886A.2553/5–2350: Telegram

The Ambassador in Saudi Arabia (Childs) to the Secretary of State

confidential

348. Embtel 316, May 23.1 Aramco reply SAG request for additional share company profits conveyed government by Fred Davies, Executive Vice President, in talks here June 8–11. Despite favorable nature reply, SAG officials June 11 for first time openly indicated to company that Aramco might be forced register in Saudi Arabia and entire concession might be revised.

In conversation with him prior his departure, Davies stated that in response request from SAG Aramco is deferring for one year beginning in June the government’s monthly railway installment payments as well as payments on the six million dollar loan granted last January which were due to begin August 1950. While no cancellations involved, Davies pointed out these deferments represent total of roughly $10,000,000 and payments under railway obligation are calculated to amount to $400,000–600,000 monthly, although this does not include liquidation total obligation estimated at $15,000,000 as of March 1950.

Davies intimated foregoing deferment decided upon by Aramco in view SAG financial situation and in effort ease increasing pressure on company for greater share profits. Aside requesting such action, SAG had also expressed hope for large-scale grant dollars for development projects and other uses, but this not agreed to by company. As result no actual increase in government share Aramco profits has yet been agreed upon and pressure for such continues. In course discussions SAG officials referred to fact Aramco paid in 1949 USG taxes totalling 38 percent its profits, an amount equal to some $40,000,000. Davies confirmed to me this figure approximately correct indicating SAG research this question preparatory pressing demands along lines indicated above.

Following Aramco reply deferring above payments Finance Minister presented Davies unsigned letter listing projects for which dollar grant from Aramco requested. Davies indicated in absence Finance Minister’s signature this could not be considered and letter was returned Finance Minister. Colonel Eddy informs he believes Finance Minister will present letter to Crown Prince Saud in Taif June 13 pointing out he has done all he can obtain concessions Aramco. Crown Prince or other high government officials may then take up question [Page 57]revising concession or registering company in Saudi Arabia in order enable SAG to obtain taxes now paid USG, but Eddy does not believe these questions will be formally raised by Finance Minister who is about to depart on extended vacation. Questions may be raised with Aramco President Moore whose arrival June 20 anticipated. Alternatively Finance Minister demand may be bluff and no further concessions may be required of company. Embassy does not believe matter ended. We fully expect continued SAG efforts obtain larger share Aramco profits.

Foregoing for Department’s information only.

Sent Department 348, repeated info London 85, Arab capitals, Tehran unnumbered.

Childs
  1. Not printed; it reported a week of discussions between Aramco officials and the Finance Minister. It read, in part: “View SAG’s continued financial straits FinMin requested several items from company which would in effect mean increasing SAG share Aramco income.” (886A.2553/5–2350)