Harriman and Oil Companies Discusses OPEC and Middle
East Situation
(December 6, 1963)
This memorandum covers a meeting held between Harriman
and various oil companies to discuss the Middle East and OPEC.
SUBJECT
Discussion of Near East Developments and OPEC/2/
PARTICIPANTS
See Attached List/3/
Governor Harriman noted that the previous four meetings
with the oil companies had been held pursuant to their requests./4/
This time the invitation had come at the Department's initiative because
of the uncertain political periods ahead which the Department faces.
The Yemen situation will likely become worse before it improves. While
we are very concerned with developments in that country, no U.S. troops
are going to be used to "liberate" Yemen. A second source
of difficulty is the impending Israel diversion of the Jordan waters.
The Gruening Amendment to the Aid bill will likely create more trouble
than it will help. Its effect will tend to reduce our influence in the
Near East area.
Governor Harriman asked Mr. Talbot for an extension
of these remarks. Mr. Talbot said that we had previously thought that
we might ease by the Jordan waters diversion date without major difficulty.
Now we are not so sure. UAR attitudes toward this problem are important.
We support Israel's diversions of Jordan waters as long as they do not
exceed Johnston plan allocations. Belligerent statements from Syria
and Iraq and the current meeting of the Arab military leaders on this
issue are a source of increasing concern.
We are also disturbed by the growing arms race in the
Middle East. There is always the chance of a rash act. The Baath party
at least had the advantage of discipline within the ranks, now this
is being dissipated. The Baathis have been squeezed out in Iraq and
a similar development seems to be taking place in Syria.
The Israelis are quite unhappy about our vote on paragraph
11 of UNGA Resolution 194(III). They have asserted that United States
action during last year's debate signified a new U.S. attitude toward
the problem. We have not considered our action of last year as in any
way reversing our long-standing policy on the refugee issue.
In recent months 80 percent of our energy has been
devoted to the Yemen issue. UN Ambassador Spinelli is in the Yemen seeking
to find a formula whereby the base of the Yemen government can be broadened.
He is due back in about 10 days. Between then and January 4, when the
UNYOM exercise terminates, a whole series of policy decisions by the
U.S. and the UN must be taken. As matters now stand, it seems unlikely
that major withdrawals of UAR forces will take place before that date
since, given the nature of the YAR, this is politically and militarily
not feasible for Nasser. It appears, therefore, that UNYOM will be terminated
in its present form after January 4. It is, of course, already substantially
changed from what it was in the first two months of its operation when
Yugoslav combat units were on the scene. We want to see a UN political
presence remain in Yemen so that pressure can be kept up for a broadened
YARG. In our judgment the pressures on the UAR to reduce its presence
in Yemen to limits tolerable for Faysal and the British are building
up. One of these is the growing disenchantment in Yemen with the Egyptians.
There is also the economic burden which the operation imposes on the
UAR. Two months ago we made it clear to the UAR that no new economic
aid would be forthcoming while the Yemen drain continued. Economic advisers
to Nasser will be the first to recognize the effect on the UAR economy.
Pressures for withdrawal are also working within the
UAR Government and within the Near East area generally. Nasser's prestige
has declined as it becomes clear that he is caught in Yemen and cannot
extricate himself nor gain a victory. For us this argues against making
January 4 a decisive date.
While UNYOM has not succeeded in removing the UAR force
from Yemen, it has kept the conflict from escalating and involving a
weak Saudi Arabian regime. The Soviet presence in Yemen has been reduced
by about half. Present indications are that the YAR does not wish the
Soviets to stay on in any appreciable numbers. The situation thus boils
down to the attitude of Faysal. In the judgment of the Department an
aid cut-off would not mean UAR disengagement, but it would greatly injure
our position in the NE area. There are even those in the UAR who would
like to see us abandon our assistance to the UAR so that another cause
celebre like the Suez might be created which would serve to rally the
Arabs around Nasser.
