Foreign Relations of the United States, 1955–1957, Near East Region; Iran; Iraq, Volume XII

265. National Security Council Report¹

NSC 5722

Washington, September 30, 1957.

CONSTRUCTION OF A NEW MIDDLE EAST PETROLEUM PIPELINE SYSTEM

Note by the Executive Secretary to the National Security Council

REFERENCE

• NSC 5428²

The enclosed draft statement of policy on the subject, prepared by the NSC Planning Board at the request of the Department of State, is transmitted herewith for consideration by the National Security Council at its meeting on Thursday, October 10, 1957.³

It is recommended that, if the Council adopts the enclosed statement of policy, it be submitted to the President with the recommendation that he approve it, direct its implementation by all appropriate Executive departments and agencies of the U.S. Government, and designate the Operations Coordinating Board as the coordinating agency.

James S. Lay, Jr.⁴

[Enclosure]

DRAFT STATEMENT OF U.S. POLICY ON CONSTRUCTION OF A NEW MIDDLE EAST PETROLEUM PIPELINE SYSTEM⁵

(Note: This paper does not consider the Middle East oil situation in general war)

General Considerations

1. The reduction of the vulnerability of oil movements from the Middle East is vital to the economic growth of Western Europe and therefore of major interest to the United States. European dependence on oil as a source of energy is steadily increasing.⁶ For the next decade at least, the Middle East will continue to be the principal source for supplying Europe’s growing requirements for oil.

2. The vulnerability of the European-North and West African area to interruption of Middle East transit facilities was clearly demonstrated during the Suez crisis. Only a major effort by the United States, Venezuela, and the European countries and by the supplying companies, coupled with an unusually mild winter and the continued operation of Tapline, prevented a serious emergency from developing. This region’s dependence on Middle East oil is increasing both absolutely and relatively. In 1955 the Eastern Hemisphere west of Suez obtained 1,938,000 barrels per day, or 67 per cent of its total oil supplies from the Middle East. In 1960 the Middle East is expected to provide 3,250,000 barrels per day, or 74 per cent of the total supplies. By 1965 this is expected to increase to 4,700,000 barrels per day, or 76 per cent of the total supplies.

3. If facilities for the transport of oil over new routes are not constructed, all of this oil, except that which passes around the Cape of Good Hope, must continue to move through Syria and Egypt. Currently about 2,300,000 barrels per day are moving across Syria and Egypt—that is, 600,000 barrels per day through the IPC pipelines and Tapline transiting Syria; 1,700,000 barrels per day via the Suez Canal. By 1958, if the IPC lines are fully repaired, planned expansion of Tapline is completed, and the customary methods of operation of the Suez Canal continue to be followed, these facilities will transport about 3,000,000 barrels per day. The risks of depending solely on these facilities are obvious.

4. A number of proposals for reducing the degree of vulnerability appear to offer prospects of long-range relief—for example, the development of new oil sources west of Suez and an emergency program for the construction of supertankers capable of economic operation around the Cape of Good Hope. Only time and experience can determine the degree of relief from new sources. In the long run, supertankers as an alternative to the Canal and existing pipelines would provide perhaps the greatest measure of safety. Existing foreign shipyards already have work expected to keep them substantially occupied until 1961. American shipyards have some idle capacity. The contribution that the tankers now under construction can make toward a reduction of vulnerability will be relatively modest during the period to 1962. The extent to which tanker construction will be continued thereafter cannot now be predicted, but would be affected by then existing or projected capacity of pipelines (see table, p. 15).⁷ An emergency program for supertanker construction, beyond that now planned, might involve government outlays for shipyard construction.

5. Another important means to help avoid an increased reliance on Syria and the Suez Canal would be the construction of pipelines to transport oil from the northern Persian Gulf region to the Mediterranean without passing through Syria. One industry proposal is Metline, a privately-financed and -operated crude oil pipeline, which 17 international petroleum companies, including 14 American companies, are currently planning to construct. The first phase of their proposed program includes construction by the second half of 1961 of part of the Mediterranean terminal and a 38/40 inch trunk line from the Mediterranean to Rumaila in southern Iraq together with gathering lines from Safaniya/Burgan and Abadan. The second phase would involve completion, in the second half of 1962, of the Mediterranean terminal and a parallel 38/40 inch line from the Mediterranean to Rumaila. The initial quantities of petroleum for the line when fully completed are as follows:

Saudi Arabia (Safaniya field)	200,000 b/d
Kuwait (Burgan field)	400,000 b/d
Southern Iran	350,000 b/d
Southern Iraq	250,000 b/d
Northern Iraq	200.000 b/d
	1,400,000 b/d

In the event that Saudi Arabia and Kuwait do not participate in a multilateral treaty covering this project, the second parallel trunk line and the gathering lines to these countries are unlikely to be completed. This circumstance would leave Metline with a capacity probably not exceeding 800,000 b/d according to the above estimates.

