NE Files: Lot 57 D 177: “Saudi Arabia, Aramco”
Memorandum by the Deputy Director of the Office of Near Eastern Affairs (Kopper) to the Assistant Secretary of State for Near Eastern, South Asian, and African Affairs (McGhee)
Mr. Ohliger has been called back to New York by Aramco to discuss the “recent and drastic” demands by the SAG on the company, the quote being Aramco wording. He and Mr. Duce will undoubtedly wish to review with you1 the various points raised which may be as follow:
1. About February of this year the Saudi Arabian Ambassador stated that if US corporate taxes were raised, the SAG would wish to revise its Aramco agreement so that the Government would not have to share the tax increase out of its profits. The tax increase has now been passed and Aramco is presumably considering some modification in the profit split to meet SAG requirements.
2. On August 10 the King went into a tirade with Ambassador Hare re Aramco shortcomings and an alleged insult. Mr. Ohliger went to Riyadh the following week to discuss these issues which were largely emotional but were basically involved in the SAG need for more ready cash. Aramco accounts are normally paid several months behind actual production and the King asked Mr. Moore for a statement of the outstanding amount. The need for cash became increasingly urgent before Mr. Moore had returned to New York to act on the King’s request. The King’s explosion followed and prompted expeditious action from Aramco which produced a statement and arranged for an advance in funds from Chase National Bank of $25,000,000 at $5,000,000 per month.
3. On October 18 Sheikh Abdullah Suleiman objected to royalty payments in sterling in excess of 25 percent. The October sterling payment was 37 percent. Aramco understood the 25 percent maximum applied only to the last half of 1950, but Sheikh Abdullah considers it indefinite. Aramco also says that the SAG is receiving no more actual sterling than before, but that the increase in percentage is due to the reduction in the gold sovereign royalty rate from $12 to $8.25.
4. The SAG is dissatisfied with the need of Aramco for referring important decisions to New York. It wants responsible authorities able to make decisions right on the spot.
5. In order to be sure it is getting its full 50 percent cut, the SAG wants price information.
[Page 336]6. Prince Faisal wants Aramco to surrender its concession lying west of the Dahana. Presumably he wishes to give some other firm a concession in that area (possibly Alireza) which is not being utilized by Aramco. It will probably be difficult—and inadvisable—for Aramco to avoid turning back this area if it is not going to develop it in the near future.
- The Aramco officers met with McGhee the following day; memorandum of conversation of the October 30 meeting, infra.↩