Oral History Interview with
Economist and economic adviser, petroleum board, Office Price Administration, Washington, 1942-45; assistant chief, petroleum division, U.S. Department of State, 1945-48, chief, 1948-50, chief petroleum staff, 1950-54, fuels division, 1954-56; economic counselor American Embassy, Santiago, Chile, 1956-59, Caracas, Venezuela, 1959-62, counselor in Rio De Janeiro, Brazil, 1963.
Robert H. S. Eakens
June 13, 1974
by Richard D. McKinzie
[Notices and Restrictions | Interview Transcript | List of Subjects Discussed]
This is a transcript of a tape-recorded interview conducted for the Harry S. Truman Library. A draft of this transcript was edited by the interviewee but only minor emendations were made; therefore, the reader should remember that this is essentially a transcript of the spoken, rather than the written word.
Numbers appearing in square brackets (ex. ) within the transcript indicate
the pagination in the original, hardcopy version of the oral history interview.
This oral history transcript may be read, quoted from, cited, and reproduced for purposes of research. It may not be published in full except by permission of the Harry S. Truman Library.
Opened March, 1979
Harry S. Truman Library
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Oral History Interview with
Robert H. S. Eakens
June 13, 1974
by Richard D. McKinzie
MCKINZIE: Mr. Eakens, one of the first things that I'd like to ask is how you happened to get into government service. I know that you went to the University of Texas and wrote a masters thesis on the oil industry in the State of Texas, and maybe you could even relate how you happened to get interested in oil.
EAKENS: Well, I guess it's best to start with my interest in oil. After I got out of the university I taught school a couple of years at Leander, and then I taught for two more years in the Kilgore High School. Kilgore is in the middle of the largest oil field in the United
States and that's actually where my interest in oil began. After completing my masters thesis on the development of proration in the East Texas oil field, I was offered a halftime instructorship at the University of Texas to work on my Ph.D.
Two weeks after school had started in the fall of 1937, the chairman of our department arrived for duty. He had been working in Baltimore for a company by the name of the American Trading and Production Corporation, which was the family holding company of the Blavstein family. This company was suing Standard Oil Company of Indiana and all of their officers, and also some of the officers of Standard Oil Company of New Jersey, over a breach of judiciary relationships towards minority stockholders, which the Blavstein's had become in some merger arrangements with Standard of Indiana. That continued my interest in oil, and I spent three years there.
MCKINZIE: Did your department chairman ask you then to go back with him to Baltimore?
EAKENS: Yes. The people at the university were very kind to me. A halftime instructor working on his Ph.D. doesn't have any kind of status -- didn't then and I'm sure he doesn't now. But they said that they would be glad to release me and give me my instructorship back at the end of the year.
Well, at the end of the first year in Baltimore (we were in our lawsuit in New York City) the company wanted me to stay another year, and the economics department here at Texas offered to let me stay another year and give me my job back then.
When this job lasted the third year, I decided not to come back to Texas. I did get a university fellowship in economics at Columbia and spent a year there completing all
my work for a Ph.D. While I was there the war came along, and I let that interrupt my dissertation writing and never did write one, like a lot of other people, I guess.
I fully expected to be drafted, because Pearl Harbor had occurred while we were in Columbia. We moved to Washington in the summer of '42 with the expectation that I'd be drafted and my wife could get a job in the Government; she had worked some in New York for the Army. So, I went to work for OPA. During that time I fully expected to go in the service; I applied for a commission in the Navy and did have all of the qualifications, but they finally turned me down because I had a history of small kidney stones. Then when I was drafted, they turned me down for the same reason, so I ended up staying in Washington.
I was at OPA until October of 1944, and at that time petroleum was a real problem in
international affairs. A person whom I knew was in the petroleum division of the State Department and made me an attractive offer to transfer from OPA to the Petroleum Division of the State Department as Assistant Chief.
That sort of tells how I got into oil, into Government, and into oil in the State Department.
So, I have had a good deal of background in the economic side of oil. I believe I was still Assistant Chief of the Petroleum Division when President Roosevelt died and President Truman came into office, in April 1945. At that time our division was in the old State, War, and Navy Building right next to the White House. Possibly a little later we moved to 1818 H Street. I believe we were in those two locations, and possibly another one, during all of President Truman's time as President.
