Foreign Relations of the United States, Diplomatic Papers, 1944, The Near East, South Asia, and Africa, The Far East, Volume V

890F.515/113: Telegram

The Chargé in Egypt (Jacobs) to the Secretary of State

Cairo, June 3, 1944—11 a.m.
[Received 6 p.m.]

1503. To Acheson⁹⁹ and Crowley.¹ Personal for [from?] Landis. Subject Saudi Arabian matters.

1. After long negotiations we have reached a considerable measure of agreement. We have an agreed supply program conditional upon acceptance of our proposals.

2. We are not agreed on the 1944 budget. Our difference here is 10 million riyals. In reaching this figure we have receded from a better than 20 million riyal figure in an effort to meet the British. The issue involved is the extent to which we will force Saudi Arabia to curtail her present program of the free distribution of goods. The British proposal forces a 50% reduction. This we believe too much and we think it endangers amicable relationships that exist with Saudi Arabs. We are thus adamant on this point although we have been agreeable to other economies.

3. British have communicated our proposal to London in a sympathetic manner.

4. Our proposal leaves a budgetary deficit after the goods subsidy of about 10 million riyals. This would have to be made up by lend-lease in riyals.

5. British here, I believe, would accept our proposal because of its intrinsic merit except for the fact that it forces Cairo to let Jordan, British Minister to Jidda, down and they would prefer to have London do it and British Treasury heretofore has been adamant against introduction of more lend-lease riyals into Saudi Arabia on allegedly [garbled group] our judgment have to [no?] merit and we believe they screen political reasons.

6. Our proposal cuts over-all subsidy British and American last year from about 80 to 60 million riyals. Of the latter subsidy some 35 millions has already been granted; our share in that has been negligible.

7. You will be interested to know that British Treasury has determined that all subsidies granted or to be granted to Saudi Arabia are clear gifts. This has not yet been communicated to Saudia Arabs.

8. Our budgetary proposal is sensible in light of potentially increasing revenues to Saudi Arabia. We can balance her budget when oil production reaches 250,000 barrels per day. It will reach 100,000 next September and the pipe line would easily bring it over 350,000 mark.

9. We have not discussed provision of advisers to Saudi Arabian Government but it has been agreed in the interim that no new projects for aid to Saudi Arabia will be started independently.

10. We have not communicated with Saudi Arabs during course of negotiations. They are aware that we have been struggling for a fair budget as against the fearful economies proposed by Jordan.

[11.] There are reasons other than political for not communicating as in paragraph 10 which cannot be disclosed except personally.

12. British and ourselves are completely agreed that we should present a common program to Saudi Arabs and adhere honestly to the concept of joint action. I do not believe we can do otherwise. Neither as a nation nor institutionally are we equipped to handle this issue alone and in competition with the British. We are not far advanced in our over-all foreign policy nor have we the resources out here successfully to carry through such a program.

13. There will be left over provided we get agreement from London (a) mechanics for 50–50 division of subsidy (b) general instructions to our respective Ministers (c) currency reform (d) nature of advisory help to be rendered Saudi Arabian Government. These matters cannot be settled here. I propose therefore pursuant to authority granted in Department’s 1158 May 16, 1944² to proceed to Washington on this and many other Middle East matters as soon as word from Condon [London?] has been received. We have a change [chance] now to do an over-all concrete job of Saudi Arabia involving concrete Anglo-American cooperation and we should not let that chance lapse. If we can succeed in this case the pattern and the spirit of this cooperative effort may well apply to other countries of the Middle East and result in the formulation of a concrete and clear American policy for the Middle East. Saudi Arabia presents the best test case for concrete cooperation with British in all the Middle East and we should succeed in making it work here.

14. I am informing British of my intention to proceed to Washington and the objectives of my visit.

15. Among the Middle East matters I wish to discuss are my relationships with the Department, my responsibility with reference to the Balkans, a series of problems that have the commodity index as their focus, the area of importers choice, relaxation of import restrictions, policy regarding the disposition of salvage and installations and others.

16. Moose has cited this telegram, it also represents his views.

17. Please pass copy of this cable to the President and the Secretary of the Treasury.

Sent Department as No. 1503. Repeated to Winant personal in London as 80. [Landis.]

Jacobs

99. Dean Acheson, Assistant Secretary of State.
1. Leo T. Crowley, Administrator, Foreign Economic Administration.
2. Not printed.