)OCUMENT IS THE P R O P E R T Y OF H E R B R I T A N N I C M A J E S T Y *S G O V E R N M E N T ) C(67) 123
COPY NO.
U '&
7th July, 1967
A R A B ATTITUDES AND BRITISH ECONOMIC INTERESTS
IN THE MIDDLE EAST
"
M e m o r a n d u m by the S e c r e t a r y of State £or F o r e i g n A f f a i r s
A t our meeting on 20th June ( C C ( 6 7 ) 40th Conclusions, Minute 2 ) ,
I was invited to c i r c u l a t e a m e m o r a n d u m a s s e s s i n g the manner in which
the attitude of the A r a b countries to the supply of o i l to this country might
develop and the consequences for our e c o n o m i c i n t e r e s t s .
2.
The a s s e s s m e n t s in this paper and its annex a r e n e c e s s a r i l y no
more than i n f o r m e d g u e s s e s , since they depend on a s e r i e s of v a r i a b l e
factors which cannot be a c c u r a t e l y p r e d i c t e d and o v e r some of which we
have little or no c o n t r o l .
But B r i t i s h p o l i c y w i l l have its own b e a r i n g
on these f a c t o r s .
It i s t h e r e f o r e i m p o r t a n t to c o n s i d e r the r e l a t i o n s h i p
of possible p o l i c i e s to our e c o n o m i c i n t e r e s t s .
British P o l i c y
3,
The t h r e e o c c a s i o n s in the past 20 y e a r s on which our o i l supplies
and general e c o n o m i c i n t e r e s t s in the Middle E a s t have been dangerously
threatened by p o l i t i c a l d e v e l o p m e n t s have been the A r a b / I s r a e l w a r s of
1948, 195 6 and 1967;­
( i ) In 194G our e c o n o m i c stake was not so v i t a l and our p o l i t i c a l
posture, although not r e g a r d e d as f a v o u r a b l e by the A r a b s , was l e s s
unfavourable than that of any other g r e a t p o w e r .
Our e c o n o m i c i n t e r e s t s
greatly expanded during the succeeding p e r i o d ,
( i i ) In 1956 we d e l i b e r a t e l y took the I s r a e l side and i n c u r r e d intense
odium in the A r a b c o u n t r i e s .
Our p o l i t i c a l position suffered permanent
damage.
N e v e r t h e l e s s , by a p o l i c y of lying l o w and disengaging f r o m
political i n v o l v e m e n t to the extent that was p o s s i b l e , we r e c o v e r e d
remarkably quickly,
Our e c o n o m i c i n t e r e s t s in the a r e a have expanded
considerably during the past 11 y e a r s to our g r e a t advantage,
(-"-"-) I"- 1967 f o r r e a s o n s v a r y i n g f r o m spontaneous public r e a c t i o n to
United A r a b Republic ( U A R ) p o l i c i e s to downright m i s r e p r e s e n t a t i o n and
malice we b e c a m e identified to a wholly unreal d e g r e e with the I s r a e l
side and this has done much d a m a g e to our p o s i t i o n in A r a b c o u n t r i e s .
M e m o r i e s of 1956 a g g r a v a t e d t h i s .
-1­
4.
In, both 1956 and 1967 our national i n t e r e s t s , p o l i t i c a l and e c o n o m i c ,
would have been endangered if I s r a e l had been defeated and N a s s e r ' s
hegemony in the A r a b w o r l d f i r m l y e s t a b l i s h e d ; it would a l s o have been
difficult f o r us to maintain a p u r e l y neutral position if I s r a e l was being
overwhelmed,
But I s r a e l has now d e m o n s t r a t e d her ability, by her own
e f f o r t s , to s e c u r e her e x i s t e n c e , and her r i g h t of p a s s a g e through the
Straits of T i r a n i s again a s s u r e d .
With United States diplomatic support
for I s r a e l on these points, t h e r e i s no s e r i o u s danger that either of these
rights w i l l be threatened for the f o r e s e e a b l e future, whether there is a
peace s e t t l e m e n t or not.
Nothing that v/e do can fundamentally i m p r o v e
I s r a e l ' s p o s i t i o n ; nor is it l i k e l y to affect substantially the chances of a
peace settlement.
A p a r t f r o m A r a b attitudes, the chances of a s e t t l e ­
merit turn on the acceptance or not by the R u s s i a n s of the need to c o m e
to an a g r e e m e n t with the A m e r i c a n s on t e r m s which can be p r e s s e d on
the A r a b s and I s r a e l i s .
We are unlikely to have m o r e than a m a r g i n a l
influence on the outcome of such a dialogue if it takes pl3.ce, and, since
the t e r m s a r e l i k e l y to be unpalatable to both s i d e s , we cannot gain by
being a s s o c i a t e d with i t .
( W e may be c o m p e l l e d to take s o m e
diplomatic p a r t e . g. in d e t a i l e d negotiation in the United Nations
if s o m e g e n e r a l United States/Soviet understanding i s r e a c h e d ) .
5.
