886A.2553/12–650: Telegram

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


356. AramcoSAG conversations resumed Monday.1 Discussion has revolved around following SAG demands:

Guarantee from company that proposal would result in substantial per unit increase over present basis. Aramco representatives have categorically refused such guarantee.
SAG equal share in net profit should be in addition to and without credit for basic royalty and other payments to SAG. This being similarly refused by Aramco representatives who point to previous fact that acceptance such a demand would result in SAG receiving disproportionate share.
Same condition by SAG was in paragraph 2 re possible tax deductions.

Situation is that discussion remains on basis principle of Aramco proposal.

Feisal has submitted report of proceedings to Riyadh for comment, pending receipt of which no meetings scheduled.

Aramco representatives report Feisal has been friendly and open minded. Finance Minister has also appeared well disposed but has been insistent on positive assurance increased reserve. Such difficulty as has arisen appears to stem from Ahmed Tewfik and Salha.

London pass Cairo for Lager, sent Department 356, info Cairo 72.

  1. Telegram 345 from Jidda, December 1, not printed, reported that meetings between Aramco and Saudi Arabian Government negotiators began on November 28. In the first session Saudi Arabian negotiators wanted their 10-point demands discussed, but “Aramco representatives replied not here to discuss these points but to submit proposal based on equal participation net profits after foreign taxes and withdrawal outstanding SAG demands.” Aramco representatives said it was impossible to give specific guarantees about the actual benefits that would accrue to Saudi Arabia, but said if Saudi Arabia was interested in their proposal they would bring tax and financial experts to go over the details. (886A.2553/12–150)