CAB129-78 — Page 79

INTERIM REPORT OF AN INTER-DEPARTMENTAL WORKING PARTY ON MIDDLE EAST OIL

The Working Party has taken as its geographical area Iran and the Arab world, including (a) Libya, since this country lies on the flank of Egypt and is the only country where the Armoured Division which is intended for the defence of our oil-fields can train in desert warfare, and (b) (for the limited purposes specified in paragraph 12 (v)), Pakistan and Aden, because of their close contact with the Middle East, in the case of Pakistan through the Bagdad Pact.

2. The Working Party believes that, within the limits imposed by finance, the general direction of our efforts in the Middle East has been right. They may be briefly described as the traditional methods of diplomatic and commercial representation which are of particular effect in a society where the personality of the individual is of decisive importance, supported by cultural relations and information work, by an active policy of military co-operation, and by encourage- ment to the local governments to develop their countries on modern lines and to spend their oil revenues for the benefit of their peoples as a whole. It must be stated, however, that we cannot expect to obtain the wholehearted goodwill of the Arabs so long as they remain dissatisfied with our policy on the Israel question, and that overt diplomatic activity, particularly in the field of information, can do no more than mitigate the hostility which they feel towards us on this

account.

3. So as to make proposals for action at the earliest possible moment, the Working Party has so far confined itself to recommendations on measures which have already received sufficient study in the departments concerned to be put into effect at once, and has examined only some of the wider problems which require further study. Their recommendations, which cover the principal categories for which expenditure by Her Majesty's Government is likely to be necessary are listed in the annexes to this report, to which paragraphs 7 to 19 below refer.

4. Some of the recommendations are designed as a direct and immediate counter to the present Russian diplomatic offensive in the area, and will be so interpreted by its inhabitants. But it is important not to give any impression of panic, and not to allow the Arabs to think that the way to gain favours from the West is to accept them from the East. Moreover, much of the action proposed would lose its value to Her Majesty's Government if it were directly related in local minds to the preservation of our oil interests. The majority of the recommendations are therefore designed as an unobtrusive extension of our present activities.

5. It has not been possible in the time available to consult H.M. Missions overseas, or to attempt any detailed co-ordination with the oil companies or with the United States Government. The recommendations for immediate action have, however, all been studied in the past with the Missions concerned. The heads of the major British oil companies have, moreover, been consulted and have indicated that they agree with Her Majesty's Government's analysis of the situation as set out in the Cabinet paper, and that they are willing to help, both by reviewing their own policies in the field of local relations, and, where appropriate, by supporting financially some of the projects recommended in this report. An opportunity for co-ordination with the United States Government will be provided by the next series of regular bi-annual discussions on Middle East oil. The question of co-ordination of policy between the British and American oil companies can also be raised at these meetings. We might also renew our efforts to see whether the United States Administration can find any administrative means by which the deterrent effect of the United States anti-trust laws on all forms of co-operation can be reduced. In the meantime a general approach to the United States Government will be necessary.

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