155. Briefing Memorandum From the Assistant Secretary of State for Near Eastern and South Asian Affairs (Atherton) to Secretary of State Kissinger1

Strategy for Your August Visit to Saudi Arabia


Your basic purpose in making a stop in Taif is to enlist Saudi support for phase two of the Egyptian-Israeli disengagement. You will [Page 518] also seek to strengthen in King Khalid, and in Prince Saud bin Faisal, the new Minister of State for Foreign Affairs, the conviction that you personally, and the United States as a government, are firmly committed to a final, peaceful settlement of the Arab-Israeli dispute. Additionally, you should seek to reassure the Saudis, including Prince Sultan, the Minister of Defense, of our commitment to support the modernization of the Saudi armed forces.

Specifically, your objectives will be:

—to allay Saudi fears that the implementation of this agreement will diminish our concern for further progress, particularly on the Syrian-Israeli front;

—to elicit Saudi support in our efforts to obtain Syrian acceptance of the Israeli-Egyptian agreement;

—to reassure the Saudis that, despite Congressional actions toward Turkey and Jordan, the Administration remains desirous of continuing to respond to the needs of those countries for military equipment and that the Administration would take the strongest action possible to insure that nothing disturbs the harmonious military supply relationship now existing between the United States and Saudi Arabia;

—to encourage the Saudis to use the leverage of economic assistance on the Somalis toward the end of reducing and ultimately removing the Soviet presence from Somalia;

—to encourage the Saudis to move ahead on their program of military assistance to the Yemen Arab Republic by reaffirming our willingness to sell reasonable amounts of military equipment;

—to assure Yamani that we wish to reach mutually satisfactory progress through the reconvened Preparatory Producer-Consumer Conference and subsequent dialogue, and to emphasize the deleterious effect on the Free World’s economy if there is another OPEC price increase.


The assassination of King Faisal on March 25 did not disturb the fundamental internal political stability which has characterized Saudi Arabia for the past decade. Indeed, the smoothness of the transfer of power provided visible evidence of the stability of Saudi governmental institutions. The previous cabinet continued with only one major change: the appointment of one of the late King’s sons, Saud bin Faisal, to the vacant position (following Saqqaf’s death) of Minister of State for Foreign Affairs, from his previous position as Deputy Minister of Petroleum and Minerals.

The country now enjoys a form of dual leadership in which the hard-working and competent Crown Prince Fahd relieves the quieter, [Page 519] more retiring King Khalid of much of the burden of complicated international and technical affairs. The King personally prefers a ceremonial role but is forced by his position to participate in discussions for which he is by education and experience inadequately prepared. Care must be taken to extend to him, at least outwardly, the deference and respect accorded his more capable predecessor. It is likely that Crown Prince Fahd will participate in all of your discussions with the King. These discussions may take the form of a three-way dialogue in which you speak to the King, who turns to the Crown Prince to reply. When unassisted, the King has been known to ramble, to reply with pat cliches, and to stray from the topic at hand.

One other noteworthy change accompanying the accession of King Khalid was the elevation of Prince Abdullah to the position of Second Deputy Prime Minister, the number three position of leadership. Prince Abdullah remains Commander of the National Guard. He is likely to attend the meeting with the King, but may be reluctant to speak, [less than 1 line not declassified]. The elevation of Abdullah to the number three position was strictly in accordance with the principle that the senior leadership positions, unless declined, are awarded to the sons of King Abd al-Aziz ibn Saud in order of descending age. While Minister of Defense Sultan, junior to Abdullah, had no right to expect the number three position himself, and has suffered no diminution of his own personal power, he chafes under the new arrangement which now, in meetings of the Council of Ministers, places Sultan in a position of deference to Abdullah, with whom he could previously contend as an equal.

Our bilateral relations, while outwardly good, are troubled by Saudi dissatisfaction with what they view as a lack of dispatch in responding to requests for armaments; by doubts raised by Congressional treatment of arms requests for Jordan and Turkey; by embarrassing revelations of the Church Subcommittee that SAG funds have been used, in the USG-supervised Northrop F–5 contract, to pay large agents’ fees to a Saudi businessman, Adnan Khashoggi, who may have made improper payments to Saudi military officers; by different approaches over the formula for reconvening the preparatory conference of oil consumers and producers; and by the SAG position on the Arab boycott and its anti-Jewish visa policy.

