188. Memorandum of a Conversation, Department of State, Washington, January 25, 19571
SUBJECT
- Proposed Discussions in London regarding New Middle East Pipeline
PARTICIPANTS
- The Under Secretary
- Brewster Jennings, Chairman of the Board, Socony-Mobil Company
- M. J. Rathbone, President, Standard Oil of New Jersey
- Rear Admiral Thomas Kelley, Socony-Mobil Company
- William M. Rountree, Assistant Secretary, NEA
- Herman Phleger, Legal Advisor (for last half of conversation)
- Edwin G. Moline, RA
- Murat W. Williams, GTI
Mr. Jennings explained that he and Mr. Rathbone had come to ask Mr. Hoover’s advice regarding an invitation for discussions in London with Shell, British Petroleum, Compagnie Francaise and three other American companies concerning the construction of a new pipeline to carry Middle East crude oil (from the Persian Gulf area through Iraq to Iskenderun, Turkey). He said that the oil involved would be more than IPC oil and would include probably oil also from Kuwait and Iran. Mr. Rathbone said that the project would be a very large trunkline carrying 1.2 million barrels a day in two parallel lines, each of 600,000 barrels capacity. The meetings in London would probably not take place before February 18. The London discussions would be preliminary and would probably lead to the setting up of a working group to bring the matter into focus.
Mr. Rathbone said that the companies concerned desired assurances from the U.S. Government that their undertaking was legal and satisfactory. They further desired the assurance that our Government is sympathetically inclined to the project and would consider backing it up with some sort of treaty protection. No one of the companies wanted to go into this project without assurance that the Government was favorably disposed to it.
It was explained that the companies envisaged the organization of a pipeline company which would make agreements with the various countries. A treaty would probably be sought between the countries of transit and of ownership. This treaty (1) would recognize the existence of the agreements between the pipeline company and the countries; (2) would provide that no country would make any changes in its laws [Page 444] to affect adversely the operation of the company, and (3) in case such changes were made, would provide the companies recourse to the International Court of Justice.
Mr. Hoover expressed general agreement with the treaty relationship and compared it to the Convention of 1888 covering the operation of the Suez Canal. He also said that the project would seem to be desirable from an overall point of view.
Regarding the anti-trust aspect of the project, Mr. Jennings said that the companies would like a similar arrangement to that which was provided in the Iranian case in 1953, when a letter from General Bedell Smith stated that the Government would have no objection to the discussions that were to be undertaken leading eventually to the consortium agreement. Mr. Hoover pointed out that there might not be any anti-trust problem provided the discussions were limited to the pipeline project without reference to production concessions. However, he asked Mr. Phleger for a legal opinion. Mr. Phleger said he could see no reason why the Department of Justice should object to attendance at the meeting, particularly since the discussions in London would only be exploratory. Mr. Rathbone proposed that a letter be written to the companies with the clearance of the Department of Justice and ODM saying that there was no objection to the discussions provided no agreement was entered into and provided that when an agreement was contemplated it would be submitted for the opinion of the Department of Justice.
Mr. Rountree expressed the opinion that the proposed pipeline would be a most helpful development in the Middle East. There was some discussion on the effect of the project upon existing pipeline contracts. It was generally agreed by Department representatives that this would strengthen the existing pipeline arrangements since an alternative route was provided. However, it was clear that this undertaking would require at least three years to complete and the total cost was estimated at $760 million.
Mr. Jennings left a letter addressed to the Secretary informing him of the invitation to the London meetings and asking the Department’s opinion regarding attendance. It was agreed that an answer would be forthcoming shortly, but Mr. Hoover stated that the companies could be reasonably sure that the answer would be favorable.
- Source: Department of State, Central Files, 880.2553/1–2557. Confidential. Drafted by Williams.↩