No. 247
Memorandum of Conversation, by David Longanecker of the Office of African Affairs



  • NEA—Mr. Jones
  • NE—Mr. Kopper
  • NE—Mr. Awalt
  • PED—Mr. McMaster
  • AF—Mr. Longanecker
  • Mr. Charles Harding and
  • Mr. Thomas Kelly, Socony Vacuum Oil Company

Mr. Harding opened the discussion by stating that he thought the Department would be interested in an informal report on the recent discussions between Aramco officials and SAG for the purpose of reaching agreement on various changes requested by the latter in Aramco’s operating arrangements.

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First of all, however, he wished to point out that the mission was very favorably impressed with Ambassador Hare and the work he is doing in Saudi Arabia.

Mr. Harding’s report did not add anything to the information already reported to the Department by Embassy Jidda, other than the views of the mission on the attitude of various SAG officials towards Aramco and the U.S. The Aramco representatives spent the first several weeks at Riyadh, and while there were received by the Crown Prince who was very friendly and asked that he be informed if they were not treated properly. The Foreign Minister, Prince Feisal, attended all of the meetings in Riyadh and contributed a great deal to the friendly atmosphere maintained in the discussions as well as the progress made, despite the tendency of the SAG side to reopen in the morning points on which agreement had been reached the preceding day. During the second week, general agreement was reached on most of the points under discussion and the Aramco representatives were ready to leave when they were called to a meeting with Finance Minister Abdullah Suleiman in Dhahran, at which Deputy Foreign Minister Yusuf Yassin presided. He reopened discussion on all points under consideration, including those on which agreement had been reached. The discussions were resumed at Dhahran but were not nearly as satisfactory as at Riyadh and ended with agreement on only 3 of the 11 points at issue. The discussions were concluded with a statement of the points agreed on and those still to be settled when negotiations are resumed within two months by company officials located in Saudi Arabia. Aramco’s Egyptian counselor, Saba Habashy Bey, is highly regarded in Arabia and was especially helpful during the discussions.

One of the major points at issue is the price used in valuing the crude oil output for SAG taxation. This question was raised very early in the discussions, the SAG representatives taking the position the country is not receiving its share of the benefits from the existence of Tapline. After much discussion, it was finally agreed if the company can present facts proving that its position on this point is valid, SAG will accept it, unless in the meantime SAG develops conclusive evidence to the contrary. The raising of the crude oil price in the IPC agreement just renegotiated with the Iraq Government to $1.51 per barrel was mentioned by the SAG negotiators as a basis for at least examination if not revision of the crude oil price specified in the Aramco agreement.

The mission had an audience with the King who was very cordial but apparently very tired. Abdullah Tariki served as the interpreter at the audience.…

. . . . . . .

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At this point, Mr. Jones asked Mr. Harding if he wished to comment upon the Department’s impression that his mission left Arabia in a very pessimistic state of mind as to the company’s future there.

Mr. Harding replied that the company is not too perturbed over the situation in view of the fact that general agreement had been reached at one point.

. . . . . . .

Mr. Harding also mentioned that their Egyptian problems were of some concern and that he would like to discuss them with the Department in the near future. Mr. Jones replied that we will be very happy to meet with Mr. Harding whenever he is ready and appreciate having had the opportunity of hearing his comments on the discussions in Saudi Arabia.

  1. This memorandum of conversation was prepared on Mar. 14.