173. Editorial Note

On March 16, 1973, officials from Continental and Marathon Oil Companies met with Department of State officials to discuss the Libyan Oil Sharing Agreement, first activated in 1971 when Libya nationalized British Petroleum. The Agreement required the issuance of Business Review Letters by the Anti-Trust Division of the Department of Justice. [Page 439]These Letters, issued as needed for specific crises, exempted the oil companies from anti-trust restrictions, allowing them to pool production, determine price structure, and negotiate jointly. The Letters also required the companies to report to the Justice Department through their lawyer, John McCloy. The March 16 meeting was to discuss the repercussions of a suit brought by the Corporate Accountability Research Group against the Justice Department for release of documents pertaining to the Libyan Oil Sharing Agreement. A similar request by The New York Times in 1971 had been averted under the Freedom of Information Act. The Anti-Trust Division asked the Department of State to review the issue of whether the Letters and documents should be made public.

The basic principles of the Libyan Oil Sharing Agreement were that all Libyan producers pooled oil in order to lessen the effect of Libyan cutbacks against any one of the companies operating there. Companies operating in the Persian Gulf also supplied “makeup” oil to those independents operating in the Mediterranean suffering cutbacks, in order to bring their oil availability as close as possible to previous levels. The companies informed Department officials that the Sharing Agreement provided them a “form of insurance” during negotiations with Libya, and had allowed Bunker Hunt Oil Company to “stand firm” against Libyan demands. The oil executives did not recommend making the Sharing Agreement public out of concern for Libyan retaliation. (Memorandum of conversation, March 16; National Archives, RG 59, Central Files 1970–73, POL 33 PERSIAN GULF) Background information is attached to a March 30 memorandum from Bennsky to Katz; ibid., PET 3 OPEC; and a memorandum of conversation, October 12; ibid.

In a March 23 memorandum to Gordon Brown in the Office of Fuels and Energy of the Bureau of Economic Affairs, Warren Clark of the North African Office in the Bureau of African Affairs, argued that release of information on the Sharing Agreement would be “highly detrimental” to the companies because it would demonstrate to Libya that the companies had banded together to “denationalize” part of British Petroleum after it had been nationalized, would stiffen Libyan demands in negotiations, and could provoke punitive action. Although Clark did not feel that nationalization per se affected U.S. national security as long as the oil continued to flow, he stressed that the question was “very sensitive from a domestic political point of view. The State Department and the USG have sanctioned in these Business Review Letters a strengthening of the international cartel of seven Anglo-Saxon oil companies. A special subcommittee of the Senate Foreign Relations Committee has now started an investigation into the role of business in US foreign policy. It is starting with ITT, Chile, et al., but it will also be looking into the role of US oil companies in US foreign relations. This subcommittee will have the power to subpoena classified documents. I believe this group would fry the State Department if [Page 440]it was revealed that we classified these documents in order to protect the ‘cartel,’ and that we had taken the position that what was good for the cartel was good for US national security.”

The reference is to the Senate Subcommittee on Multinational Corporations’ 1973 investigation into charges that International Telephone and Telegraph subsidized the opposition to Salvadore Allende’s government during the 1970 elections in Chile. In this March 23 memorandum, Clark also wrote that the independent oil companies could not get crude because the “Seven Sisters” had most Middle East crude locked up for their own customers. Senators on the subcommittee would “be quick to pick this up, and accuse the State Department of being a patsy for the big companies and denying oil to the little fellows by keeping this information about the Agreement classified. For the State Department at this time to justify withholding this information because preservation of the interests of these seven companies, two of which are not even American, is vital to ‘US national security’ would be most unwise, I believe.” Clark approved keeping the Sharing Agreement and the Business Review Letters classified on narrow grounds of proprietary interests. (Ibid., PET 3 OPEC)

John Countryman, Economic and Commercial Officer in the Embassy in Tripoli, wrote Clark on March 26 that the “rift between the majors and the independents over the relative importance of the Persian Gulf and Libyan holdings is deep.” He also noted that while Libya was already aware of the Sharing Agreement and the Business Review Letters, publication would give Libya an opportunity to attack the companies. (Ibid.) In a March 30 memorandum, George Bennsky, Acting Director of the Office of Fuels and Energy, recommended to Acting Assistant Secretary of State for Economic and Business Affairs Julius Katz that the documents remain classified. (Ibid.) On March 30, Katz informed Thomas E. Kauper, Assistant Attorney General, Anti-Trust Division of the Department of Justice, that most of the documents on the Sharing Agreement and the Business Review Letters should remain classified:

“Maintenance of a stable and secure supply of oil from abroad for the years ahead is of vital interest to the United States and an important foreign policy objective of this Government. We believe that the international oil companies have an important role to play in assuring such a supply of oil and that their ability to do so could be seriously jeopardized if the documents contained in the files in question were to be disclosed. Moreover, disclosure of the documents for which we have advised classification could, in our judgment, damage the national security of the United States.” (Ibid.)

The Department of State would maintain this position in October 1973, after Ralph Nader filed a request for copies of all Business Review Letters issued by the Justice Department. (Memorandum of conversation, October 12; ibid.)