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Page 424 9. The conclusions to which these considerations lead would thus seem to be
(a) that any reduction in demand incurred by the United States oil companies as a result of discrimination against them by the Sterling Area would probably lead them to revise their programmes in the Middle East; (b) that such a revision would be more likely to result in the suspension of expansion programmes and some shutting back of production over their Middle East ventures as a whole than in the complete abandon- ment of any one of them.
10. It might therefore appear that there is no reason to avoid a policy of discrimination on the ground that it might lead to such a reduction in United States investment in the Middle East as would be politically and strategically dangerous to British interests should that policy of discrimination be on balance desirable from all other points of view. These preliminary conclusions are, however, derived only from study of the problem from the technical angle of United States oil investment commitments, and they require to be re-examined in the light of future Anglo-United States relations as a whole.
11. A discriminatory policy would presumably be adopted by His Majesty's Government either-
(a) as part of an agreement with the United States Government; or (b) as part of the measures of a more desperate nature taken independently, if no satisfactory conclusion emerges from the Washington discussions.
12.
In the first case the policy of Anglo-United States co-operation in the Middle East would presumably be covered by the agreement, and would not be affected by some contraction of activity by the American oil companies. In the second case, discrimination would be only one of many steps we should have to take which would prejudice Anglo-United States relations, so that a general deterioration in those relations would in any event threaten Anglo-United States co-operation in the Middle East.
13. There is, however, one final consideration which must weigh in the scales. So long as United States exports exceed United States imports, the only long-term solution to the problem of balancing trade may be the encouragement of United States investment overseas of both Government funds and private capital. Such investment could hardly fail to be discouraged by a policy of discrimination on oil that results in a considerable decline in the profits derived from the largest of all existing United States overseas investments, the interests in the Middle East of the American oil companies.
14. On balance, however, provided the general question of United States overseas investment is borne in mind, a policy of discrimination, if acceptable on other grounds, need not be rejected because of possible repercussions on United States policy in the Middle East.
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