Coll 30/216 'Development of oil supplies in the Middle East.' [‎19v] (38/131)

2
remains to be done, enough has already been accomplished to demonstrate the
great richness of the oil reserves of certain of these countries. 1 he extent to
which their oilfields could be developed will, however, depend upon a number of
factors, namely : (i) the final lines that the Anglo-American oil agreement will
take, (ii) the oil policy of the U.S.S.R. and whether or not she becomes a party
to the above-mentioned agreement, (iii) whether or not early steps are taken to
define and demarcate the frontiers of these countries, wherever this has not
already been done, (iv) internal security in the countries concerned.
2. Of the above factors, the first is really beyond the scope of .this survey.
All that can be said under this head is that: when, as is expected, there is a
serious falling off in the exportation of oil from the United States, arrangements
will doubtless be made for the Middle Eastern countries to play an important
part in making up the deficiency. They would be in a favourable position to
do so not only because of the richness of their fields, but also because their internal
requirements are likely (except in the case of Egypt) to keep far below their
output level, thus leaving large quantities of oil available for export. Of the
remaining factors, the one that seems most in need of attention is the question
of undefined and undemarcated frontiers.
3. Of all the regions dealt with in this survey, the most promising appear
to be those situated on each side of the Persian Gulf The historical term used to describe the body of water between the Arabian Peninsula and Iran. . Persia, the largest oil-
producing country in the Middle East at the present time, draws the bulk of
her oil from the areas to the east and north-east of the head of the Persian Gulf The historical term used to describe the body of water between the Arabian Peninsula and Iran. .
Less is known as yet of the potentialities of the western littoral of the Gulf and
of the prolongation of this area to the south and south-east across eastern Arabia
to the Indian Ocean in the neighbourhood of Masira island. Enough has,
however, been done already for it to be said that the region from the north of
Kuwait to the south of Qatar holds out much promise and that it may in time
turn out to be even richer than the producing areas on the Persian side of the
Gulf. The question of inter-State boundaries is most acute in Arabia, where it
is likely to cause friction or even more serious trouble, and so interfere with
development^ 1 )
4. The effect of oil discoveries in the Middle East is already manifest, and
very soon it will be profound. Western industrialisation has come with a
sudden impact upon regions that have hitherto been untouched by the West, and
it has had a noticeably stimulating effect upon those parts of the Middle East
where contact had already been established.
5. In order to meet the requirements of the oil companies undertaking the
development of the oil-bearing regions, numerous satellite companies have already
been formed, while others are coming into being. Apart from this development,
the economy of the various countries concerned is being radically altered by the
scale of rentals and royalties paid by the oil companies to the rulers and Govern
ments who had hitherto been, in the majority of cases, poor. In Iraq, for example,
the revenue from the oil companies amounts to over a quarter of the income of the
State at the present time, while in Bahrain the percentage is much higlTer. The
Persian Government receive no less than £4,000,000 annually in royalties from
the Anglo-Iranian Oil Company, together with an additional sum in respect of
income tax. This company employs nearly 60,000 Persians, the majority of whom
were, until comparatively recently, nomadic tribesmen; many of these men have
now become skilled artisans.
6. In Sa’udi Arabia, where development has only just begun, there are now
over 8,000 men on the pay-roll of the Arabian American Oil Company.
7. The general standards of health, living and workmanship are being
raised to a marked extent by the example set by the companies for their workmen.
Furthermore, the activities of the companies have necessitated the introduction
of better means of communications and the development of roads, in many cases in
districts where, up to ten years ago, a motor car had never been seen. In this way
the relations and outlook of the peoples of these countries are being profoundly
altered.
8. It is inevitable that, as long as oil is required from the Middle Eastern
fields, those regions will have a vastly increased importance in world affairs, and
that, instead of being the preserve of the strategist and orientalist, they will
become and remain an area of great and increasing concern to statesmen,
economists, exporters and business men.
(p For a detailed study of this question, see the ‘Foreign Office memoranda entitled
“ Ibn Saud’s Claims in respect of the South-Eastern Frontiers of Sa’udi Arabia” and “The
South-Eastern Frontiers of Sa’udi Arabia.” Both memoranda bear the reference E 2203/2203/25
and are dated the 30th June, 1940.