We are still working with the UAR on the Arab-Israel
problem--not with great success but still the UAR is more moderate than
Iraq and Syria.
Mr. Owen asked what the USG position would be if, after
January 4, the UAR resumes its bombing of Saudi Arabia. Mr. Talbot replied
that the question would then be whether or not such bombing were aggression.
If the President so determined, then we would have no flexibility in
the situation. Mr. Talbot observed that the question of aggression is
very difficult to define--the subject having been wrestled with by the
League of Nations as well as the UN.
Mr. Noble asked whether the USG is considering withdrawal
of recognition of Yemen. Mr. Talbot replied that in considering all
possible courses of action, we could pull out our Embassy and aid program
from Yemen but we believe this would be interpreted as abandonment of
Yemen to the UAR. Mr. Roosevelt said that the Shah feels strongly that
withdrawal of recognition would be otherwise interpreted by Nasser and
in the Middle East area. Mr. Talbot responded that the monarchies of
the Middle East and Israel have one view of the Yemen situation but
other states of the area have a different view. As a practical matter
there is not for the moment in Yemen an alternative to the present regime.
OPEC
At the suggestion of Mr. Parkhurst, Mr. Page turned
the discussion to the subject of OPEC. Mr. Page said that Mr. Pattison
(BP), one of the "3 P's", had received a telegram from Rouhani
following the December 4 OPEC meeting in Beirut stating that the companies'
offer "as made" was unacceptable and that OPEC was going ahead
with its plan for a December 24 meeting at which sanctions would be
considered. Previously there had been reports that Iran was prepared
to accept the Consortium offer but not the mechanism. On the other hand
there were reports that the Saudis liked neither the offer nor the mechanism
of achieving it. Mr. Page felt that the highest levels of the governments
of the OPEC countries were not getting the oil company side of the story
since all information was being channeled through Rouhani. Faysal, for
example, does not understand the offer, he said.
Mr. Roosevelt demurred saying that as for the Shah
he had spent two hours with him a few days ago, and he had found that
the Shah had a very clear understanding of the offer and of Rouhani's
counter proposals. Mr. Parkhurst asked if the Shah understood why the
offer is the maximum which the companies can make. Mr. Roosevelt said
that he does. However, he noted that the Shah had said that bargaining
is what the companies and governments will have to live with for a number
of years to come.
Mr. Page said the company offer gives the governments
a 57-58 percent take which is comparable to any arrangements elsewhere
in the world including that in Indonesia. It is better for the government
than the SIRIP or Pan American deals in Iran. If the Venezuelan tax
arrangements were offered to Iran, the GOI would receive less than under
the Consortium offer. Mr. Parkhurst emphasized that it was a final offer
but that it did not represent the least common denominator of the companies
involved.
Mr. Page noted that Faysal now says that the situation
is a political problem for him. Page remarked that the problem is one
of Faysal's own making. If too much steam is put behind the issue, it
will get out of hand. If there is a final breakdown between companies
and governments, it will be "real warfare", he said.
Mr. Talbot said that he supposed steps had been taken
to inform the governments of the details of the companies' offer and
the rationale behind it. Mr. Page said that this had not yet occurred.
The companies did not wish to give the impression that they are prepared
to better their offer.
Governor Harriman asked what the companies might want
the Department of State to do. Mr. Page replied that the companies might
request the State Department to make sure, in Iran and Saudi Arabia,
that the offer is understood. Mr. Talbot said that the Department would
want the companies to have a firm idea of what they wanted in their
own minds before we could consider taking any action.
Mr. Parkhurst observed that the coincidence of the
impending Yemen and OPEC crises was most unfortunate, especially in
view of Faysal's deep involvement in the former.
Governor Harriman asked about the proposal the Shah
had made to Mr. Roosevelt. Mr. Roosevelt replied that the Shah had suggested
expensing of only a part of the royalties for the time being. Mr. Parkhurst
observed that if you accept expensing of part of the royalties, the
oil company position against expanding this beachhead is shaky. On the
other hand, the offset of the 8-1/2 percent discount on posted prices
is sounder economically and can be defended. Mr. Page noted that the
Consortium offer would give Iran $22 million more than it would receive
under the present arrangement. The offer if applied throughout the Middle
East would result in additional costs to the companies of $125 million.
