886A.2553/11–750: Telegram
The Secretary of State to the Embassy in Saudi Arabia 1
161. Aramco parent cos meeting Nov 6 to decide position re renegotiations. Duce, Davies expressed to Dept Nov 3 belief only major financial contract change such as profit sharing, income tax, increased basic royalty wld satisfy SAG. Aramco reps believe such increased payments necessary retain concession. Eddy believes anti-co-sentiment so serious Dept shld be prepared protect US citizens, claiming Sulaiman might shut down co operations in order obtain demands.
Dept took position it cld not in present circumstances effectively oppose SAG pressure for increased benefits but wld endeavor prepare as favorable stage for negots as possible. If no objection perceived, fol memo with any appropriate modifications shld be transmitted FonOff before negots:2
“USG has welcomed at all times spirit of complete frankness with which SAG has approached USG in matters common interest. This frankness has been appreciated as reflection of close ties existing between two countries and desire maintain them on most cordial basis.
“It is in that spirit that USG is moved to approach SAG in present instance and to present informally expression of its great interest [Page 112] and concern in forthcoming negots understood contemplated with reps Aramco concerning Aramco concession. USG believes that SAG shares views this Government re extraordinary performance achieved by this American enterprise since its inception in Saudi Arabia. Development since war has resulted for SA in more rapid rise in oil output and in revenues to SAG than has ever been experienced by any oil-producing country anywhere in world.
“Also view this Government that Aramco has at all times displayed most enlightened spirit and outlook in its dealings with SAG and its desire take into account interests of people and Government Saudi Arabia. It is understanding this Government that as result co has enjoyed real confidence of SAG.
“So far as USG can ascertain, Aramco intends continuing best efforts in this partnership undertaking. Major problem which unfortunately continues arise concerns division pecuniary benefits between SAG and Aramco. With respect to this USG can only note that funds out of which benefits SAG can come are not inexhaustible and that there must be point beyond which Aramco or any commercial co cannot expand its production costs (in the form of benefits to SAG) without impairing its competitive position and thereby reducing or destroying its ability contribute joint task of developing SA’s oil resources. It is in development of these rich but exhaustible resources and through wise use of considerable funds which such development makes available that greatest benefits to govt and people of SA can be realized.
“In consequence USG expresses hope that SAG will take carefully into consideration mutuality of interest between co and SAG and is confident SAG will approach negots with same spirit of friendship and cooperation which has marked relations between co and govt in past.”