But if our actions and our attitudes to the A r a b / I s r a e l p r o b l e m
a r e unlikely to affect the chances of a settlement., they can v e r y substan­
t i a l l y affect our economic and other i n t e r e s t s in the Middle E a s t ,
There
a r e l i m i t s to the extent to which v/e can take a position based on a
calculation of national i n t e r e s t alone; these l i m i t s include both public
sentiment about the issue of p r i n c i p l e i n v o l v e d in the r i g h t of a s m a l l
country to s u r v i v e and s p e c i a l p r e s s u r e s in this country.
But, except
to the extent to which v/e can take a p o s i t i o n based on our i n t e r e s t s which
i n v o l v e s leaning if anything t o w a r d s the A r a b s i d e , our interventions in
the A r a b / I s r a e l p r o b l e m w i l l w o r k counter to the salvaging of our
economic i n t e r e s t s in the a r e a .
If we f o l l o w the post-Suez p o l i c y
of d i s e n g a g e m e n t , there m a y be a better chance of r e s t o r i n g our
situation than t h e r e was in 1957 b e c a u s e :
(a)
We have after all a far better c a s e for our actions in the past
six w e e k s than v/e had o v e r Suez; this should gradually c o m e to be
recognised,
(b)
Although it is too e a r l y to s t r i k e a balance with any c e r t a i n t y ,
the p o s t - w a r position of N a s s e r in the A r a b w o r l d is weaker instead
of s t r o n g e r .
The same may p r o v e to be true of the R u s s i a n position,
though the Soviet G o v e r n m e n t w i l l do everything within their power to
r e d r e s s this and they have a c t i v e a l l i e s in the A r a b w o r l d ,
6,
The Americans are differently placed (see paragraph 8 below),
but t h e r e a r e signs that our need (as opposed to that of the A m e r i c a n s )
to cultivate the m o d e r a t e A r a b s is now better understood in Washington,
and r e c o g n i s e d as being i n d i r e c t l y in the A m e r i c a n as well as in the
British interest.
7,
The c r i t i c a l factor in the future of our economic i n t e r e s t s i s
thus not so much whether the A r a b / I s r a e l p r o b l e m w i l l continue to
disturb the a r e a , but what r o l e B r i t a i n w i l l continue to play.
The
m o r e r e t i r i n g our r o l e , the better our p r o s p e c t s s e e m l i k e l y to b e ,
and v i c e v e r s a .
American Policy
8
The United States G o v e r n m e n t a r e differently situated for the
following r e a s o n s s ­
0
(a)
They a r e not so v u l n e r a b l e to e c o n o m i c p r e s s u r e s as we a r e , and the A r a b s (and R u s s i a n s ) know i t , (b)
The d o m e s t i c p o l i t i c a l p r e s s u r e which the I s r a e l i s can b r i n g to bear is s t r o n g e r . (c)
A m e r i c a n influence o v e r the I s r a e l i G o v e r n m e n t and A m e r i c a n
ability to p r o v i d e aid as p a r t of any settlement a r e things of
which the A r a b s must take account, however hostile they f e e l .
These f a c t o r s taken as a whole g i v e the A m e r i c a n s m o r e scope than we
have for manoeuvring independently of Ajrab attitudes.
A r a b hostility
to the United States is at p r e s e n t g r e a t e r than to us; but the A r a b need
to c c m e to t e r m s with the United States is s t r o n g e r .
M o r e o v e r , in the
last analysis it is S o v i e t f e a r of a m i l i t a r y confrontation v/ith the United
States which i m p o s e s l i m i t s on Soviet support for the A r a b s of a kind
which could b r i n g m a t t e r s to a ^ r i n k ,
1
Soviet P o l i c y
9.
In the long t e r m , R u s s i a n p o l i c y in the Middle E a s t i s l i k e l y to
continue to be d i r e c t e d t o w a r d s : ­
(a)
The maintenance or c r e a t i o n of p r o - S o v i e t r e g i m e s in the a r e a and
the encouragement of l o c a l Communist or "National L i b e r a t i o n "
m o v e ment s ,
(b)
The e r o s i o n of W e s t e r n influence, including the economic i n t e r e s t s
of the United States and B r i t a i n ,
In the pursuit of these a i m s the Prussians w i l l be subject to two i m p o r t a n t
limitations
(a)
The wish to avoid a m i l i t a r y conflict involving the United States
r e f e r r e d to a b o v e .
During the c r i s i s their r o l e was undoubtedly
one of caution and r e s t r a i n t as soon as they appreciated that this
r i s k was a p o s s i b i l i t y .
They a r e unlikely to wish to see the
r e c r e a t i o n of a situation in which the A r a b s might d r a w t h e m
into a conflict with the United States o v e r I s r a e l .
(b)
The fact that even if they can afford to sustain the U A R e c o n o m y
for a p e r i o d (and it i s questionable whether they can take this on
as a p e r m a n e n t c o m m i t m e n t ) they c e r t a i n l y cannot a l s o afford
the scale of economic support which w i l l be n e c e s s a r y to tide
other A r a b countries o v e r a p r o l o n g e d p e r i o d o v e r which o i l
r e v e n u e s and other trading connections with the W e s t a r e
interrupted.
10.
So far the R u s s i a n s have shown f e w o v e r t signs of looking beyond
the s h o r t - t e r m t a c t i c a l need to r e - e s t a b l i s h their c r e d e n t i a l s with the
Arabs.