Additionally the take per barrel for Iran would be higher under the
Consortium proposal than was its take in 1955 when the Consortium agreement
was reached. Positively no company was prepared to exceed this offer;
and if a showdown was inevitable, it might as well take place now.
Mr. Owen asked Mr. Davis whether, based on his conversations
in Kuwait, Sayed Omar (Kuwait OPEC delegate) had indicated that he would
oppose sanctions. Mr. Davis said Omar appeared moderate but it was very
difficult for any one Arab to stand up against the more extreme in an
OPEC meeting.
Mr. Roosevelt remarked on the December 2 Platt's Oilgram
interview with Omar in which he had indicated a very conciliatory line
and had suggested postponement of the OPEC meeting until March.
There followed discussion of the dangers of the issues
becoming a matter of public debate and Mr. Talbot noted that we fear
a band wagon situation. Mr. Page remarked that the tactic of OPEC is
to get member governments into a position from which they cannot retreat.
If any one person in OPEC is pushing the issues harder than the others,
it is Yamani, perhaps aided by Watarri who has ambitions to succeed
Rouhani as OPEC Secretary General. Perez Alfonso of Venezuela is perhaps
also working behind the scenes. Venezuela has nothing to lose if an
impasse between the companies and the Middle East governments is reached.
If sanctions are applied against the companies, Venezuela is not affected.
Mr. Moses asked what Mr. Talbot thought of a diplomatic
initiative with the Shah concerning OPEC in a manner which would not
indicate any weakening of the company position. Mr. Talbot said that
this was something which we would wish to look at very carefully.
/1/Source: Department of State, Central Files, POL
1 NR EAST. Confidential. Drafted by Blackiston on December 9 and approved
in M on December 30.
/2/A memorandum from Davies to Talbot, September 16,
contains information on the OPEC Conference, then scheduled for November
1963, and its implications for U.S. policy. (Ibid., PET 3 OPEC) A memorandum
from Symmes to Talbot, December 11, contains a recommended course of
action with respect to OPEC. (Ibid.) Both memoranda are in the Supplement,
the regional compilation. Briefing memoranda prepared prior to the December
6 meeting are in Department of State, NEA/NE Files: Lot 66 D 5, Memos
to Secretary and through S/S.
/3/The list is printed below.
LIST OF THOSE ATTENDING MEETING
Oil Executives
G. L. Parkhurst--Vice President and Director, Standard Oil Company of
California; Director, Arabian American Oil Co.
William F. Bramstedt--Vice President, Standard Oil Company of California
John Noble--Vice President, Texaco, Inc.; Director, Arabian American
Oil Co.
Howard Page--Director and Vice President, Standard Oil Co. of New Jersey;
Director, Arabian American Oil Co.
Henry C. Moses--Executive Vice President, Middle East Concessionary
Interests, Socony Mobil
Oil Co.; Director, Arabian American Oil Co.
Garry Owen--Director and Vice President, Arabian American Oil Co.
Kermit Roosevelt--Vice President, Gulf Oil Co.
Grady Davis--Vice President of Gulf Oil Co.
Department Officers
M--Governor Harriman
E--Assistant Secretary G. Griffith Johnson
NEA--Assistant Secretary Phillips Talbot
NEA--Deputy Assistant Secretary John D. Jernegan
NEA/NE--Rodger P. Davies
E/FSE--Andrew Ensor
AFN--David Newsom
NEA/NE/E--Slator C. Blackiston, Jr.
/4/Documentation on these meetings is in the Supplement,
the regional compilation.
Sources: Foreign
Relations of the United States, 1961-1963: Near East, 1962-1963,
V. XVIII. DC: GPO,
2000. |