THE IMPORTANCE OF IRANIAN AND MIDDLE EAST OIL TO WESTERN EUROPE UNDER PEACETIME CONDITIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01012A000300070001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: December 9, 2016
• Document Release Date: September 24, 1998
• Sequence Number: 1
• Publication Date: January 8, 1951
• Content Type: NIE

Approved For Release 2001/03/04: CIA-RDP791)0'AA90030007000l91A9a
F. ASSISTANT DIRECTOR
NATIONAL`>'INTELLIGENCE ESTI14ATf S
NATIONAL INTELLIGENCE ESTIMATE:
THE IMPORTANCE OF IRANIAN POND
MIDDLE EAST OIL TO WESTERN EUROPE
UNDER PEACETIME CONDITIONS
FOR
PLbli.hed 8 January 1951
CENTRAL INTELLIGENCE AGENCY
Approved For Release 2001/03/04: CIA-RDP79RO1012A000300070001-9
 Approved For Release 2001/03/04: CIA-RDP79RO1012A000300070001-9
This document contains information affecting the na-
tional defense of the United States within the meaning
of the Espionage Act, 50 U.S.C., 31 and 32, as amended.
Its transmission or the revelation of its contents in any
manner to an unauthorized person is prohibited by law.
Approved For Release 2001/03/04: CIA-RDP79RO1012A000300070001-9
 Approved For Release 2001/03/04 479R01012A000300070001-9
1. This copy of this publication is for the information and use of the recipient
designated on the front cover and of individuals under the jurisdiction of the recipient's
office who require the information for the performance of their official duties. Further
dissemination elsewhere in the department to other offices which require the informa-
tion for the performance of official duties may be authorized by the following:
a. Special Assistant to the Secretary of State for Intelligence, for the Depart-
ment of State
b. Assistant Chief of Staff, G-2, for the Department of the Army
c. Director of Naval Intelligence, for the Department of the Navy
d. Director of Intelligence, USAF, for the Department of the Air Force
e. Director of Intelligence, AEC, for the Atomic Energy Commission
f. Deputy Director for Intelligence, Joint Staff, for the Joint Staff
g. Assistant Director for Collection and Dissemination, CIA, for any other
Department or Agency
2. This copy may be either retained or destroyed by burning in accordance with
applicable security regulations, or returned to the Central Intelligence Agency by ar-
rangement with the Office of Collection and Dissemination, CIA.
DISTRIBUTION (NIE Series) :
Office of the President
National Security Council
National Security Resources Board
Department of State
Office of Secretary of Defense
Department of the Army
Department of the Navy
Department of the Air Force
Atomic Energy Commission
Joint Chiefs of Staff
Federal Bureau of Investigation
Research and Development Board
Munitions Board
Approved For Release 2001/03/04: CIA-RDP79RO1012A000300070001-9
 Approved For Release 2001/03/04 79R01012A000300070001-9
NATIONAL INTELLIGENCE ESTIMATE
THE IMPORTANCE OF IRANIAN AND
MIDDLE EAST OIL TO WESTERN EUROPE
UNDER PEACETIME CONDITIONS
N I E- 1 4
This estimate has been prepared in response to a request
from the Senior Staff of the National Security Council. The
basic data were supplied by an interdepartmental ad hoc
committee of technical representatives of ECA, the Petroleum
Committee of the Munitions Board, the Departments of the
Treasury, Commerce, and State, and CIA. The intelligence
organizations of the Departments of State, the Army, the
Navy, the Air Force, and the Joint Staff participated in the
preparation of this estimate and concur in it. This paper
is based on information available on 30 December 1950.
j
Approved For Release 2001/03/04: - DP79RO1012A000300070001-9
 Approved For Release 2001/03/04+,@ 179R01012A000300070001-9
THE IMPORTANCE OF IRANIAN AND MIDDLE EAST OIL
TO WESTERN EUROPE UNDER PEACETIME CONDITIONS
THE PROBLEM
To estimate the importance of (a) Iranian oil production and (b) total Middle East oil
production to Western Europe in time of peace.
ASSUMPTIONS
That access to (a) Iranian oil production, and (b) total Middle East oil production is
denied to the Western Powers by means other than war.
