Foreign Relations of the United States, 1964–1968, Volume XXI, Near East Region; Arabian Peninsula

6. Memorandum of Conversation¹

Washington, January 13, 1965.

SUBJECT

• Discussion of Near East Developments

PARTICIPANTS

• Oil Executives
  • Arabian American Oil Company
  • Thomas C. Barger, President
  • Garry Owen, Vice President and Head of Washington Office
  • J. J. Johnston, Secretary and General Manager of New York Operations
  • Gulf Oil Company
  • Elston Law, Associate General Counsel for Foreign Operations
  • Stuart Nelson, Gulf’s Washington Office
  • Socony Mobil Oil Company
  • William P. Tavoulareas, Senior Vice President
  • Standard Oil Company of California
  • George Parkhurst, Vice President
  • Standard Oil Company of New Jersey
  • Howard Page, Vice President
• Department Officers
  • M—Governor Harriman
  • NEA—Assistant Secretary Phillips Talbot
  • E/OR/FSE—Andrew F. Ensor
  • AFN—Grant McClanahan
  • NE/E—George M. Bennsky
  • NE/E—William D. Wolle

Governor Harriman after welcoming the visitors said the Department believed that USG Near Eastern policy had achieved a reasonable degree of success since the Suez crisis of 1956. The Arab-Israel problem and the question of Communist penetration continued to occupy much time and effort. He thought the Soviets had had very little reason to be happy over Near Eastern developments in the same period, though perhaps they were somewhat more happy recently due to Nasser’s cooperation with the Congo rebels. The arms race in the area had been held fairly well under control. There were constant threats from Arab nationalism in the area. Recent actions by Nasser brought us face to face with a major policy question: how far does the USG want to push Nasser? The Governor said he thought nothing would please the Russians more than for the US to break with Nasser. Anyone advocating such action on our part would do well to give the question the most serious consideration. The Department views as dangerous the present trend in Congress toward taking legislative action which would end American aid to the UAR. Governor Harriman asked Mr. Talbot to extend these remarks.

Oil Information Activity

Mr. Talbot began by discussing the dissemination in the Middle East of information on petroleum and energy matters. He said British government officials had discussed with the Department recently the possible intensification of oil information efforts. What was contemplated was a program aimed at attacking the notion that the Near Eastern oil producing countries can dominate and thereby control the international energy market both now and in the future. The Department’s basic feeling was that this task is and should remain the main responsibility of the oil companies, but wondered if the government could play an expanded role to supplement company efforts. Mr. Page confirmed that the companies had been doing a good deal along this line although relatively little through the press. He referred to various speeches given at regional professional and technical conferences and to frequent private discussions with government policymakers during the companies’ frequent OPEC negotiations in the past two years. He felt it was a question of deciding whether to put on a campaign or simply keep at the present efforts. Mr. Barger thought the government could assist in this effort in some respects. He said Near Eastern oil leaders were often highly impressed by this type of information and gave as an example the deep impression made on the two Saudi members of the ARAMCO Board at a recent meeting by a Pacific Gas and Electric Company presentation on its activities in the nuclear energy field. Mr. Parkhurst thought that to be more effective the proper information should flow more to Arab politicians in addition to oil ministers and technicians as at present.

Mr. Law warned of a possible adverse effect from putting too much stress on potential energy resources outside the Near East, in that it might make the Arabs want to get still greater benefits now from their oil to build up a reserve against the day 10 to 15 years from now when their oil earnings potential might be reduced. Mr. Tavoulareas added another word of caution, noting that Middle East oil production was bound to keep rising and that this fact might belie our admonitions about the energy potential of other areas. Mr. Barger reiterated he felt there was an appropriate US Government role aimed at preventing unthinking use of oil as a political weapon by radical Arabs. He thought the Bureau of Mines could increase its publicity on its research activities in western oil shales. Mr. Talbot summarized, stating that this discussion led him to believe the word is getting through now to the people who really count in oil decision-making in the area. The government’s role was perhaps one of waiting for targets of opportunity rather than mounting a major information campaign. Governor Harriman added that the government might, however, do well to increase its dissemination of pertinent portions of scientific publications on oil.

