Foreign Relations of the United States, 1961–1963, Volume XIII, Western Europe and Canada

298. Memorandum of Conversation⁰

Washington, March 17, 1962.

SUBJECT

• Mattei and ENI

PARTICIPANTS

• Mr. Ball
• Mr. McGhee
• Mr. Johnson
• Ambassador Reinhardt
• Mr. Tyler
• Ambassador Achilles
• Mr. West
• Mr. Knight
• Mr. Schlesinger, The White House
• Mr. Komer, The White House

Summary:

Following an exhaustive reassessment of the position of Mattei in Italian politics and in the international oil industry it was agreed that we should examine the possibility of encouraging one or more of the major Western oil companies to reach an accommodation with him. Mr. Walter Levy will be asked by Mr. McGhee to come to Washington to canvass the situation. Jersey, Socony, or other companies might be interested in considering such an arrangement.

Mattei’s General Position:

Ambassador Reinhardt said that the problem of Mattei was a longstanding one and that there were no particularly new elements in the situation other than the evergrowing magnitude of his activities. Mr. Ball commented that new elements might be found in his alleged responsibility for the establishment of the new Fanfani Government dependent on the PSI, and the possibility that he was becoming a front for the Chinese Communists and an agent for the Soviets in the sale of oil.

Ambassador Reinhardt said that even Mattei’s power had its limitations. Last summer when he seemed to be bidding for a special role to help the Iraqi oust the British oil companies, the Italian Government had forced him to back down. Similarly, when he gave evidence of attempting to develop special relationships with the FLN with a view to obtaining special concessions in Algeria after the liberation, the Government had again forced him to back down. The Ambassador noted the opinion of the French Ambassador to Rome, M. Gaston Palewski, who believed that Mattei was undoubtedly the most powerful single individual in Italy and was strong enough to force others not to interfere in his operations but by the same token was not strong enough himself to exercise control in other fields.

The Ambassador said that Mattei’s “power” had to be kept in perspective. When he claimed to have masterminded the opening to the left this was pure nonsense. Certainly he had long been in favor of it, but so had many others. He was a highly unstable person and the term megalomania was the only one that suitably described him. He had only two obvious interests: the oil industry and salmon fishing.

Mr. McGhee said these considerations limited the problem but did not change the fact that this government-owned Italian organization was doing things in many areas of the world that were most harmful to our interests.

Ambassador Reinhardt agreed, but pointed out that Italy had a long-standing complex about being short of energy. ENI and Mattei had become Italian institutions answering the Italians’ national desires in the energy field, as well as their wish to be “big time” in general. Mr. Schlesinger suggested that Mattei had become a great symbol of economic nationalism in Italy. Mr. McGhee noted the disruptive effect of Mattei’s operations in third countries and in our relations with the bloc. As an oil company, however, he said Mattei’s operations had been a failure. He had not found oil in Italy, his development of gas supplies had been made possible by a discovery made by American companies, and the cost of the oil he produced himself was uneconomically high by any objective standard.

What the United States Should Do About Mattei:

Ambassador Achilles then raised the question of what we should do about Mattei in the future, [1-1/2 lines of source text not declassified] we could try to win him over. [1-1/2 lines of source text not declassified] to the U.S. and give him the red carpet treatment; or b) we could involve him in profitable oil operations in the Middle East, Africa or elsewhere to provide him with sources of oil other than the Soviet Bloc.

Ambassador Reinhardt could not say whether we would be able actually to take Mattei into camp. Mattei thought he was going to succeed in developing other sources of supply (in the Near East, Africa, etc.) for his distribution network. On the question of his purchases of Soviet oil the Ambassador noted Mattei’s own statement that as a percentage of his total consumption during the next few years these would decrease to perhaps half of their present relative level. The Ambassador said he did not believe Mattei wanted Soviet oil because it was Soviet oil but merely because he could get it at a lower price. He was completely one-track-minded in his concentration on the oil business.

