890F.5151/11–448: Telegram
The Chargé in Saudi Arabia (Bergus) to the Secretary of State
576. For State and Treasury from Eddy and Mikesell. We tentatively favoring supporting riyal with dollars probably around 28 cents, without exchange control and leaving sovereign rate open market [Page 251] with paper rival convertible silver supervised mixed currency board composition which not yet fully determined. Paper backed hundred percent (1) dollars (2) gold bars both at par (3) riyal coins within limits (4) sterling, Egyptian, Indian, etc., [currencies] at average Jidda market rate but limited to each year’s pilgrim dues to meet pilgrim seasonal demand riyals and finance holding sterling for issuing months trade or (5) sovereigns at $2 under prevailing market price and limited to each month’s royalty receipts in sovereigns and all to be sold within 30 days (5) [6] is necessary let government meet riyal monthly payrolls while income is mostly sovereigns. Local market too small exchange necessary riyals without pointless rate fluctuation since government, plus Aramco, needs nearly one-third of estimated total riyals coins in country monthly. SAG still tends wish tie riyal to sovereign for above reasons.
Retarded absence American Minister, though continuing full-time explorations above possibilities with Department Finance and general public investigations. Confident workability program. Prompt Department approval Legtel 5631 would assist. Facing several points delicate selling though reception so far not unfavorable. Also recommend prompt Washington approval above program which believed conforms principles discussed Washington. Eddy believes SAG should not forgo premium on sovereigns while such flagrant gold dealings reported here many fund members Egypt, Syria, Lebanon, Iran, Iraq, Italy, Greece, France, Holland, Mexico, Indo-China plus Switzerland. Also Indian controls half-hearted. Also smuggling goods, dollars, etc., too wide-spread this area to warrant emphasizing gold.
Both go Dhahran seventh special Gulf problems including [garble] support riyal coins prevent smuggling. Mikesell reaching Washington 13th Eddy return Jidda about 10th await authorizations and explain SAG. Would appreciate promptness.2 [Eddy and Mikesell.]
- Dated October 24; it conveyed the request of the Saudi Arabian Minister of Finance for the United States to sell to the Saudi Arabian Government $2,000,000 worth of gold in the form of sovereigns or gold bars (890F.51/10–2448). Jidda reported, on November 1, that the Deputy Minister of Finance had given oral assurances that the gold would be left in the United States as an extra reserve and that it would not be sold above the United States official price (telegram 570). The State and Treasury Departments, on November 8, agreed to the sale of the gold, on the basis of these assurances (telegram 425). Telegrams 570 and 425 are both filed under 890F.51/11–148.↩
- Mr. Eddy provided
supplemental information on November 21, suggesting that an
immediate program include the tying of the riyal to a strong
foreign exchange, namely the dollar and not the sovereign, the
discontinuation of exchange restrictions, and the holding of the
riyal at 25 cents (telegram 800 from Jidda, 890F.5151/11–2148).
Mr. Eddy advised, on November 29, that his personal report did not involve any United States Government commitment and that it had been cleared by Minister Childs for delivery to the Minister of Finance “today” (telegram 608, 890F.5151/11–2948).
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