Foreign Relations of the United States, 1955–1957, Near East: Jordan-Yemen, Volume XIII

219. Instruction From the Department of State to Certain Diplomatic and Consular Posts¹

CA–6860

Washington, March 7, 1956.

SUBJECT

• U.S. Policy in Persian Gulf and Arabian Peninsula

The Department has received numerous reports from posts in the area concerning alleged Saudi Arabian efforts to support elements in opposition to the Baghdad Pact and to the British. There have been further reports that many in the area, including some British officials, believe that the Arabian American Oil Company is not only advancing large sums of money to the Saudi Arabian Government, but is also assisting Saudi Arabia in the movement of troops in sensitive areas.

. . . . . . .

For your background information and appropriate oral use, you may be guided by the following:

(1) The United States supports and desires to see the maintenance of a substantial British position in the area; the United States and UK aims in the area are alike in many important respects.

(2) The United States has interests of its own as exemplified by petroleum concessions, rights at the Dhahran Air Field, and traditional friendships with the nations of the area.

(3) Neither the United States Government nor private United States interests are seeking to expand their position at the expense of the British. Private United States companies are frequently under pressure to be responsive to the demands of the country which granted their privileges. Both the United States Government and the companies, however, desire to reduce to a minimum their involvement in international disputes.

(4) The Western position can best be maintained by reducing to a minimum the points of conflict between Western nations and the nations of the area. Every effort must be made to settle outstanding differences by peaceful means.

(5) The Arabian American Oil Company makes advance payments to Saudi Arabia only for specific purposes, such as the Dhahran–Riyadh Railroad, local public works, housing developments and other similar projects.

In addition, Saudi Arabia, from time to time, borrows money from certain New York banks equal to accumulated, but unpaid, Aramco tax payments. These advance loans are possible because there is frequently a lapse of several months between the actual production of the oil on which the tax is levied and the payment by Aramco of the tax. In these cases, Aramco pays the tax, which forms the collateral for the loans, directly to the bank which made the loan. During 1955, loans of this type totaled $93,000,000, of which $57,000,000 were paid off during that year.

The only unusual payments made by Aramco to Saudi Arabia in 1955 covered retroactive taxes under a pricing settlement. This totaled $73,000,000.

(6) The Arabian American Oil Company has assured the Department of State that, except where Saudi Arabian guards accompany Aramco field parties, Aramco does not move Saudi Arabian armed forces in its transport. Some confusion arises because trucks of Saudi Arabian Army and of Aramco are painted similar colors.

A record of the talks between representatives of the Department and representatives of the British Foreign Office which took place between January 16 and January 20, 1956, will follow shortly. These transcripts will provide further useful background information.

Hoover

1. Source: Department of State, Central Files, 611.80/3–756. Confidential. Drafted by Newsom and approved by Burdett. Sent to Aden, Amman, Baghdad, Basra, Beirut, Cairo, Damascus, Dhahran, Jerusalem, Jidda, Kuwait, and London.