"American Oil Interests in the Near East," in Bruce R. Kuniholm, The Origins of the Cold War in the Near East: Great Power Conflict and Diplomacy in Iran, Turkey, and Greece (Princeton: Princeton University Press, 1980), Chapter III, "The Iranian Context," pp. 178-192

Until World War II, the religious, cultural, educational, and economic interests of the United States in the Near East evolved independently of political interests. Americans regarded the Near East as an appendage of Europe, where political noninvolvement was a tradition, and did not consider the competing imperialisms of Russia and Britain as relevant to American policy, which recognized Britain's primacy in the Near East. 120

This does not mean that American interests were neglected. It is true that before World War II there had been a partial break in diplomatic relations between Iran and the United States and that at the outbreak of the war there were only eighteen employees (native and American) in the United States Mission in Iran. But these facts do justice neither to the role of Iran nor to that of the Near East in general as a focus for American commercial interests between the world wars. 121

One of the lessons of World War I had been that an adequate supply of oil was essential for national security, and the experience of that war was why Britain and the United States began a rivalry over oil immediately after the war. Standard Oil of New York, spurred on by a fear that American oil reserves were exhausted, contended with the British government for oil rights in Palestine and Mesopotamia. The United States delegation at Paris in 1919 did little to promote American oil interests, and the British government, attempting to capitalize on that fact, sought to exclude all foreign oil companies from the area. As a result, the United States insisted on the Open Door policy in attempts to prevent grants of exclusive concessions. Lord Curzon, the British foreign minister, had little sympathy for the Open Door. He noted that the British share of world oil production (4½ percent) compared unfavorably with that of the United States (70 percent) and that Americans secured an additional 12 percent of world production from Mexico. Curzon also liked to point out that in spite of the Open Door policy, the United States had restricted alien exploitation of oil in the United States and had interfered with British oil prospecting in the Caribbean. As a consequence, the two countries engaged in a bitter dispute over oil rights in the Middle East mandates until, finally, British need for American capital and engineering expertise led in 1928 to a cooperative agreement: the British sold a group of American oil companies a 23.75 percent share of the Turkish Petroleum Company (renamed the Iraq Petroleum Company [IPC] in 1929). 122

As American oil corporations made inroads into the British sphere of influence, the State Department played an important role. Since British oil companies were partly owned by the British government, American companies were at a disadvantage: they were more vulnerable to the whims of governments which granted concessions. But the Open Door, while it offered little protection to American companies, was an instrument for opening the oil fields to them. This does not mean that it had much value as an idealistic principle: IPC, for example, had a virtual monopoly on the production of oil in Iraq, and the United States acquiesced in restrictive measures which repudiated the basic principles of the Open Door. But regardless of the principle sacrificed, the State Department made good use of it as a rhetorical device for helping American companies get concessions. 123 If the door was not wide open, at least it was not locked.

American oil interests, having gained entrée into the Middle East in the 1920S, proceeded in the 1930s to wedge the door open even further. Standard Oil of California organized the Bahrein Petroleum Company in 1930. The discovery of oil in Bahrein in 1932 stimulated a search for claims on the Arabian peninsula. King Abd al-Aziz (Ibn Sa'ud), concerned about British domination of Saudi Arabia and favoring the superior financial terms offered by Standard Oil of California, 124 in 1933 granted the American firm a 360,000 square mile concession. After four years of discouraging results, the company discovered a field of great commercial promise. Standard Oil meanwhile joined with the Texas Oil Company to form a new combine, Cal-Tex. A supplemental agreement between King Abd al-Aziz and Cal-Tex added 80,000 square miles in Saudi Arabia to the earlier concession, and by 1939, following the opening of a new terminal at Ras Tanura on the Persian Gulf, American oil interests in the Middle East had become one of the most important of American foreign investments. In addition to exclusive ownership of the Bahrein, Ethiopia, and Saudi Arabia grants, American holdings included half of a Kuwait concession and approximately a quarter of the extensive IPC holdings in Iraq, Syria, Trans-Jordan, the Trucial Coast, Qatar, Oman, and Dhofar, not to mention other oil exploration rights in Cyprus, Lebanon, Palestine, and Aden. The increasing number of American workers and the large capital outlays in the oil regions of the Middle East indicated even before \Vorld \\Tar II that the Middle East would play a vital role in the security interests of the United States. 125