The Saudis’ main concern in talking to you, however, will be over the question of future Israeli withdrawals in Sinai and Golan. Since this second phase of the withdrawal has taken so long to achieve, the Saudis will be asking for your prognosis concerning future withdrawals. The Saudis will be concerned about the absence of substantial progress on Golan and its effect on President Asad’s position. The Saudis view Asad as a moderate in his own environment and will be [Page 520] concerned that a lack of progress on the Syrian front will weaken his domestic position.


In your opening remarks to King Khalid you should begin by paying tribute to the memory of King Faisal, from whom you received much wisdom and good counsel. You should state that you look forward to the benefit of similarly good counsel from His Royal Majesty. You have already heard of His Majesty’s concern and interest in improving the standard of housing and medical care in the Kingdom. All of our efforts, in fact, are directed toward bringing peace to the entire region so that each nation’s resources can be utilized in improving the standard of living of all of its citizens, just as His Majesty is attempting to do in Saudi Arabia.

In reviewing the steps which have led up to the present state of the Middle East peace talks, you should:

—describe the delicate political situation in Israel and how this complicates negotiations;

—reiterate the need for continued Saudi support of Egypt, especially against attacks from Iraq and Libya;

—underline our commitment to do as much as possible to promote movement on the Golan front, as well as Sinai;

—express appreciation for Saudi support of Palestinian moderation during these delicate negotiations and our hope that such Saudi support will continue;

—discuss the consequences of a move to expel Israel from the United Nations and request active Saudi support in forestalling—and, if necessary, opposing—any expulsion effort.

The most difficult point will be to obtain Saudi support of a Sinai withdrawal in the absence of any simultaneous withdrawal on the Golan Heights.


(1) Military Supply Relationships (See Background Memorandum)

The Saudis have become very concerned at the treatment by Congress of Turkey and Jordan over arms sales to these countries. They are puzzled that we could treat an ally like Turkey or a close associate like Jordan in such a fashion. They are also concerned that Congress may pass restricting legislation, such as Senator Kennedy’s proposal for a six-month moratorium on arms sales to the Persian Gulf. The Saudis have wondered aloud to a number of recent visitors (including Senator Mansfield and Army Chief of Staff Weyand) whether the US is a reliable partner for an important political/military relationship.

The Saudis have also been watching closely how we respond to their different arms requests. Before Ambassador Akins left on leave [Page 521] in mid-June, Prince Fahd and Prince Sultan pressed him hard for decisions on a number of items, some of which are new. Saudi unhappiness was alleviated to some extent when the Ambassador was able to come back a few weeks later and indicate we were prepared to sell 50 TOW launchers and 500 missiles (an initial portion of a larger order), with deliveries within 120 days of Saudi acceptance, and to lend 24 rehabilitated 155mm howitzers pending the manufacture and delivery in 1977–78 of an order already contracted for. There remain, however, a number of outstanding requests which have been delayed either because (a) they are new and require a policy review and decision (i.e., armored personnel carriers, M–60 tanks); (b) presentation to the Congress has been delayed in light of recent Congressional reaction over the Hawk sale to Jordan (i.e., construction of harbor facilities for the Saudi navy) or (c) a decision has been put off pending completion of the reassessment (i.e., briefing on advanced aircraft—F–14, F–15, F–16, and F–18).

Saudi sensitivities have been further heightened by the activities of Senator Church’s Subcommittee. Recent revelations by Northrop before Senator Church on agents’ fees have implicated Saudi military officers. The Saudi leadership is concerned lest it be in for more disagreeable surprises when the Subcommittee scrutinizes the activities of other American companies supplying military equipment or services. Prince Sultan has recently affirmed, in the presence of his senior generals, his opposition to the use of SAG funds for agents’ fees for military purchases, while also maintaining that he is unable for legal reasons to insist that the TRIAD firm of Adnan Khashoggi agree to terminate its agency agreement with Northrop. Northrop maintains to us that it will be unable to pay the required agents’ fees out of company profits alone and that it will therefore be unable to conclude further contracts in Saudi Arabia. Sultan has taken the position that since the Northrop contract is administered by the USG under a government-to-government Foreign Military Sales case, that it is the responsibility of the US Air Force to provide technical and advisory personnel for the F–5 program if Northrop should withdraw.


