890F.51/3–1746: Telegram

The Secretary of State to the Minister in Saudi Arabia ( Eddy )


80. In letter submitted to Dept in Feb 1945, Lebkicher of Aramco stated that provided US Govt was willing to undertake program of assisting SAG financially in meeting expected deficits in its budget, Aramco was walling to forego recovery of its advances to SAG so long as US Govt was supplying funds toward meeting ordinary SAG budget expenditures. (Your 75, Mar 17, 194612). In letter dated Mar 12, 1946 to James MacPherson of Aramco, Terry Duce13 interpreted this commitment to mean that collection by Aramco is secondary to repayment of US Govt, and stated “We do not want to be accused [Page 742] under any circumstances of being paid directly or indirectly from funds advanced by or otherwise repayable to US Govt.” It was deemed unnecessary to place specific provision against prior payment of Aramco claims in loan agreement because understanding with Company precluded acceptance by it of any payments which might be offered by SAG.

Dept does not feel that payment by SAG of installments on Aramco debt at this time would be wise or would improve SAG credit standing. Credit rating with US Govt far more important to SAG than credit rating with Aramco. Also Eximbank advances carry 3 percent service charge. Aramco advances are interest free. If SAG has unexpected revenues, it should reduce drawings against Eximbank line of credit and save interest on unnecessary borrowings, or better still, establish reserve fund for purchase of silver for return to Treasury under terms of lend-lease silver agreement.

[Here follows a paragraph suggesting that the Saudi Arabian Government consider procuring its riyal needs by the exchange of gold in the Saudi Arabian market rather than by the purchase of silver in the United States for minting new riyals.]

SAG cannot be considered to have surplus dollars until it has made provision for meeting its obligations to US Govt. If at some later date it should become clear that SAG will be able to meet all obligations on schedule, Dept might withdraw objections to payments by SAG to Aramco, but would certainly point out to SAG advisability of liquidating interest bearing obligations first.

  1. Not printed; it inquired whether the United States Government would have any objection to the Saudi Arabian Government’s making payments on its debt to Aramco (890F.51/3–1746).
  2. James Terry Duce, vice president and director of Aramco.