CONCLUSIONS
1. The amount of crude oil and refined prod-
ucts now exported from Iran could be derived
from other areas by small increases in crude
production and by fuller use of available re-
fining capacity. At the rates of consumption
and levels of prices prevailing at the end of
1950, the extra annual dollar charge to Europe
of procuring this amount of oil elsewhere
would be about $700,000,000.*
2. Loss of Iranian oil production and of the
refinery at Abadan would temporarily have
an adverse effect upon Western European eco-
nomic activity, and would impose severe finan-
cial losses particularly upon the British, who
control all the oil production of the country.
Although the effect of the loss of Iran on the
volume of petroleum which could be made
available to Western Europe might be over-
* Figures in this paper representing estimates of
extra annual dollar costs and of the extent of oil
shortages which would result from a loss of Iranian
or Middle Eastern oil are indicative rather than
exact. They will hold true as given only as long
as oil prices stay at the levels of late 1950, and oil
production and consumption continue at the rates
currently estimated for the fiscal year 1950-51. The
general effect of the rearmament programs in the
US and in Western Europe will presumably be to
raise the consumption of oil, and probably also to
raise its price. These factors would tend to make
the oil of the Middle East more important to the
western economies, and to cause its loss to be even
more severely felt than is indicated by the figures
cited in this paper.
come in a relatively short time by developing
reserves and building refineries elsewhere, the
financial effects would be overcome slowly, if
at all.
3. If all Middle East oil production were to
be lost, a cutback of about 10 percent in the
total oil consumption of the non-Soviet world
would have to be imposed, even after a maxi-
mum practicable increase of production from
other sources. This would call for substantial
rationing in the United States as well as else-
where. International allocation would be re-
quired. At the price level of late 1950 a net
increase in dollar requirements of from $1 to
$1.2 billion would occur if Western Europe,
after a cutback of 10 percent in its consump-
tion, were to procure from alternative sources
an amount of oil sufficient to make up for the
loss of Middle East imports.
4. It is estimated that if a cutback of 10 per-
cent from present levels of oil consumption
were imposed on Western Europe, it would
permit maintenance of industrial production
at approximately the levels of late 1950, and
of transportation at the extreme minimum
necessary for that purpose. No appreciable
expansion of industry, whether for normal
economic development or for rearmament,
would be possible, unless economies were ef-
fected, expansion of industry and transporta-
tion facilities were accomplished only with
solid fuel-utilizing equipment, and possibly
1
Approved For Release 2001/03/04: CIA-RDP79RO1012A000300070001-9
 Approved For Release 2001/03/044
79 R01012A000300070001-9
some conversion of existing petroleum-using
equipment were made. Rationing even to re-
duce consumption by 10 percent would pre-
sent great difficulties in time of peace.
5. No way can be foreseen at present by which
a satisfactory adjustment, over a longer period
of time, could be made to the total loss of
Middle East oil, unless new reserves are proved
elsewhere, or new sources of energy developed.
Western Europe therefore would not be able
to compensate for the loss of Middle East oil
save by profound changes in its currently
planned economic structure.
DISCUSSION
1. Total petroleum requirements of Western
Europe (including the UK) for the fiscal year
1950-51 are. estimated at 66 million metric
tons, of which 42.5 million will be imported as
crude and 20 million as refined products; the
remaining 3.5 million tons will be derived from
indigenous sources. Of the total import re-
quirements, 43.8 million metric tons, repre-
senting 70 percent, will come from the Middle
East. In addition, international bunkers of
6 million tons and US military supplies aggre-
gating . approximately 2.5 million metric tons
will be lifted in the Middle East area.
2. Of the total requirements of Western Eu-
rope, it is estimated that Iran alone will supply
the following:
Millions of Metric Tons
Percent of
Crude Oil WE Requirements
7
16
Refined Products
6.3 (including British Military)
31
Bunkers
4
3. It is estimated likewise that of total West-
ern European requirements, the entire Middle
East area will supply the following :
Millions of Metric Tons
Crude Oil
38
Refined Products
8.3
Bunkers
6
Percent of
WE Requirements
90
LOSS OF IRANIAN PRODUCTION
4. If Iranian oil should cease to be available,
the seven million metric tons of crude oil by
which Western Europe would thereby fall
short (according to the 1950-51 estimates)
could be more than made up by increasing the
output of British companies operating else-
where in the world. Indeed it could all be
replaced, at some additional dollar cost, from
the other producing areas of the Middle East.
Replacement for the balance of Iran's crude
oil output (that processed at Abadan) could
also be obtained outside the Soviet sphere by
releasing shut-in production and by more
rapid drilling of known reserves.
5. Loss of the Abadan refinery, with its ca-
pacity of 27 million metric tons per year, would
call for much more difficult adjustments than
would the loss of Iranian crude oil output.