After war broke out in 1939, activities in Saudi Arabian oil fields were curtailed and the pilgrimages to Mecca (which had been an important source of income) ceased. Financially embarrassed, King Abd al-Aziz demanded advances from the American oil firms and the British government. The American oil companies believed that if they did not come through with such advances the king would give concessions to the British; they feared that if they gave the king what he demanded they would not be repaid. The upshot was that the California and Texas companies sought government assistance. President Roosevelt decided that the United States could not assist Saudi Arabia directly, but he arranged for -American assistance through the British, within whose political sphere it was felt that Saudi Arabia fell. This decision caused even more concern about British influence among the oil companies. Seeking to gain political credit for American assistance that was being channeled through British sources, the top executives of Cal-Tex in 1943 again sought government assistance. Arguing that British encroachments, the insecurity of their concessions, and the importance of oil all meant that lend-lease aid should be granted to Saudi Arabia, they found an unlikely ally in Secretary of the Interior Harold Ickes.126

Roosevelt had appointed Ickes Petroleum Coordinator for National Defense in 1941. Tn that capacity, he was responsible for promoting government cooperation with the oil industry. Most oil executives distrusted Ickes because he had tried (and failed) to nationalize the oil industry-in 1935, and again in 1940. The federal government, moreover, had tried to restrict the production of oil in order to stabilize the industry, and the oil companies were still suspicious of the Roosevelt administration. But the wartime situation changed the problem from one of stabilization to one of production. Between December 1941 and August 1945, the Allies would require seven billion barrels of crude petroleum, and the United States would have to supply 8o percent of that total. As a consequence, Ickes now supported production through a variety of means: extension of tax benefits, suspension of antitrust laws, and raising ceilings on crude oil. Ickes was given more authority when he was made Petroleum Administrator for \Var in December 1942. In this new capacity, he did everything possible to increase oil production both at home and abroad. It was as a result of Ickes' influence that the president on i8 February 1943 granted lend-lease to Saudi Arabia. 127

Ickes in June 1943 went a step further. Prodded by Secretary of the Navy Frank Knox and Secretary of War Henry Stimson, and fully accepting the arguments used by the oil companies to obtain lend-lease for Saudi Arabia, he proposed government purchase of Middle East oil concessions. History compelled the conclusion, he wrote Roosevelt on 10 June, that "American participation must be of a sovereign character compatible with the strength of the competitive forces encountered in such undertakings." Two days earlier, the Joint Chiefs of Staff, because of "an insufficient supply of crude oil from indigenous production," and "in the interest of national security," had urged President Roosevelt that "steps be taken immediately to assure control of sufficient oil reserves to meet our country's needs." The president on ii June concurred. The next day, James F. Byrnes, director of the Office of War Mobilization, presided over a White House meeting which agreed that the federal government should search out new reserves. Within a week, a State/War/Navy/Interior interdepartmental committee agreed on the organization of the Petroleum Reserves Corporation (PRC), with powers to acquire ownership of petroleum reserves outside the United States-specifically in Saudi Arabia. The secretaries of State, \\rar, and Interior, and Acting Secretary of the Navy James Forrestal then submitted a report to President Roosevelt endorsing the committee decision. The PRC was organized on 30 June, and Harold Ickes was designated president of the Board of Directors. 128

The PRC, however, never became operational in any real sense. This failure was due in part to differences within the government over the desirability of government ownership, but mainly to the fact that the oil companies which owned the concessions were outraged at the PRC's proposals. At first they were willing to accept partial government ownership, but they rejected this idea after Rommel had been driven from North Africa and the oil situation had become less critical. Ickes tried a different tack in 1944. \Vhen a PRC exploratory mission came back from the Middle East in January 1944 with optimistic estimates of oil reserves in the region, 129 he considered building a government pipeline from the Saudi Arabian oil fields to the Eastern Mediterranean. The pipeline would have been another means of effecting direct government interest in the concession. But this proposal, too, was opposed--not by the big oil companies which were associated with the concession, but by smaller companies which feared the advantages that might accrue to those already ensconced in the Persian Gulf. 130

