890F.00/3–845
Memorandum of Conversation, by the Assistant Secretary of State (Acheson)
In accordance with the direction of the State-War-Navy Coordinating Committee, Mr. Acheson arranged through the Speaker of the House a conference which was held this afternoon.43 There were present the Speaker; the Majority Floor Leader, Mr. McCormack; Mr. Carl Vinson, Chairman of the House Naval Affairs Committee; Mr. Drewry, ranking Majority Member of that Committee; the Under Secretary of the Navy, Mr. Bard; Mr. Keith Kane,44 Colonel George Brownell45 and Mr. Acheson. Mr. Bloom of the Foreign Affairs Committee and Mr. May of the Military Affairs Committee, who had been expected, were not present.
Mr. Acheson presented to the meeting the financial situation of the Saudi Arabian Government, the assistance which had hitherto been provided by the British Government and by this Government through Lend-Lease, and the needs of the Saudi Arabian Government for the next five years, pointing out that this demonstrated an approximate deficit of $50,000,000 over the next five years, of which about three-fifths would occur in the next two years. He reviewed the existing oil concessions held by American companies and the interest of the Navy in preserving those concessions. He indicated the possible danger to those concessions should the Saudi Arabian governmental deficit not be met. He also touched briefly upon the desire of the Army to establish an airfield in Saudi Arabia. Mr. Bard for the Navy and Colonel Brownell for the Army briefly stated the interest of their Departments in this matter, Mr. Bard stressing the desirability of obtaining for the armed forces the right to draw on Saudi Arabian oil to relieve reserves in this country.
Mr. Acheson then stated that the first question was to obtain the advice and guidance of the Leaders as to whether and how the aid of the Congress could be enlisted to make possible the granting to Saudi Arabia of the financial assistance needed. He stated that if the Leaders believed that the Congress would be willing to take such a step there were, in general, four ways of going about it. The first would be a series of outright grants to the Saudi Arabian Government. This was the method followed by the British Government. The second was a series of payments to the Saudi Arabian Government in return for which it would make firm guarantees regarding the concessions. [Page 862] The United States might obtain in return for these payments either from the Government or from the oil companies a right to a billion barrels of oil at an agreed rate per year and at a price which would return the money to this Government through a reduced price of oil. The third method would be an unsecured loan with the Saudi Arabian Government to be repaid when its revenues were restored to a point agreed upon. The fourth method would be a guaranteed loan by which future royalties paid by the oil companies to the Government would be assigned to this Government in such way as would repay the amounts advanced.
The Speaker stated that in his opinion it was highly desirable to undertake these payments even though they were made on the basis of a direct grant. The other Leaders present expressed their agreement of the desirability of adopting one or a combination of the methods. Mr. Vinson was strongly in favor of a method which would obtain a quid pro quo for the United States, believing that if such were done the possibility of approval would be greatly increased. He strongly favored the quid pro quo which would obtain oil at a reduced price for the armed forces. Mr. Drewry agreed with this view. Mr. McCormack also expressed approval, although at one time in the discussion Mr. McCormack appeared to favor a secured loan.
The suggestion was then made that a draft proposal should be prepared and that the meeting should be reconvened at an early date.
Mr. Acheson then inquired whether it was the opinion of the Leaders that such a draft proposal should spell out in the formal legislation the entire transaction or whether it would seem wiser to the Leaders to have legislative action consist of placing the necessary funds in the hands of the Secretary of State, or in the hands of the Secretary of Navy to be spent through the State Department, without specifying the purpose except in the most general way, with an understanding between the Executive Departments and the appropriate Committees of the House and the Senate that the funds should be expended in a particular way and the Committee kept informed. The discussion brought out for consideration that if the entire matter were stated at some length in a bill this would require extensive hearings in which strong attitudes might be taken by various private interests, that such a debate could not take place before the Saudi Arabian Government is approached without doing great harm in the negotiations, and that embarrassment might occur if the debate takes place after the Saudi Arabian Government is approached. It appeared to the Leaders highly desirable and practicable to adopt the second course. [Here follows discussion regarding development of a domestic oil reserve.]
It was agreed that the officers from the Executive Departments should confer at once, prepare some concrete suggestions, and resume the conference at an early date.
[Page 863]After the conference these officers agreed that they should immediately proceed with this and also with discussions with appropriate Senators.