Foreign Relations of the United States, 1969–1976, Volume E–9, Part 2, Documents on the Middle East Region, 1973–1976

20. Memorandum of Conversation¹

Washington, May 23, 1974.

SUBJECT

• US–UK Gulf Talks

PARTICIPANTS

• UK SIDE

  • Michael Weir, Assistant Under Secretary for UN and Middle East Affairs (FCO)
  • Patrick R.H. Wright, Head Middle East Department, FCO
  • John Graham, Minister-Counsellor, UK Embassy Washington
  • Anthony Reeve, First Secretary, UK Embassy Washington

• US SIDE

  • Rodger P. Davies, Acting Assistant Secretary, NEA
  • Sidney Sober, Deputy Assistant Secretary, NEA
  • Francois M. Dickman, Director for Arabian Peninsula Affairs
  • Curtis F. Jones, Director, INR Office of Near East and South Asian Affairs
  • Frank Mau, Office of Fuels and Energy
  • Joseph W. Twinam, Ambassador-designate to Bahrain
  • Philip Stoddard, Deputy Director, INR/RNA
  • J. Thomas McAndrew, Chief, Near Eastern Affairs, INR/RNA

Summary

US–UK consultations on the Gulf centered around the following subjects, proposed by the British: oil, military assistance and sales, Iranian initiatives and intentions vis-à-vis the Gulf and Indian Ocean, Saudi Arabia, the military situation in Oman and prospects for settling the Dhofar conflict, and the two Yemens. The talks revealed no changes of policy on either side, or policy differences. The FCO expects that the present defense budget review being conducted by the new Labor Government will not result in any significant cuts in its presence in Oman or the Gulf. Iran has expressed an interest to both the US and UK in buying sea control ships. The UK’s answer will depend on the defense budget review. Iran plans to station 16 F–5’s in Oman, beginning with 4 this fall on Masirah until an airstrip in Dhofar is paved for the planes. Iran will also add 1000 troops this fall to the 1200 it presently has in Dhofar. Although the British did not feel that Iran intends to establish a permanent military presence in Oman, they doubted that Iran’s military involvement will be as “temporary” as initially envisaged. Sudan may supply a battalion of troops to Oman. The British believe the activity of the Arab League Conciliation Committee for Dhofar has helped Oman and hurt PDRY. British proposals for cooperation with Saudi Arabia are similar to ours. The British are skeptical about any benefits to be gained from providing assistance to PDRY so long as PDRY supports insurgency in Dhofar. On PDRY, they prefer the stick to the carrot approach. End Summary.

Mr. Davies opened by welcoming his British colleagues and noted it was a pleasure as always to see them. He said that, although during twelve years of UK/UK Middle East talks attention had centered in the Levant, those of us interested in the Gulf had seen this latter area accorded a dramatic rise in importance.

Mr. Davies continued by stating his understanding that HMG was interested in learning if there had been any change in US policies towards the Gulf since the two governments’ discussions last September, or whether there was any change in the emphasis of policies remaining in effect. He assured the UK representatives that there had been no change and that we continue to see Saudi Arabia and Iran as the keys to regional stability with Great Britain, whose interests parallel our own, maintaining a position of special importance in the area. Nevertheless, given the Gulf’s increased economic-strategic significance and the fact that our relations are becoming more important, we are willing now to play a more active role there in supporting regional cooperation. We still do not wish to become directly involved as a go-between in the settling of disputes which we feel the parties themselves should work out.

Mr. Weir reciprocated Mr. Davies’ pleasure at the chance to see his colleagues and to take stock of the Gulf situation. He noted that, although he was no stranger to these sessions, he had participated last year simply as a spectator and that it had been three years since he had had first hand experience in Gulf matters.

In general, Mr. Weir continued, HMG does wish to know if the USG has changed or contemplates changing any of its Gulf policies. Conversely, he said, one could ask the same question of the UK. London is in the midst of a defense policy review. This is still going on, but its implications will be discussed with all affected parties. Although Britain withdrew from the Gulf in 1971, it has retained a special position there. British seconded officers are serving with several Gulf states, and Mr. Weir said, they represent to those states a very good value for services rendered. He expressed the personal hope—but with conviction—that the defense review would not cause any major changes in the UK’s current Gulf policy. Mr. Weir said he looked forward to getting into the specifics of today’s agenda, as HMG’s chiefs of Middle East missions, under Minister Callaghan’s direction, had just completed a one week review of the full range of UK policies in that part of the world.

