Dying to Forget

Oil, Power, Palestine, and the Foundations of U.S. Policy in the Middle East

Irene L. Gendzier

• Publisher: Columbia University Press
• Year: 2015
• Topic: Politics & International Relations
• eBook ISBN:
  9780231526586
• Subtopic: 20th Century History
• Index: Politics & International Relations

Irene L. Gendzier presents incontrovertible evidence that oil politics played a significant role in the founding of Israel, the policy then adopted by the United States toward Palestinians, and subsequent U.S. involvement in the region. Consulting declassified U.S. government sources, as well as papers in the H.S. Truman Library, she uncovers little-known features of U.S. involvement in the region, including significant exchanges in the winter and spring of 1948 between the director of the Oil and Gas Division of the Interior Department and the representative of the Jewish Agency in the United States, months before Israel's independence and recognition by President Truman.

Gendzier also shows that U.S. consuls and representatives abroad informed State Department officials, including the Secretary of State and the President, of the deleterious consequences of partition in Palestine. Yet the attempt to reconsider partition and replace it with a UN trusteeship for Palestine failed, jettisoned by Israel's declaration of independence. The results altered the regional balance of power and Washington's calculations of policy toward the new state. Prior to that, Gendzier reveals the U.S. endorsed the repatriation of Palestinian refugees in accord with UNGA Res 194 of Dec. 11, 1948, in addition to the resolution of territorial claims, the definition of boundaries, and the internationalization of Jerusalem. But U.S. interests in the Middle East, notably the protection of American oil interests, led U.S. officials to rethink Israel's military potential as a strategic ally. Washington then deferred to Israel with respect to the repatriation of Palestinian refugees, the question of boundaries, and the fate of Jerusalem—issues that U.S. officials have come to realize are central to the 1948 conflict and its aftermath.

PART I

The Petroleum Order and the Palestine Question, 1945–1946

Part I introduces readers to the dominant role of petroleum in postwar U.S. policy and illustrates the manner in which it shaped U.S. policy in the Middle East, including Palestine.

Chapter 1 demonstrates the U.S. commitment to maintaining access and control over Middle East oil resources, as revealed in the pronouncements and practices of U.S. officials in the State Department and the network of allied agencies established to deal with petroleum policy. Against this background, which constituted Washington’s ongoing commitment to U.S. oil interests in the Middle East, President Truman and the policymaking elite confronted postwar conditions in Europe that had profound implications for Palestine and the Middle East. Chapter 2 analyzes the Earl Harrison Report, the Anglo-American Committee Report, and the Morrison-Grady plans that followed, with special attention to the reactions of U.S. officials, including the dissenters among them.

1

The Primacy of Oil

DEFINING U.S. OIL POLICY

The U.S. preoccupation with Middle East oil was a trademark of policy planning in the period after World War II, although it was by no means limited to the Truman era, as the experience of successive presidential doctrines of the Eisenhower, Nixon, and Carter administrations, and those that followed, have demonstrated.¹

U.S. policymakers crafted their vision of a petroleum order in “postwar”² 1945, an environment marked by the emergence of the United States as the undisputed power of the postwar world, with an economy “three times the size of the USSR’s and five times that of Britain, commanding half of the world’s industrial output and three quarters of its gold reserves.”³ By contrast, Washington faced the despairing plight of millions of Displaced Persons⁴ across the boundaries of its allies and former enemies, whose populations would be haunted by the trials and judgments at Nuremberg and by the nameless atrocities committed in Hiroshima and Nagasaki. Postwar U.S. policy in the Middle East, and more particularly in Palestine, was to be defined by these diverse and incompatible forces.

In 1945 John Loftus, the special assistant to the director of the Office of International Trade Policy in the State Department categorically asserted that “a review of diplomatic history of the past 35 years will show that petroleum has historically played a larger part in the external relations of the United States than any other commodity.”⁵ In explaining its “unique and outstanding importance,” Loftus underlined the “absolute importance of oil as a commodity in terms of the gross value of annual production; and in part from the extremely high relative importance of oil in the foreign trade of certain nations.”⁶ In light of these conditions, Loftus argued that it was desirable for U.S. companies to control petroleum production abroad. He offered a two-part justification for this position; the first rested on the “talent of the American oil industry for discovery and development”; the second, was that “oil controlled by United States nationals is likely to be a little more accessible to the United States for commercial uses in times of peace and for strategic purposes in times of war.”⁷

Moreover, as Philip Burch reported, “the nation’s major corporate interests, having reestablished good working relations with the federal government during the war years, remained very much in control of the key defense and foreign policy posts during the Truman administration.”⁸ According to Burch’s calculation, “over 70 percent (22 out of 31) of Truman’s chief defense and foreign policy officials had elitist links, the bulk of them with America’s rapidly evolving business establishment.”⁹ Among Truman’s select officials were figures such as “Forrestal, Lovett, Harriman, Stettinius, Acheson, Nitze, McCloy, Clayton, Snyder, Hoffman—a stratum unlikely to overlook the interests of American capital in redesigning the postwar landscape.”¹⁰ The business most closely involved in consideration of Middle East policy, including that applicable to Palestine, was the oil business.¹¹

