Memorandum by the Secretary of State to President Roosevelt 55

It is believed necessary for this Government to extend additional financial and economic assistance to Saudi Arabia in order to safeguard adequately the American national interest in the great petroleum resources of that country.56

During the past few years the Government of Saudi Arabia has relied principally upon British subsidies to meet its deficits arising from inadequate sources of revenue. Recently this Government has furnished limited quantities of Lend Lease durable goods and also silver for coins, which is to be repaid in kind five years after the war.

It has now been ascertained that the British Government proposes in 1944 to subsidize Saudi Arabia to the extent of nearly 12 million dollars for the purchase from British sources of such consumer goods as foodstuffs and textiles. This sum is approximately six times greater than the value of Lend Lease aid this Government contemplates extending during the current year.

Furthermore, it has just been reported57 that the British Minister in Jidda has persuaded King Ibn Saud to remove certain key Saudi Arabian officials known to be friendly to the United States and to agree to appoint a British economic adviser and possibly a British petroleum adviser as well.

If Saudi Arabia is permitted to lean too heavily upon the British, there is always the danger that the British will request a quid pro quo in oil. To obviate this danger, it is recommended that this Government share the subsidy on an over-all equal basis with the British. In view of the immediate urgency of so doing, it is suggested that the American share of the subsidy take the initial form of Lend Lease aid and that the Foreign Economic Administration be authorized to [Page 680] provide whatever goods may be necessary. Subsequently Congressional approval might be sought for outright financial assistance. In connection with the extension of such assistance it is recommended also that a proposal be made to the Saudi Arabian Government to establish a central bank under purely American auspices, in as much as nothing has been heard of a proposal made by this Government to the British on February 17, 1944 for the establishment of such a bank under joint American and British auspices.58

  1. Marginal notation: “OK FDR.”
  2. For correspondence on this subject, see pp. 8 ff.
  3. In telegram 90, March 30, 11 p.m., from Jidda, not printed.
  4. See footnote 47, p. 674.