Sticking Point

Eight years after Aramco, the U.S.-owned Arabian American Oil Co., introduced into the Middle East the magic fifty-fifty formula of splitting production profits with the governments concerned, the numbers game no longer has its old magic. The formula was often broken while still technically honored--through side bonuses, generous rentals, air-conditioned Cadillacs or airplanes presented to sheiks. But on one matter the major oil companies of the world, which may compete at filling-station pumps but frequently join in partnership abroad, were adamant. They would split with Arab governments only at the production stage, would not let governments in on the profits of marketing. This week negotiations are heading for a showdown in Jidda between the Saudi Arabian government and one of the biggest U.S. oil companies that could upset the whole grand scheme.

Latecomer. On the one side is the Standard Oil Co. of Indiana, a Midwestern giant which has belatedly joined the rush for overseas reserves and is ready to pay to get in on the comparatively few good areas still unallocated in the Middle East. For an offshore Iranian concession earlier this year, Indiana Standard paid a $25 million cash bonus, promised to spend $82 million in twelve years developing the area, and by accepting the state oil agency as equal operating partner entitled to half of future profits, in effect gave the Iranians a 75-25 share of total profits. The big established companies were bothered but not outraged.

They are more concerned by the deal being discussed by Indiana Standard with Saudi Arabia. At the bargaining table sits swart, smiling Sheik Abdullah Tariki, 39, the Arab oil expert whom Americans most respect and fear. Head of the Saudi office of Petroleum and Mineral Affairs, Tariki is an oil engineer with a master's degree from the University of Texas, is divorced from his American wife. His dedicated Arab nationalism is reportedly deepened by painful memories of having been confused with Mexicans in Texas. In the land of sheiks with Cadillacs and concubines, he is regarded as personally incorruptible. He has long felt that Arab countries should share in profits made on their oil outside the country as well as in it. Last December he struck an offshore oil deal with Japanese oilmen for an "integrated company" that would produce, ship and market Saudi oil and split profits 56-44 all the way up to the filling-station pump.

Ready to Wait. For Indiana's enterprisers, who are bidding for a choice zone around the capital city of Riyadh, Tariki hiked his opening demand to a 60-40 profit split, also "integrated1' right up to the gas pump. Indiana's President John Eldred Swearingen publicly rejected these terms last week, but was obviously ready to bargain further. Foreign oilmen pointed out that Tariki's deal with the Japanese promised at best small profit in limited markets, and only after years of waiting; Western companies alone, with their tanker fleets, refining facilities and extensive marketing systems, can offer an immediate and sizable outlet for Middle East oil. The feudal princes of Saudi Arabia, who have overdrawn on their big profits to support their luxurious living, are interested in getting the most possible revenue now. But Tariki, an admirer of Nasser, shows a disposition to settle for less revenue now, which in his view is wasted on palaces and princes, in favor of Arab control of future oil marketing. On this point, the major Western companies insist, they must never yield.

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