If, therefore, American and British interests should enter upon private negotiations on this subject, the Department has no objection, provided (1) that any reputable American company which is willing and ready to participate will not be excluded by the arrangements decided upon, and (2) that the legal validity of the claims of the Turkish Petroleum Co. will not be recognized except after an impartial and appropriate determination of the matter such as has been suggested by this Government.

As to the first condition named above, Bedford has given the Department to understand that all American companies likely to be interested are already included in the seven companies now concerned. As to the second condition, the Department has suggested that doubtless it would be possible at the proper time to obtain a new or confirmatory grant of a concession to the Turkish Petroleum Co. if that company is to be the basis of the proposed arrangement.

The above position is concurred in by Bedford, who stated that the American group would send a representative to London to confer with the British interests.

The Department has made no commitments further than that stated above. You are requested to try so far as possible discreetly and informally to follow the negotiations and to keep the Department informed, but you will not participate in the negotiations.

HARRISON

890g.6363 T 84/46

The Chairman of the Board of Directors, Standard Oil Company of New Jersey (A. C. Bedford) to the Secretary of State

NEW YORK, June 27, 1922.

[Received June 28.]

DEAR MR. SECRETARY: Referring to the conference I had with you on Thursday of last week with reference to Mesopotamia and the rights of the Turkish Petroleum Company, I beg to transmit herewith for the information of the Department, copy of the cablegram which I sent last night to Sir Charles Greenway of the Persian Oil Company, said cablegram having been agreed to at a meeting of the Executives of the several Companies held in my office yesterday afternoon.

As it is possible that the British Foreign Office may mention the matter to the American Ambassador in London, it has occurred to me that the Department might think it desirable to communicate the substance of the despatch above referred to, to the American Ambassador.

Respectfully yours,

A. C. BEDFORD

[Enclosure-Telegram]

The Chairman of the Board of Directors, Standard Oil Company of New Jersey (A. C. Bedford) to the Chairman of the AngloPersian Oil Company (Sir Charles Greenway)

[NEW YORK,] June 26, 1922-7 p. m. Referring further your telegram June 8th have conferred with State Department and obtained its consent to discuss a practical basis of American participation provided:

First: That the principle of the open door already acquiesced in for mandated territories by the Allied Powers be maintained;

Second: that the Department does not withdraw its previously communicated views respecting validity of Turkish Petroleum Company's claims. Department has no objections however to use of Turkish Petroleum Company as a basis for working out some plan acceptable to all participants which later should be ratified or adopted by the Government ruling Mesopotamia which should possess sovereignty.

Third: that any arrangement of practical questions involved should be tentative and subject to acceptance by State Department after they have been advised as to its details. The seven American companies interested have considered views of State Department and questions concerning American participation and their views are that percentage you indicated to me would not be adequate from point of view of what would be an equitable proportion to allocate to American interests. If on foregoing information you feel that representative of American group should now visit London to discuss details with Turkish Petroleum Company such a representative will be selected and will probably be able to sail not later than July 8th. We await your further views by cable.

A. C. BEDFORD

890g.6363 T 84/43: Telegram

The Ambassador in Great Britain (Harvey) to the Secretary of State

[Paraphrase]

LONDON, August 4, 1922-4 p. m. [Received August 4-3:05 p. m.] 339. In the matter of participation in the Turkish Petroleum Co., I am informed by Teagle, who is returning to the United States tomorrow, that no agreement has been reached. . . . Pineau, chief of the French Government's petroleum department, and representing French interests, has unexpectedly displayed sympathy with

* W. C. Teagle, president of the Standard Oil Co. of New Jersey. 32604 vol. II-38-29

64

the American view. Following a conversation which he had had with Poincaré, Pineau presented Teagle with a memorandum and asked that it be brought informally, to your attention. The memorandum reads as follows: 65

"(1) The French Government are in accord with the American Government's position as to the open-door policy which they understand to be just and equal treatment for the nationals of all countries. Their understanding being that reciprocity of treatment will be accorded to French nationals in all other areas, therefore if the American Government is in accord with this [then] the French Government are entirely willing that the American group should have an equal participation with them in the development of the petroleum resources in the areas covered by the San Remo agreement. "(2) The French Government desires the modification of the San Remo agreement so that the application of the special sovereignty of the local government of Iraq under the British mandate shall be accorded to the local government of Syria under French mandate.”

Pineau stated also that the French Government's views as set forth in the above memorandum had been communicated to the British Government. Paragraph (2) above is to be explained by the fact that from all oil produced under the agreement the Government of Iraq may collect a royalty. It is the desire of the French, therefore, that the Syrian Government shall have a similar privilege of levying a small transit tax on Mosul oil passing through Syria to Alexandretta by the proposed pipe line.