—We have very much in mind pending Saudi requests for various military equipment and services, and we will do all in our power to be as responsive as possible. As you know, I asked Deputy Secretary of Defense Clements to visit Saudi Arabia last April. I am aware that there are a number of outstanding requests that have not been responded to. We should plan to have another meeting of the Joint Security Commission fairly soon for another in-depth review.

—During the period of our reassessment of the state of affairs in the Middle East and at a time when Congress is taking increased [Page 522] interest in all aspects of our arms sales, there have inevitably been some delays and obstacles which we must work together to overcome. We have no intention of slowing down the process of responding to Saudi requests, but the degree of public interest does require careful consultation with Congress to get the understanding needed to proceed with these requests. The Saudis must be patient and accept our assurances that we are moving as fast as we can.

—It is reasonable to assume that as we make more progress toward a permanent peace in the Middle East, we can expect Congress and the American public to become less sensitive to the sale of military equipment and services destined for defensive needs of countries in the Middle East.

—In response to my own inquiries into the matter, I understand that the Department of Defense will soon be ready to brief the Royal Saudi Air Force on the F–14, F–15 and F–16 aircraft and a concept briefing on the F–18; and that DOD will soon be proposing dates for this briefing. The Administration will shortly begin consultations with the Congress to insure its understanding of the considerations which led us to respond positively to Saudi wishes.

(2) Petroleum

Oil Minister Yamani had indicated earlier that if a consumer/producer conference were to have any impact on oil prices, the conference should take place before the OPEC Ministerial on September 24. We have explained to Yamani why this is not possible. We expect the French will issue invitations by the end of August to a resumed Preparatory Conference in October. This, we believe, will help moderate the size of any oil price increase.

Meanwhile, Yamani is insisting on—and we have agreed to—the creation of a fourth Commission on Monetary and Financial Affairs. The Saudis are interested primarily in seeking a mechanism that will protect the value of their investments from inflation. Our problem has been that the Saudi terms were so sweeping and vague that this fourth Commission could have ended up preempting work of the Group of 20. We are also concerned lest we get trapped in trade-off positions between financial issues and raw material issues. We have now accepted the establishment of a fourth commission but with terms of reference that will limit its discussion of monetary reforms and concentrate on the issues before the three other commissions.

Yamani also says that the success of the Prepcon can only be assured if there is prior agreement on membership, how members are selected, the functions of the secretariat, and the means of inter-commission coordination. We recognize that these problems exist but we believe that if all participants approach these procedural problems with a view to working them out, they should be quickly resolved.

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—We are concerned over the serious international economic effects that another increase in the price of oil would cause. We are also concerned over the domestic effect such an increase would have on inflation and unemployment, and on the progress we are beginning to make toward economic recovery.

We would be interested in Saudi views on what can be expected at the next OPEC meeting. We hope the Saudi Government will take a long-term view of any decision on oil prices and use its influence to hold the line against increases at the September OPEC meeting, since it alone has the power to do so. Saudi Arabia’s security—like our own—ultimately depends on achieving a strong and healthy world economy.

—We are moving forward with our plans for the Prepcon which we expect will resume in October. We are pleased that most of the procedural issues have now been resolved and we feel that those remaining can be dealt with quickly provided there is good will on both sides.

—On the question of the fourth Commission on Monetary and Financial Affairs, because of the importance we attach to our relations with Saudi Arabia and the major contribution we expect it to make to the producer/consumer dialogue, we have agreed to its establishment. We expect in return, however, that the Saudis will agree to limit its terms of reference to assure that the commission does not get into areas which are within the competence of existing and responsible international financial institutions such as the IMF and IBRD.