Mr. McGhee asked whether there would be any basis for reaching a deal with him. He personally thought it would be worthwhile for the American oil companies, for example, to offer him participation in the Iranian consortium, or other first-rate oil fields. Mr. Ball asked whether, in connection with any such deal, we could achieve an acceptable degree of cooperation with Mattei on restraints in purchases of Soviet oil. Ambassador Reinhardt was of the opinion that the price of the oil involved would be an important factor. Mr. McGhee asked whether Mattei and his organization disposed of large sums of capital. He noted that the oil companies were usually happy to distribute the risks of their operations but that such an arrangement would presumably require substantial capital from Mattei. Ambassador Reinhardt commented that Jersey seemed to be trying to reach some sort of arrangement with Mattei on the lawsuits currently before U.S. courts. He noted that some time ago Mattei was said to have stated to a friend in response to a question as to just what he wished that, “All I want is 10% of the European market”.

Mr. Tyler said that in his opinion there were two sides to the question: the matter of Soviet oil and the free world petroleum industry, and the existence of an extremely powerful individual in Italian politics who could, if he so decided, exert tremendous pressure on the Italian Government for a given line of policy. Ambassador Reinhardt said that Mattei did not appear to have any particular bias in favor of the Communists and he cited Mattei’s history in leading anti-Communist partisans at the end of the last world war. It was Mattei’s pride that he had succeeded in keeping his organization entirely separate from the Communist partisans. The Ambassador suggested accordingly that Mattei was not political in his orientation but was an opportunist whose interests were focused on the oil and related industries. Mr. Ball said that if this were the case, it might be possible to dissuade him from some of his more harmful present pursuits by involving him deeply in the free world oil industry. Mr. Schlesinger asked whether he was the type of person who would, in fact, wish to be tied down in this way.

Mr. McGhee thought there would be no problem on the question of sharing the sources of oil with Mattei. The problem would be on the marketing side. The oil companies would be well advised to cut Mattei in on their good concessions. Insofar as the markets were concerned the situation was one of dog eat dog and Mattei might compete to his heart’s content. In any case, he would not be able to cut prices beyond a certain minimum since he would then also face the same economic facts of life that the other companies faced. Jersey itself was large enough to make an arrangement with Mattei.

Mr. Schlesinger and Mr. Ball both said they thought such an operation worth trying. Mr. Ball said, however, that it would be necessary for Mattei to behave like a member of the club if he were, in fact, admitted. Perhaps he would not wish to be domesticated but we would lose nothing by trying.

Mr. McGhee suggested that an arrangement with Mattei would presumably have to include some undertakings on his part such as: 1) that he would not interfere with the percentage split with the governments of producing countries; 2) that he would be “fair” to the Western oil companies in Italy itself both with regard to markets and exploration; and 3) that he would reduce his trade in oil with the Russians.

Mr. Ball said the net result of such an arrangement, if it could be accomplished, would be to remove Italy from the category of oil-short countries. It was entirely possible that this would basically change Italian actions and attitudes in this entire field for the better.

Mr. McGhee suggested that Department representatives discuss this question quietly with Jersey. Mr. Ball agreed and suggested that Walter Levy be asked to come to Washington in a few days to discuss the possibilities. (Mr. McGhee will arrange this.) [1-1/2 lines of source text not declassified] Ambassador Reinhardt suggested that if such an attempt were made Egidio Ortona (Director General for Economic Affairs in the Italian Foreign Ministry, and favorably disposed toward the United States) might be helpful. Mr. Ball agreed.

Possible Meeting of the Under Secretary with Mattei

Ambassador Reinhardt suggested that before any approach on the possibility of an accommodation were made to Mattei, Mr. Ball should meet with him on a social basis without raising substantive matters. He said that if Mr. Ball did, in fact, visit Rome this month, an inconspicuous luncheon could be arranged at the Villa Taverna. It was agreed that it would be undesirable for such a visit to take place under circumstances making it seem that Mr. Ball had gone primarily to see Mattei. If, however, other business took him to Rome a talk with Mattei might be made to seem incidental. The Ambassador pointed out that a visit to Rome by Mr. Ball would in any case be useful from the point of view of our overall relations with Italy. Mr. Ball concluded, however, by saying that it was not yet clear whether he would be able to go in the immediate future.

0. Source: Department of State, Secretary’s Memoranda of Conversation: Lot 65 D 330. Secret. Drafted by Knight and approved in M on April 2 and U on April 5.