6. The precise extent of interest on the part of Near East petroleum producers in this project cannot now be determined. The original concept, as indicated in paragraph five above, was based on the assumption by the industry that a treaty negotiated with Iraq, Kuwait, Saudi Arabia, Turkey and Iran and the Governments of the investing companies was needed to protect existing investments in petroleum activities in the area generally and the new investment necessitated by this particular project. The inclusion of Saudi Arabia and Kuwait now seems marginal and the project increasingly appears to be one involving essentially Iraqi petroleum, possibly Iranian petroleum and right-of-ways across Turkey. Turkish petroleum, if commercially exploitable deposits are discovered in that country, could also be moved through this line. It cannot be assumed that the industry would be interested in making a heavy investment in this line if it extended solely from the northern Iraqi fields to the Mediterranean. Only four of the seventeen companies interested in Metline are involved in the development of northern Iraqi fields and they export the bulk of the output of the fields in this part of Iraq over existing lines in Syria. Currently they are moving 200,000 b/d out across Syria; by next May shipments will reach 530,000 b/d; and current improvement plans will bring shipments up to 700,000-800,000 b/d by 1961 when the Kirkuk fields will be producing at their estimated capacity (800,000 b/d).

7. Among the risks involved in the construction of Metline are the following:

a. The proposed pipeline system is a fixed installation which can be easily sabotaged in case of serious trouble in the area. It is susceptible to stoppage in case of disputes over transit rights, labor considerations and other difficulties with local governments. The extent of this risk will vary with the proximity of the line to the Syrian border, which will depend upon the detailed plan developed by the oil companies.

b. Establishment of Metline, or expansion or establishment of any other pipelines from the Persian Gulf, would reduce future tanker requirements and thus tend to reduce the construction and⁸ reduce the availability of tankers. The security interest of the United States might be better protected through expanded tanker construction; tankers can be flexibly used, and, providing that political factors permit it, can be used from any point in the Persian Gulf either via the Canal or via the Cape of Good Hope or shifted to the Western Hemisphere or other sources of production. They have a wartime security value which a pipeline would not have.

c. The possibility that Arab states may actively oppose a pipeline route through non-Arab lands creates a degree of political risk for Western interests in the area. Arab pressures in and upon Iraq to oppose the project may result in political instability within that country with unfavorable political developments for the West including further isolation of Iraq in the Arab world. Except for Iran, at present all oil to be moved originates in Arab countries and passes through Arab countries.

8. Despite the risks mentioned above, however, Metline offers the following advantages:

a. Metline will reduce the vulnerability of Western Europe to interruption of existing transit facilities under conditions short of general war in the following manner:

(1) Metline will provide an alternative route through friendly territory (Baghdad Pact countries) for the transport to the Eastern Mediterranean coast of a portion of Western Europe’s requirements for Middle East oil.

(2) The existence of Metline may lessen the likelihood that any other transit facility will be closed either by sabotage or by the imposition of crippling conditions of transit.

(3) The existence of Metline will lessen Western Europe’s growing dependence on the Suez Canal.

b. Metline will lessen the vulnerability of the economy of Iraq to the cessation of the movement of its inland petroleum across Syria.

c. The conclusion of an inter-governmental treaty protecting the specific pipeline agreements involved in Metline may develop new international criteria for the resolution of disputes involving transit arrangements which may have beneficial effects on the existing pipelines and Canal operations.

d. The proposed pipeline makes possible economies in the transport of Middle East petroleum as compared with an all-tanker operation from the Persian Gulf. Capital investment is smaller than would be involved in an equivalent tanker lift; less steel and other materials are required.

e. Since the major trunk lines of the new system would be within the territory of certain Baghdad Pact states, the project would serve to strengthen ties among them.

