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merly an executive of the Shell Company and the present Director General of that company was a member of the same Committee.
The Egyptian Government opposed the construction of this pipe line pending settlement of the question of its post-war ownership. The director of the section of the Egyptian department of mines and quarries is said to be an outstanding Egyptian advocate of post-war ownership of the Suez-Cairo pipe line by the Egyptian Government and of steps to restrict the Shell Company from obtaining monopolistic advantages in Egypt. Representation by the British Ambassador,20 however, citing the provisions of the Anglo-Egyptian treaty of military collaboration,21 was sufficient to break the deadlock. The Egyptian Government nevertheless undertook to limit the use of the pipe line to the transport of gasoline for military use, pending the acceptance of its demands that the pipe line become its property after the war and that its State Railroads be compensated for the loss of traffic suffered during the remainder of the war. It was planned that upon settlement of these questions the Shell Company would distribute to both military and civilian consumers the kerosene and gasoline transported by the pipe line.
A supplemental despatch dated October 12, 1943 22 described some additional construction operations, indicated that it was hoped to have the line working satisfactorily by October 15 and indicated further that under the existing arrangements the pipe line would transport annually about a million and one-half barrels of kerosene for civilian consumption and 147 thousand barrels for military consumption as well as 483 thousand barrels of gasoline for civilian consumption and 484 thousand barrels of gasoline for military consumption.
Upon receiving this information the Department and the LendLease Administration were somewhat concerned about what appeared to be an unjustifiable retransfer and use of lend-lease materials. The Lend-Lease Administration indicated that they had received no notice of this transaction and felt that a rather firm position should be taken by this Government with respect to it. The Department was primarily concerned with the possibility that the title to the materials might be transferred to the Egyptian Government without the authorization of this Government as required under the terms of the lendlease agreement.23 It felt however that the information at hand was insufficient and that our first step should be to get more information. Before an instruction was sent certain letters from the Lend-Lease Administration to British officials concerning retransfers were found which made the British action in this case appear in a more favorable light although the Lend-Lease Administration still felt that it should have been notified of the retransfer and that the United States Government clearly held the right to the final disposition of such materials.
20 Baron Killearn, British Ambassador in Egypt.
a Anglo-Egyptian Treaty of Friendship and Alliance, signed at London, August 26, 1936, League of Nations Treaty Series, vol. CLXXIII, P. 401.
22 Despatch No. 1338, not printed.
An instruction was sent on November 25, 1943 to our Ambassador in London 24 requesting him to discuss the matter with the proper British officials indicating the interest of this Government under Article 3 of the master lend-lease agreement between the United States and the United Kingdom in any possible transfer of post-war title rights to lend-lease materials, the thought being that the British Government might wish to call this to the attention of the Egyptian Government in case the latter insisted upon an immediate settlement concerning the post-war disposition of these materials. It was pointed out that even if they were transferred to the Egyptian Government, under the terms of the proposed lend-lease agreement between the United States and Egypt we would still have a voice in the post-war disposition of the materials.
The Department requested full information, pointing out its particular interest in the fact that a private company seemed to be closely involved in the transaction and the fact that it appeared probable the pipe line would be used largely for commercial purposes. It was further suggested that the British Government be reminded of the desirability of prior consultation between the two Governments with respect to such transfers wherever practicable and that in any case prompt notification should be made to this Government to avoid misunderstanding. A copy of the instruction was also sent to Cairo.
A despatch from London dated February 4, 1944,25 and enclosures, has just been received. From this it appears that our instruction was interpreted as evidence of concern over the possible transfer of title to the Shell Company although what the Department had in mind was any retransfer of title without our authorization as well as the use of the lend-lease materials for nonmilitary purposes. It is asserted that the title to the materials is still retained by the British military authorities and that the Shell Company “merely act as agents of the War Department in operating the lines”. From an enclosure to the despatch, a letter dated July 19, 1943 from the British
23 Between the United States and the United Kingdom, signed at Washington, February 23, 1942; for text, see Department of State Executive Agreement Series No. 241, or 56 Stat. (pt. 2) 1433; for correspondence regarding negotiation of this agreement, see Foreign Relations, 1942, vol. I, pp. 525 ff.
Instruction No. 3429, not printed. 25 Despatch No. 13721, not printed.
а military officer in charge of administration, Middle East forces, to the Ministry of Public Works Cairo, it appears that the need to gain the approval of the United States Government for transfer to the Egyptian Government of such installation constructed on Egyptian territory was clearly recognized.
The covering despatch states that the full details regarding pipe line rates are not available at London but that a basic principle in the arrangements with the Shell Company was that it should pay to the British military authorities the going freight charge for petroleum products transported for civilian use. It further states that aside from the fee paid the Shell Company for its services as agent of the War Department the company gains no competitive advantage in transporting petroleum products. It states that the selection of the Shell Company to operate in this capacity appears to have been based on the fact of its holding a larger share of the Egyptian market, owning terminal and refining facilities, and that the arrangement “had the blessing of the Cairo petroleum committee ... stated to include representations of United States military offices".