MCKINZIE: The International Bank's now at 1818 H Street.
EAKENS: That's exactly right. The International Bank took over our offices at 1818 H. I think the State Department had that whole building prior to the time the International Bank took it over.
MCKINZIE: When you went over to that office after October of 1944, did you have any feeling about how President Roosevelt thought about oil? I've seen some things that said he was really worried that oil was going to be a problem in the future and that that influenced his diplomacy, especially with the Middle East.
EAKENS: Oil was a real problem for the State Department at the time I went over there and until well after the war was over. Our friends in foreign countries had difficulty in getting
oil supplies. Take, for example, a country like Brazil. Most all of the oil available to the Allies was under allocation no matter where it was produced. I sat on an oil allocation committee, representing the State Department. It was chaired by an official of the Petroleum Administration for War. The Brazilian Embassy would present us a request for a tanker of gasoline or a tanker of fuel oil, and this request would go before the Oil Allocation Committee. We would decide whether and how much oil we could give Brazil. This occupied a great deal of our time until the war was over, and, in fact, the Petroleum Division in the State Department had probably six or eight officers working on oil. A lot of this was on allocation, but also we were trying to do what was possible to encourage the production of additional oil, from the State Department's standpoint, outside the United
States but in friendly countries. Steel was under allocation - virtually everything that was needed to produce oil was also under allocation. So, we were concerned, along with the Interior Department, which had the main responsibility, and, in the Interior Department, the Petroleum Administration for War, with oil allocation, encouraging oil production, and oil finding, to the extent that materials could be made available for exploration. All of these things involved the State Department when these activities were overseas.
MCKINZIE: Harold Ickes, I know, wanted the U.S. to buy into Aramco very heavily at one point. Did that concern you, or was that already over at the time that you took that division?
EAKENS: I don't believe the question of the Government buying into Aramco came up during my time in the Petroleum Division or subsequently as
Chief of the Petroleum Division (eventually it became the Fuels Division; our name changed several times during this period). I was in petroleum in the State Department for 12 years, from '44 to '56; so I was in the Petroleum Division all during President Truman's time in the White House.
Following the war there were also problems of oil field equipment allocations, which continued a long time, as I remember. I know one problem that we sat on and probably made a mistake on was getting an allocation of steel to build the trans-Arabian pipeline from the Persian Gulf to the Mediterranean. In retrospect, I think that was a serious mistake because of the political problems which have been encountered by the pipeline. The pipeline not only went through Saudi Arabia, but it went through Syria and Lebanon. Either one of these countries could
cut off the flow of oil through the line -- and did. If the same amount of steel had gone for the construction of tankers, our entire relationship would have been solely with Saudi Arabia. During this time we were naturally trying to protect investments in oil and trying to -- once the pipeline was built -- insure the continued flow of the oil. I don't remember exactly, but I think that line was completed before '53, when President Truman went out of office, but the serious problems of the line occurred after that. One thing that did occupy a great deal of our time was relationships with countries like Saudi Arabia.
MCKINZIE: How did that work? Did someone from the political side of the State Department come down and confer with you and your people, or did you arrive at independent judgments which then reached the political people?
EAKENS: We were the State Department experts on oil, and I would say, in general, that we acted sort of in a staff capacity. Very few meetings were held by, say, the Assistant Secretary of State for Near Eastern Affairs without inviting us to be present, because nearly all of the problems of Saudi Arabia involved oil in one way or another. This was also true of many of the other countries; so that I guess we did sit in all of the discussions involving oil with all of the bureaus. And when the problem involved just mainly oil, we were usually the initiator of the action, rather than the political office. During my time in the State Department, I drafted hundreds of telegrams and signed the Secretary of State's name to them, but it was my responsibility to have the proper clearance of anyone in the State Department who should know about it and agree with the policy.
