Britain-Israel Relations: British Government Accedes to Saudi Blackmail, Shell and British Petroleum Cease Oil Sales to Israel

CONCLUSIONS of a Meeting of the Cabinet held at 10 Downing Street, S.W. 1, on Tuesday, 16th July, 1957, at 10-30 a.m. HAROLD MACMILLAN, M.P., Prime Minister

The Foreign Secretary said that the Shell Oil Company and the British Petroleum Company had decided to close down their distributing organisation in Israel as the result of a threat by the Saudi Arabian Government that, if they continued to operate in Israel, they would be denied facilities in Saudi Arabia. It was unfortunate that the two companies should have represented this to the Government of Israel as a political decision, although they had not in fact consulted Her Majesty's Government before taking it. Steps had already been taken to disabuse the Government of Israel of any misunderstanding which might have arisen on that account. The decision of the companies had in fact been dictated primarily by commercial considerations, including the low level of profitability of their operations in Israel. There was no reason to suppose that, as a result of their withdrawal, Israel would be deprived of access to alternative sources for oil supplies.

In discussion there was general agreement that there was no occasion for the Government to ask the companies to reconsider their decision. Consideration should, however, be given to the extent to which our commercial interests, and those of other countries, might be affected by the Arab policy of attempting to establish an economic boycott of Israel, and to the steps which might be taken, in association with the United States, to counteract it.

The Cabinet—

(1) Agreed that the Government should not attempt to persuade the Shell Oil Company and the British Petroleum Company to reconsider their decision to withdraw their distributing organisation from Israel.

(2) Invited the Chancellor of the Exchequer to arrange for the Economic Policy Committee to examine the implications of the Arab boycott of Israel and to consider what action might be taken to mitigate any damage which this boycott might inflict on our commercial interests.

Sources: British National Archives