The I s r a e l i v i c t o r y and the subsequent accusations that they
failed to c o m e to the assistance of the A r a b s dealt a c o n s i d e r a b l e b l o w
to their p r e s t i g e .
But the effect of this should not be e x a g g e r a t e d .
The
Russians probably c o n s i d e r that the d a m a g e to W e s t e r n i n t e r e s t s In the
area has been, and is l i k e l y to continue to b e , v e r y g r e a t .
This short­
t e r m Soviet a i m of consolidating their position with the A r a b s i s l i k e l y to
o v e r - r i d e other c o n s i d e r a i i o n s f o r some t i m e , and during this p e r i o d they
v/ill continue to exploit and stimulate A r a b h o s t i l i t y to B r i t a i n and the
United States.
M o r e o v e r , if it is c o r r e c t that they wish to avoid another
A r a b / I s r a e l w a r , they w i l l p r o b a b l y see l e s s r i s k and m o r e p o l i t i c a l
benefit to t h e m s e l v e s in continuing to d e f l e c t A r a b hostility p r i m a r i l y
against "Western i n t e r e s t s even after the p r e s e n t phase of c o n s o l i d a t i o n
is o v e r ,
Soviet p o l i c y , d i r e c t l y or i n d i r e c t l y , w i l l encourage the
maintenance of punitive m e a s u r e s on the o i l trade and/or p a s s a g e
through the Suez Canal.
They v/ill a l s o p r e s u m a b l y continue their
'foothold in A f r i c a p o l i c y , e x e m p l i f i e d by their a r m i n g of Somalia,
and their i n t e r e s t , which must be a s s u m e d , in the future of the Y e m e n
and A d e n .
1
11,
T h e r e a r e some f a c t o r s which may 5n due c o u r s e modify R u s s i a n
Middle E a s t p o l i c y at l e a s t in p a r t .
It is p o s s i b l e that if the d i s l o c a t i o n
caused by the p o l i c y d e s c r i b e d w e r e p r o l o n g e d without any c o r r e s p o n d i n g
p o l i t i c a l b e n e f i t s , w e could e x p e c t an A r a b r e a c t i o n against the R u s s i a n s ,
The Russians may a l s o b e c o m e a w a r e that they can only hope to d e l i v e r
political satisfaction to the A r a b s in the shape of an I s r a e l i w i t h d r a w a l
if they can c o m e to some a r r a n g e m e n t with the A m e r i c a n s ,
12,
M o r e o v e r , anticipating this r e a c t i o n and as a r e s u l t of the
r e a p p r a i s a l of their p o l i c i e s in the a r e a which they must a l s o be
undertaking, the Prussians may d e c i d e that their i n t e r e s t s w i l l be
better s e r v e d and the e c o n o m i c burden l e s s by placing g r e a t e r emphasis
on A l g e r i a , S y r i a , I r a q and/or other A r a b countries rather than by
continuing to back N a s s e r .
Israel Policy
13,
It is to be expected that the I s r a e l i s v/ill pursue a f i r m p o l i c y ,
i, e. no substantial c o n c e s s i o n s without a quid p r o quo in the way of
peace negotiations or acceptance of I s r a e l ' s r i g h t to e x i s t .
Since
economic w a r f a r e against us is the most substantial weapon in A r a b
hands, this w i l l tend to harcien A r a b action against our e c o n o m i c i n t e r e s t s
on the p r e t e x t of B r i t i s h sympathy with and the b e l i e f in B r i t i s h influence
over I s r a e l .
T h e r e a r e nuances to t h i s : if the I s r a e l i s a r e p r o v o c a t i v e
on e. g J e r u s a l e m or the Yfest Bank, then the A r a b w i l l to maintain
punitive m e a s u r e s against us w i l l be c o r r e s p o n d i n g l y strengthened;
unless we succeed in d i s s o c i a t i n g o u r s e l v e s convincingly f r o m I s r a e l ' s
actions.
On some points we shall be able to do t h i s , but t h e r e . w i l l be
limits and they m a y a r i s e soon.
s
Inter-Arab Policies
14,
Much v/ill depend on the d e v e l o p m e n t of r e l a t i o n s between the
Arab G o v e r n m e n t s ,
F o r some t i m e ahead, we must abandon any hope
of modifying the attitude of total hostility on the p a r t of the " r e v o l u t i o n a r y "
A r a b c o u n t r i e s ; the U A R , A l g e r i a , I r a q and S y r i a .
But d o m e s t i c
p r e s s u r e s may cause e v e n t h e m to modify their punitive e c o n o m i c
m e a s u r e s ; and these and other p r e s s u r e s - e . g . A s i a n and A f r i c a n
economic i n t e r e s t s - may cause the U A R to reopen the Suez Canal.
In the m a i n , h o w e v e r , we must assume that this group w i l l do all they
can to hurt u s , and w i l l use a l l the means of p r e s s u r e at their d i s p o s a l
to induce other A r a b g o v e r n m e n t s to d o l i k e w i s e .
In this they w i l l have
Soviet and other C o m m u n i s t support.
