886A.2553/7–653
No. 300
Memorandum of Conversation, by the
Ambassador in Saudi Arabia (Hare)1
Following my final audience with the King on July 2, I met with Shaikh Yusuf Yassin in the office of the Political Secretariat to discuss several pending matters, one of which was Aramco.
I told Shaikh Yusuf that, as he knew, I never undertook to discuss specific subjects pending between Aramco and the Saudi Government. Such discussion I felt should be confined to the qualified representatives of both sides. However, before leaving Riyadh for the last time, there were certain general observations which I wished to make and I repeated the remarks which I had previously made to the Finance Minister to the effect that a strong Aramco meant a strong Saudi Arabia and a weakened Aramco a weakened Saudi Arabia. This did not mean by any means that Aramco–Saudi relations were a static thing; quite to the contrary, their relationship would obviously be subject to continual change as situations changed. What was important was that this change should take place within a concept of maintaining the strength of both parties. The Saudi Arabian Government could not build itself up at Aram-co’s expense; if it attempted to do so, it would be to its sorrow.
Furthermore, I was convinced that this concept was understood and subscribed to by Aramco. There would, of course, be differences from time to time between Aramco and the Saudi Government but such differences should not be taken as a measure of the basic relationship. For instance, I understood that the question of pricing was now very much to the fore and that agreement had not been reached despite protracted discussion. This was hardly surprising when one considered the complexity of the problem, which had ramifications going far beyond the normal scope of both parties. However, I had talked this matter over at length with Aramco officials and knew that they really wanted to reach a reasonable settlement, [Page 691] and I felt certain that, if the Saudi Government afforded an opportunity, the matter could be adjusted.
Finally, I wished to say a word about the so-called F.T.C. report alleging monopolistic practices by oil companies and I desired to make it clear, as Secretary Dulles had stated here, that this report was as drafted in a special political atmosphere and that it by no means reflected the views of the present administration regarding Aramco. Not only that but it had not even had official endorsement by the previous administration. This should be clearly understood since it would be a great mistake to assume that Aramco was regarded other than most favorably by the American Government.
Shaikh Yusuf, who by this time had been joined by Khalid Gargoni, said he was glad I had mentioned this before departing. He wished to make it clear that he fully appreciated how much Saudi Arabia was indebted to Aramco for providing the means to develop the country and he realized that a strong Saudi Arabia depended on a strong Aramco. However, he could not understand (Khalid Bey joined in with vigorous support at this point) how Aramco could expect the Saudi Government to consent to its giving a 20% discount to its parent companies. If such a practice were brought up before a court it would merit a judgment of robbery. But this situation would no longer be tolerated. The Minister of Economy of Iraq had recently been here and the Saudis and Iraqis had compared notes and found that, whereas Aramco was citing IPC as a competitive reason for not yielding, IPC was giving the Iraqi Government the same story and citing Aramco. As a consequence, the Saudi and Iraqi Governments had decided that this practice must stop and they also intended approaching the Governments of Kuwait and Qatar to elicit their cooperation.
Furthermore, the attitude of the Aramco representatives had been abrupt and discourteous in their negotiations. They did not seem to understand where their best interests lay.
I replied that, as I had stated before, I would not attempt to debate the pricing question but, regarding the negotiating atmosphere and attitudes, it was interesting to hear the same events described in apparent sincerity by both sides in such different terms. I was certain that I knew what was in the minds of the Aramco negotiators and that no offense was intended. In so saying, I was not just trying to defend Aramco, although as Ambassador I was naturally very much interested in the welfare of such an important American enterprise; I was also thinking of the welfare of Saudi Arabia itself. As the time for my departure from Saudi Arabia neared, I hoped that I could feel that this matter would be settled in a broad and constructive spirit.
[Page 692]Shaikh Yusuf replied that I could rest assured on that score and he was certain that Saudi Arabia would reciprocate any good-will shown by Aramco—a statement which, knowing Shaikh Yusuf, I interpreted to mean that such good-will could be shown by full compliance with Saudi demands. However, I feel that the conversation did serve a useful purpose and, on the whole, Shaikh Yusuf’s attitude was considerably more frank than in normal discussion with him. Furthermore, I have found in the past that such conversations with him are usually made the subject of quite accurate record for the information of the King, Crown Prince and others of the Saudi hierarchy.
- See footnote 1, supra.↩