Foreign Relations of the United States, 1952–1954, The Near and Middle East, Volume IX, Part 1

886A.2553/7–653

No. 299
Memorandum of Conversations, by the Ambassador in Saudi Arabia (Hare)¹

confidential

Jidda, [July 6, 1953]

In the course of a courtesy call on Shaikh Abdullah Sulaiman, Minister of Finance, on June 29, I observed that I had been kept informed of recent developments regarding negotiations between Saudi Arabian and Aramco representatives regarding the matter of pricing, and I wished Shaikh Abdullah to know that, based upon my very thorough discussion of this subject with Aramco officials, I was convinced that they were eager to achieve a solution and were prepared to take any reasonable steps to reach a settlement. However, the matter under discussion was very complicated and depended on various considerations going beyond the normal scope of both Aramco and the Saudi Arabian Government. As a consequence it was to be expected that reaching an agreed solution would be time consuming and frustrating at times but I was convinced that with good will on both sides, and I was sure that Aramco had such good will, satisfactory settlement could eventually be reached.

Shaikh Abdullah said that he was glad that I had mentioned the matter and that he would give a history of what had taken place. His story was essentially the same as that which I had previously been given by Aramco but with particular emphasis on the fact that he had endeavored to facilitate settlement by letting Americans deal with Americans, i.e., by having Messrs McNaughton and Blowers negotiate with Aramco, but they had failed and he had consequently decided to withdraw from the picture and turn the matter over to other authorities. That had been done and the result was that Aramco and the Government were now much further apart than they had been previously; especially than they had been in the period during which he himself had been negotiating when the matter had finally turned on whether Aramco would pay back taxes for 1951.

I expressed my appreciation for this account and added that there were certain general comments which I desired to make regarding the relationship between Aramco and the Saudi Arabian Government. If one were frank one would have to admit that prior to the coming of Aramco and exploitation of Saudi oil resources, Saudi Arabia had been little more than a geographical expression. Other countries of the area such as Egypt, Syria, Lebanon, Iraq, etc., had experienced long periods of development in various fields of activity. They had communications, schools, hospitals, industries, roads, and the various other attributes of a normally modern state, but Saudi Arabia had had none of these. It had been an economic vacuum and, being so, had been a mere skeleton without flesh. All that had been changed by oil and Saudi Arabia was now in the process of building itself up to a position similar to that of its neighbors. Flesh was being put on the bone. Saudi Arabia was becoming strong but it had only become strong because of Aramco and Aramco in its turn had grown strong, too.

All this led, as I saw it, to the conclusion that, dependent as it is on a single source of income, a strong Aramco means a strong Saudi Arabia; a weak Aramco means a weak Saudi Arabia. And in this latter connection, I had been both surprised and somewhat concerned to note what had appeared to be a recent tendency in certain circles in the Saudi Arabian Government to treat Aramco as something to be attached rather than something to be supported. It was, of course, to be assumed that problems would arise from time to time where Aramco and the government might have different ideas but these were not serious if the two parties settled such differences in a spirit of cooperation. It was quite a different thing when a policy was followed of nagging at Aramco and seeming to want to weaken it. Such a policy could only end in hurting both the Government and Aramco and do no one any good.

Shaikh Abdullah replied that it was quite true that there had been a change in attitude toward Aramco and he thought it was very important since he agreed fully that a strong Aramco meant a strong Saudi Arabia. The trouble seemed to be that Aramco was resorting to undue haggling when clear-cut action was required. A case in point was the payment for services rendered by the Government on Tapline where Aramco had been bargaining with the Government for some time and the matter still remained unsettled. Also Aramco did not seem to appreciate the necessity of getting along with the Ministry of Finance which was the Ministry under whose jurisdiction it came. As a consequence many of its problems were being brought before other authorities and the situation was getting steadily more complicated and difficult.

I asked Shaikh Abdullah if he had any recommendations as to how this problem might be put right. He added he had two suggestions. The first one was that Aramco should quit quibbling and settle the Tapline payment question. The second was the matter of pricing. It was true that he had retired from participation in this matter but if Aramco were to tell him that they would include 1951 in their recent informal agreement which they had reached regarding 1952 and 1953, he would undertake to go to see Prince Faisal and endeavor to persuade him to accept such a solution, and he thought that he would have quite good prospects of being able to do so.

Shortly after this meeting I saw Floyd Ohliger, Vice President of Aramco, who was in Riyadh at the time and told him of my conversations. He was very appreciative and said that he would follow up the matter with his principals but that he thought it inadvisable to mention the matter to Shaikh Abdullah immediately since he had no firm directive. Later he told me that he had seen Shaikh Abdullah on other matters and that, although pricing had not come up, Shaikh Abdullah had been very friendly and that he (Ohliger) thought that my conversation with him might prove to be very useful. He said that Shaikh Abdullah had frankly admitted that he was personally responsible for certain restrictive measures being imposed on Aramco now but had said that he frankly thought that the whole Aramco-Saudi relationship at the present time was rather absurd and that both sides were acting like children. He felt that they should settle their differences in their mutual interest.

1. Despatch 4 from Jidda, July 6, transmitted the source text and the memorandum of conversation with the Deputy Foreign Minister, infra. According to the despatch, the talks had taken place during the Ambassador’s recent visit to Riyadh, and Aramco representatives had been advised of their substance.