After private discussions between the present partners in Turkish Petroleum it was decided to offer the American interests a 12% participation. Naturally the offer appeared entirely too low to Mr. Teagle and there was a rupture of official negotiations.

HARVEY

890g.6363 T 84/48

Memorandum of Negotiations in London between American Oil Interests and the Turkish Petroleum Company 66

[Extracts]

OPEN DOOR POLICY

The first three or four meetings were devoted entirely to a discussion of whether or not a formula could be arrived at to give full effect to our State Department's views as to the open door policy in Mesopotamia which would be acceptable to the present partners in

Raymond Poincaré, French President of the Council and Minister of Foreign Affairs.

05

The quotation which follows is not paraphrased.

'Left with the Department by Mr. Bedford, Aug. 16, 1922.

the T. P. Co., Limited. As a result of these discussions a memorandum was prepared, dated July 21st, copy of which, marked "Exhibit A", is annexed. This document was in the main drafted by me and discussed prior to its presentation to the partners in the T. P. Co., Limited, with Ambassador Harvey, who rendered me most valuable assistance by his suggestions and advice during my sojourn in London. This document is acceptable to the present partners in the T. P. Co., Limited, and I venture to express the hope that it may also be found acceptable to our State Department.

It was made perfectly clear to the partners in the T. P. Co., Limited, that the acceptance of this memorandum, or some other formula to give effect to the open door policy, must of necessity be obtained prior to any commitment on the part of the American group as to a participation in the T. P. Co., Limited.

[Annex-Exhibit A]

21 JULY, 1922.

The development of the Oil resources of Mesopotamia requires the installation of an extensive pipeline gathering and storage system, which can only be accomplished by enterprise of more than ordinary dimensions, and in order to bring together all interests so as to ensure the provision of ample capital and the most economic and efficient administration, the Turkish Petroleum Company was established. The participation in the Turkish Petroleum is now as follows:

the capital of the Company being £160,000, fully subscribed and paid up.

It is now suggested that American interests join the Turkish Petroleum Company-with a participation of %-the shares being provided by the original holders in proportion to their holding, or by a proportionate increase of Capital.

To establish the open door policy for others desirous of developing in Mesopotamia, it is proposed that the following general principles be adopted :

(1) That the royalties payable to the Iraq Government under the various concessions and rights held by the Turkish Petroleum Company, including the Petroleum Rights in Iraq acquired by them from the Bagdad and Anatolian Railways be agreed with the Iraq Government at the earliest possible date on the basis of a fixed and definite amount per ton of oil produced and saved.

(2) The Turkish Petroleum Company, Ltd., future operations in Iraq to be, inter alia, as follows:

a. Own and operate pipe line systems from the various fields to tidewater, either as a common carrier at published tariff rates, or else as a common buyer in the fields of crude oil.

b. Select for their own exploitation within two years from the date of the confirmation of the concessions by the Iraq Government a total not to exceed 12 blocks, the area of each block not to exceed 16 square miles.

c. The oil rights for the balance of the territory covered by the concessions, totalling some 150,000 square miles, to be opened for sub-lease to any responsible individual, firm or corporation who may be interested in developing oil production in Iraq.

d. Operate refineries to supply the internal consumption of Iraq and such other trade as the Company may decide.

The method of procedure in the granting of these sub-leases to be as follows:

(1) A standard form of sub-lease to be adopted and published, and all sub-leases to be made on the basis of this standard form. Such standard form to contain, in addition to the usual lease clauses, definite provisions for the starting of work or the payment of a uniform rate of rental by all sub-lessees.

(2) Each sub-lease to cover single areas of as nearly as possible 16 square miles.

(3) Prior to January 30th of each year until the entire area has been sub-divided notice to be given by publication in official Gazette of Iraq and in the leading oil trade papers in Holland, France, Great Britain and the United States of the particular district which has been sub-divided into blocks of as nearly as possible 16 square miles each. Each one of these blocks to be designated and individually numbered.

(4) One year after the publication of the particular district which has been sub-divided and is, therefore, open for leasing, a public auction shall be held in Bagdad and the various leases sold to the buyer who is prepared to pay to the Turkish Petroleum Co., Ltd., the highest royalty in crude oil.

(5) The Turkish Petroleum Co., Ltd., not to become a bidder for any of these sub-leases.

890g.6363 T 84/41a

The Secretary of State to the President of the Standard Oil Company of New Jersey (W. C. Teagle)

WASHINGTON, August 22, 1922. SIR: In leaving with me on August 16th a copy of the confidential memorandum describing your negotiations at London to secure par