886A.10/11–450: Telegram

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


274. Following week-long meeting Riyadh of top Saudi officials including princes, FinMin and Najib Salha, latter returned Jidda Thursday and informs following decisions taken:

Introduce income tax SA along lines Treasury proposals of September. Decree this subject to be published tomorrow.
Establish “accounting department” Riyadh directly under King to prepare budget, oversee SAG finances. To assist here Salha wants two trained American accountants, to which King agreed in writing and for which Salha will apply under Point IV soonest. Embassy yet not perfectly clear as to scope proposed new office, but believes perhaps similar to Budget Bureau. In any event feel top priority should be assigned getting these experts to SA once formal request received. [Page 1193] Prior efforts to line up personnel would be appreciated. Salha stated AUB graduates would be hired assist these Americans.
King also reportedly agreed to American experts for customs and for FinMin, and Salha informs he will request two US customs experts and one financial-monetary expert under Point IV in addition to those paragraph 2.

Queried as to reason this sudden “coming of age” SAG, Salha stated King and princes impressed by what had been done so far (by him) to introduce order in SA finances and reduce waste, and felt now with income running high and expenses becoming increasingly manageable was time to introduce further steps required by more complicated financial problems created. Also said YY had faithfully reported King my observations on SA finances (Embtel 272, November 41), that leaky faucet figure of speech had caught King’s imagination and that timing just prior Salha’s arrival Riyadh had been fortunate coincidence. Salha added members royal family had indicated they now willing live within given budget. Also appears star free-spending Shaikh Abdullah perhaps descending for moment, while Salha appears to have returned with more duty than heretofore. FinMin has returned to his fishing camp 50 miles south Jidda, leaving Salha in complete charge here. If, as indicated by latter, FinMin’s role in coming Aramco talks is to be intermittent, while Prince Feisal heads delegation, further indication his eclipse will have been provided.

While foregoing still partly in talking stage and we feel all talk SAG financial reforms should be viewed with caution, information furnished by Salha concerning King’s new willingness have budget, foreign experts and income tax indicates definite forward steps in Saudi governmental structure are planned. Salha says he told King if such measures taken and Americans secured, USG would be more sympathetic any subsequent requests based on financial troubles, but that we would do nothing as long as existing profligacy and mismanagement continued. Embassy feels every effort should be made by USG take advantage this new turn events to ultimate benefit ourselves as well as SAG. Further developments will be reported and formal SAG requests transmitted soon as received.

Sent London pass Cairo 42 for Parker.

  1. Not printed; it discussed the Saudi Arabian financial situation as it related to demands being made on Aramco. Hare informed the Department he had “compared the situation to a leaking faucet on a water tank. It would be a poor way to correct the continual loss of water merely by pouring in more water and not fixing the wasteful leak.” (886A.2553/11–450)