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

886D.2553/8–1054: Telegram

No. 359
The Secretary of State to the Embassy in the United Kingdom¹

confidential

Washington, August 10, 1954.

809. Deptel 771.² Swensrud of Gulf called on Murphy Aug 9 reiterate Gulf desire Department’s support its position vis-á-vis British Government. He was informed of line stated Reftel and expressed hope we would at least refrain from indicating to British we felt AIOC and Gulf should acquiesce Kuwait demand for payment taxes on basis posted price. Murphy was non-committal but said for present we adopting hands-off policy pending further word as to British position which we assumed Embassy and Proctor would obtain shortly. Indicated our views not fully crystallized although we hesitant take sides dispute involving details of commercial questions such as price.

FYI. Swensrud said in great confidence and not to be communicated British he visualized possible solution through payment Kuwaiti taxes by Shell provided Shell received corresponding tax credit from UK. This might be accomplished by device of establishing Shell subsidiary in Kuwait which would resell at profit oil received from Gulf and so subject such profit Kuwait jurisdiction. Swensrud believed if Gulf and US Government insisted on principle that Gulf must not be required pay tax on profits it did not and could not receive under existing contract, and if British nevertheless felt Sheikh’s demand should be met, would be logical suggest tax be paid by company really receiving profits and that Shell therefore be permitted pay taxes to Kuwait with corresponding discount UK. He emphasized Gulf could not properly advance this suggestion itself but thought Embassy might do so informally if occasion arose. (Embassy should of course refrain from action on this unless instructed.)

Swensrud also said Gulf would probably be willing agree payment tax on posted price basis in future provided exception made for existing contracts. End FYI.

Request Embassy keep Department fully informed developments.³

Dulles

1. Drafted by Jernegan and cleared by NE and PED.
2. Dated Aug. 6, not printed. On Aug. 4, Gulf representatives in London told Embassy officers they understood the Department of State had instructed the Embassy in London to support Gulf’s position on the 50–50 division of profits in Kuwait. The Embassy had no record of instructions on that issue. (Telegram 619 from London, Aug. 4; 886D.2553/8–454) Telegram 771, the Department of State answer, informed the Embassy that after full consideration of the matter, the Department’s view was that it should not intervene in the case, in accordance with its established policy of not intervening in commercial provisions of concession arrangements between private companies and concessionary governments. (886D.2553/8–454)
3. Telegram 749 from London, Aug. 11, reported on a meeting on Aug. 6 between Gulf and AIOC representatives and British officials. The Embassy believed the British would be reluctant to use their special position in Kuwait to force the Shaikh to maintain or accept an arrangement less favorable than those in neighboring countries. (886D.2553/8–1154)