15. Our hopes of e a s e m e n t t h e r e f o r e depend b a s i c a l l y on the non­
revolutionary g o v e r n m e n t s and the extent to which they a r e able to act
independently of the U A R G o v e r n m e n t .
It is in any case in these
countries that the preponderant part of our e c o n o m i c i n t e r e s t s - o i l
supply, o i l investment and t r a d e - a r e situated: the two important
exceptions a r e the Suez Canal and I r a q i oil.
16. A s t i m e p a s s e s , we can expect disenchantment with N a s s e r
and r e c r i m i n a t i o n s b e t w e e n the A r a b Governments about r e s p o n s i b i l i t y
for defeat to weaken A r a b s o l i d a r i t y and the w i l l to maintain a state of
affairs which hurts the A r a b s at l e a s t as much as it hurts the t a r g e t s
of their hostility,
T h e r e is s o m e evidence of this happening a l r e a d y :
f r o m the start the U A R , A l g e r i a and Syria have taken a m o r e e x t r e m e
line on o i l stoppages
17. A key e l e m e n t w i l l be the position of P r e s i d e n t N a s s e r .
If he
d i s a p p e a r e d , then t h e r e would a l m o s t c e r t a i n l y be a strong trend
towards a l e s s h e r o i c and l e s s c a v a l i e r attitude to the A r a b s own
economic i n t e r e s t s .
A t p r e s e n t , his disappearance does not s e e m
likely to happen; but it is not i m p o s s i b l e and, short cf it, the trend
of his p r e s t i g e and influence s e e m s l i k e l y to be downward, unless he
can produce some new p o l i t i c a l s u c c e s s .
1
18. N e v e r t h e l e s s , it must be expected that the deep A r a b sense of
humiliation resulting in w h o l e s a l e b l a m i n g of others and affecting
non-revolutionary as w e l l as r e v o l u t i o n a r y governments a l i k e , w i l l
continue to be a strong influence on g o v e r n m e n t s ' actions f o r many
months.
This w i l l be s o , e v e n though emotions m a y cool and m a t e r i a l
factors b e g i n to r e - e x e r t t h e i r influence,
19.
The attitudes of G o v e r n m e n t s a r e only part of the p r o b l e m .
We
must a l s o take account of popular p r e s s u r e s on m o d e r a t e l y disposed,
governments.
The propaganda of the U A R and the other r e v o l u t i o n a r y
A r a b g o v e r n m e n t s w i l l continue to incite a n t i - W e s t e r n hostility among
mass opinion and industrial labour and to encourage s u b v e r s i v e a c t i v i t y .
This has been important in r e c e n t weeks when oil stoppages have often
been either the d i r e c t r e s u l t of action by organised labour or because
governments have found it n e c e s s a r y to appease popular f e e l i n g by
acting t h e m s e l v e s .
Although the m o r e m o d e r a t e A r a b G o v e r n m e n t s
seem to be regaining c o n t r o l of the g e n e r a l situation in their c o u n t r i e s ,
they w i l l have to pay great heed to these dangers for many months.
They must t h e r e f o r e be e x p e c t e d to be cautious about any r e t u r n to m o r e
normal r e l a t i o n s with the W e s t which could e x c i t e popular p a s s i o n s ,
stimulate strike action or f a c i l i t a t e subversion and sabotage.
However
successful these g o v e r n m e n t s a r e in maintaining g e n e r a l c o n t r o l , we
must s t i l l a l l o w for at l e a s t s p o r a d i c outbursts of popular action
against W e s t e r n i n t e r e s t s ,
-5­
20. F i n a l l y , the attitudes of the A r a b G o v e r n m e n t s w i l l to a l a r g e
extent be affected by the c o u r s e of events and the p o l i c i e s of other
governments.
These are discussed above.
The two b i g g e s t
unknowns a r e the future of N a s s e r , and the i m m e d i a t e d i r e c t i o n of
Soviet p o l i c y in the a r e a : in p a r t i c u l a r the extent to which the Russians
w i l l d e c i d e to continue to back N a s s e r o r , as a r e s u l t of their own
r e a p p r a i s a l , put m o r e m o n e y on A l g e r i a and other A r a b h o r s e s .
This m e m o r a n d u m assiunes that e a r l y p r o g r e s s towards a d e f i n i t i v e
settlement of the A r a b / I s r a e l p r o b l e m is u n l i k e l y , and that it w i l l
r e m a i n a disturbing p o l i t i c a l e l e m e n t f o r the f o r e s e e a b l e f u t u r e ,
though without a r e n e w a l of h o s t i l i t i e s .
21.
The annex t o this m e m o r a n d u m attempts to r e l a t e these A r a b
attitudes to our s p e c i f i c e c o n o m i c i n t e r e s t s : o i l (which is looked at
m o r e w i d e l y than the n a r r o w question of supply to the United K i n g d o m ) ,
exports g e n e r a l l y , a r m s s a l e s , the Suez Canal and s t e r l i n g .
Conclusions
22.
The conclusions a r e in fact set out in p a r a g r a p h s 4 ana 5 a b o v e .
We have an important and v u l n e r a b l e industrial and financial stake in
the A r a b c o u n t r i e s .
