880.2553/1–2754
No. 328
Memorandum of Conversation, by the Chief
of the Petroleum Policy Staff (Eakens)
Subject:
- Effect of Oil Cartel Case on United States Interests and Objectives in the Middle East.
Participants:
- Mr. J. R. Withrow, Special Counsel for Socony-Vacuum Oil Company, Inc., in Oil Cartel Case.
- Mr. Kalijarvi—E
- Mr. Metzger—L/E
- Mr. Eakens—PED
The first part of the discussion centered around questions which Mr. Kalijarvi had raised at the meeting on Saturday, January 23,2 when Mr. Withrow presented to representatives of State, Defense, and CIA the findings of a study which he and two colleagues had recently made in the Middle East of the above-mentioned subject. Mr. Kalijarvi again mentioned his question as to whether Mr. Withrow did not have in mind what he expected to find before he went to the Middle East to make the study.
According to Mr. Withrow, he was frankly skeptical as to just what their study would show. In the study he represented three of the four parents of Aramco, one of which was Socony-Vacuum. He did not disclose the names of the other two. The fourth partner in Aramco did not think there was enough to the question to justify the study and did not join in it. Being skeptical when he started, Mr. Withrow said that he was surprised to learn of the serious repercussions which the people he talked with expected from a revival of the suit.
On the revival of the suit, he explained that what he meant was any action that led to news reports again appearing in the press as would be the case if the issues in the suit were aired in court proceedings. He said the impression which he received from people in the Middle East was that the suit already had been settled or dropped, and they were alarmed to learn that was not the case. They had apparently obtained this impression from the fact that nothing has been appearing in the Middle East press on the case now for many months.
[Page 785]Another question discussed was whether the dropping of the suit by the United States Government would not have a more unfavorable effect on United States interests in the Middle East than continuing it. Mr. Kalijarvi stated that he was frankly in a dilemma on that point at the present time. Mr. Withrow felt that this problem could be met in the press release which would be issued at the time of the dropping of the suit. He thought that Mr. Brownell could announce that after examining the documents, Justice had concluded that there was not a sufficient basis for the suit.
Mr. Metzger then took up the question of what the documents would show and particularly whether they would show any violations of the antitrust laws. Mr. Withrow’s reply was that assuming the applicability of the antitrust laws to the operations in question, there had been violations. He made the point, however, that the violations which had occurred since World War II were of a fringe nature and did not concern the basic issues of the four companies operating through Aramco, the several companies in IPC and the Kuwait offtake agreement. He referred to a price agreement covering Cyprus or Crete. He also said that prior to World War II three companies did have a world cartel agreement under which prices were fixed, markets divided and exchanges made, but that two of the three companies who had participated in that agreement were not even parties to the oil cartel suit.
According to Mr. Withrow, there are two factions in Aramco, each of which holds different views on the effect of the oil cartel proceedings. One group in Saudi Arabia considers that the Aramco concession already is forfeit by the Saudi Arabian Government and that Aramco is now continuing its operations only upon sufferance of the Saudi Arabian Government. This group feels that if any new company came along and made a better offer to Saudi Arabia and Saudi Arabia was convinced that the new group could operate the properties, that would be the end of Aramco. The other group, consisting of the New York management of Aramco together with some officials in the field, are less pessimistic about Aramco’s position.
In response to a question concerning the people with whom he talked in the various Embassies, Mr. Withrow covered the discussions which he had had with Embassy people. When he first talked with Ambassadors Hare and Moose he did not think they had given a great deal of thought to the question. The last time he saw Ambassador Hare it was his impression that Mr. Hare’s conclusions were about the same as his concerning the potential damage to American interests. He thought Ambassador Moose and Mr. Clark at Damascus went along with the thinking of the oil company attorneys about two-thirds of the way at first, and after some [Page 786] discussion among themselves reached about the same conclusion as they did. He thought Ambassadors Henderson and Berry had thought about the problem and agreed with the conclusions of their study group. Mr. Withrow’s only discussion with Ambassador Caffery was for about thirty minutes before the Ambassador was having an important meeting with the Egyptian Foreign Minister on the Suez Canal problem. Mr. Withrow did not consider that meeting very productive as he felt that Ambassador Caffery had other things on his mind and had not been able to concentrate on their problem.
Apparently the study by Mr. Withrow and his colleagues had to some extent been prompted by a suggestion of the Attorney General to the oil company attorneys that if they had any facts to lay before him on this question he would be glad to consider them. When they went back to lay the facts before Mr. Brownell and Mr. Barnes after their study, they were told that the agencies responsible for the questions to which their report was pertinent were State and CIA. Mr. Withrow said that their report had now been presented to State and CIA and, frankly, he did not know where the problem would go from there.