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A draft of the MCA prepared contemporaneously with the
August 4, 1975, letter provides in part:
In calculating its A.R.E. Income Taxes, EGPC shall be
entitled to deduct royalties paid by EGPC to the
GOVERNMENT and the A.R.E. Income Taxes of AMOCO [Egypt]
paid by EGPC on AMOCO [Egypt]'s behalf.
An internal telex, dated August 26, 1975, from Chiati,
states that "In article IV(f) with respect to taxes, EGPC insists
on our taking Esso's text as it is, i.e. without amendments".
Article IV(f)(6), specifically, was proposed by EGPC, and
had no significance to Amoco Egypt, given Amoco Egypt's
understanding that it entitled EGPC to deduct royalties and Amoco
Egypt's taxes from taxable income. Craig understood that Article
IV(f)(6) entitled EGPC to a deduction from income, and at some
point discussed such understanding with Leithy, but Craig never
discussed EGPC's taxes in general.
On November 16, 1975, Leithy and Craig initialed the MCA in
English on behalf of EGPC and Amoco Egypt, respectively.
Under Article VII of the MCA, Amoco Egypt is entitled to up
to 20 percent of the crude oil produced as a reimbursement for
the costs of exploration, production, and related operations.5
EGPC and Amoco Egypt share the remaining 80 percent of production
in varying percentages, between 85 and 87 percent for EGPC and 13
5 Such recovery limit is not related to the computation of Amoco
Egypt's Egyptian income taxes with respect to deductible costs.
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