336. Memorandum of Conversation0
SUBJECT
- US-UK Bilateral Talks; Oil
PARTICIPANTS
- UK—Lord Hood, Minister, British Embassy
- Mr. D.A. Greenhill, Counselor, British Embassy
- Mr. W.C.C. Ross, Petroleum Attache, British Embassy
- Mr. D.J. Speares, First Secretary, British Embassy
- Mr. C.D. Wiggin, First Secretary, British Embassy
- Mr. M.S. Weir, First Secretary, British Embassy
- US—Mr. Foy D. Kohler, Assistant Secretary for European Affairs
- Mr. William C. Burdett, Director, BNA
- Mr. Clarence W. Nichols, Special Assistant, E
- Mr. Armin H. Meyer, Director, NE
- Mr. S.B. Jacques, Director, OR
- Mr. Kennedy W. Cromwell, III, WE
- Mr. William B. Dozier, BNA
Lord Hood said that he was not prepared to go into the details or the technicalities of oil, but rather wished to discuss the subject in general terms. Energy was, of course, vital to the UK economy, and of all the energy sources oil was the most important. Moreover, oil’s share of the UK energy market was constantly increasing. Not only must the UK import this large amount of oil, but it has a further interest in that earnings from its oil companies were very important to the UK international payments position. A significant aspect of the oil situation was that production, refining, transportation and marketing were largely centralized in seven international oil companies—five US owned, one UK, and the other half UK and half Dutch. Oil was thus largely controlled by Anglo-American firms and is identified as such in the outside world.
Lord Hood felt that it was very important for our two countries to keep in touch with respect to the oil situation, particularly since in their view our difficulties were likely to increase. He said that they thought it necessary for our two governments to provide political guidance to the oil companies and government backing when free world oil was threatened. The principal problem areas were as follows:
- 1.
- Oil producing countries demanding an even larger share of earnings and in some cases even ownership;
- 2.
- Increasing interference in consuming countries, particularly the trend toward nationalization of refining and distribution operations;
- 3.
- Indonesia;
- 4.
- Soviet oil exports.
Mr. Kohler said that we could readily agree on problems 1 and 2, but he was not so sure about the question of political guidance to private companies. We have always had difficulty here because of our antitrust laws. The difficulty over the Iranian arrangement was mentioned as a case in point. He added that we probably could not expect any radical change in our policy on this point.
Mr. Nichols said that there was a general appreciation in the US that the historical basis for the orderly distribution and marketing of oil was undergoing change. Our oil companies, however, have a history of doing a fairly good job in adjusting to and managing the changing situation themselves. He said that in Europe there was continuous discussion of energy policy by government bodies. The situation there was complicated by the rivalry between different energy sources, particularly oil and coal, and by the unusual degree of public ownership. We ourselves participated in the NATO oil study group which was now completing a comprehensive report on the problem of Soviet oil in relation to Western interests. It was anticipated that the report, which should prove to be a very useful document, will be turned over to the NATO economic advisers in about five weeks.1
Mr. Kohler said that Ambassador Thompson, in recent talks here, stated that over the next ten years we should be prepared to face greatly increased Soviet capabilities in the economic field. Mr. Kohler added that the West may have to organize to meet the threat of increased economic warfare, perhaps along lines similar to the wartime effort.
Mr. Kohler observed that while he agreed that bilateral discussions should be held, it seemed that much could also be done in the NATO forum. Lord Hood replied that he agreed with this, and pointed to the NATO study as being very useful in pulling all the threads together.
Lord Hood asked if we agreed that our Governments may have to give backing to the oil companies. Mr. Kohler replied in the affirmative. Mr. Meyer asked if the British had anything specific in mind. Lord Hood said that Indonesia was a good example, and possibly even Venezuela and Japan.
Mr. Nichols observed that in some areas there were policy questions which go beyond oil that may have to be settled. He said that, for example, large pipe had been taken off the COCOM list some time ago, and [Page 754] since then imported pipe had been of great use to the U.S.S.R. in building oil pipe lines to the West. This may be a matter for NATO consideration.
Mr. Kohler asked if the UK had had any thoughts on how to bring the Italian concern Mattei back under control. This firm was very useful to the Soviets as a means of breaking into Western oil markets. Lord Hood replied in the negative.
Mr. Meyer, referring to the question of guidance to oil companies, said that we do talk to our oil companies from time to time about their problems around the world, and they are usually cooperative since they consider themselves as being in the same boat. Perhaps the greatest problem is in educating the companies’ home offices.