886A.2553/6–2851: Telegram

The Ambassador in Saudi Arabia ( Hare ) to the Department of State 1


758. Owen Aramco informs he summoned to meeting with MinFin afternoon June 27 which also attended by Najibsalha, Mahhammad Surrziz Suroor and other MinFin officials.

MinFin adroitly opened meeting by referring Iran situation and stating SAG entirely satisfied with Aramco contract2 and he wld be glad so state in writing if Owen desired. He then observed that “within scope of existing agreement” and friendly relations existing between company and SAG latter now signed seek assistance Aramco in form of advance of 50 percent anticipated tax receipts for current term (payable of course under Dec 1950 agreement during calendar 1952). MinFin stated budget had recently been completed and approved by King (for summary see fol tel3) and it was now necessary implement it but necessary funds lacking. He then suggested Owen work out details arrangement for advance with Salha.

Owen replied he wld pass word to his principles and wld also hear what Salha had say but he wld venture prediction that Aramco cld hardly be expected comply with request. MinFin who had by then been out of room several times … did not seem in mood pursue question further and discussion consequently ended at this point.

Comment: foregoing SAG admission stringency and request Aramco aid comes as no surprise Emb in view developments since MinFin took over sole controls SAG finances in May and stringency was foreshadowed Embtels 677, May 154 and 705, June 25 as well as Embdes 405, June 4.6 For several years, continually mounting income has been dissipated in spectacular fashion with no thought for morrow and special loans and facilities have not altered trend e.g. Aramco $6 million loan of Jan 1950 railroad and loan repayment deferments by [Page 1058] Aramco of May 1950 conclusion new agreement last Dec and TAA advances extended so far this year which now total ¾ whole amount due. In fact as income rises stringencies only appear become more pronounced and in capacity Shaikh Abdullah makes impossible putting together any coherent story of where expenditures have gone. We believe SAG financial situation by no means hopeless but that SAG wld have to pull in horns if attempt made get by on present income anticipated balance this year. Since MinFin rashly agreed increase payments to Royal Family when in Riyadh during budget discussions he in no position now go to King and ask for retrenchment.…

And if SAG request clever tactical move view Iran7 situation we do not believe any lasting improvements in use income wld result should Aramco agree make advance. Claim that funds needed implement budget is specious since latter drawn up several months ago and based upon income anticipated at that time. Rather it appears SAG stubbornly persisting endeavor repair leaky water tank by pouring more in at top, a procedure which we believe will continue as long as more water available and that a halt should be called somewhere.

  1. Repeated to Cairo.
  2. For documentation on the Aramco contract of December 1950, see pp. 268 ff., and Foreign Relations, 1950, vol. v, pp. 9 ff.
  3. Telegram 4 from Jidda. July 2, not printed, reported on the salient features of the Saudi Arabian budget. It read, in part: “SAG has so far spent over one-half 1951 income from Aramco without, on admission Fin Min to Owen, having been able implement above budget which drawn up on basis full utilization that income. Sole bright spot is that salaries have been brought virtually up to date from position in some cases as much as six months in arrears.” (886A.10/7–251)
  4. Not printed; it reported on a reorganization of the Saudi Arabian Finance Ministry (886A.10/5–1651).
  5. Not printed; it reported the Saudi Arabian Government had received more than $30 million in tax payments from Aramco, leaving approximately $20 million for the rest of 1951, and advised the Department of State the Saudi Arabian financial position would not get better for the rest of 1951 (886A.2553/6–251).
  6. Not printed; it concerned personnel changes at the Saudi Arabian Ministry of Finance (786A.13/6–451).
  7. For information, see p. 544.