Page 331 - The Arabian Gulf States_Neat

LAND BOUNDARIES 267

Legal problems
(a) The grant of oil concessions
Practice has shown that the concession agreements concluded by
Kuwait and Saudi Arabia, separately, with foreign oil companies in
respect of their own territories did not include the Neutral Zone area.1
• Both Kuwait and Saudi Arabia granted separate concession agree­
ments to oil companies in respect of their undivided half shares in the
Zone. Thus, in June 1948, Kuwait signed an agreement with American
Independent Oil Company, and in February 1949, Saudi Arabia
signed an agreement with Pacific Western Corporation. These agree­
ments covered the land territories of the Zone.2 Similarly in 1957 and
1958, both Governments granted to the Japanese Arabian Oil Com­
pany separate concessions in respect of the offshore areas of the
Zone.
It can be deduced from this practice that the conception of joint
sovereignty over the Neutral Zone, as conceived in the Agreement of
1922, did not prevent cither Kuwait or Saudi Arabia from granting
separate concession agreements to different companies in respect of
each country's undivided share in the Neutral Zone. In other words,
it was not regarded as necessary for Kuwait and Saudi Arabia to
conclude a joint concession agreement in respect of their ‘equal rights’
in the Zone.
A further implication of this practice seems to be that in a case
where Saudi Arabia alone, for instance, grants a concession to a
foreign company in respect of her own share in the Zone, the validity,
or the operation, of this concession does not appear to be conditional
on another agreement being concluded by Kuwait with the same, or a
different, company. Thus the Saudi Arabian Japanese Offshore Agree­
ment of 10 December 19573 came into effect from the date of its
1 It is to be noted, as an exception to this practice, that in her Agreement of
1933 with Ararnco, Saudi Arabia specifically mentioned, in Article 3 of the Agree­
ment, the Neutral Zone as an area to which the preferential rights of exploitation
of oil granted to the Company should apply. (See Umm al-Qura Semi-official
gazette, 14 and 21 July 1933.) However, this right was abandoned by the Company
in 1948, when the Shaikh of Kuwait secured more favourable terms by his Agree­
ment of 1948 with American Independent Company, as will be explained below.
2 See Shwadran, B., The Middle East Oil and the Great Powers (1956), p. 393.
According to the writer, the two American companies ‘worked out an agreement
between them’ for the joint exploitation of oil in the zone. And quoting from the
New York Times of 6 August 1947 the writer says that ‘early in August, 1947, it was
reported that King Ibn Saud and the Shaikh of Kuwait had agreed to share the
income from any oil discovered in the neutral zone’.
3 For text, sec The Petroleum Times, suppl. to vol. LXII, No. 1579, 14 February
1958.