174 Commonwealth Government to Cranborne

Cablegram 121 [1] CANBERRA, 30 May 1944

MOST SECRET IMMEDIATE

Your D.768. [2] Oil.

The following comments are offered on text of memorandum in D.732 [3]:

1. We support your objection [4] to the lack of precision in Article 1(3) [5] and suggest that the preamble also does not make adequate reference to relationship between petroleum supplies and world security.

2. It is obvious that oil resources controlled by the United States, Great Britain and U.S.S.R. can be powerful instruments in maintaining collective security, and it seems important to us that the Declaration of Principles to which other nations will be asked to adhere should approach this issue more resolutely. Article 1(3) as drafted, gives only a vague recognition to the fact that peace- loving nations defending themselves against aggression must have oil, and it does not recognise at all the proposition that oil should be denied to any nation committing an act of aggression.

The Italian case in 1935 [6] suggests that it is desirable to remove the imposition of an oil embargo on aggressors from the field of diplomatic-negotiations. We also think that recollection of that incident will lead other nations to remark upon the omission of any reference to oil sanctions from an Anglo-American Declaration touching on petroleum and security.

3. Accordingly we should like to see the preamble strengthened by adding to Clause 4 [7] the words 'and in order to serve the ends of collective security'. This is a subject on which you will recognise the Atlantic Charter is itself too imprecise to be of value.

4. We should also like to see a redrafting of Article 1(3). As the article now stands we are not sure whether it means that adequate supplies of petroleum will be made available to peace-loving nations who participate in a collective security system or that the supply of petroleum to peace-loving countries will be subject to whatever arrangements are made for collective security. In any case the article is not strong enough. To attempt to strengthen it by amending the present draft along the lines of paragraph 4 of your D.525 [8] would, in our view, be likely to arouse wrong- headed American criticism to the effect that American oil was being used to defend the British Empire, and we suggest that the whole emphasis of the paragraph might be shifted from national security to world security. The following new paragraph is suggested for your consideration.

Begins:

Having regard to the use of petroleum for military purposes and in industries of war the two Governments recognise that the development of resources should also be conducted to assist the maintenance of world peace and agree that, as part of whatever collective security arrangements may be established, they will make adequate supplies of petroleum available to all peace-loving countries and will withhold supplies from any country embarking on military aggression. Ends.

5. Having regard both to our interests as consumer and to importance of petroleum in international economic relations we are particularly anxious that an international petroleum agreement should be reached as envisaged in Article 2. [9] Looking at the memorandum as an approach to an international agreement we have some doubt whether it may not appear to other nations as a proposal for the endorsement of an Anglo-American partitioning of the world's oil resources outside Russia. We would, therefore, suggest that the preamble and Article 2 might be reconsidered with a view to removing the danger of such an impression. In this regard the strengthening of Article 1(5) as suggested in your D.769, paragraph 2 [10] would in our view, heighten the impression that the purpose of the agreement was that Britain and America should support each other in holding on to what they have.

1 Repeated to the N.Z. Acting Prime Minister as no. 105.

2 Dispatched 24 May. On file AA:A989, 44/735/850.

3 Dispatched 16 May. On the file cited in note 2. It gave the text of a memorandum of understanding, drawn up during exploratory discussions between U.K. and U.S. officials at Washington in April-May.

4 See cablegram D769, dispatched 24 May. On the file cited in note 2.

5 Article 1(3) read: 'That the development of these resources shall be conducted with a view to the availability of adequate supplies of petroleum to both countries as well as to all other may be established. peace loving countries subject to the provision of such collective security arrangements as may be established.

6 On 3 October 1935 Italy invaded Ethiopia, whereupon the League of Nations branded Italy as an aggressor an invoked economic sanctions which did not, however, include oil.

7 Clause 4 of the preamble read: 'That such supplies should be available in accordance with the principles of the Atlantic Charter'.

8 Dispatched 7 April. On the file cited in note 2. It conveyed the instructions issued to the U.K. delegation at the Washington oil negotiations. Paragraph 4 of the instructions sought an orderly framework for the development of oil resources, but one which would not inhibit full development of U.K. resources or Imperial defence and which would allow the maintenance of the U.K.

industrial, commercial and foreign exchange position.

9 Article 2 proposed that oil producing and consuming countries should conclude '... an international Petroleum Agreement which, inter alia, would establish a permanent international Petroleum Council composed of representatives of all signatory countries'.

10 Article 1(5) read 'That the Government of each country and the nationals thereof shall respect all valid concession contracts and lawfully acquired rights and shall make no effort unilaterally to interfere directly or indirectly with such contracts or rights'.

In paragraph 2 of cablegram D769 Cranborne observed that the U.S.

Govt had declined to agree to strengthen Article 1(5) to the effect that signatories would support as well as respect other signatories concessions. He advised that the U.S. delegation feared public opinion would construe this as committing the U.S.

to military support of U.K. interests.

[AA:A989, 44/735/850]