I remember on one occasion the Assistant Secretary of State for Latin America and I were working on an oil problem. I drafted a cable and assumed he would sign it as Assistant Secretary of State for Latin America. When we finally finished our consultation he said, "Well, if you'll sign it, I'll approve it," which I did. So, our relationships were very close with the geographical bureaus. During a lot of this time Loy Henderson was chief of the Office of Near Eastern Affairs and later became Assistant Secretary for Near Eastern Affairs.
MCKINZIE: Do you think the Near Eastern bureau appreciated the importance of oil in dealing with the Middle East?
EAKENS: I think they did at that time. As I mentioned earlier, up until the time I went on an overseas assignment in May 1955, I don't recall but that we had the most cordial
relationships with Saudi Arabia, Kuwait, and the oil producing countries of the area. It was mainly Saudi Arabia and Kuwait at that time, and Qatar had come in in the early fifties.
I made a trip to the Middle East in February of '52 with an officer of the geographic bureau and some military people. We went to Kuwait, Saudi Arabia, Bahrain, and Qatar, which apart from Iran were the main oil producing countries in the Middle East.
MCKINZIE: You mentioned the cordial relationship between the Middle Eastern people and your office. How about the military? James Forrestal, for example, argued in late 45 and early '46 that the U.S. could not fight another war for more than three years without outside oil supplies and without some way of safeguarding them. That puts a pretty heavy responsibility on somebody to take steps to insure
that oil is going to be there and going to be protected. Was that a function of your office, to keep reminding people of this situation?
EAKENS: I would say so. We encouraged American companies to go overseas and explore for oil.
MCKINZIE: Now, how could you do that? Just by other than saying to some official of the company, "You're going to find some oil," what kinds of inducements was it possible to make?
EAKENS: Well, I guess one thing is that many American companies who have not been in overseas operations for some time are a little reluctant to invest overseas unless they think they've got the support of the State Department, however valuable or however not valuable this support might be. So, we spent a great deal of time talking to American oil producers who were either going overseas or were interested in
going overseas. We called their attention to opportunities which existed overseas. One very clear and specific one is the neutral zone between Saudi Arabia and Kuwait. The neutral zone is a territory between Saudi Arabia and Kuwait of some 25,000 square miles, in which there were no permanent residents. The tribes of Kuwait and Saudi Arabia would migrate in and out of this neutral zone, and the oil rights to the neutral zone were held jointly, 50-50, by Saudi Arabia and by Kuwait.
I don't know how this got started exactly, whether Kuwait expressed the interest or just what, but the question came up of leasing the oil rights of each of the countries. We brought this to the attention of a great many oil companies, who went over and talked to the Kuwaitis. Eventually the American Independent Oil Company took a lease on the interest of Kuwait, and the Getty interests took the lease
on the interest of Saudi Arabia. This neutral zone had never had a well drilled in it at the time; it had never really been explored, but today it's producing several hundred thousand barrels of oil per day.
Now, our action was largely one of information, encouragement, bringing the opportunity to the attention of oil companies, and things like that.
In the case of Iran -- and this probably occurred before '53, although I'm not sure -- the Iranian oil company was nationalized by Prime Minister [Mohammed] Mossadegh. This resulted in negotiations in which the United States became involved. I was in one conference in Washington with Mossadegh and George McGhee, who was our Assistant Secretary for Near Eastern Affairs. Paul Nitze was probably the director of our own office at the time. And the negotiations in which we became involved
resulted in the American companies getting a 40 percent interest in the Iranian consortium that was set up and which went back to producing in Iran. We were instrumental in getting this opportunity for the American companies -- I guess, primarily in negotiations with the British, as well as with the Iranians -- and then giving American oil companies a chance to take a piece of this; so, offhand, I would say that seven or eight American oil companies share that interest, as well as some independent companies.
One thing our petroleum division always fought for was giving the American oil companies an equal opportunity at this. We really did not show favoritism to any particular company or companies, although undoubtedly we probably were accused of it. But we did keep 5 percent of that 40 to let companies in who had never been overseas. And some companies, on the advice of
consultants, turned down an opportunity to participate in this consortium.
This, of course, was a mystery to us, because at the time this was an opportunity to buy known oil reserves at the cheapest price available anywhere in the world. One well-known oil consultant advised one large company not to take this interest, and that company didn't take it, but most companies who had an opportunity did take an interest in that consortium.
