Foreign Relations of the United States, 1952–1954, The Near and Middle East, Volume IX, Part 1

886A.2553/7–1654

No. 350
Memorandum of Conversation, by the Officer in Charge of Economic Affairs, Office of Near Eastern Affairs (Gay)

confidential

[Washington,] July 16, 1954.

Subject:

• Pacific Western Oil Company and the Onassis Agreement

Participants:

• Deputy Under Secretary Murphy
• Mr. Hadfield, Pacific Western Oil Co.
• NE-Mr. Dorsey
• NE-Mr. Gay

Mr. Hadfield, after referring to the letter of notification from the Saudi Arabian Government concerning the Onassis Agreement,¹ said Pacific Western’s reply to the Saudi Arabian Government had pointed out that the Agreement contravened Pacific Western’s concession and incorporated economically untenable terms, but that to the extent possible Pacific Western would cooperate with Mr. Onassis. Pacific Western received a response from the Saudi Arabian Government in April which expressed the hope that Pacific Western could come to agreement with Mr. Onassis.

Mr. Getty who owns 85% of the $20 million investment of Pacific Western met with Mr. Onassis in Paris and reached a “tentative” understanding. This understanding provides that Pacific Western will employ the Onassis vessel, Saud I, for three trips to the Western Hemisphere at rates substantially below those called for in the Onassis Agreement but still somewhat above the competitive level. If in the meantime Aramco comes to agreement with Onassis, Pacific Western is released from the commitment. After these first three loads on Saud I have been completed, Pacific Western would give Mr. Onassis forty-eight hours on all offers to meet other competition. Mr. Hadfield emphasized that his client, Mr. Getty, had much at stake and that this understanding offered him a chance to “buy our peace for $200,000”, a price that is “not too high”. Mr. Hadfield mentioned incidentally that he did not know if Onassis yet owns Saud I or how much money he might have paid on it.

Mr. Murphy asserted that the U.S. Government is taking a hard look at the Onassis Agreement and may make firm representations to the Saudi Arabian Government. The policies contemplated in the Agreement have important ramifications and wide acceptance of them would seriously affect international commerce. Mr. Murphy indicated that we would have no objection to the Saudi Arabian Government developing a merchant marine even with the collaboration of Mr. Onassis if the bad features of the Agreement were eliminated. It is the monopolistic and restrictive elements that are not attractive to us. He hoped Pacific Western would find it possible to cooperate in achieving our objective.

Mr. Hadfield noted that time “is of the essence” to Pacific Western, that Onassis representatives have been pressing him all week, that Mr. Getty has been under the same pressures in Paris and that Pacific Western hopes to finalize its position in a week or so. He wondered if its going ahead would hamper U.S. Government plans.

Mr. Murphy replied that to some extent it would hamper our plans and, to Mr. Hadfield’s inquiry if he should try to have the decision deferred, further replied that it would be of help to us if Pacific Western would do this. Mr. Hadfield agreed to attempt deferment and was told we in turn would keep him informed of developments.

1. Despatch 220 from Kuwait, Feb 7, informed the Department of State that Pacific Western had received the letter. (886A.2553/2–754) It was the same as the letter received by Aramco, referred to in telegram 333 from Jidda, Document 329.