Meanwhile, as a result of the increasingly aggressive American attitude concerning oil resources in the Middle East, and following State Department invitations to the British to exchange views on the subject, Prime Minister Churchill worried about American intentions in the area. "There is apprehension in some quarters here," he wrote Roosevelt, "that the United States has a desire to deprive us of our oil assets in the Middle East on which, among other things, the whole supply of our Navy depends."131

Roosevelt's reply was quick in coming: "You point to the apprehension on your side that the United States desires to deprive you of oil assets in the Middle East. On the other hand, I am disturbed about the rumor that the British wish to horn in on Saudi Arabian oil reserves." Roosevelt felt that mutual apprehensions, and the long-range importance of oil to postwar international security and economic arrangements, necessitated technical discussions at a high level. After Churchill explained his concerns in more detail, and expressed his intention to inquire into the oil situation throughout the world, Roosevelt on 3 March 1944 wrote back: "I am having the oil question studied by the Department of State and my oil experts, but please do accept my assurances that we are not making sheep's eyes at your oil fields in Iraq or Iran." On 4 March, Churchill shot back: "Thank you very much for your assurances about no sheep's eyes at our oil fields in Iran and Iraq. Let me reciprocate by giving you the fullest assurance that we have no thought of trying to horn in upon your interests or property in Saudi Arabia." 132

As a result of the exchange the two leaders agreed to technical and high-level discussions of mutual problems. 133 These discussions began in April, and arrived at a preliminary agreement in August. Since the basic purpose of the agreement was to place international petroleum trade on an orderly basis, its principles followed logically: respect for valid concessions contracts and lawfully acquired rights in the Near East; orderly development of oil reserves; equal opportunity for exploration or developmental rights in areas not under concession; and freedom from restrictions inconsistent with these principles. There was also provision for an International Petroleum Commission to analyze short-term problems and make long-term estimates of demand and distribution. Despite the evidence of government concern, these principles were essentially academic. Many American oil executives feared the agreement would create a cartel, or lead to nationalization of the industry in the United States, or cause a depression of the domestic oil industry as a result of large-scale imports. So strong were their objections that the agreement was never ratified. 134 Failure of the agreement, however, in no way diminished the importance of Middle East oil to the United States. It only illustrated the obvious fact that economic interests in the United States were not monolithic, and that they often worked at crosspurposes with each other and with policies the administration considered to be in the country's strategic interests.

Thus, burgeoning American business interests throughout the Near East help to explain Stettinius's recognition of the increasing importance of United States-Iranian relations. The Department of State and President Roosevelt as early as 1943 had clearly recognized Iran's strategic importance as a buffer between the Soviet Union and American interests in the Middle East. It was in the interests of the United States, a policy statement then said, that "no great power be established in the Persian Gulf opposite the important American petroleum development in Saudi Arabia." In his instructions to Richard Ford, the chargé in Iran in July 1944, Stettinius said the same thing in a more general way. He stressed the desire to assist Iran in creating a strong national entity free from foreign domination. He also cautioned against giving the impression that the United States intended to stand at the side of Iran as a "political buffer" to restrain its Allies.135 Presumably, as in the Balkans, the United States was neither willing nor ready to commit troops to such an enterprise. Hopefully, acceptance of the Atlantic Charter had been sincere and would have a restraining effect upon Britain and Russia. Iran would be the testing ground. But there was no question that if the Charter were observed, a strong Iran would serve the purpose of a strategic buffer. \Vhile Department of State memoranda never forgot American interests in Iran itself, they consistentlv conceived of Iran's importance in the context of its strategic links to American interests in the Arabian peninsula. This relationship was a constant concern of which the department, if not the president, was clearly conscious.