This occupied quite a bit of time. Our Deputy Assistant Secretary for Economic Affairs at the time was Harold Linder, and Harold Linder spent practically all of his time on this Iranian problem for months. I and members of my staff were in Mr. Linder's office practically all of the time during this time, figuring out various possibilities, alternatives, costs, and things that were
involved in working out a final arrangement.
So, things like this occupied a good bit of our time. And this, having occurred in '52, did occur during President Truman's administration, American companies got a 40 percent interest in Iranian oil production that they did not have before.
One thing that I think we foresaw in our petroleum side of the State Department was that it was not good for one company to have a concession on an entire country, and we tried to discourage people from taking such an interest. It was better to have more companies and actually more nationalities involved than for one company to come in and take a whole country.
So, we discouraged American companies from doing this, mainly by persuasion and by the fact that most companies operating overseas did give some weight to what they thought
the views of the State Department were on these issues. For this reason, I think we had some considerable influence.
MCKINZIE: Now, you discouraged one company from taking all of the industry in a country for what reason, on grounds that it was too vulnerable, or public opinion?
EAKENS: It was too vulnerable. In most cases, the amount of territory involved, such as in Iran, was really too big for one company. Aramco does have four owners, but it just might have been better if four companies had been operating separately. Aramco is the largest oil producing company in the world today, and as such it is one company, but owned by four different American companies.
MCKINZIE: I saw in the newspaper where 60 percent of the stock has been . . .
EAKENS: It is now owned 60 percent by Saudi Arabia who has just taken it.
MCKINZIE: Ever since that business with Mexico long ago, oil companies have been a little bit upset about the possibility of expropriation. How did you deal with that during the Truman years? Was that a live problem until Iran came along? Did it ever seem that this was going to be a problem with Kuwait, with Saudi Arabia, or with the neutral zone?
EAKENS: I believe that the only additional one to Mexico that came along was Iran, and we took the traditional position that a country certainly had the right to nationalize any industry, including oil, provided it paid prompt, effective, and adequate compensation for the properties. The companies, of course, didn't think they got that in Mexico, but that settlement
occurred during [Franklin] Roosevelt's regime. But I think that companies expected the State Department to support them in such settlements, and I think the State Department would have. No doubt, the position the State Department took had a lot to do with the eventual settlement in Iran, which has continued until this day.
Now, the international oil business has completely changed, with the countries no longer dealing on a contractual basis but just simply asserting that such and such is going to be the case. This had not started back in the days of the Truman administration. At the same time, problems were continually arising in which the government wanted to change the concession agreement. In some cases, the oil companies sought the help of the State Department to maintain the strict terms of the contract. But we foresaw the things that have since developed, I think, pretty well. On one
of these, we saw it and then foresaw the problem coming out of it, and that is that a contract between a sovereign government and a private company is a completely one-sided contract. A forty-year contract is also a fairly unreasonable contract, because conditions change and one just cannot expect the strict terms of a forty-year contract to be lived up to by a foreign government. I suggested to some of the oil companies at the time that they put into their concession contracts that the agreement would be renegotiated every five years and that problems arising at any time would be put on the table for negotiation at the next five-year renegotiation of the contract. None of the companies bought this; they preferred to meet each problem as it came along, and, as a result, negotiations over problems became more and more frequent with the foreign countries until now, when the countries act
completely independently, as if no contract existed. They agree to a price and say that it will be a price for five years, and six months later they change it. So, whether what we had suggested at that time would have prolonged arrangements better, one can never tell, but this was an effort to recognize problems arising under forty-year concession contracts and to develop some systematic way to meet them.
We did, during the time were talking about, give our support to 50-50 arrangements, and these held, I'd say, almost all of the time during the Truman regime. It was only later that the countries began to get away from that type of agreement. We encouraged the companies to go to the 50-50 arrangement, where the country provided the opportunity for the company to explore and develop any resources that might exist within its territory, and the company
provided the technology to develop it and the money. So, that 50-50 looked like a fairly reasonable formula for a partnership on the part of a company and the foreign governments, and this 50-50 arrangement did last for a long time.