Review of 1964

Mr. Talbot recalled the Department’s belief a year ago that 1964 would be an extremely rough year politically in the Near East. Fortunately there had been no real blowups, either over the Jordan Waters issue or others, and the year had been completed with far less damage than we had dared hope. There had been real problems, however, in several fields. Arab summitry had brought renewed threats to the status quo along the Israel-Arab borders. The UAR seemed to be soberly cognizant of the possible dangers of stirring things up, but the Syrians were plainly less averse to gambling with this potentially explosive situation. There had fortunately been no revival of fedayeen units. We remain concerned lest the Lebanese permit foreign (Arab) troops on their soil under the UAC banner. Jordan’s United Arab Command-inspired military buildup plans also remain a large problem.

In the boycott field the proposed Arab action against the Chase Manhattan Bank almost became a runaway. The Department interpreted the recent six-month postponement announced by the Arabs at Bahrain as a face-saving device, and we believe that barring unexpected developments Chase is now in the clear. The UAR action with its sister Arab states had been crucial on this issue and was a good example of the way the UAR could help us if the overall US-UAR relationship was satisfactory.

Kuwait and Saudi Arabia had agreed during the year to bank the UAC. Whether they would keep this up was an important question. There were indications the Kuwaitis were beginning to get tired of being the financial “fall guy” all the time. Yet their keen hunger to be accepted as a full-fledged member of the Arab club might keep them on this tack.

Mr. Talbot congratulated the oil companies on the success with OPEC issues which their painstaking negotiations seemed to have won.

Current Situation

Mr. Talbot said the principal focus of attention is now on our UAR policy. He reviewed in some detail recent events which had received much press attention, such as the library burning, the Mecom plane incident and Nasser’s speech at Port Said. The library destruction clearly had been the work of African students who got out of hand in their demonstration over our Congo rescue operation due in part to laxity of the UAR policy. After much initial hesitation the UAR expressed regret and followed up by offering a building to house our library temporarily. The matter is now “on the tracks.” Regarding the plane incident there are still many unanswered questions, yet it is not as fundamental an issue in our UAR relations as several others. Nasser’s Port Said speech had been irresponsible, unnecessary and uncalled-for. We would probably never know just what kind of report was given Nasser of Ambassador Battle’s conversation with Deputy Supply Minister Stino, which had prompted Nasser to lash out at us in his speech. Yet it is obvious that had not basic differences in UAR-US relations been nagging at him Nasser would not have waxed so suddenly and bitterly emotional over the Battle-Stino meeting.

Yemen remains a matter on which the US and UAR do not see eye-to-eye, yet vital US interests are no longer seriously threatened by the Yemeni turmoil as had been the case in 1963, when the situation appeared to have within it the seeds of destruction for Saudi Arabia and perhaps a much wider area. The Yemen issue was now one among the Arabs. It is Nasser’s problem, not ours, how to get his troops out, and the situation does not require US intervention.

Mr. Talbot said the most serious current clash of US and UAR policies is in the Congo. Curiously, several Arab states, notably Algeria, Sudan and the UAR, have been more active in supporting the rebels in the Congo than have the great majority of black African states. Our present objective is to find a way to remove these three Arab countries from their active support to Congolese rebels. Governor Harriman pointed out that the Congo question is not solely an African matter but is tied in somehow to Russian policy, though the precise Russian role is not easily defined. He said the Department found it hard to tell whether the Soviets had stimulated the rebellion or were aiding and abetting it. He said that some thought the Russian participation in Congo troublemaking represented a Russian desire to offset the Chinese Communist penetration of Africa, which in recent years had been much more successful than Russian efforts in Africa. He noted the difficulty of defining just what the new Sudanese Government is doing and intending to do vis-a-vis the Congo.

