Memorandum by the Deputy Director of the Office of Near Eastern and African Affairs ( Villard ) to the Under Secretary of State for Economic Affairs ( Clayton )

Subject: United States Policy Toward Saudi Arabia

It is my understanding that Mr. Martin, President of the Export-Import Bank will be talking with you tomorrow on the subject of a possible $15,000,000 development loan to Saudi Arabia. The question of assisting Saudi Arabia with its transportation system and particularly the question of developing railroads or highways in that country is expected to come up in this connection.24

As you know, our policy toward Saudi Arabia is to provide such assistance as may be necessary and feasible to strengthen and maintain that country as a sovereign state free of internal and external disturbances which might threaten its stability. Because Saudi Arabia at present has no railroads and almost no highways, the immediate development of its transportation situation appears justified.

The engineering firm of International Bechtel Brothers–McCone which has studied the relative merits of railroad us. roads favors the road as do the economic officers of the Department and the Export-Import Bank. However, King Ibn Saud is very strongly in favor of the railroad.

It is the opinion of this Office that sufficient information has not been provided to make a final decision on this matter, and we strongly support the idea of having the Export-Import Bank finance an adequate survey of these two possibilities for developing transportation in Saudi Arabia. The final decision should weigh political and military as well as economic factors involved in this case.

H[enry] S. V[illard]
  1. In a memorandum of September 13 to the Assistant Chief of the Division of Financial Affairs (McGuire), Mr. Sanger had noted that preliminary surveys of eight projects had been prepared by International Bechtel Brothers-McCone for the Saudi Arabian Government. They involved the water supply of Jidda, electrification of Mecca and of Riyadh, construction of a cement plant, the harbor of Jidda, irrigation and water conservation, hospitals at Riyadh and Taif, and railway and highway transportation. The initial costs of the eight projects were estimated at $56,505,000, the major elements of which were $32,418,000 for the railway and $13,075,000 for highways. (890F.51/9–1346)