846b.6363/3: Telegram

The Secretary of State to the Chargé in Great Britain (Atherton)

[Paraphrase]

61. The Department of State has been informed that the Gulf Oil Company of Pennsylvania in November 1927 obtained an option contract on a Bahrein Islands petroleum concession from a British company, the Eastern & General Syndicate, Limited, to which the Sheikh of Bahrein had originally granted the concession in December 1925. The Turkish Petroleum Company agreement was signed July 31, 1928, and by its terms, as a member of the American Group, the Gulf Company was barred from operations in Bahrein. The Gulf Company, with the Syndicate’s consent, accordingly assigned its option rights on December 21, 1928, to the Standard Oil Company of California, and the latter organized in turn a Canadian subsidiary to hold and to operate the concession.

The Syndicate, under the option contract’s terms, was to secure from the British Colonial Office a one-year renewal of the concession which was expiring December 2, 1928. When the Colonial Office was approached in October 1928 by the Syndicate, approval of the renewal was made contingent upon the insertion in the original concession agreement of a clause providing, among other things, that the managing director and a majority of the other directors should be British subjects, that the concessionaire company should be British-registered, and that none of the rights and privileges which the Sheikh had granted in the concession should be controlled directly [Page 81] or indirectly by foreigners. Such a clause inserted in the concession agreement would exclude effectually from holding or operating the concession a company which was directly or indirectly controlled by Americans.

You are desired by the Department to discuss this case informally at an early date with the appropriate authorities of the British Government. You should point out in your conversation that existing legislation is extremely liberal in the United States and its possessions in regard to operation of petroleum concessions by companies of foreign control; and you should add that the Department of State would be glad to obtain a statement of the British Government’s policy respecting the holding and operating by foreigners of petroleum concessions in territories such as Bahrein.

The result of your conversation should be promptly reported by telegraph.

Kellogg