Despite the strident notes which sometimes appeared in American communications to the British about Iran and the Middle East, State Department officials were also conscious of the fact that America and Britain had many interests in that area which did not conflict and which in fact required close cooperation. As a result of the understanding between Churchill and Roosevelt, Anglo-American discussions during the so-called Stettinius Mission to London in April 1944 had touched on such topics as Russian exploitation of Iran, support for the American advisor program, and the maintenance of order throughout the Middle East. 136 Foy Kohler, who as an aide participated in the discussions on ear and Middle East between Wallace Murray, now director of the Office of Near Eastern and African Affairs, and British Foreign Undersecretary Sir Maurice Peterson, asserts that the change toward a more harmonious relationship between the British and the Americans in NEA dates from the Stettinius Misson. It was no secret, Kohler recalls, that until that time,

Wallace [Murray] tended to be strongly anti-British, perhaps as a result long struggle he had participated in to promote American inter-oil and trade in [the] Near Eastern area. He was even more anti-Russian, probably as a result of his earlier experiences in Iran. In fact, some of us used to say that the only way to get a paper through our beloved chief was to persuade him it was more anti-Russian than pro-British.

But wide-ranging discussions with the British appear to have crystallized Murray's thoughts on the relative dangers of British and Russian influence in the area, and as Kohler recalls,

Wallace was almost completely won over. Both sides agreed that there was entirely too much bickering between British and American representatives in the field who were constantly sending their complaints against their counterparts to their respective foreign offices. Consequently, we agreed with Sir Maurice to send parallel instructions to all our missions to the effect that in the future they were not to complain about the attitudes and actions of their respective colleagues without reporting in the same dispatch what efforts had been made locally to discuss and iron out differences.

Thus, agreed minutes of the discussions "established that there was a general community of aims and outlook between the Foreign Office and the State Department in Middle Eastern questions. It was cordially agreed that in principle there would be great advantage in bringing about in the future an even closer co-operation between British and American policy in the territories concerned." 137

The beneficial effects of the Stettinius Mission were immediately apparent in terms of improved relations between American and British representatives throughout the Middle East. One of many steps toward Anglo-American cooperation was the assignment of Raymond Hare, second secretary at the legation in Cairo and a Near Eastern specialist, to the American embassy in London in July 1944. Hare's task was to keep in continuous and intimate touch with the appropriate people in the British Foreign Office. Further steps led to the preliminary Anglo-American agreement regarding petroleum in August 1944. Thus, by the time that Roosevelt's year-old proposal to Stalin (made at Teheran) of an international trusteeship in Iran finally surfaced at the department in December, a memo to the secretary of state by Wallace Murray made clear what his office had been thinking all along:

Our experts on Soviet Russia are most dubious that Russia would be interested, at least for the present, in an international trusteeship or would participate in it in the genuine manner intended by the President.

The British, moreover, would doubtless raise strenuous objections. Britain's policy for a hundred years has been to prevent Russia or any other great power from establishing itself on the Persian Gulf, and there is no indication that British policy has changed in this respect. If we proceed on the assumption that the continuance of the British Empire in some reasonable strength is in the strategic interests of the United States (and I understand the strategists of the \Var Department proceed on this assumption), it is necessary to protect the vital communications of the Empire between Europe and the Far East. Britain has always tried desperately to keep Russians, whether of the Czarist or Soviet variety, away from the Persian Gulf, and will doubtless continue to do so.

The foregoing considerations might possibly be brushed aside if there were any reason for confidence that the Soviets would participate in an international trusteeship of the high principles the President has in mind. \Ve would be deluding ourselves, however, if we built our plans on such hopes.138

Paradoxically, although the United States was Britain's greatest rival for oil in the Middle East, American strategic conceptions of the Northern Tier countries mirrored those of the British. What explains this paradox? Anglo-American mistrust of the Soviet Union in the Near East--a mistrust resulting from tradition, from Soviet actions in Iran following the Battle of Stalingrad, and from the fact that both countries now had important oil interests to protect. Mutual mistrust of the Soviet Union, accompanied by the decline of Britain's military strength, made possible the Anglo-American agreement of August 1944. The agreement reflects the secondary nature of Anglo-American rivalry over oil in the Middle East, and indicates that by late 1944 mistrust of the Soviet Union was a basic notion in British strategic thinking. Already the British were thinking of spheres of influence in the Balkans, and of theirposition in the Eastern Mediterranean. Before Britain and the Soviet Union became allies, Anthony Eden had made clear to Ivan Maiskv, the Soviet ambassador, that Britain was determined to maintain its position throughout the Middle East, including Iran. This thought was reiterated at the Dumbarton Oaks Conference in 1944 by Sir Alexander Cadogan, the British undersecretary of state for foreign affairs, who stated that while Great Britain to a very considerable extent was prepared to give in to Russian demands in Eastern Europe and the Balkans, his government could not and would not yield in Iran. 139 The State Department, aware of Cadogan's statement, with the War Department proceeded on the assumption that along the Northern Tier the interests of the British Empire were similar to those of the United States.

