210. Intelligence Note From the Director of the Bureau of Intelligence and Research (Hughes) to Secretary of State Rusk1
SUBJECT
- Algeria Nationalizes Esso and Mobil Affiliates
The Algerian Government has formally announced the nationalization of five US-owned companies engaged in distributing and refining oil (Esso Standard-Algeria, Esso Africa, Esso Saharienne, Mobiloil Nord-Africaine, and Mobiloil Francaise).2 The companies’ assets have been transferred to the state-owned company, Sonatrach, which has long had its eye on the Esso and Mobil distribution networks, as well as their holdings in the Algiers refinery. Two other Mobil affiliates, both producing companies, have escaped nationalization. The decrees authorizing the nationalizations provide in principle for compensation [Page 384] after an inventory of the companies’ assets, but the details have yet to be spelled out.
Political Motives Uppermost. In nationalizing the Esso and Mobil affiliates, Algeria appears to have been guided mainly by political considerations. Despite strong pressures from the domestic left, Industry Minister Abdesslam Belaid had previously resisted nationalization of the distributing companies on the grounds that Sonatrach would be unable for some time to absorb them efficiently, and that they would eventually fall into the government’s hands anyway; indeed, the government has for some time been employing a strategy of graduated harassment. The Middle East crisis has produced compelling reasons, however, for overriding Abdesslam’s reservations. Unable to translate its hard line against Israel and its Western backers into effective military action, the Boumediene regime can at least point to its nationalization of US oil firms as proof of its militancy.
Prospects for the Producing Firms. The Algerian Government’s intentions towards US oil-producing companies remain unclear. Its short-term goal appears to be to force the producers to accept the government’s demands on a wide range of unresolved issues (tax reference prices, arbitration, new investment).3 It is currently using both the carrot of new offers of cooperation and the stick of possible nationalization. Two major US producers, Phillips and Sinclair, have been approached with tentative offers of participation in new companies to be jointly owned by the Algerian Government and the US firms. The latter would contribute their present concessions as an investment and, in return, would be allowed to manage the new firms without harassment. However, even should the US companies agree—the initial reactions of the field representatives have been positive—they would have little assurance of long-term security. In Algeria political, rather than economic, considerations will continue to shape government policies in the petroleum sector.
- Source: National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967–69, PET 15–2 ALG. Secret; No Foreign Dissem; Controlled Dissem.↩
- The Algerian Government announced the nationalization on August 30. (Telegram 30198 to Algiers, August 31; ibid., PET 15–2 ALG)↩
- See Intelligence Note 654, “US Oil Companies in Algeria: The Tightening Noose,” August 10, 1967 (Confidential/No Foreign Dissem/Controlled Dissem). Footnote in the source text.]↩