In May 1940, in the very period in which Council of Foreign Relations members were deliberating on the economic dimensions of postwar U.S. policy, the Roosevelt administration created the Office of Petroleum Coordinator. In the following year, FDR’s Secretary of the Interior, Harold Ickes, was named Petroleum Coordinator for National Defense, and in 1942 that agency became the Petroleum Administration for War (PAW). On March 27, 1944, by Departmental Order 1245, the State Department established a Petroleum Division (PED) in the Office of Economic Affairs that oversaw “the initiation, development and coordination of policy and action in all matters pertaining to petroleum and petroleum products,” and maintained contact with related agencies.¹²

The subsequent creation of the Petroleum Industry War Council (PIWC) attested to the growing bureaucracy that “was made up of 78 top-flight industry executives” who, in addition to their other responsibilities, met with PAW executives, “and at these meetings all the major problems and policies of the worldwide oil situation are on the table. The Council, working with the executives of PAW, is the powerhouse of industry-government cooperation.”¹³ These remarks were made by Max Ball, who was the special assistant to Harold Ickes, the deputy administrator in the Petroleum Administration for War.

As Ball emphasized in an essay in 1945, the international range of the PIWC’s responsibilities as well as that of PAW “do not stop at the water’s edge: the cooperation of the industry is not circumscribed by our national boundaries. Every gallon of petroleum products produced or used by the United Nations anywhere in the world is within the sphere of interest and activity.”¹⁴ Ball estimated that there were some thirty or forty government agencies dealing with oil. Among them were “the Geological Survey, the Bureau of Mines, various bureaus of the Treasury Department, the Department of Justice, the Interstate Commerce Commission, the Office of Defense, Transportation, Defense Plant Corporation, Defense Supplies Corporation, the War Manpower Commission, the Office of Price Administration, the War Production Board, and a host of others.”¹⁵

In the spring of 1946, Ralph K. Davies, ex-Deputy Petroleum Administrator for War, recommended to the president that a coordinating body be put in charge of the multiple and diverse agencies dealing with oil-related questions. Davies, who had been responsible for creating the Office of Petroleum Coordination in May 1941, was now calling for its dissolution. But he was also calling for the establishment of a permanent office capable of coordinating the vast hierarchy of oil-related agencies. In that capacity, he recommended a new office that would “operate in a liaison capacity with the petroleum industry in all oil and gas matters of concern to the administrative branch of the Federal Government.”¹⁶

The president did, in fact, follow Davies’s advice, and on May 6, 1946, the Secretary of the Interior, J. A. Krug, announced the creation of an Oil and Gas Division within his department. Ralph K. Davies became its first director. Along with the National Petroleum Council, the Oil and Gas Division was assigned to consult with the president on petroleum policy. Among the duties of the new division was to amass and analyze information relevant to oil and gas operations, including the availability of existing and future supplies of petroleum, on the basis of which the president would recommend policy. In December, Davies nominated Max Ball to be director, having searched for a candidate who would have both the “technical and practical training” as well as the leadership qualities required.¹⁷ What Davies did not write on this occasion, although it was probably unnecessary to do so, was that Ball’s outlook on the question of private versus government control of oil was entirely compatible with that of the major oil companies and contemporary federal agencies, including those in which Davies had been involved.

Under Harold Ickes and PAW, for example, Davies, VP of Standard Oil of California, was named deputy coordinator. The organization of the Office of Petroleum Coordinator was itself modeled along the lines of the petroleum industry.¹⁸ An “industry committee organization” was set up to ensure government policy was favorable to the oil industry, with the Justice Department complicit in arranging “to relax its anti-trust procedures by agreeing to rule beforehand on proposals for group action within the industry.”¹⁹

Max Ball’s intimate knowledge of the petroleum industry’s operation at both the national and international levels was to have particular significance in his relations with representatives of the Jewish Agency prior to May 1948, and with the Israeli government after its independence. Ball’s encounters with Eliahu Epstein, one of the principal representatives of the Jewish Agency in the United States, in the winter and spring of 1948 are discussed at length in part II. Suffice it to note here that these meetings contradict one of the axioms of postwar U.S. policy. U.S. officials and their oil company collaborators feared the adverse effect of U.S. government support for partition and Jewish statehood on their relations with the oil-rich regimes of the Arab world.

