Foreign Relations of the United States: Diplomatic Papers, 1944, The British Commonwealth and Europe, Volume III

800.6363/1643c

The Secretary of State to President Roosevelt

Washington, May 4, 1944.

The enclosed draft Memorandum of Understanding on petroleum was agreed to, on an ad referendum basis, by the United States and United Kingdom expert groups as a result of the exploratory discussions on oil, and was considered on May 2 by the Committee you appointed and of which I am Chairman. This Committee unanimously approved the Memorandum.

In the exploratory discussions, the United Kingdom Delegation urged that the Memorandum of Understanding be re-enforced on two counts:

1. The British group felt that there should be explicit recognition of the United Kingdom’s dependence upon imported petroleum supplies and that therefore there should be special assurances of ample supplies to the United Kingdom for its national security and industrial and commercial well-being. The American expert group felt that the prime purpose of the Memorandum is to assure ample oil supplies to all countries and that any specific further assurance for the United Kingdom would be in conflict with our established commercial policy.

2. The United Kingdom group urged that the two Governments should agree not merely to respect but also to support all valid concession contracts. This further commitment would have obligated the United States Government to take joint action with the British vis-à-vis third governments regarding the validity of contracts, and the American group was not authorized to consider so broad a commitment.

We understand that when the British Delegation presents the draft Memorandum to the Cabinet Committee, they will urge that the second of these points be pressed again at a higher level. It is thought unlikely that there will be further pressure for special assurances of supplies for the United Kingdom.

[Enclosure]

Draft Memorandum of Understanding With the United Kingdom on Petroleum, April 29, 1944

Preamble

The Governments of the United States and the United Kingdom, whose nationals hold, to a substantial extent jointly, rights to explore and develop petroleum resources in other countries, recognize:

1. That ample supplies of petroleum,^* available in international trade to meet increasing market demands, are essential for both the security and economic well-being of nations;

2. That for the foreseeable future the petroleum resources of the world are adequate to assure the availability of such supplies;

3. That such supplies should be derived from the various producing areas of the world with due consideration of such factors as available reserves, sound engineering practices, relevant economic factors, and the interests of producing and consuming countries, and with a view to the full satisfaction of expanding demand;

4. That such supplies should be available in accordance with the principles of the Atlantic Charter.²³

I

The two Governments agree that the development of petroleum resources should be expanded in an orderly manner on a world-wide basis with due consideration of the factors set forth in paragraph 3 of the Preamble and within the framework of applicable laws or concession contracts. To this end they will concert their efforts to ensure, with respect to petroleum resources in which rights are held or may be acquired by the nationals of either country,

1. That petroleum shall be available in international trade to the nationals of all peace-loving countries in adequate volume, at fair prices and on an equitable and nondiscriminatory basis;

2. That the development of petroleum resources and the benefits received therefrom by the producing countries shall be such as to encourage the sound economic advancement of those countries;

3. That the development of these resources shall be conducted with a view to the availability of adequate supplies of petroleum to both countries as well as to all other peace-loving countries, subject to the provisions of such collective security arrangements as may be established;

4. That, with respect to the acquisition of exploration and development rights in areas not now under concession, the principle of equal opportunity shall be respected by both Governments;

5. That the Government of each country and the nationals thereof shall respect all valid concession contracts and lawfully acquired rights, and shall make no effort unilaterally to interfere directly or indirectly with such contracts or rights;

6. That the exploration for and development of petroleum resources, the construction and operation of refineries and other facilities, and the distribution of petroleum shall not be hampered by restrictions imposed by either Government or its nationals, inconsistent with the purposes of this Memorandum of Understanding.

II

The two Governments recognize that the principles declared in Article I hereof are of general applicability and merit adherence on the part of all nations interested in the international petroleum trade of the world.

Therefore, with a view to the wider adoption and effectuation of the principles embodied in this Memorandum of Understanding they agree that as soon as practicable they will propose to the governments of other interested producing and consuming countries an International Petroleum Agreement which, inter alia, would establish a permanent International Petroleum Council composed of representatives of all signatory countries.

To this end the two Governments hereby pledge themselves to formulate plans for an international conference to consider the negotiation of such a multilateral Petroleum Agreement. They also pledge themselves to consult with other interested governments with a view to taking whatever action is necessary to prepare for the proposed conference.

III

There are, however, numerous problems of joint immediate interest to the two Governments, with respect to petroleum resources in which rights are held or may be acquired by their nationals, which must be discussed and resolved on a cooperative interim basis if the general petroleum supply situation is not to deteriorate.

With this end in view the two Governments hereby agree to establish a Joint Petroleum Commission to be composed of ten members, five members to be appointed immediately by each Government. This Commission, in furtherance of and in accordance with the principles stated in Article I hereof, shall consider problems of mutual interest to both Governments and their nationals, and, with a view to the equitable disposition of such problems, shall be charged with the following duties and responsibilities:

1. To prepare long-term estimates of world demand for petroleum, having due regard for the interests of consuming countries and expanding consumption requirements,

2. To suggest the manner in which, over the long term, this estimated demand may best be satisfied by production equitably distributed among the various producing countries in accordance with the criteria enumerated in paragraph 3 of the Preamble,

3. To recommend to both Governments broad policies for adoption by operating companies with a view to effectuating programs suggested under the provisions of paragraph 2 above,

4. To analyze such short-term problems of joint interest as may arise in connection with production, processing, transportation and distribution of petroleum on a world-wide basis, wherever the nationals of either country have a significant interest, and to recommend to both Governments such action as may appear appropriate;

5. To make regular reports to the two Governments concerning its activities;

6. To make, from time to time, such additional reports and recommendations to the respective Governments as may be appropriate to carry out the purposes of this Memorandum of Understanding.

The Commission shall establish such organization as is necessary to carry out its functions under this Memorandum of Understanding. The expenses of the Commission shall be shared equally by the two Governments.

IV

To effectuate this Memorandum of Understanding the two Governments hereby grant reciprocal assurances:

1. That they will adhere to the principles set forth in Article I, paragraphs 1 to 6 inclusive,

2. That they will endeavor to obtain the collaboration of the governments of other producing and consuming countries in the implementation of the principles set forth in Article I, and will consult, as appropriate, with such governments in connection with activities undertaken under Article III,

3. That upon approval of the recommendations of the Commission they will endeavor, in accordance with their respective constitutional procedures, to give effect to such approved recommendations and, wherever necessary and advisable, to ensure that the activities of their nationals will conform thereto,

4. That each Government will undertake to keep itself adequately informed of the current and prospective activities of its nationals with respect to the development, processing, transportation and distribution of petroleum,

5. That each Government will make available to the Commission such information regarding the activities of its nationals as is necessary to the realization of the purposes of this Memorandum of Understanding.

V

This Memorandum of Understanding shall continue in force until six months after notice of termination by either Government or until superseded by the International Petroleum Agreement contemplated in Article II.

1. “Petroleum” throughout this document is used to signify crude petroleum and its derivatives. [Footnote in the original.]
23. Foreign Relations, 1941, vol. i, p. 367.