Mr. Talbot spoke of the great strains on the UAR economy. What is happening is precisely what Harvard economist Edward Mason had foreseen two or three years ago: UAR economists had planned a workable economic development program, but UAR politicians had forced its pace, desiring to double national income in ten years rather than twenty. Serious economic difficulty has resulted. The magnitude of Soviet and Chicom economic aid, and promises of future aid, dwarfs the scale of US economic assistance, and Nasser’s present economic plight makes it natural for him to swing more and more toward reliance on his Communist supporters rather than on the West. Kuwait weighed in with massive financial support in 1964 when the UAR economic crisis became clearly recognized. For our part, we have not made any kind of development loan to the UAR since 1963. There is an Egyptian tendency to relate this fact to President Kennedy’s assassination inferring that somehow the present administration has not the will or the skill for understanding and cooperation with the Arabs. We have not been able completely to disabuse them of this fallacy. Mr. Talbot recounted the history of the proposed $20 million commodity loan to the UAR, noting that in the end we had not proceeded with it.

Mr. Talbot pointed out that our three-year PL 480 agreement with the UAR ends in July. This is our one instrument of policy with Cairo. Our present intention is to live up to this existing commitment by issuing purchase authorizations for the remaining commodities, provided there is UAR compliance with the normal terms of such PL 480 agreements. We are faced with deciding soon on a PL 480 agreement for the future. Was this the time to squeeze the UAR, or was it the time to give additional assistance to increase our leverage on her? There was the possibility that Congress in its present anti-UAR mood might legislate a decision.

Mr. Talbot noted that our national interests in the area have not yet been put in jeopardy by the UAR. We still enjoy MATS rights, our warships can still proceed through the Suez Canal without inspection for nuclear weapons, our civil air rights remain untouched, the flow of oil to Western markets continues uninterrupted, and there had been no major outbreak on the Arab-Israel border. While the UAR had sided increasingly with the Soviets we have had a surprising number of comments in the last month from sources close to the UAR pulse that the UAR really thinks it has swung too far to the Soviet side this time and wants to move the pendulum back. Governor Harriman mentioned Nasser’s potential influence for bad with respect to US base rights in Libya as well as US oil interests.

Regarding the area arms buildup, Mr. Talbot noted that any Arab efforts which may be undertaken, either through the UAC or other means, are self-defeating due to Israel’s refusal to be left behind at any level of armaments.

Mr. Talbot said the US is going to push hard to attain rectification of the UNRWA ration rolls and expected considerable agitation by Palestinian refugees.

Discussion

Leading off for the companies Mr. Parkhurst said that what stood foremost in his mind was the depth of feeling in the Iranian, Saudi and perhaps Libyan attitude toward our UAR policy. The Iranians and the Saudis could not understand why we aided Nasser, and Mr. Parkhurst believed their doubts were justified. He believed personally that we should live up to our existing commitments, however.

Mr. Page said it should be realized that a policy of continued aid to Egypt causes losses in the area as well as gains. During the recent OPEC negotiations the Shah had complained long and bitterly against US policy toward Nasser and had given the impression that Iran was moving closer to the Soviet camp. Governor Harriman interjected that he challenged this. He felt he knew the Shah extremely well, and over a long period of time, and he believed the Shah simply wanted more and better jet aircraft from the US. He did not believe the US would lose Iran over what the US did toward Nasser. He repeated an earlier observation that he was convinced the Russians would pay a tremendous price for the US to break with Nasser.

Mr. Barger suggested the essentiality of forming a judgement as to what Nasser’s real personal objectives are before one can properly decide how to deal with him. He went on to recommend that the US use USIS for some attacks on Nasser just as Nasser continually attacks us with propaganda. Governor Harriman stressed again that one should weigh very carefully the idea of breaking relations with the UAR. He found it extremely difficult to believe we could break with Nasser and still hope that Nasser would retain his freedom and not become a tool of the Soviet bloc. The Governor drew a parallel with the Yugoslavian situation, pointing out that our long and patient support of Tito against Moscow since 1948 was paying great dividends today, since Tito’s staunch stand against the dictates of Moscow had made possible the growing independent spirit of other East European states. Concluding, the Governor admitted a good case could be made that both the US and USSR had been played for suckers by Nasser. He submitted that while this was not to our liking it left us in a much better position than if we pulled out of the UAR completely and left the field to the Russians. Governor Harriman left the meeting at this point.

