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.