890g.6363 T 84/41a

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

Sir: In leaving with me on August 16th a copy of the confidential memorandum describing your negotiations at London to secure participation [Page 343] of American petroleum interests in the development of the oil resources of Mesopotamia, you enquired whether the Department considered that American cooperation in this enterprise through the Turkish Petroleum Company on the terms outlined in your memorandum would be in conformity with the Open Door principle for which this Government has stood. You further informed me of your belief that the foreign interests now in the Turkish Petroleum Company, namely, the Anglo-Persian Oil Company, the Shell Company and the French group, would be willing to accord American interests a 20% share in the Turkish Petroleum Company and an equal voice with each of the other partners in the management and control of the Company.

In its support of the Open Door policy it is not this Government’s desire to set up impractical and theoretical principles or to place obstacles in the way of the participation of American companies in foreign enterprise but rather to open to American companies the opportunity for such participation if they desire it. It rests chiefly with American commercial interests themselves, once the opportunity is offered, to determine the extent and terms of their participation and to decide whether, under existing circumstances, an adequate opportunity is offered.

From page 5 of your memorandum I have noted that in your discussions at London an endeavor was made to arrive at a formula which would give full effect to this Department’s views as to the open door policy in Mesopotamia and that as a result a statement was prepared which is given on page 9 of your memorandum as Exhibit “A”. From Exhibit “A” it would appear that the Turkish Petroleum Company, to justify the expenditure of the large sums which will be required in making available the oil resources of Mesopotamia through an elaborate pipe line system, contemplates retaining some actual oil bearing territory but it is apparently intended that the major portion of the fields should be open to the private initiative of all nationalities on equal terms by lease let through public bids. I assume that it is the intent of your proposal that a reasonable service charge for transportation will be made to such private oil producers.

I have also noted on page 10 of your memorandum that it is proposed that the shareholders in the Turkish Petroleum Company should agree:—

  • “1. That if necessary, the Articles of Incorporation of the Turkish Petroleum Company shall be amended to give full effect to the “open door” policy as set forth in the Memorandum dated 21st July, 1922.
  • “2. That all concessions now held or which may in the future be acquired shall be confirmed by the proper governmental authorities [Page 344] and every possible step shall be taken to ensure that all concessions now held or to be acquired are absolutely valid before expenditure is incurred by the Turkish Petroleum Co. for drilling operations.”

In reply to your specific inquiry whether the plan outlined in your memorandum, as I have summarized it above, is in conformity with the Open Door principle, I desire to state that if, as you have indicated to me, all interested American oil companies have been invited to participate and those companies which have expressed a wish to share in the development of Mesopotamian oil resources are represented in the proposed arrangement, if a fair and equitable share in this development is accorded to American interests, and if there is no attempt to establish a monopoly in favor of the Turkish Petroleum Company, or any other company or interests, the Department would not consider that the arrangement contemplated in Exhibit “A” (referred to as the Memorandum of July 21, 1922) is contrary to the spirit of the Open Door policy.

I would point out, however, that on page 1 of your memorandum it is indicated to be the intention of the present shareholders of the Turkish Petroleum Company to extend their operations to territory in the former Turkish Empire outside of Mesopotamia and to obligate participants in this Company to be interested in this area exclusively through the Turkish Petroleum Company. While American petroleum interests are at liberty to take such action as they may see fit to limit their activity throughout the Turkish Empire no such undertaking would affect the attitude of this Government in the future consideration of claims in this area or its support of American interests there and the Department will reserve its entire freedom of action in dealing with such a future contingency.

I would appreciate it if you would kindly bring this communication to the attention of the interested American companies for which, as I understand it, you have been authorized to act as spokesman.

I am [etc.]

Charles E. Hughes