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

890F.51/12–2044

Memorandum by the Secretary of State to President Roosevelt ⁷⁷

Washington, December 22, 1944.

Subject: Proposals for the Extension of Long Range Financial Assistance to Saudi Arabia.

In a memorandum from the Secretary of State dated April 3, 1944, which you approved, it was recommended that lend-lease funds be used for the extension of increased economic assistance to Saudi Arabia and that subsequently Congressional approval be sought for the provision of direct financial aid.

Largely because of wartime conditions, Saudi Arabia is experiencing budgetary deficits. These may be expected to continue for the next few years until oil royalties and a revival of normal trade provide sufficient sources of revenue to meet essential governmental expenditures. Meanwhile Saudi Arabia is dependent for survival upon help from abroad. If such help is not provided by this Government, undoubtedly it will be supplied by some other nation which might thus acquire a dominant position in that country inimical to the welfare of Saudi Arabia and to the national interest of the United States.

An American national interest, basically strategic in character, exists in Saudi Arabia for the following reasons:

1. A strong and independent Saudi Arabian Government in the Near East, where two great world powers come in contact, is less likely to fall victim to war-breeding aggression than a weak and disintegrating state vulnerable to economic and political penetration.

2. The vast oil resources of Saudi Arabia, now in American hands under a concession held by American nationals, should be safeguarded and developed in order to supplement Western Hemisphere oil reserves as a source of world supply.

3. The military authorities urgently desire certain facilities in Saudi Arabia for the prosecution of the war, such as the right to construct military airfields and flight privileges for military aircraft en route to the Pacific war theater.

King Ibn Saud has indicated that he prefers to rely upon the United States for the assistance his country needs and that he would adopt a much more independent attitude toward third countries if he were assured that this Government will extend adequate aid on a long-range basis. This cannot be done through lend-lease (a) because the Foreign Economic Administration is unwilling to continue it beyond the present fiscal year; and (b) because there is no assurance in any case that lend-lease would be available on a long-range basis.

Your approval is requested of the following steps to be taken in order to enable this Government to extend adequate long-range assistance to Saudi Arabia for the purpose of affording protection to the American national interest in that country and of obtaining wartime facilities urgently needed there:

1. That the Congress be requested to appropriate funds for use in meeting the urgent financial requirements of Saudi Arabia to the extent deemed necessary by the Secretary of State:

2. That the Secretary of State inform the President of the Export-Import Bank that you desire the Bank to make a commitment in principle of its intention to extend, after the necessary study, development loans to finance long-range projects for the improvement of economic conditions and living standards in Saudi Arabia;

3. That the military authorities, after consultation with the Department of State, give immediate consideration to such projects as it may be advisable for them to undertake promptly in Saudi Arabia in order to provide interim assistance by means of such measures as the construction of airfields and related installations, the dispatch of training missions and equipment, and the construction of strategic roads, together with other facilities.

The Secretaries of War and the Navy concur in the foregoing proposals.

[Annex]

Supplementary Note to Memorandum for the President Entitled “Proposals for the Extension of Long-Range Financial Assistance to Saudi Arabia”

It cannot be stated with certainty at this time the funds which will be needed to meet the urgent financial requirements of Saudi Arabia. It is estimated, however, that the budgetary deficits of the Saudi Arabian Government will continue for approximately five years. If the war should continue for several years more and if the return of normal trading conditions should be delayed unduly, the maximum sum to meet these deficits is estimated at $57,000,000. Should the war end in the near future, and should more favorable economic conditions obtain, only about $28,000,000 will be needed. A reasonable expectation, however, is that the sum of $43,000,000 will suffice to meet these budgetary deficits over a five-year period until Saudi Arabia becomes financially self-sufficient.

77. Drafting of this memorandum was undertaken by the Office of Near Eastern and African Affairs, after which it was discussed informally with officers of the War and Navy Departments; on December 1 the draft was forwarded by the Director of the Office of Near Eastern and African Affairs (Murray) to the Secretary of State for approval (890F.51/12–144). The memorandum was submitted on December 13 by Secretary Stettinius to Secretary of War Stimson and Secretary of the Navy Forrestal for approval, with covering letters which constituted an acknowledgment to Secretary Stimson’s letter of October 27 and Secretary Forrestal’s letter of December 11. By December 20 both of the Secretaries had expressed concurrence in the proposals contained in the memorandum and in the view that it should be transmitted to President Roosevelt as soon as possible; the memorandum was sent to the President on December 22.