176. Memorandum of a Conversation, Department of State, Washington, December 20, 19561
SUBJECT
- Pipeline Problems
PARTICIPANTS
- The Under Secretary
- Howard Page, Director, Standard Oil Company of New Jersey
- NEA—William M. Rountree
- NE—Edward L. Waggoner
The Under Secretary saw Mr. Page at the latter’s request at 3 p.m. on December 20, 1956.
The Under Secretary gave Mr. Page a brief review of the efforts the U.S. has made to bring about a resumption of the flow of oil through the IPC pipelines passing through Syria. He expressed some concern at a report the Department had received from Ankara to the effect that the Syrians were interested in employing their own consultants to survey the IPC pipelines and conjectured that the Syrians might be thinking of nationalizing the pipelines. Mr. Page said this interpretation was disturbing, but that it might be possible that the Syrians feared that they will be called upon to pay the cost of repair and wanted an independent appraisal of the extent of damage.
In a discussion of the possibility of building a new pipeline which would terminate at the Mediterranean via Turkey, Mr. Page gave the following information. Discussions among the companies which might be interested in such a pipeline have taken place and a further meeting [Page 418] may be held in the near future. The American companies would wish an assurance that such a project would have the approval of the United States Government, particularly the Department of Justice. He added that approval of the NSC on security grounds would be extremely valuable in promoting interest among the companies. The proposed pipeline would carry from 800,000 to 1,000,000 barrels a day, would cost approximately $650,000,000 and should be open to any company which could use such a pipeline. The proposition was an entirely practical one and the route not too difficult. Because of the anticipated delay in steel deliveries, were the project to be decided on in the near future, completion could not be expected before 1961. The Under Secretary asked whether completion might be speeded up if special priority were assigned to steel deliveries for this project. Mr. Page replied that in general three years are required from the time the steel starts through the plant until the oil starts flowing and that 1960 appeared to be the earliest possible date for completion under any circumstances.
Mr. Page stated that the companies felt that some form of treaty arrangement should be made to afford the pipeline international protection and that the companies would be prepared to start immediately once a satisfactory treaty arrangement was arrived at. The essence of his position was that an investment of the magnitude envisaged would be far safer if based on a government to government interest rather than purely on a government to company relationship. There followed a discussion of the desirability of bilateral treaties among the interested parties as opposed to one multilateral treaty. Mr. Page had with him a suggested draft of a bilateral treaty. It was felt that a multilateral treaty covering only the construction and operation of the pipeline itself would probably present fewer difficulties in terms of negotiation and parliamentary procedures than would a series of bilateral treaties. The Under Secretary suggested that Mr. Page send some of his legal people to discuss the general subject of a treaty with NEA and the Legal Advisor’s office in the Department and Mr. Page agreed to do so.
In a discussion of the registry and ownership of the company which would construct and operate the pipeline, Mr. Page stated that the company would be partially owned by U.S. interests (presumably in part by the UK-French-Dutch interests in IPC) and probably registered in the U.K., Panama or the Bahamas. Mr. Rountree remarked that U.K. or Bahamas registry might present certain problems in terms of public reaction in the Middle East. Also, Panamanian registry might present problems since Panama would not presumably be a party to a treaty covering the pipeline. It would seem that registry should be in one of the participating companies’ countries. Mr. Page agreed that this might be desirable and added that the company must, for financial reasons, be registered in a country in the sterling area.
[Page 419]The Under Secretary was obliged to leave at this point in the conversation to keep another engagement.
Mr. Page then proposed that consideration be given as well to establishing a U.N. corridor from the Gulf of Aqaba to Gaza in which pipelines could be laid. He observed that such an arrangement would remove some of the risks involved in dependence on the flow of oil through Syria and the Suez Canal, and might provide a U.N. buffer between Israeli and Egyptian forces. Also, U.N. port area at the head of the Gulf of Aqaba would provide a neutral gateway between Egypt, Israel, Jordan and Saudi Arabia. Mr. Rountree agreed that it was necessary to reduce Western Europe’s dependence on a continuing flow of oil through such unstable countries as Egypt and Syria, but expressed the opinion that it would not be feasible to undertake such a project in the absence of a definitive Arab-Israeli settlement. Mr. Page left with the Department copies of proposals concerning the construction of pipelines from the Gulf of Aqaba to Gaza (attached).2