890F.51/11–3045
Memorandum of Conversation, by the Assistant Chief of the Division of Financial Affairs (McGuire)
| Participants: | Messrs. Tandy34 and Christelow,35 British Embassy |
| Messrs. Merriam, Jones,36 Jenkins37 and Sanger, NE | |
| Mr. McGuire, FN | |
| Mr. Page, IFLS38 |
Mr. Merriam explained that it had seemed appropriate to the Department, in continuation of the practice of mutual consultation between the U.S. and U.K. Governments on matters relating to the economy of Saudi Arabia, to inform the British Embassy of plans which the U.S. Government was formulating for providing U.S. financial assistance to Saudi Arabia after December 31, 1945. After that date, lend-lease would no longer be available as a source of funds, but interested U.S. officials were convinced that King Ibn Saud would need financial assistance for about five years. In the absence of any indication that the U.K. Government intended to provide any financial assistance to Saudi Arabia after the present year 1945, U.S. plans had been drawn up on the assumption that the United States Government would have to undertake the entire responsibility itself, in contrast to the joint Anglo-American supply programs which had been carried out in the years 1944 and 1945. In fact, a recent aide-mémoire from the British Embassy had indicated that the United Kingdom Government did not consider it practicable to continue on a joint basis, because the aid which the U.K. could possibly provide was so small relative to that which the U.S. seemed to believe necessary.
Accordingly, the Department had drawn up a five-year financial assistance program. Advances under this program would be in the nature of loans, which the Saudi Government would be expected to repay out of future oil royalties. The Department was reasonably confident that its suggestions would be approved, and that funds would be available by January 1, 1946.
At Mr. Merriam’s request, Mr. McGuire elaborated somewhat upon the plan, and answered questions asked by Mr. Christelow. Mr. McGuire brought out that the advances the first year might be as high as $11,000,000, but advances in subsequent years would be reduced, and the total contemplated for the five-year period would not exceed $25,000,000. He stressed the fact that Ibn Saud would be [Page 974] told in advance how much assistance he could anticipate in each of the five years, but if he economized and saved money in any year he could use the conserved funds in subsequent years. It was hoped thus to encourage the King to put his financial house in order, while at the same time providing some flexibility. After the five-year period of advances, there would be a five-year period of grace before amortization began, and repayment would then take place over a ten-year period. Interest would average about 3 percent over the entire twenty-year period. Advances could be spent only on certain specified commodities, not including silver, which the King would have to procure out of his own revenues from oil royalties or pilgrim fees.
Mr. Christelow asked whether the loan would be “tied,” i.e., expendable only for American goods and services. Mr. McGuire said it was contemplated that the funds would be so spent for the most part.
Mr. Christelow asked whether special Congressional approval would have to be obtained for the loan, or whether it could be made under existing authorizations. Mr. McGuire said it was felt that Saudi Arabia was a good credit risk for a twenty-year loan, and that it might be possible for an existing lending agency such as the Export-Import Bank to advance the funds as a part of its regular foreign lending program. Mr. McGuire stressed the point that nothing was settled as yet; the Department of State had formulated certain plans, but there was no certainty that they could be carried out.
There was some discussion as to whether the U.S. plans would be affected in any way if the British were to decide that they desired to provide a small amount of financial assistance. Mr. McGuire said that if the British were to commit themselves in advance to providing a given amount of assistance during each of the next five years, the U.S. Government would probably take that into account in determining the size of its own advances. However, he made it clear that the U.S. Government attached great importance to having a definite five-year program to present to the King before the end of this year, and that rather than delay presentation or introduce an element of uncertainty, the U.S. Government would prefer to go ahead on its program, even though the King might later on secure more assistance than we believed necessary by obtaining additional advances from other sources. On the other hand, if the British could give a definite indication in the very near future that they planned to provide assistance, it might be very helpful, since it was to the advantage of both governments that Ibn Saud not have an opportunity to play one off against the other and thus obtain more assistance than he needed.
The British representatives indicated their understanding of the [Page 975] U.S. position, and said they would inform London. Mr. Paige and Mr. Christelow discussed certain technical problems arising from attempts to balance the U.S. and U.K. contributions to the 1944 and 1945 joint programs, and the meeting then adjourned.
- A. H. Tandy, First Secretary of the British Embassy.↩
- Allan Christelow, Assistant Secretary of the United Kingdom Treasury delegation in the United States.↩
- George L. Jones, Assistant Chief of the Division of Near Eastern Affairs.↩
- William L. Jenkins of the Division of Near Eastern Affairs.↩
- Robert M. Paige of the Interim Foreign Liquidation Service.↩