886A.10/7–251: Telegram

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


3. Re Embtel 758, June 28.2 In conversation with Owen June 28 pursuant request for advance from Aramco made previous day (see reftel) Salha pointed out SAG requirements $10 million monthly and thus wld need additional $45 million from Aramco (i.e., approx 50 percent tax due in 1952) to cover expenditures for next nine months (until end new Saudi fiscal year). Salha estimated net income from Aramco at about $3 million monthly (which Owen says approx correct) for period, which in no way sufficient meet needs.

Owen replied he “flabbergasted” by SAG request in view current high level income. Pointed out SAG wld receive fol in addition royalties during next nine months:

$12 million December tax installment, $9 million from customs (based on Salha’s estimate), plus approx $25 million early next year as first quarter installment on income tax due 1952. In this context no apparent need $45 million and he very much doubted Aramco wld agree. (Owen did not mention pilgrimage and other receipts which, [Page 1059] added to above, roughly equal $90 million Salha says SAG needs for next nine months.)

Salha then stated Min Fin wld accept letter from Aramco stating company wld agree pay $50 million during first half 1952.

Meanwhile other signs SAG stringencies are appearing. Dutch Bank reportedly has refused make further advances govt even pursuant an Aramco letter promising payment as result bank’s extended credit position and uneasiness concerning recent financial developments here. On June 27, Dutch Bank unable honor SAG dollar and riyal drafts presented by Bechtel as result current negots liquidate past obligations due that company. Riyals were paid out of Salha’s “private account” at Indochine.

SAG also has had default on installment payment due June 27 to French combine guilding arms factories near Al Kharj and has been unable pay Indochine anything on Saudi gold sovereign contract, even though first 100,000 coins already here,

In view Dutch Bank inability make further advances SAG and continued unwillingness Indochine do so we know of no local source able meet demands. Heat will therefore be on Aramco and mention has also been made in passing of possibility loan from USG although we have not been approached as yet. In view present trend events financial stringencies here during latter portion this year can be expected have important repercussions on Saudi Governmental structure and SAGAramco relations. Shaikh Abdullah’s strong point with King has always been his ability produce funds when needed. If, however, he now unable perform we believe King may be expected react strongly particularly in view growing criticism of Shaikh Abdullah because of his personal habits.

  1. Repeated to Cairo.
  2. Supra.