890F.515/7: Telegram

The Chargé in Saudi Arabia (Shullaw) to the Secretary of State

29. My 22, March 22, noon. Saudi Government apparently approves bank plan and currency issue but is asking full coverage in gold and silver during first year of operation in order that full redemption [Page 867]could be made. Reason given is that this necessary to instill confidence in notes.

British Government reported to be hesitant about this proposal and concerned at present with the problem of establishing a ratio between sterling gold and rial notes. Fear is that higher value of gold in terms of sterling in neighboring countries might result in flight of Saudi gold in short time.