The Ambassador in Saudi Arabia (Childs) to the Secretary of State 1
Subject: Discussion With Aramco and Saudi Arabian Government Officials Regarding Saudi Arabian Government Requests for Increased Participation in Revenues of the Arabian American Oil Co.
During the past several months relations between Aramco and the Saudi Arabian Government have been increasingly strained chiefly as a result of numerous demands which the Saudi Arabian Government has made for increased participation in the revenues of Aramco and Aramco’s unwillingness to make further concessions to the Government at this time. Aramco feels that the Saudi Arabian Government has been attempting during the last few months to force it to alter its position with regard to the Government’s demands by throwing numerous petty obstacles in its path, all of which have resulted in the needless expenditure of time and effort which could, they believe, be more profitably spent in increasing oil production and revenues to the advantage of both Aramco and the Saudi Arabian Government.
In view of the growing difficulties and increasing intransigence on the part of the Saudi Arabian Government, Aramco sought my help and asked if I would come to Dhahran to discuss these difficulties with the Aramco officials there and, if necessary, go to Riyadh to explain the difficulties to His Majesty the King.[Page 63]
On July 15 I flew to Dhahran in a plane provided by Aramco and for two days discussed with Mr. Moore, President of the Company,. Mr. Ohliger, Mr. Davies, Mr. Eddy and Mr. Spurlock,2 the difficulties which are confronting Aramco in an attempt to come to some decision as to what might be the best way to solve these difficulties.
Just prior to my departure for Dhahran I called on Najib Bey Salha, Assistant Deputy Minister of Finance (see enclosure No. 1)3 and Shaikh Abdullah Sulaiman, the Saudi Arabian Minister of Finance (see enclosure No. 2)4 in order to obtain their views with regard to the difficulties between the Saudi Arabian Government and Aramco. Shaikh Abdullah was in a rather uncompromising mood and emphatically claimed that Aramco was proving uncooperative and that they had neither answered his recent communications relating to the Saudi Arabian Government’s requests nor had they appeared the slightest bit willing to discuss these matters with His Excellency.
During my discussions with the Aramco officials in Dhahran I mentioned Shaikh Abdullah’s grievances regarding the unanswered communications and the alleged failure of Aramco to agree to discuss with the Saudi Arabian Government’s representatives, and as will be seen from enclosure No. 5,5 I learned that Aramco has in fact replied to all of Shaikh Abdullah’s communications with the exception, of course, of those to which replies are still under consideration by the Company. I also found the Aramco officials very eager to discuss on friendly terms the differences between Aramco and the Saudi Government although, as was pointed out by the Aramco officials, Aramco does not feel that it can make any further concessions to the Saudi Arabian Government.
Aramco feels that the deferments of the payments by the Saudi Arabian Government on the $6,000,000 loan granted by Aramco and on the payments for construction of the Dammam pier and the Saudi Arabian Government railroad are as far as it is financially able to go at the present time and that further concessions on the part of the Company would not only invite additional demands by the Saudi Government but would be financially unwise.[Page 64]
After discussing these various difficulties, Aramco prepared for me a memorandum covering the situation to use as a basis of any further discussions I might have with the Saudi Arabian Government officials on any of the subjects discussed. It was decided at that time that, since Shaikh Abdullah was necessarily the man with whom Aramco would constantly have to deal, it might be unwise for me to bring the present difficulties to the attention of the King as this might very well irritate Shaikh Abdullah and result in even more difficulties for the Company. I told Aramco, however, that since I had promised Shaikh Abdullah that upon my return I would present him with the views of Aramco it would of course be necessary for me to do so.
After completing our discussions at Dhahran I flew to Riyadh for the purpose of taking leave of His Majesty before departing on leave. Shaikh Yusuf Yassin, Deputy Foreign Minister, met me at the airfield and, though I wished him to be aware of our discussions in Dhahran, I did not feel it wise to become involved personally in any discussion with Shaikh Yusuf on the points of dispute. Consequently, I requested Mohammed Effendi, the Embassy’s Arab Secretary, to explain the situation to Shaikh Yusuf in order to acquaint him with the matter and obtain his views. This Mohammed did, and found Shaikh Yusuf quite unsympathetic with Aramco’s viewpoint and of the opinion that if Aramco continued to be uncooperative with reference to the Saudi Government’s demands, a revision of the Aramco concession might become necessary. A copy of the memorandum of Mohammed’s conversation with Shaikh Yusuf is attached as enclosure No. 3.6 As mentioned previously, I did not mention this subject to the King during our brief conversation.
Upon my return to Jidda on the 19th I called on Shaikh Abdullah and, finding him to be in a more reasonable mood than I had on our previous meeting on July 13, I informed him in general of my talks with the Aramco officials in Dhahran, pointing out that I had found these officials to be extremely anxious to maintain the most friendly relations with His Excellency and that they deeply regret that Shaikh Abdullah had felt that they were not prompt in replying to his various communications. (See enclosure No. 4).7 I mentioned at that time that Aramco had given me an inclusive memorandum on the entire subject under discussion and would shortly forward to him a memorandum which I had prepared, outlining the Company’s point of view as expressed in the memorandum. Shaikh Abdullah stated that the Government was also anxious to continue friendly discussions [Page 65]with Aramco and suggested that it would be best for the Company officials to come to Jidda for a preliminary exchange of views and later go to Riyadh to report their findings if such appeared necessary.
The memorandum (enclosure No. 6)8 has been prepared and forwarded to Shaikh Abdullah but as yet no answer has been received from him, and I have had no further discussions with him or any other members of the Ministry of Finance on this subject since that time.
- Copies sent to Cairo, Dhahran, and Aramco.↩
- Aramco Legal Counsel.↩
- Memorandum of conversation of July 13; not printed. Salha told the Ambassador he deplored the worsening relations between Aramco and the Saudi Arabian Government, and he arranged a meeting for that night with the Minister of Finance.↩
- Memorandum of conversation, dated July 14; not printed.↩
- Statement of Aramco’s position with regard to the Saudi Arabian Government’s demands for increased participation in Aramco’s earnings—prepared for Ambassador J. Rives Childs by Aramco, dated July 16; not printed. The statement contained a list of Saudi Arabian requests and the Aramco replies to each of them. The last paragraph read: “We are hopeful that the American Ambassador will take any opportunities available, to confirm the fairness of the Company’s position and to counter the charges of intransigeance being made by the Minister of Finance. We will welcome any meetings he may arrange for us, either in Riyadh or elsewhere.”↩
- Memorandum of conversation of July 17; not printed. When Effendi explained that Aramco considered it impossible to meet the Saudi Arabian Government’s financial demands if it was to remain competitive with other oil companies in the Middle East, Yassin replied that if Aramco was not prepared to help, the Government would probably find it necessary to revise Aramco’s concession.↩
- Memorandum of conversation of July 19; not printed.↩
- Printed below.↩