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

890F.24/7–744

The British Embassy to the Department of State

Aide-Mémoire

As the Department are aware, discussions have been proceeding in Cairo and Jedda between United States and British representatives about the proposed programme of joint economic and financial help to Saudi Arabia. It has been agreed that such aid should be furnished on a fifty-fifty basis by the United States and the United Kingdom.

2. These discussions resulted in a programme for 1944 of supplies for Saudi Arabia which contemplates that the United Kingdom shall provide goods free to the value of £2,754,000 and the United States goods on credit lend-lease to the value of £292,000. His Majesty’s Government accept this supply programme, and are prepared in addition to provide Ibn Saud with a sterling cash credit of £10,000 a month to cover the expenses of his Diplomatic Missions and Consulates abroad.

3. Ibn Saud will also raise revenue by selling part of the goods furnished under the joint programme. The United States representatives at the discussions maintained the view, however, that he would need a further subsidy in cash of 10,000,000 rials. While they do not share this view, His Majesty’s Government, in their desire to reach an agreed solution with the United States Government, have decided to accept the proposal on the basis that this additional subsidy should take the form of lend-lease silver.

4. His Majesty’s Government wish to make it clear that their agreement to this arrangement should not be regarded as indicating any departure from the views which they have expressed to the United States Treasury as to the proper solution of the Saudi Arabian currency problem, in connexion with which the scheme proposed by His Majesty’s Government is still under discussion with the United States Treasury. It is in any case too late to introduce it this year, but His Majesty’s Government hope that it can be introduced next year and that there will then be no further need for a supply of silver rials.

5. His Majesty’s Government understand that in the Saudi Arabian budget for 1944 provision has been made for receipts arising out of the sale of the 10 million rials referred to in paragraph 3 above, (i.e. 40% of the dollar proceeds of the silver rials supplied for financing the oil companies less minting and transport costs) on the assumption that His Majesty’s Government will provide sovereigns against gold in New York. His Majesty’s Government regret that owing to their very limited supply of sovereigns and the lack of available minting capacity they cannot accept this assumption. They do not know how much difference this will make to the estimated revenue of 4.7 million rials if some other method of using the American gold is adopted.

6. During the discussions, consideration was given to possible methods of putting into effect the principle, which had already been agreed between the two governments, that Anglo-American aid to Saudi Arabia should be on a fifty-fifty basis, in view of the fact that owing to shipping and supply considerations the value of the aid to be furnished by the United Kingdom under the agreed programme would be considerably more than that to be furnished by the United States. The suggestion was made that the necessary adjustments should be effected by means of a credit to the United Kingdom on reciprocal aid account. His Majesty’s Government regret that they are unable to accept this suggestion, the effect of which would be the same as if the United Kingdom were to supply goods to the United States on reciprocal aid for the latter to furnish without acknowledgment to a third party as United States lend-lease aid. His Majesty’s Government would welcome the views of the United States Government on how best to make the adjustment in such a manner as to lend substance to the proposed statement to Ibn Saud that the Anglo-American aid offered him is on an equal basis as between the United States and the United Kingdom. His Majesty’s Government feel that such a statement could only be made if there is a cash adjustment, i.e. by the transfer of the appropriate sum in dollars to His Majesty’s Government.

7. Finally, His Majesty’s Government consider that it would be better to avoid any attempt at detailed control of Saudi Arabian expenditure. We should seek rather to convince Ibn Saud that the help now promised is all that we can give him, and that it is his responsibility, by using forethought and the technical means which have already been indicated to him in general terms, to make the resources thus put at his disposal meet his requirements. His Majesty’s Government also think it desirable that, in accordance with the agreements reached during the Cairo discussions, Ibn Saud should be warned that it will be necessary to carry out further cuts next year in the amount of supplies available to him for free distribution within his territories.

8. On the assumption that the above proposals are acceptable to the United States Government, His Majesty’s Government consider that the necessary communication to the Saudi Arabian Government can be drafted and agreed between the American and British representatives in Jedda.

Washington , July 7, 1944.