We t h e r e f o r e have a strong i n t e r e s t in rebuilding
our r e l a t i o n s with these c o u n t r i e s .
But the d e g r e e t o which we can
f o l l o w a purely s e L . - i n t e r e s t e d c o u r s e of this kind is l i m i t e d by public
feeling on the m e r i t s of the A r a b / I s r a e l i dispute and by s p e c i a l
p r e s s u r e s e x i s t i n g on this subject in B r i t a i n .
W e a r e t h e r e f o r e in a
highly v u l n e r a b l e position.
23. G i v e n that the I s r a e l i s have shown an outstanding ability t o
defend t h e m s e l v e s without our support, our b e s t policy would appear
to be that of the m a x i m u m p r a c t i c a b l e d i s e n g a g e m e n t f r o m this
dispute.
W e cannot wholly d i s e n g a g e , e. g. f r o m d i s c u s s i o n under
United Nations a u s p i c e s .
But in g e n e r a l , in our p r e s e n t m i l i t a r y
and e c o n o m i c situation, w h e r e we cannot i n t e r v e n e d e c i s i v e l y , we
stand to lose m o r e f r o m a c t i v i t y which m a y be m i s u n d e r s t o o d (and
exploited by C a i r o R a d i o and the S o v i e t G o v e r n m e n t ) than we gain f r o m
the w i s d o m and e x p e r i e n c e we may contribute to the p r o b l e m .
This
may not sound an h e r o i c stance but it c o r r e s p o n d s to the r e a l i t i e s
governing our e c o n o m i c i n t e r e s t s in the a r e a .
G. B .
F o r e i g n O f f i c e , S. W . 1.
7th July, 1967
-6­
ANNEX To. C(67)123
Oil
This
annex l o o k s
the context
a t o i l m a t t e r s more w i d e l y
of s u p p l i e s
other economic
t o t h e United Kingdom.
interests
the Arab c o u n t r i e s
The U n i t e d A r a b R e p u b l i c ,
oil
Saudi A r a b i a ,
in their
Syria
and A l g e r i a
can be e x p e c t e d
to make maximum
b e i n g the most p o w e r f u l ,
confrontation
o r do not
with
only been p a r t i a l l y
( e v e n though at p r e s e n t
resumed)
sufficiently
Israel.
lattempt to r e t u r n f a i r l y
quickly
the West.
Gulf
of d e t e r m i n a t i o n
and s k i l l ,
to something a p p r o a c h i n g
Saudi A r a b i a
is less
predeliction f o r n a t i o n a l i s t
countries,
gestures.
I r a q i s t h e most l i k e l y
dine in s p i t e
to forego
reliable
o f the f a c t
that
Jpro-Nasser l i n e
Of the o t h e r
The l i k e l y
i t i s i n the worst
t h e r e i s bound to be a r e a c t i o n
effects
at a
Arab
by the TT.A.E.
position
of
all
Even i n
against the
b e g i n to be f e l t ;
indeed e x p o r t s h a v e a l r e a d y been resumed on a s e l e c t i v e
P'
and
owing t o the r e g i m e ' s
t o be i n f l u e n c e d
as the economic e f f e c t s
line,
her lead,
i t s o i l r e v e n u e s f o r any l e n g t h o f t i m e .
llraq, however,
normal
i s t h e government most
Sheikhdoms can be e x p e c t e d to f o l l o w
Kuwait
have
Sheikhdoms can
likely among t h e o i l e x p o r t e r s t o t a k e an i n d e p e n d e n t
safe d i s t a n c e .
Kuwait,
i t s o i l exports
and t h e P e r s i a n
be expected, w i t h v a r y i n g d e g r e e s
[the Gulf
against
v
Libya
relations w i t h
implica­
concerned.
those c o u n t r i e s which i n t h e i r view oppose
support the A r a b s
1
in
payments, which w o u l d
to continue t o p r e s s t h e o t h e r A r a b c o u n t r i e s
use of economic weapons,
our
interests
and o n l y m a r g i n a l l y w i t h the w i d e r
call f o r s t u d y by o t h e r departments
in
As r e g a r d s
d e a l s with our d i r e c t
it
tions f o r o u r economy and the b a l a n c e o f
2o
than j u s t
on our o i l i n t e r e s t s
basis.
are best considered
/ i n the
I the s h o r t
and t h e l o n g e r
terms.
I n the s h o r t
ia good hope t h a t L i b y a n e x p o r t s w i l l
term t h e r e
soon r e t u r n
to normal
Icept to t h e U n i t e d Kingdom and t h e U n i t e d - S t a t e s .
fcepted U.K.
and U . S .
Isition as a l l
i change of
the
I regards o i l
i n Iraq.,
Assuming
our b e s t
guess
reliable
and i n any c a s e
control
o v e r the
If
she
t h i s would p u t h e r i n the
producers.
to be the l e a s t
exports
physical
1
other o i l
government
laqis a r e l i k e l y
Urians
destinations
is
is
that
there
that
is
the
and t h e most
they c a n n o t
same
selective
ignore
the
p i p e l i n e s from N o r t h I r a q
to
Mediterranean.
