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

886A.2553/11–2754: Telegram

No. 374
The Acting Secretary of State to the Embassy in Saudi Arabia¹

secret
priority

Washington, November 27, 1954—1:20 p.m.

223. Davies, Keyes, Ray, Duce, Saba Habashi called on Byroade November 26 to report on recent oil company–Onassis conversations New York. Onassis given to understand that if he cancelled his agreement with SAG or modified it to remove entirely preferential provisions companies would “consider” chartering from him again on strictly competitive basis. Onassis apparently desired company pledge to reinstate him in his status quo ante position in charter trade but he was informed he would have to take his chances. No promises made by either side but Onassis returning soon to Saudi Arabia (via London for talks with Shell) with possible intention of proposing to SAG elimination preferential provisions of agreement. Onassis stated he could not propose outright cancellation to SAG for face saving reasons. Onassis also insisted United States Government holding indictment over him to support oil companies and he asked intervention of companies to lift indictment which they refused.

Davies (who will be arriving Saudi Arabia approximately November 29) asked whether Department might instruct Embassy approach SAG in advance his arrival to emphasize again that whatever might be outcome of arbitration (if resorted to) neither off-takers nor United States Government could recognize preferential position for any carrier of oil. Aramco unable influence oil purchasers including parent companies, who prepared purchase oil elsewhere rather than recognize so disruptive a precedent in oil trade.

In order to reinforce points you may have already made pursuant to Department telegram 174² as well as Department telegram 16³ you are requested again to approach SAG soonest at whatever level you consider best suited to achievement of good results. In your own words make clear United States Government feels it must emphasize to SAG in friendliest possible spirit that arbitration might not advance an answer to present impasse since neither oil purchasers nor most maritime nations (including United States) could accept or do business under such preferential clauses regardless of outcome of this particular case.

If question of United States indictment is raised by SAG you should remind them sealed indictment antidates their agreement with Onassis and is based on quite independent considerations.

Saltzman

1. Drafted by Hart and repeated to London and Dhahran.
2. Not printed; it advised the Embassy the U.S. Government objected to the Onassis agreement not only for legal and financial reasons but also because it violated the accepted principles of international commerce, a point which other governments had also stressed. Since there was more at stake than the direct interests of Aramco, it suggested the Ambassador might consider the desirability of reiterating to the King the views of the United States and its interest in the nature of the solution of the problem. (886A.2553/10–2454)
3. Document 351.