3,-79 PETROLEUM IN SAUDI-AMERICAN RELATIONS: THE FORMATIVE PERIOD, 19 32-1948 DISSERTATION Presented to the Graduate Council of the North Texas State University in Partial Fulfillment of the Requirements For the Degree of DOCTOR OF PHILOSOPHY By Mohammad Mahmud Nairab, B.A., B.S., M.A. Denton, Texas August, 1978 Nairab, Mohammad M., Petroleum In Saudi-American Relations: The Formative Period, 1932-1948. Doctor of Philosophy (United States History), August, 1978, 225 pages, 1 map, bibliography, 202 titles. This dissertation is an examination of the American oil industry in Saudi Arabia and its influence on United States foreign policy. The study examines the Americans who went to Saudi Arabia, the effect of the oil companies on Saudi- American relations, and the American government's response to oil company actions. There is an attempt to answer such questions as: Did the oil companies exert pressure on the American government to influence governmental policy? How effective was this pressure? And, what benefits did the oil companies have from their relationship with the govern- ment? This study is based primarily on Department of State records in the National Archives and at the National Records Center at Suitland, Maryland. Also important were published hearings conducted by two United States Senate special com- mittees on petroleum and national defense during 1947 and 1948. The published memoirs and reminiscences of several participants were also utilized. Newspapers and magazine articles, especially the New York Times, supplemented the narrative throughout. The first two chapters review the background of American contacts and oil interests in the Persian Gulf region by 1932. The following two chapters trace the progress of the oil concession negotiations between the Saudi government and Standard Oil Company of California and the latter!s attempts to convince the State Department to increase American repre- sentation with Saudi Arabia. Chapters V through VII discuss the attempts by the oil companies to influence the American government to extend lend-lease aid to Saudi Arabia during wartime, the actions taken by the American government to guarantee the flow of oil to satisfy war demands, and the efforts of the American government to aid Saudi Arabia in several domestic programs. The last two chapters deal with postwar events from an Anglo-American oil agreement to Senate investigations of petroleum policy in 1947 and 1948. The study concludes that Aramco was instrumental in bringing official and nonofficial contact and representation between Saudi Arabia and the United States. Moreover, Aramco was instrumental in involving the American government directly in Saudi Arabia through the extension of lend-lease aid to that country. American government involvement thwarted potential British ambitions in the Saudi oil resources and resulted in the American dominance of oil interests in that kingdom. In addition, Senate investigations showed that the oil companies grossly overcharged the United States Navy on oil purchases and that the financial assistance to Saudi Arabia was made for the protection of Aramco's oil concession. Nonetheless, United States policy toward Saudi Arabia was not INTRODUCTION The United States assumed a leading role in the Middle East in the postwar period. To understand the growing impor- tance of that role, monographic studies of United States relations with particular countries of the Middle East are necessary. Two reasons attracted my attention to undertake this study. One, Saudi Arabia is one of the major sources of petroleum for the United States and was the first Middle Eastern country where Americans attained significant in- fluence. The other was a growing emphasis at home on the energy question, which made the average American, perhaps for the first time, interested in Middle Eastern affairs. The special position attained by the United States in the Kingdom of Saudi Arabia and the emphasis at home on energy then make the topic of oil diplomacy timely. This study is concerned with the examination of the interaction between the American oil industry, especially the one operating in Saudi Arabia, and the American govern- ment. Specifically, this study is a historical inquiry into how and why had the Americans came to Saudi Arabia, the adverse or favorable effect of oil companies' role on Saudi- American relations, the degree to which domestic oil con- siderations affected United States oil policy, and the in position and extent to which the American government was responsive to such considerations. The objective of the study is to find answers to such questions! Did the oil companies exert any kind of pressure on the American govern- ment to influence that government's policy in Saudi Arabia? If so, how effective were these attempts on the government's foreign-policy decision-making in regard to Saudi Arabia? And, did the oil companies draw any material benefits from their relationship with the government? The