134. Telegram From the Embassy in Saudi Arabia to the Department of State1

3974. 1. At dinner last night, I tackled SAMA Governor Anwar Ali2 about growing Saudi military expenditures. Told him about Fahd’s [Page 432] request to extend Hawk payments schedule and Sultan’s modified request payments be equalized under existing schedule. He seemed unaware Saudis currently considering additional, costly naval, coast guard, artillery and other programs. I noted Saudis are shortsightedly building up heavy future financial liabilities for equipment, much of which they show little capability of effectively using. I urged that he, Gov Ali, use his influence to try to curb current Saudi military appetites.

2. Gov Ali indicated he equally concerned. He stated even MinFinance Prince Musa’ad, whose tightfistedness is proverbial and who has constantly been strongest opponent of more military purchases, has recently apparently been won over to the view that urgent arms purchase requirement exists. Musa’ad had recently told him planned to dip additionally into reserves to pay for arms purchases. Musa’ad overruled Ali’s strong demurral. While having to follow MinFin’s instructions, Gov Ali claimed he has written letter to King Faisal pointing out that if SAG continues dip into its reserves at present rate, they will be exhausted (apart from those committed to currency cover) in two years’ time. He deplored continuing subsidy payments to UAR and Jordan and heavy military spending, which divert funds from needed economic development projects. Said he is making this point to anyone who will hear, but current Saudi phobia about Communist encirclement causes his argument fall on deaf ears. Nor does there seem be any awareness rapid obsolescence weapons systems. Gov Ali blamed Adnan Khashoggi3 for encouraging more Saudi military purchases.

3. I told Gov Ali that I was probably only Western Ambassador here who has not sought to peddle arms. We have indeed sold military equipment and services to SAG in response specific requests and in context close USGSAG bilateral agreement, but have consistently urged Saudis not buy what they cannot use or do not need. We value our relationship with SAG and do not wish be negative or unsympathetic re legitimate Saudi concerns. In this context, however, we are continuing efforts somehow find way persuade Saudis not to overindulge in expensive weapons systems of only cosmetic or marginal value to them. I hoped he and I might quietly carry on complementary dialogue with SAG to this end. We agreed discreetly keep in touch on subject.

  1. Source: National Archives, RG 59, Central Files 1967–69, DEF 12–5 SAUD. Secret; Limdis.
  2. Anwar Ali, a Pakistani accountant, was Governor of the Saudi Arabian Monetary Agency (SAMA), which operated as the Kingdom’s central bank. King Faisal recruited Ali from the International Monetary Fund for the purpose of handling the financial ramifications of Saudi overspending.
  3. Adnan Khashoggi, an international businessman, middleman, and arms broker, amassed a fortune in business deals related to Saudi military purchases. Khashoggi had made the initial suggestion to invite Prince Fahd to the United States, but Saunders informed Chapin, May 2, that an invitation through Khashoggi might embarrass both the Prince and King Faisal. Saunders suggested that the invitation come from Rogers through the Ambassador. (National Archives, Nixon Presidential Materials, White House Central Files, Box 8, Subject Files, Confidential Files, CO 128 Saudi Arabia, 1969–1970)