In a seminal report titled “A Foreign Oil Policy for the United States,” issued in 1944, Herbert Feis, former adviser on international economic affairs in the State Department, argued firmly in favor of private ownership of oil and its global expansion, U.S. capital investment in the oil sector, and the staunch support of the U.S. government. According to the 1975 Senate Foreign Relations Subcommittee Report on Multinational Corporations, Feis’s report represented “the most systematic analysis of the major oil companies’ position.”²⁰ Feis maintained that

the companies insist that private enterprise is the best medium for oil development, and that oil controlled by American corporate interests is equally available for the needs of national security with that owned wholly or in part by the United States government. Secondly, they urge that the American petroleum industry be encouraged to expand its plans for developing the world’s oil resources. To this end, they urge that the government should seek to secure for American nationals access to the world’s oil resources on equal terms with the nationals of all other countries; it should also accord diplomatic support as effective as that accorded to nationals of other countries.²¹

Feis called on Washington to adopt a policy capable of guaranteeing adequate supplies in the event of war while not depleting U.S. reserves. He insisted that the arrangements he favored would provide for “(a) the maintenance of storage, as at bases, and (b) the acquisition directly by the United States government of proven reserves that could be quickly developed.”²² He insisted that private ownership of foreign oil would preclude a U.S. military presence, which would be a challenge to “every near-by country.”²³ And along the same lines, he was persuaded that such arrangements would eliminate the risk of involvement in local petroleum politics and, more generally, in the politics of the Middle East.

Well before 1946 and the creation of the National Petroleum Council, the petroleum industry enjoyed close relations with policymakers. The creation of institutions such as the National Petroleum War Service Committee “served as a liaison between the government and the oil corporations, helping to develop and supervise plans for supplying oil necessary for the war. In all these efforts care was taken to maintain the market percentages and power of the key companies.”²⁴

At its opening meeting in 1946, Interior Secretary Julius A. Krug “reassured the oil leaders that there was no intent to increase government power over them, and that the Council could do ‘no greater good to the oil and gas industry than by educating people in the Government in the economies and the problems of the industry.’”²⁵ In addition, Krug held out the promise that “you men will help U.S. with the staffing of our Oil and Gas Division to the end that we will get the kind of people who understand the problems of the industry and who know how to do a good job.”²⁶

Earlier, Feis had advocated for the expansion of U.S. oil interests abroad, arguing that “the war has established the fact that American military action may take place anywhere in the world, and that, particularly in any struggle involving the Pacific, control over these oil fields (and the political status of this area) might be of direct concern to U.S.”²⁷ Hence the importance of expanding U.S. oil operations, along with U.S. support. The Soviet press, reviewing U.S. and British oil expansion several years later, recognized the importance of Feis’s recommendations. They viewed them as extending beyond economic considerations, suggesting instead that “they may be referred to as secondary enterprises of ‘American world system of bases’ and as American outposts expanding along British naval and air communications.”²⁸

In its April 11, 1944, report on “Foreign Petroleum Policy of the United States,” the Inter-Divisional Petroleum Committee of the State Department reviewed the official justifications for relying on foreign sources of oil, repeating the claim that it was essential to conserve Western Hemisphere petroleum for “military and civilian requirements of strategically available reserves,” while identifying the foreign policy implications of such a policy.²⁹ The excuse was hardly convincing. Domestic reserves were not exhausted, nor were they being preserved in some artificial manner. The explanation for focusing on Saudi Arabia rested on the profits it generated for U.S. oil companies.

The authors of the State Department committee position paper, “Foreign Petroleum Policy of the United States,” identified the regions of prime importance for oil, namely, “the great developed oilfields of Russia, Roumania, Iraq, Iran and the Arabian Peninsula as well as the potential petroleum resources of Turkey, the Levantine Coastal areas, Afghanistan and Baluchistan.”³⁰ But the primal zone of U.S. Middle East policy was to be the Middle East; as the Department of State report pointed out, it was in the areas encompassed by “Iran, Iraq, and the Arabian peninsula including Saudi Arabia proper and the Sheikhdoms of Kuwait, Bahrein, Qatar and Trucial Oman,” that “United States policy must be formulated and implemented.”³¹ If there was a dissenting voice in such deliberations, it came from Great Britain, whose primacy in the Middle East was to be fatally undermined by U.S. policy.

The Place of Saudi Arabia in the Postwar Petroleum Order

The project of building a base in Saudi Arabia ...

Table of contents

• Cover 
• Title Page
• Copyright
• Dedication
• Contents 
• Acknowledgments
• Introduction: Open Secrets
• Part I: The Petroleum Order and the Palestine Question, 1945–1946
• Part II: The Question of Partition and the Oil Connection, 1947–1948
• Part III: Beware “Anomalous Situation,” 1948
• Part IV: Rethinking U.S. Policy in Palestine/Israel, 1948
• Part V: The End as the Beginning, 1948–49
• Part VI: In Place of a Conclusion
• Notes
• Index