions.
  • “e. Middle East pipeline projects should be considered individually on their merits bearing in mind the advantages of tankers in a transit emergency and the need to diversify transit routes. The construction of additional trunkline pipeline capacity from the Persian Gulf to the Eastern Mediterranean should be discouraged unless, in a particular case, political considerations are deemed to justify it.
  • “f. Encourage the crude oil-producing companies, through individual approaches, to construct and maintain, consistent with their commercial resources, reserve production and loading facilities in the various producing areas (Middle East and elsewhere) to aid in the rapid expansion of exports in an emergency.
  • “g. Encourage the oil industry to maintain as large tanker fleets in being as possible and to make maximum use of the Cape route. To this end practical studies should be undertaken in consultation with industry representatives, of the means, cost and implications (including the adequacy of port facilities) of maintaining a reserve of tanker capacity.

“18. It is also recommended that in the light of recent political developments in the Middle East the two Governments make a joint study of the special problems that would be caused by an interference with Middle East production at the source.”

Herter approved the report. (Department of State, Central Files, 880.2553/6–3058) The full text of the report and the memorandum from Dillon to Herter summarizing the report is scheduled for publication in volume XII.