Foreign Relations of the United States, 1958–1960, Western Europe, Volume VII, Part 2

208. Despatch From the Embassy in Italy to the Department of State⁰

No. 1129

Rome, March 7, 1958.

REF

• Deptel 3019, February 5; Embtel 2392, January 28,¹ and previous

SUBJECT

• Proposed Talks on Italian-American Petroleum Relations

We have had several recent indications that Governor Herter’s views expressed in Washington and repeated informally here have not been enough to satisfy President Gronchi regarding Italian-American oil relations. In fact, he has informally mentioned a new idea: to hold an international conference of oil exploiting and consuming nations, probably with the purpose of regulating competition and defining spheres of influence in Middle East oil operations.

Conversations with Gronchi Representative

On January 24, Commendatore Tomaso Sillani, unofficial emissary of President Gronchi, called at the Embassy. The President, he said, was still concerned about the Middle East situation and particularly the oil question. He felt, Sillani said, a certain resentment over the Libyan development which had caused ENI to lose out in that country. (Enrico Mattei has charged repeatedly and with wide publicity that heavy pressure was brought on the Libyan Government by American companies to prevent ENI’s receiving a concession.) Sillani suggested that it might have been a good move for the American companies to have allowed ENI to obtain a concession in Libya, a country to which Italy had sentimental attachments and which was geographically so close, rather than to have followed the policy of constantly trying to squeeze the Italian company out of the picture.

We explained that the American Government had not intervened in any way in the Libyan affair, and from our information it appeared that ENI had simply been beaten in a straight commercial competition. We emphasized once again that the U.S. Government has no control whatsoever over American oil companies which obey U.S. laws. We urged Sillani to remove any misunderstanding on the Libyan matter which might remain in the President’s mind.

Sillani then alluded rather vaguely to a project which he said President Gronchi had suggested, of calling a conference of all countries interested in exploration and exploitation of petroleum. The purpose of this meeting would be to agree on certain standards and, we gathered, to regulate competition for oil concessions. Sillani seemed to think something might have been said to the Department of State in this regard. We said we had not heard of it and it seemed to us there would be serious difficulties for the U.S. in such a proposal. As we had already said, the American Government could not control American oil companies, and the oil companies themselves were prohibited by the anti-trust laws from entering into agreements with other companies, whether American or foreign, to regulate their respective activities. Furthermore, such a conference could be expected to have grave political repercussions in the Middle East countries. Sillani seemed a little disappointed at our negative reaction but concluded his remarks with a vague statement that he and the President were simply seeking ways to eliminate unfortunate causes of friction between Italy and her friends, the first and foremost of which was of course the United States.

In a further brief conversation with an Embassy officer on February 28, Sillani said the President was still interested in the idea of a conference of several countries interested in Middle East oil development, and above all in talks with the United States on this subject. The President was unhappy with the cool response his proposals had received in the Department of State. Sillani had tried to pacify the President by saying the Department was only moving cautiously.

Gronchi Interview with ESSO Representative

Ralph P. Bolton, who is in charge of Jersey Standard operation in Italy, Austria and Switzerland, has reported to the Embassy a conversation he had February 26 with President Gronchi, who called him in for an interview. (Sillani was present.)

Gronchi said it was too bad the American oil companies “had it in” for Mattei and ENI, and alluded to the Iranian and Libyan situations. Bolton said that ESSO had never attempted to squeeze ENI out of the Middle East activity. He told Gronchi that when the controversial ENI-Iranian agreement (which gives the Iranian state oil company 50% participation in a new company to explore major permits) was announced last spring, he had personally congratulated Mattei, saying that if the deal turned out to be an economic success the American companies might learn something from it. ESSO welcomed competition, Bolton continued, and had done nothing in Libya to impede ENI’s efforts there.

Gronchi suggested that the American companies should work with ENI, that a meeting should be arranged between the U.S. and Italian Governments or between spokesmen of the major U.S. companies and of ENI to see if a spirit of greater cooperation could not be found. Bolton replied that U.S. legislation did not permit the U.S. companies to band as a group in this manner. There was no such thing as a spokesman for the major American companies. Furthermore, ESSO, for one, preferred not to enter partnerships but to operate on its own. Joint undertakings were usually less successful and invariably more difficult to manage. The President concluded the conversation by saying he was still interested in improving the unfortunate relations between ENI and the American companies.

Bolton is convinced that Gronchi’s efforts are inspired by Mattei, and that they are likely to continue. He feels that the Department must clarify the position of the U.S. Government, if the American companies are not to have continuing troubles as a result of Gronchi’s support of Mattei.

Foreign Minister Pella’s Attitude

As the Department will recall, I had previously talked with Foreign Minister Pella on this general subject. He had suggested that it might be well to have an unpublicized exchange of views between the Embassy and the Foreign Ministry, to which I agreed in principle. During a conversation on other subjects on March 7,² I asked Pella whether there was anything new on this matter. He replied that the President had not raised the subject with him for the past three months and, accordingly, he thought we might let it alone at least until after the Italian national elections in May. If it seemed desirable, he and I could then have some exchanges of views.

Recommended Action

Since the Foreign Minister seems to prefer to let sleeping dogs lie, I think it is probably best that we take no action at this moment. Nevertheless, Sillani’s remarks and Bolton’s report clearly indicate that Gronchi has not lost his interest in some sort of understanding on the general subject of oil exploitation. He may return to the attack at any moment. I think we should be prepared to meet it without delay. I therefore suggest that the Department have ready a sympathetic but clear statement of the U.S. position which could be presented either by this Embassy to the Foreign Minister or by the Department to the Italian Ambassador in Washington.

Such a statement, I believe, should cover the U.S. Government’s attitude toward an international oil conference as well as the views it would want to convey to the Italian Government on the general subject of petroleum policy and the possibility or impossibility of any understanding with Italy on this subject. If I am correct in my assumption regarding our policy, the statement should make clear: 1) that the U.S. Government cannot force American oil companies to enter into any special arrangement with Italian companies; 2) that the American companies are forbidden by law to enter into combinations among themselves or with foreign companies; 3) that for these reasons, it would be impracticable for us to participate in an international conference involving the marking out of “spheres of influence” or sharing of oil concessions; and 4) that even if a conference were confined to more general matters, we would think it unwise to hold one, because of the adverse reaction it would produce in the countries where Western oil companies have or seek concessions.

The rigid position suggested in the preceding paragraph is put forward in the light of the existing situation in Italy. I think the Department should keep in mind, however, that there may be a change in Italian oil policy after the elections this spring. There is at least a hope that the new government will move to bring Mattei and ENI under control. If that should happen, it would be desirable for us to assist the process, possibly by encouraging one or more American firms to cooperate with ENI on mutually advantageous business basis.

J.D. Zellerbach

0. Source: Department of State, Central Files, 865.2553/3–758. Confidential.
1. Telegram 3019 to Rome stated that, pending completion of a staff study of ENI and Italian oil policy, the Embassy should be guided by the remarks of Under Secretary Herter in his conversation with Brosio on January 16. (Ibid., 865.2553/1–2858) Telegram 2392 is printed as Document 206.
2. No record of this conversation has been found.