148. Telegram From the Department of State to the Embassy in Saudi Arabia1
138345. Subject: Northrop Agent’s Fees. Ref: State 137147.
1. In your meeting with Sultan, request you state that USG is preparing to issue policy statement to effect that no commission will be permitted for sales under FMSA unless it is in a reasonable amount for services rendered by a bona fide commercial agent and has been specifically disclosed to and approved by the buyer-government in advance.
2. We do not believe it would be productive at this sensitive time for you to try to dissuade Sultan from any public statement or publication of documents he might feel necessary.
3. At your discretion, however, you may point out the following:
A. Because of possibility of reviving publicity on Northrop (addressed in reftel) we do not desire to issue any joint statement with Saudis at this time.
B. As noted reftel, publication of May 17 letter would provide basis for questions regarding Sultan’s assertion he stated Saudi policy to you and USMTM Chief as soon as he received Ellsworth letter of March 6.
C. Timeliness of any SAG statement addressing only Northrop problem would seem questionable given possibility that Church Subcommittee or other body may turn up new allegations regarding actions by other US companies in Saudi Arabia.
D. Blanket SAG prohibition of all agents fees would pose problem if, as appears likely, services by local agents such as travel arrangements, translations services, appointments, visas, are essential to effective operations by FMS contractors in Saudi Arabia. New USG policy para 1 would permit SAG to review and approve or disapprove fees proposed for such services in future FMS contracts.
4. At this time, we do not believe you should discuss legal or financial consequences for Northrop or its ongoing programs in Saudi Arabia of Sultan’s prohibition of agents fees in Phase IV. This would [Page 492] seem to be matter best explored at this stage by the company, Khashoggi, and if they so desire, SAG.
Summary: The Department provided guidance for the Embassy regarding the Northrop dispute over commission fees.
Source: National Archives, RG 59, Central Foreign Policy File, P900105–0527. Confidential; Immediate; Exdis. Drafted by Assistant Legal Advisor for Near Eastern and South Asian Affairs B. Keith Huffman, Jr.; cleared by Dickman, Maw, and Fish, and in L/PM; approved by Sober. Telegram 137147 to OECD, June 12, is ibid., D750205–1169. Akins requested a public Department statement on agent’s fees in telegram 4206 from Jidda, June 11. (Ibid., RG 84, Jidda Embassy Files: Lot 79F80, DEF 12–5.13 Northrop)
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