In the o t h e r o i l
i3. may w e l l not be
countries
removed f o r
be moderate governments
have
fet away w i t h as a g e s t u r e o f
pular p r e s s u r e s .
however,
s
solidarity
supplies
of
ab o i l
s h o u l d n o t be
W?ee o f
fen i f
too
international
there w i l l
tanker a v a i l a b i l i t y ,
'ites.
This w i l l
practical
of
oil
to
deal with
supplies
is
S
1
iuld p r o b a b l y be p r a d e n t
to
is
is
last
for
interruptions
For t h e n e x t
limited
oil.
which
review.)
as
a
regards
sufficient
it.
However,
resolved
satis­
to be a s u p p l y p r o b l e m ,
almost c e r t a i n l y
lc
for
situation
a r i s i n g from the c l o s u r e
of
valve
effect
as t h e r e
the
could
payments e f f e c t s
as l o n g
of
primarily
the
transit
some months.
of
and
they
with non-Arab
the s u p p l y
cc-operation
p of t h i s the p o s s i b i l i t y
I
tion must be a l l o w e d f o r .
i s what
Power a r e k e e p i n g u n d e r
serious
continue
This
the U . K .
and a s a f e t y
Arab o i l
therefore,
the problem of N i g e r i a n
ptorily,
its
have some b a l a n c e
term,
to
j u d g e d t o be the l e a s t
s Treasury and t h e M i n i s t r y o f
In the s h o r t
many w e e k s .
Fortunately
pee we can r e p l a c e
twill
the ban on e x p o r t s
exports
few weeks
by
On
popular
at l e a s t
assume t h a t a t any one t i m e
it
strikes,
I
Nonst r a t i o n s o r s a b o t a g e o r a c o m b i n a t i o n of
these w i l l
reduce
/current Irrent a v a i l a b i l i t y
of A r a b o i l s u p p l i e s b y , s a y , 1.5
million
farrels a day (75 m. t o n s a y e a r ) .
K
A separate
study
four dependence
i s b e i n g made by the Departments
on A r a b
o i l supplies
i n the l o n g e r
T u r n i n g from the s u p p l y problem to t h e f u t u r e
concerned
term.
our
of
invest-
Ints, o u r o i l a s s e t s i n the A r a b c o u n t r i e s a r e l i k e l y to be
i
ffected a d v e r s e l y i n t h e l o n g e r term, though i t i s i m p o s s i b l e
to
1
I precise
about
this.
The a s s e t s
most
in jeopardy
le Iraq. P e t r o l e u m Company
( I P C ) i n which B r i t i s h
[ell t o g e t h e r h o l d n e a r l y
a half
ie chance o f the I P C s
le Iraq Government
Our o i l
I
ess r i s k of
he fact
that
its
its long-standing
activities
of
P e t r o l e u m and
A t the v e r y
i n a f a s h i o n which w o u l d
derable e x p a n s i o n o f
4 be l o s t f o r
settling
interest.
are those
least,
with
dispute
open t h e way to c o n ­
i s now v e r y much" s l i m m e r a n d
good.
assets
i n the o t h e r Arab p r o d u c i n g
expropriation
during
or similar
the l a s t
drastic
countries
action.
few weeks t h e o i l
run
However,
companies
have
J
pen s u b j e c t e d to d i r e c t i o n and c o n t r o l by t h e c o n c e s s i o n a r y
Ipts to an u n p r e c e d e n t e d d e g r e e and w i t h i m p u n i t y so f a r as
govern-
I
uective I n t e r v e n t i o n
I concerned,
may e n c o u r a g e
ij p
eilarly assertive
he m a n i f e s t a t i o n
l
e
by t h e p a r e n t governments
of
the concessionary
in future
this
is
even i n l e s s
likely
of the companies
governments
abnormal
circumstances,
to be i n c r e a s e d p r e s s u r e
companies from c o n c e s s i o n a r y governments
for a larger
cake, to
payments:
the detriment
^celeration o f
our balance
of
the p r o c e s s
of
of
There are a l s o
other foreign
on
slice
i.e
e r o s i o n o f the p r o f i t a b i l i t y
jp production o p e r a t i o n s which we had a l r e a d y
Igevitable.
to b e
0
of
an
of
a c c e p t e d as
interests
e.g.
French,
/Italian
- k
Italian
and J a p a n e s e ,
open by o u r
-
who might be r e a d y
to take a d v a n t a g e s
thrown
difficulties.
;British E x p o r t s
to A r a b
Countries
ST
1
I,
I
Annexed t o t h i s
yirab c o u n t r i e s
paper i s a t a b l e
(including
arms)
showing B r i t i s h
i n 19&5 and 1966,
lion f o r 1967 o f the l i k e l y f i g u r e s
of e x p o r t s
She f i g h t i n g ,
effects
and i t s c o n s e q u e n t i a l
;1967 to be n e a r l y
£220 m i l l i o n .
The t a b l e
Into two g r o u p s :
the f i r s t
the f o u r
the second group
lountries,
being
the o t h e r s .
figure of £1+7*5 m. f o r e x p o r t s
t o be g r e a t l y
had the c r i s i s ,
not intervened.
divides
dues.