Mr. Dickman outlined an approach to the agenda which would initially handle those items relating to oil, military assistance, Iranian initiatives, Saudi Arabia, Oman, and the two Yemens. Subsequently, remaining items could be covered as time permitted.

Petroleum

Mr. Davies, assisted by Mr. Dickman and Mr. Mau, gave a detailed exposition of USG views regarding the current status of Gulf area oil problems, viz: (1) Aramco parent company participation talks with the SAG, (2) the USG attitude toward participation in general, and (3) the balancing of producer and consumer interests, given not only the new era of participation but also the probably more difficult problem of controlling prices.

Mr. Weir asked if the USG agreed that Saudi Arabia was the key to the oil situation, and agreement was unanimous. Weir also asked, now that Kuwait’s National Assembly has ratified a 60/40 participation split with Gulf and BP, if the Saudis had made moves to alter their 25 percent arrangement with Aramco. Mr. Dickman answered that to our knowledge this was not the case, although Aramco had explained its willingness to tackle this subject at any time the SAG wished to do so. Weir wondered whether the Saudis might be trying to influence the participation and price situation in Kuwait. Mr. Dickman said they were certainly watching events closely and had sent official representatives to Kuwait to be briefed on progress, but he doubted any direct Saudi effort to force a specific outcome. Mr. Mau and Mr. Dickman replied in the affirmative to Weir’s question asking if it was true that buy-back price negotiations had gotten off with the Kuwaitis seeking 98 percent of posted price. Mr. Dickman noted that FEO Director Sawhill had spoken with Gulf Oil Corporation Chairman Dorsey and explicitly sought to have Gulf hold out for less than 93 percent of posted price in these negotiations, even though 93 percent for the first six months of 1974 seems unavoidable. The USG is not overjoyed at these prospects, he added. Mr. Weir said his Government was equally concerned, and although not directly involved yet, would be démarching to Ateeqi on this subject.

Mr. Weir noted that Saudi Minister Yamani, when in London earlier this month, spoke cryptically of a “major effort to get oil prices down.” He asked if there was any substance to this comment. Mr. Dickman replied that we did not yet know whether Yamani was talking specifically of increasing production or whether his reference was to steps the Saudis would take unilaterally to reduce their oil prices. We are not aware that the Saudis have really made up their minds on the production/price question, Dickman said, and added that King Faisal was worried about high prices and that it was the King, and not Yamani, who would make the SAG’s decision on this issue.

Mr. Mau mentioned our recent talks with Nigeria’s Petroleum Minister in which the latter was of the opinion that OPEC would surely cut production before letting prices go down. Also, he said, Exxon has told the Japanese it will have trouble supplying the Japanese market as a result of having lost control of virtually all of its royalty oil. Mau reasoned that it would currently be very difficult to say whether or not there would be downward pressures on oil prices. Mr. Weir raised the question that if other OPEC states met any large Saudi production increases with countering decreases, could perhaps the Saudi action be rendered indecisive? Mr. Wright noted that Iran was becoming progressively more worried about conservation, and that if the Shah moved decisively in that direction, Saudi Arabia might not be the only key to oil supply and price questions.

Mr. Davies asked if combined Third World pressure might not be an effective tool against production cuts and artificial high prices, but Mr. Weir responded that one after another of the LDC’s seemed to have been bought-off by special deals. Mr. Dickman, however, maintained that as time passes, and the depressive effect of high oil prices are felt, Third World pressure will mount and oil producing states will feel it. Mr. Mau noted the opinion currently prominent within the industry that there will soon be excess production capacity.