The one other problem we haven't mentioned that occupied a lot of our time during the latter part of the Truman administration was the oil import problem.
We maintained a fairly open opportunity for foreign oil to come into the United States. We felt that in encouraging oil to be developed abroad and money to be invested, there ought to be the opportunity for that oil to come to the United States, if it were available to do so and would naturally flow to the United States. This raised objections on the part of the domestic oil industry, who wanted to restrict oil imports. Eventually a quota system was set up, but this occurred after my time, after
On the oil import question, we felt that our own resources were limited and that, from a strategic standpoint, there was a lot to be said for using foreign oil and not using up our own resources. The domestic oil industry wanted restrictions and used the strategic argument in just the opposite way; they said the only oil that you have available to fight a war is the oil capacity which has been developed and exists at the time the war starts. Therefore, you ought to keep foreign oil out and develop our own oil, so that you've got this capacity in time of emergency.
Anyway, by maintaining an open oil import policy for a long time, we did use up a lot of foreign oil. As a result, we have more in the United States today than we otherwise would have had, not only for strategic reasons but to meet our own requirements in case we are cut
off from foreign oil, as we were here not long ago.
MCKINZIE: When the President was gearing the Government up for the Marshall plan in 1947, there was some talk about difficulties of oil then? Up to that point, Europe had been so economically depressed that they hadn't used a lot of oil, but I recall that one of the problems about rebuilding Europe very rapidly was that a rebuilt Europe was going to be rebuilt with oil, and after it was rebuilt it was going to consume more oil.
EAKENS: Exactly. This was always a major operation on the part of our aid agency. While our aid agency purchased the oil and handled the specific arrangements, the State Department participated in the meetings in which the policies were made with respect to the oil going under the aid programs. We even began
this under UNRRA, who also was interested in supplying oil. I guess that preceded our aid agencies. So, oil occupied a very major part in UNRRA, in the Marshall plan, and in all of our aid agencies that we have had since the war. We changed the name from time to time, but nevertheless each aid agency had a petroleum section with whom we worked very closely at all times.
Another thing that I might mention is that in the State Department we tried to coordinate the thinking of all the agencies of the Government with respect to international oil. We had meetings from time to time at which representatives were present from the Department of Defense (the Army and Navy Petroleum Board, I believe, was the aid agency that handled the oil side for the military) and the Department of Commerce which allocated oil for export. I guess those were the main agencies that we tried to bring into
anything affecting foreign oil, in order to have all agencies of the Government working together and having a coordinated policy.
MCKINZIE: How did things change when the Korean war began in 1950?
EAKENS: During the Korean war, I was on assignment to the Naval War College for a year and missed some of the main things that went on during that period. I was in Newport from about August 1950 until about May '51. The Korean war had just started, I believe, in June of '50. I went to the Naval War College in August of '50, and I don't recall that the Korean war had affected our activities very much in the State Department when I went away. I'm not aware, when I came back as Chief of the Petroleum Division again in May 1951, that the oil loomed very large in that. There was no problem, as I remember, of supplies for armed services or
with respect to oil supplies generally in the world. As a result, I don't recall that there were any specific problems involving the Korean war.
MCKINZIE: In the early postwar period there were some experiments, I think here in Texas, down in Brownsville and a couple of other places, about making synthetic gas. Did that ever seem like a real possibility and one that might affect foreign policy of the United States, or was that all, as far as you were concerned, by the way of experimentation?
EAKENS: I don't think it affected us directly, but many countries were so short of gasoline that they were experimenting and running cars on gasogene or something. They also experimented with charcoal. So, I believe, that in countries like Brazil there were vehicles running on other than petroleum gasoline, and possibly in other
countries of the world. But I'm not aware that that ever figured into our policies or actions to any degree.
MCKINZIE: With all of this talk about development that came about 1947 and on up to the end of the Truman years, was your office concerned with the possibility that with that much development and that much increased use that there might be an absolute shortage of petroleum products?
