Foreign Relations of the United States, 1964–1968, Volume XXXIV, Energy Diplomacy and Global Issues

182. Memorandum of Conversation¹

Washington, September 23, 1964.

SUBJECT

• Iraqi Oil Situation

PARTICIPANTS

• Mr. Ball
• U—George S. Springsteen
• NEA—John D. Jernegan
• Robert C. Strong, U.S. Ambassador to Iraq
• FSE—Andrew Ensor
• NE/E—George M. Bennsky
• NE/E—William D. Wolle

Mr. Ball asked if the IPC-GOI negotiations were getting anywhere. Ambassador Strong said it was very hard to say because our information was not complete and because it was difficult to judge the real intentions of the two parties. Mr. Ball said we were now in a position where we should press the American IPC shareholders on precisely where the negotiations stand. Ambassador Strong remarked that Socony Mobil representative Henry Moses, one of the IPC negotiators, had brought in company lawyers and drafters from New York to join the talks and that this seemed a good sign. Mr. Ball said this might be so but one could never be sure that the arrival of lawyers signified progress. He went on to say that the time was coming fairly soon when representatives of the two companies should be invited down from New York for a discussion. The Department had stood down the independent companies for quite a while now² and yet did not have a clear idea of just how the negotiations were progressing and what the prospects were. We should make clear to Standard of New Jersey and Socony Mobil that we could not hold the line in Iraq forever. While we were prepared to go along for a while yet we could only do this if the companies proceeded diligently with the negotiations and kept us informed of progress and results. Mr. Ball added that we might consider saying the same things to the British Government as added insurance against intentional holding back by IPC.

Ambassador Strong expressed the view that the Iraqis desired settlement with IPC but did not want to appear too anxious since that would clearly give the company an advantage. He hated to see the negotiations drag on too much longer for as time passed there was increasing danger that Iraq’s political instability, together with British and Iranian activity against the present Iraqi Government, might result in a new Iraqi regime less willing and able to reach an agreement than the present Government. While he had no proof, the Ambassador felt almost certain that the British and Iranians were not just hoping for but working toward a change of government in Iraq. Certainly, he said, it was British policy to keep Iraq weak and relatively poor so as to avoid pressure from Iraq on Britain’s oil and political position in the Persian Gulf.

Mr. Jernegan said he was impressed by the importance of the principle the U.S. Government had upheld for many years regarding oil concessions: namely, that oil producing countries should be prevented from making a success out of nationalization or other unilateral actions with respect to oil concessions legally held by foreign companies. Mr. Ball agreed this was important but said he feared that in the present situation the American companies which heeded the Department’s advice to stay out of Iraq might eventually find themselves undercut by other American companies that chiseled. Also there were the Japanese, Italians, and other foreign oil operators to worry about. Mr. Jernegan pointed out that the American companies seriously interested in Iraq had in fact done some groundwork and therefore, in the event a foreign company suddenly breached the line there, our companies would be in position to move ahead rapidly and would not be at a serious disadvantage.

Ambassador Strong suggested that there might not be serious adverse effects on oil company operations outside Iraq in the event the Iraqis got away with their Law 80 action. He thought that if we considered the situation in other countries on a case by case basis we might find that there would not be repercussions elsewhere. Mr. Jernegan indicated that he thought there would be repercussions. Mr. Ensor felt that adverse effects were probable, and mentioned Algeria and Indonesia in this connection.

With regard to action by the Department, Mr. Jernegan said he was inclined to recommend that the two American IPC shareholders be called to Washington as Mr. Ball suggested, but that we limit ourselves to telling them that we could not hold the line in Iraq indefinitely and wanted to be absolutely sure that the two companies and their IPC associates were doing everything they possibly could to reach an agreement in Iraq. Mr. Ball said this would be fine but that we should also emphasize to them the real responsibility on their part to move rapidly toward a settlement. In conclusion, Mr. Ball said he would speak to Governor Harriman and would let NEA know when to proceed with arrangements for the meeting with Standard of N.J. and Socony Mobil.

1. Source: National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1964–66, PET 6 IRAQ. Confidential. Drafted by Wolle and approved in U on October 19.
2. See Document 181.