Memorandum by the Adviser on Political Relations (Murray) to the Under Secretary of State (Stettinius)

Mr. Stettinius: You may wish to note the attached marked copy of The Wall Street Journal of Thursday, October 21, 1943, carrying a story on the front page regarding the negotiations which have been in progress between the Petroleum Reserves Corporation and the Standard Oil Company of California with a view to acquisition of that company’s holdings in Saudi Arabia.

These negotiations were supposed to have been conducted in the greatest secrecy but widespread rumors regarding them were current even before the present article was published.

In this connection the following reassuring information reached us yesterday:

The California-Arabian Standard Oil Company representative in Saudi Arabia, acting under instructions of his company and in agreement with us, spoke to King Ibn Saud some time after October 9th last and informed him “that arising out of and in connection with the large refinery project which will involve large-scale Government financing in one form or another, this Government is also talking with the companies that own the California-Arabian Oil Company of the possibility of securing a participation in the California-Arabian Company such as might protect the public interests in this Government investment.” Our representative in Saudi Arabia was instructed to convey the same information officially to King Ibn Saud by the attached telegram no. 84 of October 9, 1943.39

The gratifying reaction of King Ibn Saud to the above notification, conveyed to us by the companies’ representatives in this country, is said to be that the King has complete confidence in the good faith of the American Government and that any arrangement along the above lines which we find desirable will be agreeable to the King.

We expect that our diplomatic representative in Jidda will confirm this report as soon as he has been able to discuss the matter with the [Page 941] King who is expected to proceed to the Hejaz shortly to be present during the forthcoming annual pilgrimage to the holy places.

All in all, therefore, the situation seems encouraging. According to Mr. Fortas, the companies are showing a more favorable disposition to come to some arrangement looking to participation by this Government in the exploitation of Saudi Arabian oil, and the King is reliably reported to be favorably disposed towards such an arrangement if and when consummated.

Wallace Murray
  1. Ante, p. 938.