The Secretary of State to the Legation in Saudi Arabia
109. Please advise Hamza as follows reLegs 115 Apr 4, 118 Apr 5 and 132 Apr 14:1
- Section 2(b) of Public Law 173, 79th Congress, establishing Eximbank contains statement “It is the policy of the Congress that the Bank in the exercise of its functions should supplement and encourage and not compete with private capital.”
- In view this provision it is policy of Bank not to make loans unless it is clearly evident that borrower could not obtain required credits from private sources on reasonable terms.
- It would appear current and prospective oil royalties may provide sound basis for private credits to SAG. Accordingly, Eximbank feels no application for railroad financing should be made pending clarification of extent to which private sources American capital might be willing finance such projects on reasonable terms.
- If SAG desires expedite railroad projects, it should arrange to make known to private American banks or other sources of private capital its desire for credits. Dept understands Aramco has offered to assist SAG in making contacts, although SAG might desire to make contacts directly through its Legation in US.
- It should also be understood that, although staff of Eximbank has given preliminary study to engineering report on Riyadh–Dammam railroad project, further consideration by Bank’s staff and Directors would be necessary if it is requested to provide financing in lieu of private sources. Moreover, suggestion of possible Jidda–Mecca–Medina railroad is entirely new to Eximbank. Finally, Eximbank does not regard itself as committed in any way beyond existing authorization [Page 1335]of $25,000,000, of which $10,000,000 already embodied in loan agreement of last year.2
- None printed; these are the “recent cables” referred to in Mr. McGuire’s memorandum, supra.↩
- The Department notified
the Legation at Jidda in telegram 82, March 28, that Aramco had made $5,000,000
available for construction of the Dammam–Dhahran–Abqaiq
railroad. These funds were in addition to those made
available for construction of port facilities at Dammam
Telegram 120 from Dhahran reported to the Department on October 4 that Aramco at 8 a. m. the same day gave the go-ahead signal to begin construction of the railroad (890F.77/10–447).↩