There is now in the non-Soviet world, outside
Iran, enough refining capacity to process an
additional amount of crude equal to that now
going through the Abadan plant. If Abadan
were lost, however, at least six months would
be required to place marginal plants in oper-
ation, to change the composition of refinery
output, to alter tanker routings, and to com-
plete the redistribution of crude oil among
the other refineries.
6. To acquire from other sources the amounts
of crude oil and refined products which West-
ern Europe now imports in one year from
Iran would involve an extra dollar expendi-
ture of about $700,000,000, assuming the level
of prices remained the same as that prevail-
ing at the end of 1950.
7. Loss of Iranian oil production and of the
refinery at Abadan would temporarily have
an adverse effect upon Western European eco-
nomic activity, and would impose severe finan-
cial losses particularly upon the British, who
control all the oil production in the country.
Although the effect of the loss of Iran upon
the volume of petroleum which could be made
available to Western Europe might be over-
come in a relatively short time by developing
reserves and building refineries elsewhere, the
Approved For Release 2001/03/04: CIA-RDP79RO1012A000300070001-9
 Approved For Release 2001/03/04 79R01012A000300070001-9
financial effects would be overcome slowly, if
at all.
LOSS OF ALL MIDDLE EAST OIL.
8. The loss of all Middle East oil production
would reduce the current supply of crude oil
in the non-Soviet world by about 93 million
metric tons per year. By increasing produc-
tion to the greatest degree feasible in areas
still accessible, this shortage could be reduced
to about 53 million metric tons, which is equiv-
alent to about 10 percent of estimated 1950-51
total oil consumption in the non-Soviet world.
Sufficient refining capacity would be available
to process the reduced total supply of crude,
but the problems of readjustment and alloca-
tion mentioned in paragraph 5 above would,
of course, be greater, and the time required to
carry them out would be longer. 25X6A
9. The maximum cutback in Western Euro-
pean oil consumption which would still per-
mit maintenance of industrial production at
approximately the levels of late 1950, and of
transportation at the extreme minimum nec-
essary for that purpose, is estimated to be
about 10 percent. Such a cutback would
permit no appreciable expansion of industry,
whether for normal economic development or
for purposes of rearmament, unless economies
were effected, expansion of industry and
transportation facilities were accomplished
only with solid fuel-utilizing equipment, and
possibly some conversion of existing petro-
leum-using equipment were made. More-
over, the 10 percent cutback would cover
only about 6.6 million metric tons out of
the total deficiency of 53 million. Hence it
is - clear that even if Western Europe were
restricted to less than 90 percent of its esti-
mated 1950-51 consumption, the loss of all
Middle East oil would make substantial ra-
tioning necessary in the United States. Des-
pite the fact that the US is virtually self-suffi-
cient in oil production, it would have to cut
its consumption by at least 10 percent. In-
ternational allocation would immediately be-
come necessary.
10. At the price level of late 1950 a net in-
crease in dollar requirements of from $1 to
$1.2 billion would occur if Western Europe,
after a cutback of 10 percent in its consump-
tion, were to procure from alternative sources
an amount of oil sufficient to make up for the
loss of Middle East imports.
11. No way can be foreseen at present by which
a satisfactory adjustment, over a longer period
of time, could be made to the total loss of
Middle East oil, unless new reserves are proved
elsewhere, or new sources of energy developed.
Though the Middle East now contributes only
18.4 percent of total non-Soviet production, it
contains 44.4 percent of proved reserves out-
side the Soviet orbit. A very large proportion
of the presently contemplated increase in non-
Soviet oil supply is expected to come from the
Middle East. Western Europe, therefore,
would not be able to compensate for the loss
of Middle East oil save by profound changes in
its currently planned economic structure.
Approved For Release 2001/03/04: CIA-RDP79RO1012A000300070001-9
 Approved For Release 2001 /03/0LJ?{A .F( P79RO1012A000300070001-9 4
25X6A
gaommow
Approved For Release 2001/03/04: CIA-RDP79RO1012A000300070001-9
 Approved For Release 2001/03/ QP79R01012A000300070001-9
TABLES
I. Estimated Imports of Crude Oil and Re-
fined Products into OEEC Countries
1950-1951.
II. Estimated International Bunker Lift-
ings (Refined Products) in the Persian
Gulf Area.
III. Control of World Crude Reserves 1950-
1951.
IV. Ownership of World Crude Production
1950-1951.