Objectives

9. Reduction of Western European vulnerability to the interruption of oil movement from the Middle East.

Major Policy Guidance

State-Treasury-Commerce-Budget	Interior-ODM-JCS
10. The United States should favor private industry plans for the construction of all or part of Metline as an additional facility for the westward movement of Middle East petroleum, in the interests of U.S. security.	10. The United States should not favor the construction of all or part of Metline, because the risks of interruption of that line are great and because, once built or projected, Metline would discourage construction and continued availability of tankers and thereby, in the event of interruption of the line, decrease the capability for the transport of Middle East oil which would otherwise exist.9
11. a. U.S. companies which have shown an interest in the project should be encouraged, taking into account the considerations listed below, to refer to the U.S. Government a formalized Metline plan believed by them to be acceptable. The Attorney General should be requested to advise the National Security Council as to the antitrust implications of the plan as a basis for Presidential determination of the national security interest in the plan in relation to its anti-trust implications.10
b. A prerequisite to Government approval of Metline from an anti-trust standpoint should be full opportunity by all companies which indicate an interest in this project to participate on an equitable basis. Any initial plan should encompass feasible extensions of the project to other oil fields in the Middle East, with all of the interested companies given, in advance, equitable rights to all extensions of the Metline project.
12. The United States should be prepared with the UK, the Netherlands and possibly France, to negotiate an appropriate treaty arrangement with Turkey and Iraq, and if needed with other Middle East countries. The treaty would be designed to provide feasible legal and diplomatic assurances relating to the agreements entered into between the oil companies and the Middle East Governments concerning investments in and operation of Metline.

13. No U.S. Government financial support, allocations of material or other administrative measures should be provided for the Metline project. Patrolling or other protective measures by U.S. armed forces should neither be provided for nor contemplated in the treaties referred to in paragraph 12.

14. The United States should, as appropriate, favor other activities by private enterprise not inconsistent with paragraphs 10-13 of achieving the objective stated in paragraph 9, such as developing new oil sources west of Suez, building oil stocks in Western Europe, and accelerating the development of atomic power in Western Europe.

1. Source: Department of State, S/P–NSC Files: Lot 61 D 167, Middle East Petroleum Pipeline System, Construction of; NSC 5722. Secret. Not printed are an annex and accompanying table that set forth the probable shortfall in petroleum supplies to the Eastern Hemisphere west of Suez in 1965 under certain assumptions involving the closure of all or part of Middle East transit facilities in an emergency short of general war.
2. Foreign Relations, 1952–1954, vol. IX, Part 1, p. 525.

3. NSC 5722 was not considered by the National Security Council on October 10 or later. On February 27, 1958, in a memorandum from Gerard C. Smith to Robert Cutler, the Department of State recommended that NSC 5722 be cancelled. The memorandum noted that recent developments made it “unlikely that Metline can now be successfully advanced.” The memorandum listed the following two developments:

   • “1. A lessening of industry interest as a result of (a) slackening in the rate of increase in Western European demand for Middle East petroleum; (b) an overabundance of tankers; (c) a commitment by the Iraq Petroleum Company to plan for using the Syrian pipelines to increase output of the Kirkuk fields.
   • “2. Current Arab opposition to a pipeline through non-Arab territory and the resulting likely political disturbance should construction of Metline go forward or should negotiations for necessary treaty protection be initiated.”

   The National Security Council cancelled NSC 5722 on March 4, 1958. Copies of Smith’s memorandum and Lay’s March 4 memorandum to the National Security Council are in Department of State, S/P–NSC Files: Lot 61 D 167, Middle East Petroleum Pipeline System, Construction of; NSC 5722.

4. Printed from a copy that bears this typed signature.
5. An attached map, entitled “Metline, as related to principal Middle East petroleum producing and transmission facilities,” is not printed.
6. In this statement, allowance has been made for increased coal production in Europe and for atomic energy development. [Footnote in the source text.]
7. Not printed.
8. The ODM Member wishes to insert the word “significantly” at this point. The Department of Commerce is unwilling to express a judgment at this time as to whether the reduction in availability of tankers would be significant or not. [Footnote in the source text.]
9. The ODM, Interior and JCS representatives believe that any U.S. encouragement of private industry should be limited to a line which would provide a Mediterranean outlet through Turkey from the Kirkuk area in Iraq (and perhaps also from the Qom field in Iran) and which accordingly would have no adverse effect on tanker availabilities. State believes that if such plans are presented to the U.S. Government they should receive most careful consideration. [Footnote in the source text.]
10. The Justice representative calls attention to the fact that the disposition of the pending anti-trust suit against some of the companies with respect to their activities abroad will complicate action by the Attorney General in this regard. [Footnote in the source text.]