(3) Somalia

Following a major educational effort to acquaint the Saudis with the nature of the Soviet presence at Berbera, during which briefings, including aerial photos, were presented to Prince Saud, Kamal Adham (the King’s chief intelligence advisor) and Minister of Defense Prince Sultan, the Saudis recognized the danger posed by the Soviets. In May, June, and July, SAG officials asked if the US was prepared to cooperate in an attempt to induce the Somalis to remove the Soviets. On July 14, Prince Saud reiterated questions previously asked: would the US agree to supply Saudi-financed US arms to Somalia to replace Soviet weaponry; would the US share equally the cost of replacing the $60 million in Soviet economic aid now being provided? Our response to date has been to state that our position is still under study in Washington, but that Kenyan and Ethiopian sensitivities make the question of arms sales to Somalia an especially sensitive issue. It is likely that the SAG will take advantage of your visit to seek clarification of our position. Failure to show continued interest in this problem will strengthen their present suspicion that we raised the issue of Berbera to sell our position on Diego Garcia to the Congress.

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—We appreciate the SAG’s realization of the importance of this issue and of the threat to the region and to international shipping, posed by the Soviet presence in Berbera. We share the desire to wean Somalia away from dependence on the Soviet Union.

—We are considering a modest aid program in Somalia as evidence of our desire to improve relations and as a test of Somali responsiveness. We have withheld discussing this matter with the Somalis pending this opportunity to consult with the SAG. We would now encourage the SAG to make its own proposal to the Somalis, making it clear that substantial aid is contingent upon Somali steps to limit or reduce the Soviet presence.

—We believe that consultations with Ethiopia and Kenya on arms sales are premature and should only be undertaken when we can be absolutely certain that US arms would be acceptable to the Somalis. Otherwise such a step would needlessly alarm these two countries whose continued cooperation we depend upon for maintenance of stability in the sensitive and strategic Horn of Africa.

—Our long-range objective is the closure of the Soviet base at Berbera and the elimination of Somali dependence on the Soviets. While undertaking our own modest aid program, we would welcome and would support any Saudi efforts directed along these same lines. If the SAG should wish, we would be prepared to consult with it in evaluating projects in which additional foreign aid would be most productive.

(4) Modernization of the YAR Armed Forces

We continue to await a firm Saudi commitment to the modernization of the armed forces of the Yemen Arab Republic (YAR). In a letter from Ambassador Akins to Prince Sultan at the end of May, we made a variety of recommendations to the Saudis on how to proceed with the modernization program. The letter stressed that, although we support balanced tri-service development, emphasis should be given first to modernization of the Yemeni army. The Saudi response to the letter was somewhat ambiguous. After the Yemenis threatened at the beginning of July to turn to the Soviets for military training and equipment, the Saudis promised to make specific commitments to the Deputy Commander-in-Chief of the YAR army, Lieutenant Col. Al-Ghashmi, when he visits Riyadh as the head of a Yemeni military mission to Saudi Arabia (now scheduled for late August).

In order to be as helpful as possible, we have transmitted to our Embassy in Jidda letters of offer covering a $1.5 million “impact package,” which would be a first demonstrative step in a larger program. Later steps which we have proposed to the Saudis include a shipment [Page 525] of 1,300 rifles—to equip one Yemeni infantry brigade; engineering equipment; and eventually equipment and training to cover the whole spectrum of an adequate modernization program. We do not really have any idea at this point of what the Saudis want, for they have not responded to many of the principles and concepts which were proposed in our May letter. If current Saudi thinking is still along the lines reflected in the shopping list which they gave to us in September 1974, they are thinking in terms of a program with a total cost in the range of $50 to $100 million.

We have tried to avoid pushing the Saudis too far on this program, lest they revive the position they held until late last year—that is, the United States should pay a substantial portion of the bill. At the same time, we have encouraged the Yemenis to try to get the Saudis to commit themselves to a real program.

It would be appropriate for you to raise the subject with the Saudi leadership, and note the importance we attach to it. This would serve to remind the Saudis of our continuing commitment to the program, and perhaps increase their forthcomingness with the Yemenis.


