207. Memorandum From George R. Jacobs of the Office of International Resources and Food Policy to the Assistant Secretary of State for Economic Affairs (Solomon)1
SUBJECT
- New Iraqi Oil Legislation Finally Deprives IPC of Most of its Concession Area
Iraqi Law 80 of December, 1961 deprived IPC of about 99.6 percent of its concession area. It provided, however, that about 0.5 percent could be returned to the company. IPC has tried to get the right to choose which parcels of land would be included in this crucial half-percent. It especially wanted the proven reserves in the south—the north Rumaila field—to be returned to the company and it has stated repeatedly that any agreement with Iraq on increased production or exports would have to include the return of this field to the company. [Page 380] The GOI has been equally reluctant to give back land where an excellent field is known to exist.
In spring of this year when Iraq was financially pressed as a result of the closing of the IPC line by the Syrians, the GOI negotiated a loan from the IPC and the company hoped that the GOI would then sign an agreement with the company settling all outstanding issues, including substantial additional payments to Iraq and the return of the North Rumaila field to the company. A loan was given but in spite of varied attempts no settlement was reached.
With the outbreak of hostilities between the Arabs and Israel in June 1967 it became highly improbable that a settlement could ever be reached. On August 7, 1967 the Iraqis published a decree Law 97 (it has not, apparently, yet been published in the official gazette) which ended finally IPC’s hope of settlement and which is, with the exception of the near-sequestration of US–UK interests in Algeria, the first permanent action taken against the US/UK oil powers since the crisis began.
Although Law 97 may seem somewhat unclear (a Mobil oil translation of the law taken from the Baghdad radio announcement is attached),2 its meaning is unmistakable: IPC is left with the territory given it by Law 80 and no more; the National Iraqi Oil Company is given all the rest—to exploit by itself or with other companies. In the latter case, any agreement between NIOC and another company would have to be ratified by Iraqi law.
The IPC parent companies were not especially surprised by the action and will try to take legal action outside Iraq against any company entering into agreement with NIOC on exploitation of these fields (London’s 928)3 but it has little hope of affecting events inside Iraq.
Comment:
It should become clear in a very short time whether ENI or ERAP have indeed made any deals with Iraq.