301. Telegram From the Embassy in Italy to the Department of State0

2899. Eyes only for Under Secretary McGhee. Ref Deptel 2668.1 It is encouraging that ESSO willing seek rapprochement with Mattei, and I hope this will lead eventully toward the broader objectives of containing Soviet oil and promoting harmony among Western oil companies.

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I had thought it generally agreed that, given the psychological problem of Mattei personality, a helpful first step would be accord him some recognition, on theory that this might facilitate subsequent efforts by our oil companies to reach some accommodation with him or at least assuage his sense of damaged ego sufficiently to minimize future polemics. I continue think such recognition would be useful, especially if it could be arranged before rather than after the proposed approach by ESSO. (Despite an ESSO approach, Mattei would doubtless still seek a meeting with U.S. officials, but a meeting then would be of different character, tending to involve our spokesman directly in the negotiations perhaps even at Mattei’s behest.) If a prior meeting is now ruled out by Stott’s proposed approach to Mattei this week (I assume ESSO continues to oppose what they consider build-up of Mattei by any semi-official “recognition”), then I believe best course would be to limit the U.S. Government role strictly to one of encouragement toward harmony without any direct intervention such as suggested in ref message.

I think that any official U.S. approach to the Italian Govt regarding our relations with Mattei should follow rather than precede an attempt at rapprochement in the commercial field through ESSO or other majors. It seems to me that an official US approach to Italian Govt seeking specific limitation on oil imports (and below the 14 percent limit which has been self-imposed), coming before inter-company negotiations had revealed a basis for agreement and before U.S. had “recognized” Mattei, would surely appear to Mattei as an attempt to bludgeon him into an agreement unfavorable to his interests. (The same would be true if Stott should appear to be speaking for US Govt, and particularly if Mattei got impression that he had to meet Stott’s terms before “recognition” by US Govt would be possible.) To protect his negotiating position Mattei would doubtless pressure Italian Govt not to make any commitments.

An official US approach to Italian Govt, moreover, does not seem called for at this stage, I assume that ESSO proposes to offer Mattei sufficient inducement to help resolve immediate problems between the two companies and to contribute to a satisfactory understanding with Mattei at company level concerning future ENI purchases of Soviet crude and ENI attacks on operations of the majors. We would not expect Mattei to back down immediately and openly (to his own govt) from positions he has long espoused, or from his existing contracts to purchase Soviet crude, but the availability of alternative sources of low-priced crude (from ESSO and others who might follow) should in itself operate against any increase in ENTs purchases of Soviet crude and might even lead to a commitment in that sense.

In light of foregoing, I suggest that Stott be advised before his meeting with Mattei this week that he should not expect an official US démarche to Italian Govt at this time (seeking agreement that ENI will [Page 839]not increase its purchases of Soviet crude) since such approach in our view would stiffen Mattei’s resistance and reduce the possibility of any agreement being reached. I think Stott should also be told that we remain receptive to a meeting between Mattei and State Dept officials as soon as convenient. (In my view, it would be better to have this meeting in Washington as initially suggested rather than to have UnderSec Ball come here, unless ESSO negotiations have proved fruitful by that time.)

Although this might appear as inadequate US Govt support for ESSO negotiations, it should be recognized that pressures on Italy by other govts for limitation of Soviet oil imports (through NATO oil study) produced few results and were interpreted by Italians mainly as an effort to defend interests of “petroleum cartel” and to limit Mattei’s bargaining power with Western companies. An official US intervention for the same purpose at this time, even though related to ESSO’s new offers, could be similarly interpreted. And If ESSO’s initial negotiations were unsuccessful, influence of US Govt toward an eventual agreement would have been dissipated prematurely.

As I see it the purpose of this exercise, which may well be prolonged, is to encourage rapprochement with Mattei, leading to more harmonious relations among oil companies and to cooperation on Soviet oil, to exert direct bilateral US Govt pressure at this stage, especially to achieve a specific limitation which we have failed to obtain in NATO, seems premature and could work against the broader objective.2

Reinhardt
  1. Source: Kennedy Library, National Security Files, Italy. Confidential; Priority; Limit Distribution.
  2. Telegram 2668, April 23, reported that McGhee met on April 19 with W.R. Stott of Standard Oil of New Jersey to discuss the elements of a possible accommodation with Mattei, that Stott “sizes up Mattei very much as we do,” and that he believed that a basis for accommodation existed. It requested the Ambassador’s views on a démarche with the Italian Government aimed at reducing points of friction between U.S. oil companies and ENI, at limiting ENI’s purchase of Soviet oil, and at ending unfair discrimination against U.S. oil companies in Italy. (Kennedy Library, National Security Files, Italy)
  3. Telegram 2695 to Rome, April 25, reported that Reinhardt’s objections to the proposed strategy for dealing with Mattei had been raised with Stott. Since Stott maintained his view, McGhee had urged him to meet with Reinhardt prior to any discussions with Mattei to reach agreement on tactics. (Kennedy Library, National Security Files, Italy) Telegram 2935 from Rome, April 28, reported that Reinhardt and Stott had reached agreement that an official U.S. approach to the Italian Government at that point was impractical and might be counterproductive. (Ibid.)