EAKENS: No, I'm not aware that we were ever very tight even as a result of development. We were eager to see countries that were short of oil develop supplies, so that the needed oil, the needed energy, would not be a drain on their foreign exchange. We were initially called on all over the world in our aid program to help with the energy problem as well as others. But Saudi Arabia always had tremendous capacity for development, as well as Kuwait and Iran. And
Iraq, at the time, had tremendous discovered fields that could be drilled and produced at much higher rates.
So, I think that oil prices stayed down all during this period and did not really go up until recently because there was plenty of oil available, particularly in the Middle East. It did not have to be discovered -- just drilled to produce more to meet the market requirements.
MCKINZIE: You mentioned Brazil as an example a couple of times here. What about Venezuela and Venezuelan oil and South American oil in general? To what extent were you concerned with that, as opposed to Middle Eastern oil?
EAKENS: In general, our attention was mainly on areas where there were problems, and I'd say that our relations with Venezuela were very good. We did encourage Venezuela to open up
their potential oil areas to companies other than the three American who had been producing oil there for many years. The companies in Venezuela included Creole (a subsidiary of Standard of New Jersey), Texaco, Shell, and Gulf, three American companies and one British.
The Venezuelans did open up concessions on a competitive bidding basis, and quite a few new companies went into oil production in Venezuela, such as Sun Oil Company, who had never been down there before, Atlantic Refining Company and Superior Oil Company. So during this time we are talking about Venezuela was opened up and many new companies went into Venezuela.
MCKINZIE: This always gave your division a feeling that things were a little better, the more companies that you got in rather than the fewer?
EAKENS: Yes. This was based, as I emphasized earlier, from the security standpoint of the investment in the oil. But, also, additional competition meant lower prices and more production; more different companies wanting to sell meant more oil readily available and lower prices. In fact, some of the new oil in Venezuela actually moved in the international trade at extremely low prices; I believe that that was either the late forties or early fifties.
Again, our relations with Venezuela were very close and friendly. In 1947, as Chief of the Petroleum Division, I was invited, by the top career official in the Venezuelan Government, to visit Venezuela as a guest of the Venezuelan Government. I did for two weeks in 1947 and was treated royally by the Venezuelan Government. We visited almost all of the oil fields in Venezuela, as well as the island of
Aruba, where a tremendous amount of Venezuelan oil had always been and still is refined.
During this period Venezuela began not only encouraging, but requiring companies to build refineries in Venezuela. The Creole refinery on the Paragana peninsula was under construction at the time I went there in 1947. Under Venezuelan law, the first 10 percent of all oil produced from new concessions had to be refined in Venezuela; it may be higher now. But we were concerned particularly with Venezuela, since that's where a tremendous amount of American foreign investment was located in the oil business.
This was, of course, not during the Truman administration, but I later was Counselor for Economic Affairs of our Embassy in Caracas for two years. Probably the reason that I was transferred there (and it was on very short notice) was because of my oil back-
ground and my previous relationships with the Venezuelans in the field of oil.
MCKINZIE: Do you think that the Venezuelans, the Kuwaitis or the Saudi Arabians understood that a 50-50 arrangement was a pretty good one, that they would not have made a great deal more money had they nationalized their oil industry? Did you have trouble convincing them that private development was good for all parties concerned? Since that time there had been a good deal of talk in some of the countries about how much better it is if it is nationalized, Mexico certainly thought that, earlier.
EAKENS: Well, I guess that we don't ever fully convince these countries, because it's a matter of national pride. They don't like to see their principal resource entirely in the hands of foreigners. Even in cases where it could be shown (if it could be shown) that they
would actually get less money to run the government on, they probably would still want to have either the oil industry nationalized or their own oil company.
In Brazil, all petroleum production is by the state company, Petrobras, which has never been able to satisfy Brazilian oil requirements. This is also true in Chile, where all oil production is in the hands of a government company. So, even though government companies generally are not really as efficient, or the government may not receive as much income as it would under a 50-50 agreement with private companies, there's nevertheless a great deal of support for the government owning this natural resource and the facilities to develop it.
