IDEAS FOR AN OIL PACT
BY NICHOLAS DAVENPORT FOR thirty years—on and off—I have been using my pen (in articles and books) to warn people of the dangers of mixing oil and politics. When the Labour Government refused to drop paratroopers on Abadan in the dispute with Dr. Moussadek (who made a grab similar to Colonel Nasser's) I had hoped that this would signal the end of British oil imperialism. But dangerous old ideas were revived by Sir Anthony Eden with the appalling consequences we now contemplate—the Suez Canal blocked, pipeline and pumping stations blown up in Syria, and Anglo-French tankers denied the use of Saudi-Arabian oil at the Bahrein terminal. How can we get back to sanity in our oil affairs? How can we substitute commercialism for politics? How can we make oil contribute something more sub- stantial to our balance of payments?
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The first step, as I have urged before, is to sell the Government's 51 per cent hold- ing in British Petroleum (51 million shares) to a British banking consortium who would in turn sell, it to British and American investors. Not long ago when some enter- prising bankers publicised the fact that British Petroleum had oil reserves three tithes as large as the richest American com- pany and that at the market prices pre- vailing these reserves were valued at only 50 per barrel (against 50e for the mighty Standard Oil of New Jersey), American investors made a mad scramble for the shares and forced the price up to over £9. They are now about £6 10s. and at a bargain level—if the political risk could be reduced to reasonable proportions. It should not be impossible to sell, say, 10 million shares in the American market and add some $200 million to our depleted dollar reserves. We need the dollars. We also need to tell the Arab world that the British Treasury no longer owns 50 per cent. of the oil in Kuwait, 23f per cent. of the oil in Iraq and Qatar and 40 per cent. of the Iranian consortium—in other words, that the British Government is no longer an oil imperialist.
* * * The next step is to negotiate a com- mercial oil agreement with the United States Government. This means tearing up the fatuous political oil agreement which the late Secretary of the Interior Harold Ickes signed with the late Foreign Secretary Ernest Bevin, proclaiming the Middle East as an Anglo-American oil preserve. I do not know whether America is now in a mood to negotiate with us, but if the Western alliance means anything, then it is in the interests of the United States to put its principal ally on its commercial oil feet. The agreement I have in mind would proclaim the intention of the two countries to set up an oil bank which would allow the nationals of the one to borrow oil from the nationals of the other repay- able in oil over a period of time, the only dollar payment passing being the difference in production and transport costs of the oil exchanged. It would be open to France and Holland to) oin in the agreement. If it were signed today the British Petroleum and the Royal Dutch-Shell group would be supplying their British and continental customers with Western oil borrowed front the American oil consortium to meet their present deficiencies and would be repaying it later on with Middle East oil when the Suez Canal is open and the pipelines are flowing. The obvious American agencies for the exchange would be the Standard Oil 'Esso' company and the Texas-owned Trinidad Oil ('Regent') company which are operating in Great Britain. By this agreement we should avoid the full dollar liability for the Western oil which we must now buy in considerable quantities.
There is nothing commercially novel in ail oil agreement along these lines, for the international oil companies are frequently borrowing oil from one another. It would not even be politically novel, for there IS already an understanding between the British Treasury and the American oil corn' panies importing oil into the UK, whereby the 'dollar , content' of American oil iS reduced to an amount equivalent to the 'dollar content' of oil imported by the British and Dutch companies. (This is believed to be under 30 per cent.) With such an oil agreement the Middle East crisis would not affect our balance of payments: it might even help it if tanker freights rise further, for payments to British-owned, tankers exceed those to foreign-owned tankers importing oil into the UK. But with• out such an agreement I reckon that our -balance of payments will suffer a deteriora- tion of over £100 million, representing the loss of profit on the oil normally supplied by British companies and the Royal Dutch- Shell group to their overseas customers. outside North America. Our first task of statesmanship, then, as soon as our.trooPs have left Egypt, is to negotiate this oil pact with America.
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