view that American corporate business influences the nation's policy has been a persistent one in historical and political literature. Oil companies had often been cited as examples of such influence on American foreign relations. This topic then might be taken as a case study of the influence of the oil companies operating in Saudi Arabia on United States policy toward that country. Chapters I and II review the background of American contacts and oil interests in the Persian Gulf area by 1932. Chapters III and IV trace the progress of the oil concession negotiations between the Saudi government and Standard Oil of California and the attempts by the latter at convincing the State Department to increase American representation with Saudi Arabia; Chapters V through VII discuss the Saudi government's wartime financial crisis, the attempts by the oil companies to influence the American government to extend lend-lease aid to Saudi Arabia, the actions taken by the xv American government to guarantee the flow of oil to satisfy war demands, and the efforts of the American government to aid Saudi Arabia in different ways. Chapters VIII and IX deal with postwar events, from the Anglo-American oil agree- ment to Senate investigations of petroleum policy in 1947 and 1948. TABLE OF CONTENTS Page INTRODUCTION '' iii LIST OF ABBREVIATIONS vii Chapter I. THE BACKGROUND: SAUDI ARABIA AND THE UNITED STATES BY 1932 1 II. AMERICAN OIL INTERESTS IN THE PERSIAN GULF BY 1932 27 III. THE STANDARD OIL COMPANY OF CALIFORNIA: FROM CONCESSIONS TO OPERATIONS . 61 IV. THE OILMEN AND THE DEPARTMENT OF STATE: DIPLOMATIC AND CONSULAR REPRESENTATION IN SAUDI ARABIA .80 V. AMERICAN LEND-LEASE AID FOR SAUDI ARABIA .... 90 VI. THE PETROLEUM RESERVE CORPORATION: SAUDI OIL CONCESSION, GOVERNMENT OWNERSHIP .... 116 VII. SAUDI-AMERICAN RELATIONS, 1943-1945 134 VIII. THE PROPOSAL FOR A TRANS-ARABIA PIPELINE ... 161 IX. FROM THE ANGLO-AMERICAN OIL AGREEMENT TO SENATE HEARINGS 178 X. CONCLUSION 203 BIBLIOGRAPHY 212 VI LIST OF ABBREVIATIONS Aramco: Arabian American Oil Company (Socal, Texaco, Stan- dard of New Jersey, Socony-Vacuum). Bapco: Bahrain Petroleum Company (subsidiary of Socal). Caltex: California Texas Oil Company (marketing subsidiary of the parent companies, Texas and California Stan- ard). Casoc: California Arabian Standard Oil Company. CR: Congressional Record. DSB: Department of State Bulletin. EGS: Eastern and General Syndicate (British). FR: Foreign Relations. IPC: Iraq Petroleum Company (British). MESC: Middle East Supply Center. PCL: Petroleum Concession Ltd. (subsidiary of IPC). PDL: Petroleum Development (West Arabia) Ltd. (sub- sidiary of IPC). PRC: Petroleum Reserve Corporation. RFC: Reconsturction Finance Corporation. Socal: Standard Oil Company of California. Socony: Standard Oil Company of New York. Tapline: Trans-Arabian Pipeline Company. Texaco: Texas Oil Company. TPC: Turkish Petroleum Company. MAPS General map of Saudi Arabia and Tapline, page 4. VII CHAPTER I THE BACKGROUND: SAUDI ARABIA AND THE UNITED STATES BY 1932 As a modern state the present Saudi Arabian kingdom came into being through the efforts of King Abd al-Aziz Ibn Abd al-Rahman A1 Faisal A1 Saud, better known as Ibn Saud. The kingdom's birth date is 1932, but its roots go back to the last quarter of the eighteenth century, when Mohammad Ibn Abd al-Wahhab advocated a revival movement called Wahhabism. This movement grew throughout the nineteenth and early twentieth century when it triumphed under the leadership of Abd al-Aziz. I The Arabian peninsula extends over one million square miles. Politically, it is divided into several states, the largest of which is Saudi Arabia, which comprises an area of 865,000 square miles. Saudi Arabia borders Iraq, Jordan, and Kuwait on the north; Qatar, the United Arab Emirates, and Oman on the east and southeast; People's Yemen and Yemen on the south; and the Red Sea and the Gulf of Aquaba on the west. The Arabian plateau has its highest part in the extreme west, along the Red Sea, and it slopes gradually from west to east. Thus the Red Sea coast is often mountainous whereas the Persian Gulf coast is flat and low-lying. The mountains along the Red Sea reach their maximum height in the south, in the Yemen, and their lowest about halfway along their course, around Jiddah, Mecca, and Medina. These towns grew because they offered the easiest and shortest route inland from the coast. The northern two-thirds of the area adjacent to the Red Sea is called the Hijaz province, while the southern one-third is called the Asir. Further to the east, the central northern area--Najd province--is diversified by shallow valleys, high ridges, and in some places by desert sand. Approaching the Persian Gulf coast--the al-Hasa province-- altitude does not exceed 1,000 feet, with desert areas to the north and south. The area to the north--Nefud--has some wells and rainfall where nomadic life is possible. In the south, lies al-Rub' al-Khali (Empty Quarter), a rainless desert area.