Later, Venezuela set up its own government company. This was done when I was there. They were setting it up in 59 to 61. But the Venezuelan government itself had been a tremendous
beneficiary from foreign oil development. At the time they set up the government company it was not bound by 50-50, but was actually getting probably 60 to 70 percent of the profits of Shell and a lesser amount from Creole, maybe 60 percent. Yet, they still went ahead to set up their own government company. So, there's something more than economics involved. And now the trend is that all of the countries, it appears, are going to eventually take over the oil producing business in their country.
MCKINZIE: In the country that had already done that, in Mexico, the organization Pemex asked the U.S. for a very large loan in 1950-51. Do you recall being in on all of that?
EAKENS: Yes, we were very active in that. In 1949, I was invited by the House Interstate and Foreign Commerce Committee to join them in a trip to Mexico.
MCKINZIE: Is this the Wolverton Committee?
EAKENS: Yes, I went with the Wolverton Committee to Mexico for a month. The Wolverton Committee was invited by Antonio Bermudez, who was head of Petroleos Mexicanos. We spent a month in Mexico, and right at the end of the visit, Senior Bermudez presented Mr. Wolverton a request for a loan of over 400 million dollars. Later, Bermudez came to the United States, expecting possibly to get the loan and probably was embarrassed when he didn't get it. But I would say, in general, that the State Department was not very inclined to support government enterprises through loans in a field in which adequate capital was available from private sources. They could do the job more efficiently and probably yield the country more than they could get by doing it themselves.
People might think Pemex is an example
of an efficient government operation, and it would be very difficult to assess Pemex, because you get tangled in all kinds of interrelationships. For example, the Mexican government railways are paying Petroleos Mexicanos a fraction, maybe half or less, of the value of the fuel oil that is used to run the Mexican railways and the latter might not even pay the bills. So, when you get a bunch of state enterprises dealing with each other, it's very difficult to unravel it to see whether any of them are doing a good job or not.
Another thing on Petroleos Mexicanos is that at the time that they nationalized the oil industry, in 1937, I believe, the largest field in Mexico, Poza Rica, had just been discovered by Shell. Petroleos Mexicanos, for the 20 years, put most of their energy into developing a field that had been discovered by
Shell Oil as a private company prior to the nationalization. Since it was in its early stages, Poza Rica has pretty much carried the Mexican oil requirements for many years.
Later, Pemex signed some working arrangements with private American companies to come in and do some drilling for them, so that these government companies like Pemex actually had all kinds of arrangements available to them for developing their oil resources without direct government loans.
MCKINZIE: Did the fact that Pemex had come into existence at the expense of private American industry have something to do with the opposition to the loan?
EAKENS: It might have on the part of the companies. But that happened so far ahead of my time, I don't believe it had any effect on us in the State Department.
MCKINZIE: No, I mean the idea of a loan when they asked for it was a loan to a company which existed at the expense of really . . .
EAKENS: I don't really believe that that was a factor of any importance. What was important was that there was plenty of private capital available for oil development, and it did not have to be supported by government loans. Now, in many areas, private capital simply is not available and government loans are required. But oil was an area in which there was a plentiful supply of oil in the world, a plentiful supply of capital, a plentiful supply of technology. Pemex was not forced by anybody to sign concession contracts in order to take advantage of private capital and know-how.
The oil industry is made up of all kinds of elements, and maybe one company will say, "I wont go in there unless you give me a 50-50
oil concession." But you just may find another one that will say, "I'll come down and drill ten wells for you, we'll collaborate on the geology, and you pay me 10 percent of the profits we make from this for ten years."
The range of opportunities for contracts between government companies like Pemex and private companies was just open to anybody's imagination; so I think that was a factor that influenced us more than anything else. And I think we probably were concerned about the efficiency of Pemex.
MCKINZIE: Mr. Eakens, I wonder if you would say something concerning your office about oil pricing and about the sale of oil by oil producing countries to Communist bloc nations? As the Truman era progressed, there was a lot of congressional concern over what they called "trading with the enemy," and they didn't
want any country which received U.S. aid to sell its products or its raw materials to Eastern bloc countries. Did that concern your office at all, particularly when you had to deal with Middle Eastern countries which were potentially as valuable to the Communist bloc as they would have been to the Western bloc?
EAKENS: I dont recall that we had any