198. Telegram From the Department of State to the Embassy in Ceylon 1

359. Joint State-Commerce. Embtels 596 and 597.2 Developments this subject in Washington: (1) Stanvac Director Rufus Burton in conversations at State and Commerce requested representations be made expressing U.S. concern provisions CPC bill. He stressed breadth requisitioning provisions and authority fix minimum and maximum prices could result public corporation with powers sufficient destroy privately operated companies and constitute unwarranted discrimination against substantial private investor of long standing in Ceylon. Burton also noted adverse effect on future foreign private investment; (2) Caltex New York stated no objection representations but not requesting same present time; (3) British Embassy Petroleum Attaché delivered Department copy strongly worded protest note (pouched) understood being delivered GOC.3 This asserts CPC Bill appears contemplate treatment UK oil companies in “manifestly unfair manner”, terms power for CPC fix minimum and maximum prices “serious breach fair commercial practice”, says use of these methods to introduce Soviet oil “plainly discriminatory against Western sources of supply in favor of Soviet sources”. Not clear from Embtels whether this note delivered or if UK High Commissioner used such strong line in December 19 meeting with PriMin.

Department believes your approach constructive and suggestion discussion of schedule of properties with limitation of requisition and acquisition provisions best effort possible this stage. Embassy should continue use restrained tone in future meetings Government Ministers, while at same time expressing genuine disappointment implications of such a measure. Stress might be placed on U.S. interest in economic [Page 414] development Ceylon and discouraging impact this measure may have on future foreign private investment. Fact that measure being taken at time virtually concurrent with Small Industries Exhibit and Trade Mission designed encourage private business may be mentioned by way of contrast to show U.S. conviction provisions this bill contrary best interest Ceylonese economic development. All Trade Mission personnel except one will be private American businessmen who will report subsequently their impressions of Ceylon to business organizations and public. It would be most unfortunate for promotion mutual trade if adverse reaction develops from such GOC treatment foreign investors of long standing service to Ceylon.

  1. Source: Department of State, Central Files, 846E.2553/12–2660. Confidential. Drafted by Robert Caldwell and approved by G. Lewis Jones. Repeated to London.
  2. Telegram 596, December 24, reported a conversation between Minister of Commerce T.B. Ilangaratne and managers of the Caltex and Stanvac oil companies. According to the oil company executives, Ilangaratne refused to amend the Ceylon Petroleum Corporation bill to give additional assurances to the oil companies, (Ibid., 846E.2553/12–2460) Telegram 597, December 26, dealt in part with a conversation between Embassy personnel and the Ministers of Finance and Agriculture about the CPC bill. The Embassy representatives noted that these two Ceylonese officials, Felix Dias Bandaranaike and CP. De Silva, appeared anxious to reassure them that nationalization was not their objective. Certain of their statements, according to the Embassy, contradicted those of Minister Ilangaratne, as reported in telegram 596. The Embassy further stated that the two Ministers seemed agreeable to further discussions with the oil companies, and the managers of Stanvac and Caltex said they were also willing to have such discussions, (Ibid., 846E.2553/12–2660)
  3. A copy of this note was attached to a memorandum of conversation by Robert Caldwell, dated December 21. (Ibid., 846E.2553/12–2160)