—The political conditions in the Yemen Arab Republic seem to be quite stable at the present time. I understand that Col. Al-Hamdi has been quite successful in removing leftist elements from his government and from the armed forces, while at the same time maintaining a modicum of support from moderate leftists within the country. These are salutary developments, but if they are to be maintained, Al-Hamdi must also be able to show his internal opposition that he can win adequate foreign support for both economic and military development.

—I understand that your government has been very generous—in the amount of some $700 million—in commitments of economic support to Prime Minister Al-Ghani when he visited here a month ago. This is certainly a wise policy on your part, since Yemen—with her large population—will inevitably play an important role in Arabian Peninsula affairs, regardless of her economic condition. I am sure you agree that developments in South Yemen (PDRY) will be most significantly influenced by progress in North Yemen.

—I understand that you are now prepared to make specific commitments to modernize the Yemeni armed forces, and I wish to applaud your wisdom and foresight in this decision. As you know, we stand ready to work with you, to provide equipment and training as appropriate for North Yemen’s defensive needs. To this end we have delivered letters of offer to cover an “impact package”, which we think would be a prudent demonstrative start on a comprehensive program. We are further prepared to offer you further letters of offer covering such things as infantry rifles and engineering equipment for early delivery.

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—For the overall program, however, we would like to know more about your thinking. We wish to work with you, but in order to be responsive, we need to know more about your plans. If you will give us the broad outlines of what you have in mind for the Yemeni army, navy, and air force, we will fill in the details and make appropriate offers.


Briefing Memorandum From the Assistant Secretary of State for Near Eastern and South Asian Affairs (Atherton) to Secretary of State Kissinger

Saudi Agent’s Fees


Problems arising from publicity over the enormous commissions being paid by American firms to promote sales of defense articles and services to the Saudi Government threaten to strain US-Saudi relations. They revolve primarily around the activities of Adnan Khashoggi, a Saudi citizen with close ties to senior members of the royal family, whose Lichtenstein-incorporated TRIAD company is agent for Northrop, Lockheed, Raytheon and other American companies. This memorandum summarizes the disclosures to date, those which can be anticipated, and steps we are considering to deal with this situation.


Northrop’s F–5 or “Peace Hawk” program with the Saudis under the Foreign Military Sales program began in 1971 and is divided into five phases rising in contract value from $42 million for Phase I to possibly $2.04 billion for Phase V now under negotiation (see attached table). Northrop’s agent, Khashoggi, is contractually entitled to a 4–5% commission on all Peace Hawk contracts.

Under US regulations governing the FMS program (now being revised), sales commissions could be included in the recoverable costs of the contract without being specifically identified to the buyer government if DOD concluded they were reasonable. DOD’s test for reasonableness appears to have been largely subjective and until recent months had seldom rejected a proposed agent’s fee. As the price of Peace Hawk contracts escalated, it became necessary for DOD to evaluate the reasonableness of proposed agent’s fees far exceeding those it had [Page 527] ever dealt with. This coincided with the Church Subcommittee inquiry into Northrop’s overseas commission payments sparked by disclosure that the company had channeled illegal campaign contributions in the US through one of its European agents.

Instead of seeking discussion with the Saudis on the fee problem and without consulting the Department or the Embassy, DOD sent a letter on March 6 to Saudi Defense Minister Prince Sultan through the mail stating that it could not evaluate the reasonableness of the proposed agent’s fee of at least $45 million for the Phase V contract. It followed this up with a similar inquiry regarding the $23 million fee for the Phase IV contract which had already been signed. Sultan reacted by saying he had no knowledge of prior agent’s fees and directing that none be paid for FMS sales to his Ministry. Though we were eager to comply, Northrop advised us that its contract with Khashoggi required commissions on all Peace Hawk sales and that the company could not continue its program in Saudi Arabia unless it could recover commission costs.

In his recent trip to Jidda, Ambassador Akins discussed this problem with Sultan who agreed to ensure that Khashoggi would waive his contract rights to permit Northrop to continue its Peace Hawk program. Khashoggi, however, argued his case stating that Sultan had no authority to compel TRIAD, a non-Saudi company, to terminate its agency agreement with Northrop. Sultan has now shifted his position saying that he cannot interfere with Khashoggi’s contract while continuing to insist that the USG ensure that no agent’s fees are paid on Peace Hawk, if necessary by changing contractors or assigning US Air Force personnel to carry out the project.