Thus, American oil interests in the Near East as a whole constituted an important context within which to view more specific American interests in Iran. Because American interest in Iranian oil and American oil negotiations in Iran during World War II were both part of a long history of American-Iranian relations on the question of oil, we must turn briefly to the background of these relations in order to understand the oil crisis which occurred in 1944.

Footnotes

120. DeNovo, pp. 383-384, 392-393.

121. In spite of the fact that King Abd al-Aziz Al Sa'ud had requested recognition of his country by the United States, the State Department still had no permanent representative in Saudi Arabia. DeNovo, pp. 275-318, 360-365; War History Report.

122 Gerald Nash, United States Oil Policy, 1890-1964 (Pittsburgh, 1968), pp. 5--51; Herbert Feis, Seen From E.A. (New York, 1947); DeNovo, pp. 167-209; Shwadran (2nd ed.), pp. 242-243. It might be pointed out that the influence of American capital and technical expertise was precisely what made the United
States a threat to the interests of its rivals--particularly those who were less competitive and who saw such influence through ideological lenses.

123 Shwadran (2nd ed), pp. 242-243, 315; DeNovo, pp. 197-208.

124 Again, the influence of American capital seems apparent, and is exactly the kind of problem envisaged by the counselor of the French embassy in 1945 (see n. 84 and n. 122).

125. DeNovo, pp. 201-209; Shwadran (2nd ed.), pp. 296-297; FR, The Conferences at Cairo and Teheran, pp. 162-164; Sachar, Europe Leaves the Middle East, p. 297; U.S. Congress, Senate, Special Committee Investigating the National Defense Program, Hearings, Part 41, Petroleum Arrangements with Saudi Arabia (Washington, D.C., 1948), Exhibit No. 2560, after page 25388.

In order to keep the question of national security interests in perspective, the following table indicates the growing production figures for Saudi Arabian and Iranian oil relative to those of the United States and the world. Since some references refer to volume (barrels), others to weight (tons), and since Britain uses short tons while the United States uses long tons, the figures are necessarily approximate. This is especially true because the number of barrels in a ton depends on temperature as well as on the specific gravity of the oil in question. Because the United States Petroleum Council uses a standard measure of 6.349 barrels per short ton, the corresponding figure per long ton should be 7.11 barrels.

Oil Production (long tons per year)

These figures are based on: Shwadran (2nd ed), pp. 162, 343; Nash, p. 260; Long. rigg, pp. 368, 374; Sachar, Europe Leaves the Middle East, p. 636.

An O.S.S. study of oil and power resources in Caucasia, prepared 27 July 1942, estimated Russian oil production in 1938 in and around Baku as 23,935,000 metnc tons. This was from the Azneft Trust, consisting of 17 fields and 20,000 wells. The Gruzneft Trust near Tbilisi consisted of 2 fields and produced 45,000 metric tons, while the Grozneft Trust near Groznyi consisted of 7 fields and produced 2,763,600 metric tons. O.S.S./State I & R Reports, vol. 7, 1:22.

126. Hearings, Part 42, Petroleum Arrangements with Saudi Arabia, 24728-24729, 24745, 24805, 24829-24830, 25090-25095, 25232-25233, 25392; Shwadran (2nd ed), pp. 301-317; Hull, 21511.1512, 1517 Feis, Seen From E.A., p. 95; U.S. Congress, Senate, Congressional Record 94 (Part 4) :4948.

127. Nash, pp. 157-172.

128. Henry Stimson, Diaries, Yale University, New Haven, Conn., 43:94-95 (6/4/43), 99 (6/8/43); Shwadran (2nd ed), pp. 310-314; Hull, 2:1518-1520; Hearings, Part IV, Petroleum Arrangements with Saudi Arabia, 25237-25238; FR, 1943, IV:921-930; Nash, p. 172.

