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

890F.515/116: Telegram

The Minister in Egypt (Tuck) to the Secretary of State

Cairo, June 18, 1944—10 a.m.
[Received 5:57 p.m.]

1670. From Moose. Background of message from King Ibn Saud quoted in Cairo’s 1667, June 17, 11 a.m., as described by Acting Foreign Minister and Finance Minister consists principally of five following points:

Firstly, commercial imports into Saudi Arabia have virtually ceased because foreign exchange is available to Saudi importers only at unreasonable rates.

Secondly, Saudi Government recently paid 2 months’ arrears in official salaries largely through issues of foodstuffs but partially in coin. Two months’ salaries are still in arrears.

Thirdly, deliveries of foodstuffs under British supply program have been inadequate.

Fourthly, such payments deplete Saudi Government’s stocks to danger point and free distribution of bread is ceasing immediately throughout Saudi Arabia.

Fifthly, special emphasis was laid on fact that supply of foodstuffs is insufficient without regard for transportation facilities. An attempt will be made to verify foregoing assertions of Minister.

Foreign exchange difficulties are traceable among other causes (a) to reduction in sales of foreign exchange for rivals [riyals] by Saudi Government, Arabian American Oil Company and mining syndicate (b) to enforcement of ban on export of gold and silver and (c) possibly to unusually large number of orders recently placed abroad. Jidda banking house will sell foreign currencies for riyals or sovereigns only at rate unsatisfactory to Saudi merchants while refuses unexportable gold or silver under any circumstances. Finance Minister seems willing to consider relaxing ban on gold exports used to finance imports of essential requirements. Conversationally Finance Minister stated that prompt establishment of bank of issue would help with foreign exchange problem. Acting Foreign Minister, British Chargé and I agree with his opinion.

Both Ministers pointed out that discussion of 1944 supply and finance program for Saudi Arabia began with British 6 months ago, joint American-British conversations have lasted over a month, and nothing has been proposed beyond British supply program which, in opinion of Saudi authorities and in mine, is inadequate.

Saudi Government has three possible sources of aid: British Government, American Government and Aramco.⁹ King’s message seems to indicate that he has little hope of getting necessary help from British and that American help is not materializing rapidly enough nor to extent he considers necessary. His next move may, therefore, be to turn to Aramco for loans or other assistance and Aramco may feel that it is in no position to refuse. The King has asked Ohliger¹⁰ and Lebkicher¹¹ to meet him at Al-Kharj¹² for unspecified conversations and it is not unlikely that he will request company help.

The Department’s attention is called to the fact that pressure on Saudi Arabia is being increased according to British plan although with American acquiescence. This is being achieved, intentionally or not, by British delay in plans for a joint program of assistance; while any plans for independent action by United States seem to be in abeyance so long as conversations continue.

It is, therefore, suggested that further consideration now be given to establishment of bank of issue with or without British participation, considering at the same time what steps are to be taken for American aid to Saudi Arabia in event no adequate joint program can be agreed upon or put into effect with reasonable promptness. [Moose.]

Tuck

9. The Arabian American Oil Company.
10. Floyd Ohliger, manager in Saudi Arabia of the Arabian American Oil Company.
11. Roy Lebkicher, representative of the Arabian American Oil Company who acted in a liaison capacity with the Saudi Arabian Government on currency problems.
12. Location of an experimental agricultural station and principal location of the American Agricultural Mission while in Saudi Arabia in 1942 under the leadership of K. S. Twitchell; for correspondence regarding the American Agricultural Mission to Saudi Arabia in 1942, see Foreign Relations, 1942, vol. iv, pp. 561 ff. In 1944 plans reached fruition for the establishment of a Foreign Economic Administration agricultural project at Al-Kharj, under the auspices of the Department of State, and in pursuance of certain findings of the Twitchell Mission.