took away over 99.5 percent could be returned to the company. All subsequent discussions have shattered on the selection of this crucial 0.5 percent – the company insisting that it include North Rumaila and the government insisting that if not."
In response to a request from the Under Secretary, Andreas Lowenfeld of the State Department's legal office submitted a memorandum on "the validity and effect of Law No. 80 of December 11, 1961." Emphasizing the differences between the Iraqi action and "typical nationalizations, such as have recently occurred for example in Cuba or Indonesia," Lowenfeld pointed out: "Under Law No. 80, IPC's property as such has not been taken, and in fact IPC's operations have continued substantially unimpeded. What IPC has been deprived of is mineral rights granted in a number of concessions awarded by the government of Iraq. Thus, it may be argued that IPC's claim is at most a claim for breach of contract, and not a claim arising out of expropriation of property." None of the area expropriated, the memorandum stressed, was actually under production: "For the most part the area removed from the concession was unexplored territory, but the area included in several cases proven reserves. Our understanding is that IPC's production capacity (at least in the short-run) was not affected by Law No. 80â€¦.. The question of whether and under what circumstances the breach of a concession gives rise to a violation of international law is very much in doubt." If the matter were brought before some international body for adjudication, Lowenfeld warned, IPC on at least one point would be "fairly vulnerable," i.e., that the company had not governed its exploitation of Iraq's oil "solely according to the requirements of Iraq and the intention of the concession, but in accordance with the overall interests of the participating companies."
This issue could be raised with respect to the amount of exploration and production in Iraq; with respect to pricing and discounting policies followed by the company; and possibly also with respect to IPC's efforts to exclude competitors. Without in any way attempting to examine these charges in an international adjudication would not likely to be beneficial either Britain, France, and the United Statesâ€¦..
A fairly substantial case could be made (particularly in an arbitration) that IPC has followed a "dog in the manger" policy in Iraq, excluding or swallowing up all competitors, while at the same time governing its production in accordance with the overall worldwide interests of the participating companies and not solely in accordance with the interests of Iraq. This of course has been one of the principal charges of the government of Iraq against IPC.
The memorandum concluded by stating: "While the legal issues in the IPC-Iraq dispute are numerous and complicated, law does not appear to provide solutionsâ€¦â€¦.IPCs legal remedies are few, and we have no firm legal basis for telling independent American companies – let alone foreign companies – to stay out of Iraq.
State Department Pressure On Independents
Although lacking a "firm legal basis," top State Department officials were in fact exceedingly active in telling independent American companies to "stay out of Iraq," both before and after the submission of the legal memorandum. For example, on May 6, 1964, Governor Averell Harriman and other State Department officials met with E. L. Steiniger, chairman of the Board of Sinclair Oil Company, one of the largest companies without a Mideast concession. According to the Department's Memorandum of Conversation, Governor Harriman said that: "In the IPC case proved and probable reserve areas were taken away. We wonder whether it is wise for U.S. oil companies to approve this type of action which the same companies condemn in other parts of the world. . . . We hope you will not take any action which will appear to condone unilateral acts." In reply, Mr. Steiniger cited other instances (Peru, Argentine) in which Sinclair "had refused to enter the petroleum picture since this would b