129. In addition to stating that the center of gravity of world oil production was shifting from the Gulf-Caribbean area, the PRC mission report estimated oil reserves in the Middle East to be: nine billion barrels in Kuwait; six to seven billion barrels in Iran; four to five billion barrels in Saudi Arabia, and one billion barrels in Qatar.

According to George Kirk, by 1944 U.S. interests "controlled 42 percent of the proved oil reserves of the Middle East, which themselves had increased ~.8 times by new discoveries since 1936, against only 13 percent of the smaller quantity at the earlier date. Absolutely, their share of Middle East oil had thus increased nineteenfold."

To put Middle East oil in its proper perspective, one needs only to note the following estimate regarding past production and future resources, given by Charles Hamilton of the Gulf Oil Company in June 1945 before the Special Committee of the Senate Committee Investigating Petroleum Resources:

Feis, Seen from E.A., pp. 102-1033; Shwadran (2nd ed.), p. 319; Kirk, The Middle East in the War, p. 25; United States, Congress, Senate, Hearings Before a Special Committee Investigating Petroleum Resources, American Petroleum Interests in Foreign Countries (\Vashington, D.C., 1946), pp. 52-54.

130. Shwadran (2nd ed.), pp. 314-340; Hull, 2:1513-1514, 1520-1525; Hearings, Part 41, Petroleum Arrangements with Saudi Arabia, 25240.25245; John Frey and Chandler Ide, eds., A History of the Petroleum Administration for War, 1941-1945 (Washington, D.C., 1946), pp. 276-287; Nash, pp. 173-175.

131 Woodward, BFP, pp. 396-398; Nash, p. 176; Loewenheim et al., pp. 440-441; Daniels, White House Witness, p. 222; FR, 1944, III: 100-101.

132 FR, 1944, 111:100-103; Loewenheim et al., p. 459.

133 Herbert Feis's account of why the Soviets were not included is as follows:

The certain interests of the USSR in any agreement that affected the affairs of the region were not forgotten. It was clearly understood that no step should be taken in concert with Britain that might in1ure the USSR or place it at a disadvantage. But it did not seem feasible immediately to include that country in the preparatory discussions. The American and British governments had virtually pooled their oil supplies for the conduct of the war; the USSR was managing independently and not even exchanging information. Discussions with Moscow, even on matters essential for the conduct of the war, usually took a difficult course. In this matter the first formulations were certain to be groping even between participants who approached it with the same economic conceptions. It was impossible to guess what types of proposals the USSR might make; they might bring the whole pattern of ownership in the region into question. It seemed foolish to take the risk before our own policies were defined. Lastly there was the fact that the USSR possessed no oil rights in the region and had shown no recent evident wish to acquire any. Seen from E.A., p. 136.

134. Hull, 2:1523-1526; Woodward, BFP, p. 398; Nash, pp. 176-177. As an increasingly scarce resource, oil was of great value to American business interests and hence to the economy of the United States. Conversely, the success of other countries in obtaining oil concessions would diminish proportionately those resources available for exploitation by American interests. In spite of this fact, the American business community was unable to act in its general interest.

135. FR, 1943, IV:377-379: 1944, V:343-346.

136. In addition, a committee made up of the British, Soviet, and American chiefs was set up in Iran for the purpose of examining problems of an economic nature and more generally of implementing the Teheran Declaration. In spite of repeated Anglo-American attempts to enlist Russian cooperation, the meetings failed to solve common problems and were broken off in July 1944. S.D. Post and Lot files, Lot No. 54f55, 801.6 Milispaugh.

137. 137 S.D. Stettinius Mission/3-1944/136/144/107/151/124/112½; FR, 1944, V:322-343; Woodward, 4:387, 442-443; Foy Kohler, letter to the author; Papers of Edward R. Stettinius, Jr., University of Virginia, Acession No. 2723, Box No. 251, Folder: London Mission, Conversations--Murray, "Agreed Minute," April 1944.

138. Kohler, letter to the author; Raymond Hare, conversation with the author; Jernegan, letter to the author; FR, 1944, V:485-486. The idea that British and American interests were similar in the Near East had been expressed earlier by individuals as different as Patrick Hurley and Lincoln MacVeagh. It was also endorsed in 1945 by Joseph Grew when he was acting secretary of state. See FR, 1945, VIII:523-526.

139. S.D. 891.6363/12-844.

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