I n the f i r s t
a p p l y even i f
consumers'
parts
and m e r c h a n t s '
lional s u p p l i e r s .
Ifee rest of
If
the y e a r ,
countries
receipts
the c o u n t r i e s
imports f o r t h e r e s t
On t h e o t h e r hand, t h e r e w i l l
pressures to buy spare
g r o u p the
r e d u c e d by the r e d u c t i o n i n p u r c h a s i n g
This w i l l
jr most of i t .
pressures
of t h e y e a r
imported and
to c o n t i n u e
to buy from
the b a n c o n t i n u e d t o be s t r i c t l y
our exports
concerned
to some e x t e n t be
f o r goods a l r e a d y
to t h e " r e v o l u t i o n a r y "
Rpr 1967 w o u l d p r o b a b l y o n l y amount t o £20 -
raised f a i r l y
quickly
B i l l come t o something as h i g h
W' The r e m a i n i n g c o u n t r i e s ,
countries
25 m i l l i o n o f which
April.
a s , s a y , £35 m i l l i o n .
i . e . the
"non-revolutionary"
a l l behave
group o f governments w i l l
p o s i n g any r e s t r i c t i o n s
for
o u r e x p o r t s f o r 1967 might
i n group B, w i l l n o t n e c e s s a r i l y
Most of t h i s
tradi­
applied
1-5.6 m i l l i o n would h a v e been e x p o r t e d p r i o r to t h e end o f
I the ban were
in
"revolutionary"
t o the " r e v o l u t i o n a r y "
do not m a i n t a i n a ban on B r i t i s h
^untries
This
the c o u n t r i e s
lower from the s t o p p a g e of o i l and the s u s p e n s i o n of
from Canal
to
with a p r o j e c ­
B r i t i s h e x p o r t s t o the A r a b c o u n t r i e s were l i k e l y
shows that
Is l i k e l y
exports
but w i l l
i n t h e same
w i s h to a v o i d
have t o t a k e account
of
popular
/opinion
I
41
I
-
5
ipinion and p r e s s u r e from the
;hey are i n t h i s w i l l
­
"revolutionaries".
depend on e v e n t s ,
ittitud.es, and o u r p o l i c i e s .
lamage, l a c k
of
confidence
in oil d e l i v e r i e s
successful
governments'
I n any case as a r e s u l t
d u r i n g the c r i s i s
and o t h e r f a c t o r s ,
countries a r e l i k e l y
other
How
to f a l l
well
period,
our exports
to
of
war
some
losses
these
b e l o w £171 m. t h i s
year.
1ms Sales
LI,
I t i s no e a s i e r
as r e g a r d s
arms s a l e s
to work out w i t h
precision e i t h e r what would have happened had t h e r e
or what i s
likely
provided i t
is
the
made
and the Lebanese f o r
country w i t h
Saudi A r a b i a n s
politically feasible
the arrangements
£1,760,000 f o r m i s c e l l a n e o u s
;Since
12.
As r e g a r d s
be s h o r t ,
of
Mv on our i n t e r e s t s
Iraq,
r
:Seems
grounds,
defence
rest
is
Iraq
be r e g a r d e d
as
­
it
i n t h e moderate or l e s s
Kuwait
a good
provided
be
that
and Saudi A r a b i a .
u n l e s s the p r e s s u r e s
signed
of
the
political
selling
our
luc­
orientated
The
air
and
turn i t
on them a r e
to
Jet
shortly
the L i b y a n s w i l l
risk.
Arab s t a t e s
radically
i s due t o be p r e s e n t e d
is
although,
which might be w o r t h £1 o r £2 m i l l i o n ,
Libya
with
the e f f e c t s
of
wish,
only
might y e t
"non-revolutionary"
is
scheme
the
these c o n t r a c t s
from the p o s s i b i l i t y
on the w h o l e u n l i k e l y
l^litical
cancel
any c o n s e q u e n c e ,
for
namely L i b y a ,
jWefence scheme f o r
l;
Of the
may n o t be v e r y s e v e r e ,
Apart
' ative markets l i e
pab s t a t e s ,
the a i r
outstanding
they cannot
of
1967
^conditions a r e f a v o u r a b l e
Provosts f o r
to c o n t i n u e
the q u e s t i o n o f what c o n t r a c t s
inuring the c o u r s e
jtrade with u s .
them,
ammunition and s p a r e p a r t s ;
they w i l l w i s h to
money w i l l
for
the B l o o d h o u n d s ) .
contracts
There
and the L e b a n e s e w i l l
(Saudi Arabia f o r
significant
unlikely t h a t
b e e n no war
to happen now t h e r e has been o n e .
little doubt t h a t
any
it
down on
severe.
/The same
le same w o u l d p r o b a b l y a p p l y a s r e g a r d s L i g h t n i n g s
far­the A i r w o r k
part
of t h e a i r d e a l f o r Saudi
llso the p o s s i b i l i t y
laudi
.3,
of s e l l i n g
naval
f o r Kuwait Arabia.
equipment
to
(We have L i b y a and
Arabia.)