Mr. Barger felt that his remarks had been misapprehended. He was not advocating a complete break with the UAR but only a much stricter policy toward aiding Cairo. Mr. Talbot, addressing himself to Mr. Barger’s earlier comment about Nasser’s objectives, said there was no question but that Nasser had ambitions to be “Mr. Big” in the area. He believed that Nasser realized, however, that he had been blocked whenever and wherever he tried to achieve his ambitions by outright domination and that Nasser therefore was switching tactics in favor of a more congenial, cooperative effort characterized by Arab summitry. He remarked that it was surprising how many had expressed concern to us since the Nasser speech at Port Said lest the US actually break with Nasser. King Hussein did not see such a break as being in his interest, nor did the Lebanese.

Mr. Law asked what the Department foresaw for Egypt after Nasser. Mr. Talbot responded that while it was always extremely hard to predict this kind of thing his best guess would be a closing of ranks around Ali Sabri and others distinctly more leftist leaning than today’s UAR regime.

Mr. Owen referred to the “story” around Washington that the oil companies were out to get Nasser and were lobbying in Congress for legislative action in this regard. Mr. Talbot said the version reaching him had it that the oil companies and the Zionists were cooperating under the inspiration of Bushrod Howard to achieve this. Mr. Owen wanted to make it clear the companies were taking no such action. Mr. Barger emphasized that he believed it entirely improper and unwise for the legislative branch of government to interfere with the responsibility of the President and executive branch to determine foreign policy.

Mr. Law, referring to an earlier statement by Governor Harriman critical of Kuwait for indiscriminately showering financial support among her neighbors, stated that the Kuwaitis are realists and have but one interest in life: survival. They are spending their only asset—money—to buy friends and are likely to continue to do so. They are scared to death of the UAR.

Mr. Tavoulareas called attention to the importance of understanding the way the Iranians and Saudis, and perhaps others, view the fact of extensive US aid to the UAR. They felt the US was showing neglect to its real friends while aiding a country that was playing ball with the Soviets and often intriguing against its Middle Eastern neighbors. Mr. Talbot remarked that the US and British Governments had made repeated assessments of Iranian allegations that Nasser was stirring up the Arab minority in Iranian Khuzistan. We had developed nothing indicating the Shah should be fearful of this, and had said as much to him, but there apparently continued to be a feeding of incorrect intelligence tales to the Shah which kept him stirred up on this subject.

Mr. Parkhurst said the Department might be interested to know that the Shah, speaking to him privately a few days before, said he was favorably disposed to a Russian proposal that Iran pipe gas to the Soviet border for sale in Azerbaijan.

Mr. Talbot concluded by stating that the protection of our interests in the area requires continual reassessment. Mr. Parkhurst readily agreed and on behalf of the visitors thanked the Department for this opportunity to be briefed and exchange views.

As the meeting concluded Mr. Page came to Mr. Talbot and said he understood the Department had suggested having the Jersey Standard and Socony Mobil representatives brief it concerning the status of IPC negotiations with Iraq. He said Socony’s Henry Moses, one of the IPC negotiators, was expected back from Baghdad the same day and would be in touch with the Department. He said if the Department wished he would send down a copy of memorandum containing some of Wattari’s more extreme remarks on OPEC and IPC views on them. Mr. Talbot accepted the offer. Mr. Talbot said the Department was continuing to hold the line on third-party activity, but the clock was continuing to run and there was a limit to our ability to hold the line in this situation.

1. Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 2 NEAR E. Confidential. Drafted by Wolle.