We consider that Northrop’s involvement in the project is essential to its smooth continuation and we are exploring means to this end with DOD and Northrop representatives. These could include assigning blue suiters (DOD estimates about 500 would be required), having another company take over the maintenance/training/construction part of the program, or encouraging Northrop obtain a release from its contractual obligations to Khashoggi. Though we contemplate no further exchanges with Sultan at this time, Ambassador Akins upon his return to Jidda may be able to detect more flexibility in the Saudi position than is apparent in past formal pronouncements.


The Church Subcommittee, Senator Proxmire in his capacity as Chairman of the Banking, Housing and Urban Affairs Committee, and the SEC are all jockeying for position to scrutinize Lockheed’s overseas sales promotion payments. These total $202 million since 1970 with nearly half going to Khashoggi. Since all Lockheed’s sales in Saudi [Page 528] Arabia are direct, we do not anticipate any legal complications such as those generated by Northrop’s problems. However, full disclosure of Lockheed’s payments may prove far more damaging to Saudi-US relations since we understand that the Lockheed documents strongly indicate payments through Khashoggi to [names not declassified] high Saudi officials. In the Northrop case, illicit payments could only be traced to two Saudi Air Force generals.

Lockheed’s legal counsel has agreed to permit us to read potentially damaging documents when and if they conclude that their public disclosure is imminent. The Church Subcommittee now has some 124 documents and is planning to have hearings early in September.


Raytheon expects to follow Lockheed on the block. Its sales to Saudi Arabia have also been outside of the FMS program and produced something in excess of $50 million in commissions for Khashoggi. Raytheon is currently negotiating a contract for additional Improved Hawks, equipment, and training which could approach $1 billion where the agents fee might exceed 20%. Raytheon, however, realizes that the commission is too large to justify as fair payment for services rendered and has decided it must discontinue negotiations unless it can secure a release or an amendment of its contract with Khashoggi.

As with Lockheed, we will seek advance disclosure from Raytheon of information likely to be developed in the course of Congressional scrutiny likely to damage Saudi-US relations.



Northrop Peace Hawk Program

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Peace Hawk Purpose of Program Date Contract Signed Contract Amount ($ millions) TRIAD Commission ($ millions)
I Sale of 20 F–5 trainers July 1971 42 1.2
II Sale of 30 F–5E September 1971 118 3.7
III Maintenance/Training/Construction for Peace Hawk I and II April 1972 145 5.7
IV Sale of 40 F–5E and 20 F–5F January 1975 769 23.0*
V Maintenance/Training/Construction for Peace Hawk IV Under negotiation 1,400– 45–88
III Ext. Extension of Peace Hawk III until Feb 1976 July 1975 266 none authorized**

* Northrop has paid a $6 million advance to TRIAD.

** This contract was signed on July 29, 1975, by the Saudis subject to assurances by Northrop that it has not nor will it pay any commission. Northrop has of this writing informed DOD that it has obtained a release from TRIAD on commission payments for this portion of the Peace Hawk program.

  1. Summary: Atherton provided Kissinger with talking points and background material in preparation for Kissinger’s trip to meet with King Khalid at Ta’if in September.

    Source: Library of Congress, Manuscript Division, Kissinger Papers, Box CL 209, Geopolitical File, Saudi Arabia, June 2–August 30, 1975. Secret; Nodis. Drafted on August 19 by Cecil, Molineaux, and Dickman; cleared by Special Assistant Roger Sorenson (E), Deputy Director of the Office of Fuels and Energy Lawrence Raich (EB/FSE), Fifer, Donald R. Niemi (PM/ISA), and Robert Barrett (AF/E). Two attachments are not published: a briefing memorandum drafted on August 14 by Dickman, entitled “Status of Saudi Arms Requests,” and an undated background paper entitled “Status Report on the Joint Economic Commission.”