At a v e r y
rough g u e s s ,
I s e r v e , we might
quantify
w h i c h must be t r e a t e d w i t h
the l o s s e s
I s u l t of the war as o f t h e o r d e r o f
ijen i f
Syria,
Sudan and t h e U . A . R .
esses as a r e s u l t
of a f u r t h e r
to u s of arms s a l e s
as a
something u n d e r £1 m i l l i o n
cancel
existing
deterioration
iith the " m o d e r a t e " A r a b c o u n t r i e s
great
orders.
The
i n our r e l a t i o n s
are unquantifiable,
but could
I very c o n s i d e r a b l e .
.'iez Canal
m,
The c l o s u r e ,
and p r o s p e c t s
anal, have important
implications
ver and above i t s e f f e c t
is the Suez Canal
of continued closure
on o i l
f o r our commercial
supplies
lustralasia i s g i v e n
interests
and o i l p r i c e s .
i s c l o s e d to a l l s h i p p i n g
ffn the markets o f E a s t A f r i c a ,
o f the Suez
South Asia,
So l o n g
a competitive
advantage
the P a r E a s t and
to o u r main c o m p e t i t o r s
i n the r e g i o n ,
i.e.
i;
pe Japanese, A u s t r a l i a n s
jpere opened but s t i l l
and the South A f r i c a n s .
If
c l o s e d to U . K . and U . S . s h i p s ,
the c o m p e t i t i v e
position of o n r own e x p o r t s w o u l d n o t be so s e r i o u s l y
Assuming t h a t
they c o u l d f i n d
lit there would o b v i o u s l y
Sipping earnings
pofitably
shipping
u n l e s s a l l the B r i t i s h
ft the Canal to B r i t i s h
of loss
to
at
British
s h i p s c o n c e r n e d c o u l d be
to other d e s t i n a t i o n s .
and A m e r i c a n g o o d s ,
a substantial
A closure
irrespective
p-ag of the s h i p i n which t h e y were c a r r i e d , w o u l d ,
j&ace B r i t i s h goods
affected,
space on o t h e r f l a g c a r r i e r s ,
be a p r o s p e c t
employed on j o u r n e y s
the Canal
commercial
of
o f the
course,
disadvantage
/against
Igginst v i r t u a l l y
all
competitors
nstralasian and E a s t A f r i c a n
Iterling
I5,
denial
;eneral d i f f i c u l t i e s
of
oil
Asian,
markets,
Embargo of
U.K.
to t h e U.K. by A r a b s t a t e s ,
experienced
tates, a p r o l o n g e d c l o s u r e
exports
of
to A r a b c o u n t r i e s
ould throw on o u r b a l a n c e
the p o s s i b i l i t y
of
the A r a b
of
any more
companies i n
would
and an
those
effective
be bound to
the e x t r a s t r a i n which
payments.
they
We must a l s o b e a r
in
to l i n k
or
s w i t c h of
holdings
of
The A r a b Governments w h i c h h o l d l a r g e
reserves
in
a massive w i t h d r a w a l
t e r l i n g would p r o b a b l y
lanoeuvres o f
this
financial l o s s ,
kind,
but
If course p r o d u c e
be r e l u c t a n t
which w o u l d
they might n o t
pressure from o t h e r s .
A large
to lend themselves
involve
them i n
to
against
might
us i n a
The T r e a s u r y w o u l d no doubt w i s h to
question.
with
from s t e r l i n g
which c o u l d put
mind
considerable
be a b l e to h o l d out
Arab withdrawal
a chain r e a c t i o n
position.
views on t h i s
states
affect
might d e c i d e
She o i l b o y c o t t
that
by our o i l
the Suez C a n a l ,
Confidence i n t h e pound b e c a u s e
ifficult
all
Balances
Continued
Sterling,
in v i r t u a l l y
express
U n i t e d K i n g d o m Exportjs
( i n c 1 u d ing
UNIT
1966
(actual)
£
to A r a b
Countries
arms)
million
196
(actual)
( p r o j e c t e d , assuming ­ ( o f which
c r i s i s had not a r i s e n ) arms)
U.A.R.
19.5
18.0
16.5
0.685
Iraq
21.6
25.9
23.0
1,8
Syria
6.1
6.9
5.0
Algeria
6.9
3.0
3.0
5A.1
53.8
i+7.5
8.3
9.0
9.0
0.600
Lebanon
1^.7
16.A
17.0
6.033
Sudan
l u oO
16.3
15.5
0.065
Libya
21.8
28.8
31.0
Tunisia
3.9
2.7
2.5
Ho roc co
U.5
5.1
5.0
I Saudi A r a b i a
12,6
20. k
30.0
II Kuwait
18.8
25o8
25.0
P
7.6
TOTAL
Jordan
Bahrain
C
3.3
Abu Dhabi
1.5
3.4
2.7
2.8
2.2
3.1
13-9
13.2
TOTAL
113.9
157.9
171.5
GRAND TOTAL
168.0
211.7
219.0
fecat & Oman
South A r a b i a
* £2iS
;
0,272
)
3o7
States
*15.0
aI
Qatar
Wrucial
0.005
23.5
Saudi A r a b i a - Depending on c o n t r a c t s , r a t e of
f i g u r e s c o u l d be as h i g h as £91 m. and £76 m.
delivery
s