V. Ownership of World Refining Capacity
1950-1951.
VI. Loss of Iranian Oil.
VII. Loss of All Middle East Oil.
Approved For Release 2001/03/04: IA-RDP79RO1012A000300070001-9
 Approved For Release 2001/03/01 -1 ! g P79R01012A000300070001-9
TABLE I
ESTIMATED IMPORTS OF CRUDE OIL AND REFINED PRODUCTS INTO OEEC COUNTRIES 1950-51
(1,000 MT/Y)
CRUDE
PERCENT
P
P
RODUCTS
ERCENT
TOTAL
PERCENT
Eastern Hemisphere:
Middle East
38,065
8,321
46,386
89.69
41.39
74.16
(Includes US military)
Other
......
100
100
......
.50
.16
Total
38,065
8,421
46,486
89.69
41.89
74.32
Western Hemisphere:
USA
150
1,850
2,000
.35
9.20
3.20
Caribbean
4,067
9,604
13,671
9.58
47.77
21.86
Other
160
230
390
.38
1.14
.62
4,377
11,684
16,061
10.31
58.11
25.68
42,442
20,105
62,547
100.00
100.00
100.00
TABLE II
ESTIMATED INTERNATIONAL BUNKER LIFTINGS (REFINED PRODUCTS) IN THE PERSIAN GULF
AREA
(1950-1951)
1,000 MT/Y I
PERCENT
From Iran
4,000
66.67
From other Middle East
2,000
33.33
Total
6 , 000
100.00
TABLE III
CONTROL OF WORLD CRUDE RESERVES
(1950-1951)
UNITED STATES
BRITISH
OTHER
PERCEN4
AREA
Per-
Per-
Per-
TOTAL
OF
1,000 MT
1,000 MT
1,000 MT
1,000 MT
WORLD
cent
cent
cent
TOTAL
Eastern Hemisphere:
Middle East
Iraq 170,445 23.7 378,288 52.6 170,445 23.7 719,178 7.2
Kuwait 753,424 50.0 753,424 50.0 ....... ..... 1,506,849 15.1
Saudi Arabia 1,232,877 100.0 ......... ..... ....... ..... 1,232,877 12.3
Iran ......... 958,904 100.0 ....... ..... 958,904 9.6
Bahrein ......... 21,917 100.0 ....... ..... 21,917 .2
Total 2,156,746 2,112,533 170,445 23.7 4,439,725 44.4
East Indies Islands 62,172 31.3 136,459 68.7 ....... ..... 198,631 2.0
OEEC Countries 5,834 20.0 7,293 25.0 16,044 55.0 29,171 .3
Total 68,006 143,752 16,044 227,802 ....
Western Hemisphere:
US and Canada 3,713,562 100.0 ......... ..... ....... ..... 3,713,562 37.0
Mexico ......... ..... ......... ..... 116,438 100.0 116,438 1.2
Caribbean Exporting Areas 888,865 61.5 550,663 38.1 5,781 0.4 1,445,309 14.5
Total 4,602,427 550,663 ..... 122,219 ... 5,275,309 ....
Other ......... ..... ......... ....... 1.4 45,136 .5
TOTAL WORLD 9,987,972
ni=b
Approved For Release 2001/03/04: CIA-RDP79RO1012A000300070001-9
 Approved For Release 2001/03/04 ~79R01012A000300070001-9
TABLE IV
OWNERSHIP OF WORLD CRUDE PRODUCTION
(1950-1951)
Eastern Hemisphere:
Middle East
Iraq 1,720 23.7 3,810 52.5 1,720 23.7 7,250 1.44
Kuwait 9,500 50.0 9,500 50.0 ...... 19,000 3.77
Saudi Arabia 29,750 100.0 ...... ...... 29,750 5.91
Iran ....... 35,000 100.0 ...... 35,000 6.95
Qatar 476 23.8 1,048 52.4 476 23.8 2,000 .40
Bahrein ....... 1,500 100.0 ...... 1,500 .30
Total 41,446 50,858 2,196 94,500 18.77
East Indies Islands 3,350 31.3 7,350 68.7 ...... 10,700 2.13
OEEC Countries 538 20.0 681 25.0 1,563 55.0 2,782 .55
Total 3,888 8,031 1,563 13,482
Western Hemisphere:
US and Canada 288,750 100.0 ...... ...... 288,750 57.36
Mexico ....... 10,000 100.0 10,000 1.99
Caribbean Exporting Areas 55,055 61.5 34,108 38.1 327 0.4 89,490 17.77
Total 343,805 34,108 10,327 388,240
Other ....... ...... ...... 1.4 7,110 1.41
Total World 503,332
TABLE V
OWNERSHIP OF WORLD REFINING CAPACITY
(1950-1951)
Eastern Hemisphere:
Middle East
Haifa ....
