890F.24/4–1745

The British Embassy to the Department of State

Memorandum

His Majesty’s Government feel that the time has arrived when a decision must be reached on the broad policy underlying the subsidy to be given to Saudi Arabia in 1945.

2.
It is understood that the State Department’s view is that the two Ministers at Jedda should be instructed to produce a full report containing recommendations for the 1945 subsidy. This was the procedure which the Foreign Office had also contemplated but only on the understanding that the two governments were in substantial agreement on the principle that the 1945 subsidy should be roughly half of last year’s figure. This basis, however, appears to be unacceptable to the United States Government. In these circumstances it would not appear possible for the two Ministers to be able to agree [on?]a joint report.
3.
His Majesty’s Government have decided that the United Kingdom subsidy for 1945 must be limited to one of approximately one and a quarter million Pounds. It is recommended that this contribution [Page 876] should take the form of the supply of cereals, sugar and tea, but the actual make-up of the programme could be settled later. So far as the United States contribution is concerned, there would appear to be two alternatives: either the United States Government may decide to give a larger subsidy than His Majesty’s Government is prepared to make available in which case the existing 50/50 arrangement will no longer apply: or alternatively if the United States Government’s decision enables the 50/50 basis to be maintained, His Majesty’s Government will be glad to make a joint communication to Ibn Saud as was done last year.
4.
Before the United States Government take their decision, His Majesty’s Government wish to explain the considerations which have led them to decide on a reduction in their share of the subsidy. The original subsidy was intended as compensation for the fall in Ibn Saud’s revenues from the pilgrimage. These revenues have now revived and in 1944 were well above those derived from the somewhat poor pilgrimages of the immediate pre-war years. Furthermore Ibn Saud now obtains a large revenue from payments by the Oil company operating in Saudi Arabia. Given the extremely high figure to which assistance by the two Governments rose in 1944, the Saudi Arabian Government’s income would be now at least four times higher than it was immediately before the war. In these circumstances His Majesty’s Government feel that there is no justification for continuing the subsidy on its recent scale, since the Saudi Arabian Government or the local merchants or both should now be able to finance without difficulty any balance of Saudi Arabian import requirements not covered by the subsidy. This consideration is quite apart from the desirability, if only for the sake of Ibn Saud’s own prestige, that he should cease as soon as possible to be dependent upon foreign subventions. In all circumstances and in view of the need for restricting the overseas financial commitments of the United Kingdom, His Majesty’s Government do not feel that they can exceed the figure of one and a quarter million Pounds mentioned above.
5.
If the United States Government is anxious to give in 1945 a subsidy larger than His Majesty’s Government think is required and if Ibn Saud wishes to receive it, His Majesty’s Government do not wish to stand in the way. In that case, however, it would be necessary thereafter to distinguish between supply questions and subsidy questions. On supply questions there would presumably still be a small Anglo-American (i.e. a M.E.S.C.) programme and communications on this subject to the Saudi Arabian authorities would presumably still be joint communications as in the past. On subsidy questions, however, each Government would resume its liberty of independent action.
6.
The above paragraphs attempt to give a picture of the present position and of the possible alternatives open to both governments, as His Majesty’s Government see them. His Majesty’s Government, however, feel very strongly indeed that the 50/50 basis should be maintained if at all possible. They feel that abandonment of the principle of equal partnership would inevitably give the impression of Anglo-American rivalry which on political grounds both governments are so anxious to avoid. Moreover, even if the 50/50 basis were maintained so far as the subsidy proper was concerned, this would not preclude the United States Government from furnishing special assistance to Saudi Arabia in such matters as the development of cultural projects, the construction of roads, or any other enterprises in which the United States Government might wish to help Ibn Saud.
7.
For those reasons His Majesty’s Government greatly hope that the United States Government will decide to reduce their subsidy for 1945 to the same level as theirs. This would enable the two Governments to agree upon an appropriate joint communication to Ibn Saud, which is becoming a matter of great urgency.