In the letter from our Embassy at London to the Egyptian Department of the Foreign Office, an enclosure to the despatch, attention was called to the fact that no record of any notice of the retransfer under consideration was received from the British authorities and the desirability was suggested of prior consultation in cases of this sort wherever practicable especially when private firms are substantially involved.
In the reply from the Foreign Office to our Embassy it is asserted that the present pipe line was constructed as an urgent military requirement and that while some civilian use was contemplated the military authorities maintain a priority call on it. The aforementioned letter of July 1943 to the Minister of Public Works is cited as evidence that the United States interests in the materials were in no stage overlooked. Assurance was given that the British authorities in Egypt will be reminded to keep the United States officials on the spot informed regarding installations such as the present, in the ultimate ownership of which the United States Government has an interest.
Our Embassy states that it was informed that the British Government might desire to utilize the pipe line equipment in the Far Eastern theater at a later time and that it would favor the removal of the pipe line for military use elsewhere rather than to cope with the difficulties inherent in its post-war disposition in Egypt.
The Acting Secretary of State to the Minister in Egypt (Tuck)
WASHINGTON, November 1, 1944—8 p.m. 3147. The following represents the views of interested divisions in the Department and of FEA 26 with respect to the policy to be recommended in conversations with both the British and Egyptian authorities, on the question of ownership and administration of the Cairo-Suez Pipeline. It is transmitted for the information of the Legation and Landis.27 A formal instruction will be drafted after Landis has reported the results of his discussions in London.
1. Ownership: It is not desired that there should be any discussion at this time of any arrangement whereby the ownership of the pipeline would pass from British and American hands. The division of ownership as between the US and UK Governments shall be determined on a basis of proportionate contributions to its construction made by each Government when a definitive accounting of such contributions is available.
2. Right-of-way: The Egyptian Government will agree to the utilization of the present right-of-way in return for a suitable rental which could be on the basis of an agreed minimum with or without a share of the profits resulting from operation of the line.
An operating company will be formed to operate the pipeline and will be composed of oil companies which are now using or may in the future desire to use the line. It is understood that the pipeline will be open for the transportation of petroleum products on a commoncarrier basis.
3. Policy: The determination of pipeline tariffs, the allocation of its capacity in the event that petroleum tendered for transportation exceeds the line's capacity and other basic policy matters will be determined by a standing joint commission on which representatives of the Egyptian Government, British Government and the United States Government will sit.
4. Alternatives: Should the Egyptian Government prefer the operation of the pipeline on a cooperative basis under which net profits would be divided among the shippers in proportion to the quantity of petroleum products transported through the line, there would be no objection on our part. Other modifications which do not disturb the principle of maintaining present ownership by the British and American Governments and joint control of policy matters can be discussed on an ad referendum basis.
28 Foreign Economic Administration.
* James M. Landis, American Director of Economic Operations in the Middle East.
You will wish to discuss the foregoing with appropriate British officials and obtain their concurrence in order that a joint approach to the Egyptian Government can be made.
Please report the results of any conversations you may have in line with the foregoing.
883.6363/11-644 : Telegram
CAIRO, November 6, 1944–7 p. m.
[Received November 6–6:27 p. m.] 3372. I have reviewed the Department's 3147, November 1, 8 p. m. with Landis who tells me that the covering documents 28 on his discussions in London relative to the Cairo-Suez pipeline were forwarded from London and that a further copy will be forwarded from Cairo. Landis states that these documents show that the British Government has declined to affirm the earlier commitment of the British Army to sell the pipeline. He is of the opinion, however, that some scheme for its future operation must be devised. Landis further states that suggestions along this line in accordance with conversations in Washington were tentatively advanced by him while in London. Due to the fact, however, that British technical skills on these matters are located in Cairo Landis believes that further discussions will have to be resumed here with the appropriate British authorities. The Department's viewpoint will then be requested in the light of these preliminary discussions in which of course the Egyptians will not participate. Following this step the formal instruction for presentation by the Legation to the Egyptian Government mentioned in your reference telegram can then be officially delivered to the Foreign Office.
INFORMAL REPRESENTATIONS BY THE LEGATION IN EGYPT RE
GARDING EFFECT UPON AMERICAN PETROLEUM INTERESTS OF NEW EGYPTIAN EXPORT DUTY 883.6363/91: Telegram The Minister in Egypt (Kirk) to the Secretary of State
CAIRO, February 2, 1944–6 p. m.
[Received February 3—9:32 a. m.] 232. New budget provision for 15% export duty effective February 1st is significant in connection with Petroleum Reserves Corp.29 plans
None printed. 29 The Petroleum Reserves Corporation was owned by the United States Government.