Kuwait 625
Saudi Arabia 6,500
Abadan ......
Tripoli 142
Bahrein 8,000
Total 15,267
East Indies Islands 3,200
South & East Asia
Australia & New Zealand
Northern Africa & Spain
OEEC Countries
Western Hemisphere:
United States
Canada
Mexico
Caribbean Exporting Areas:
Colombia 1,420
Venezuela 7,007
Peru 1,452
Ecuador ......
Trinidad ......
Netherlands W. Indies 21,000
Total 30,879
Other Latin American
Total 30 , 879
Total World
1,000 MT Percent
1,000 MT Percent
TOTAL
1,000 MT
TOTAL
1,000 MT
PERCENT
OF WORLD
TOTAL
PERCENT
OF WORLD
TOTAL
...... 800 100.00 ...... ...... 800 .02
50.00 625 50.00 ...... ...... :1,250 .25
100.00 ...... ...... ...... ...... 6,500 1.30
...... 27,500 100.00 ...... ...... 27,500 5.52
23.75 285 42.50 173 28.75 600 .01
100.00 ...... ...... ...... ...... 8,000 1.61
29,210 173 44,G50
31.68 6,900 68.32 ...... ...... 10,100 2.03
...... ...... ...... ...... ...... 2,500 .50
...... ...... ...... ...... ...... 650 .01
...... ...... ...... ...... ...... 3,450 .69
...... ...... ...... ....... 44,429 8.02
6,900 ...... 61,129
...... 300,000 60.20
15,500 100.00 15,500 3.11
8,350 100.00 8,350 1.68
100.00 ...... ...... 1,420 .28
57.2 5,243 42.8 ...... ...... 12,250 2.46
96.8 24 1.6 24 1.6 1,500 .30
...... 230 100.00 ...... 230 .00
4,750 100.00 ...... ...... 4,750 .95
53.4 18,300 46.6 ...... ...... 39,300 7.89
28,547 23,874 383,300
...... ...... ...... ...... ...... 9,250 1.86
28,547 23,874 392,550
498,329
Approved For Release 2001/03/04: CIA-RDP79RO1012A000300070001-9
 Approved For Release 2001/03/04 79RO1O12AOOO3OOO7OOO1-9
TABLE VI
LOSS OF IRANIAN OIL
(Millions of Units)
1. Production-physical quantities (1950-51)
a. Crude ......................................................................... .. 35 MT/Y*
b. Refined ............................................................................ 25 MT/Y
2. Loss of crude imports from Iran by Western Europe ....................................... 7.5, MT/Y
3. Dollar element of cost in replaced crude .................................................. $55
4. Loss of refined products imported from Iran by Western Europe and Sterling Area ............ 25 MT/Y
5. Annual dollar cost of replacing refined (Item 4) ........................................... $765-775
6. Gross dollar cost of replacing crude and refined (Items 3 and 5) ............................. $820-830
7. Dollar savings-equipment and services .................................................. $110-120
8. Estimated net dollar cost annually (Item 6 minus Item 7) .................................. $710
* MT/Y Metric tons per year.
TABLE VII
LOSS OF ALL MIDDLE EAST OIL
1. Production-physical quantities (1950-51)
(Millions of Units)
a. Crude .................................................................................. 94.5 MT/Y
b. Refined ................................................................................. 44.7 MT/Y
2. Loss of crude imports from Middle East by Western Europe ..................................... 43.5 MT/Y
3. Dollar element in replaced crude ............................................................. $800
4. Loss of refined products imported from Middle East by Western Europe and Sterling Area .......... 38 MT/Y
5. Annual dollar cost of replacing refined (Item 4) ................................................ $1,200
6. Gross dollar cost of replacing crude and refined (Items 3 and 5) .................................. $2,000
7. Dollar savings-eqiupment and supplies, profits to Bahrein Petroleum Co., dollar element in goods
furnished Middle East by Western Europe, etc ............................................... $600
8. Estimated net dollar cost annually assuming no cutback in current requirements (Item 6 minus Item 7). $1,400
9. Ten percent cutback would save .............................................................. $300
Approved For Release 2001/03/04: CIA-RDP79RO1012AO00300070001-9