Mr. Weir asked just what Yamani meant by “low price”—$10.50 per barrel? Mr. Dickman responded that an appropriate low price would be a U.S. landed cost of $7.00 per barrel, but that Yamani’s thoughts probably did not project that far down. Whatever level the Saudis might be thinking about, a huge balance of payments surplus would remain to the producing countries. Mr. Wright remarked humorously that the producers were apparently not out to “solve their surplus problem,” and Mr. Dickman said that if one OPEC member eased up on price, the others would probably work hard to push the price back up again. Mr. Davies said we don’t know how Yamani stands vis-à-vis his Government; Prince Fahd could have told us, but he has not arrived here yet. Mr. Weir then said “We seem to have agreed to wring our hands.”

Mr. Davies stressed his view that the Energy Coordinating Group was the best mechanism for dealing with problems of this sort, but Mr. Weir reported that Yamani had given HMG a firm “no” with respect to such coordination, except possibly within the framework of a “mini-group”—and he was indecisive even on this. Mr. Dickman suggested that perhaps a “group of ten” might be acceptable. He asked whether his British colleagues had any specific ideas on this score, and Mr. Wright replied that he did not think they did at the moment.

Military Assistance and Arms Sales

The discussion then turned to military assistance and arms sales policies. Mr. Dickman summarized USG views that (1) in the Lower Gulf, our arms sale policy should be directly related to the internal security needs of the states of the area and should avoid the introduction of weapons which could have a destabilizing effect; (2) our arms sales in Oman are complementary to and not competitive with the British; (3) although interrupted by the October 73 war, we hope to complete transfer of $2.6 million worth of small arms and ammunition to the Yemen Arab Republic, which will be financed by Abu Dhabi; (4) we believe it would be beneficial for Saudi Arabia or Abu Dhabi to finance Jordanian military training and advisory assistance to the YAR; (5) although we do not intend to become directly involved, we look forward to engaging Saudi Arabia in plans for the long-term rearmament of the YAR; and (6) we did not believe that the Saudis’ agreement to reimburse Egypt for the transfer to the YAR of $80 million in Soviet military equipment indicates a Saudi desire to continue the YAR’s dependence on Soviet Arms. Rather, it is an interim measure pending steps to slowly reorient the YAR to a western arms inventory.

Responding to Mr. Dickman’s presentation on US arms sales policy, Mr. Weir said that HMG’s policies were in agreement and had not changed since we discussed them last summer. The UK shares our desire to avoid a direct military role and does not want to crimp the US style in any way other than normal competition. Mr. Weir said he noted that policy on arms sales to the Middle East had been a hot issue during the October war. The new Labor Government had taken a fresh look at arms sales policy. Less than two weeks ago it reached a decision which essentially coincided with the policy of the previous government prior to the October war. That is, that HMG is prepared to consider requests for arms so long as these do not hinder the prospects for a lasting peace in the Middle East. Weir said that HMG did not plan to make any announcement of this decision but was privately informing the various governments concerned. Its net effect would be to permit a resumption of British arms sales to the area.

Weir remarked that resumption of UK arms sales was unlikely to include significant sales to either Libya or Iraq, countries which in any event had not expressed interest in significant purchases. In response to Mr. Sober’s question, Mr. Weir said that he could not think of any inhibitions regarding UK arms sales to Iran. In response to Mr. Weir’s question about US arms sales to Kuwait, Mr. Dickman said that up to the present we had sold only 20 million dollars worth. Almost all our letters of offer of last year had expired. Our impression was that US aircraft were out of the running. However, the Kuwaitis were still interested in the advanced Hawk. Weir said that there were no major deals pending with the Kuwaitis, although they had expressed interest in tanks and aircraft. Although there was talk of Kuwait’s purchasing Mirages, the British hoped that the Kuwaitis were still interested in purchasing Jaguar aircraft as well as Chieftain tanks. Mr. Wright noted that George Lambrakis of our Embassy London had reported that the Kuwaitis had expressed disappointment at the slow delivery times from the USSR and asked if the Kuwaitis planned to procure arms from the Soviet Union. Mr. Dickman remarked that Kuwait’s dealings with the USSR on arms might be for purchases for third countries such as Syria rather than for Kuwait itself. Also, the Kuwait Defense Minister’s trip to Moscow appeared to be primarily a public relations exercise so that when and if Kuwait decided to buy weapons from western countries, radical members of Kuwait’s parliament could not accuse the Ministry of not having looked into all possible sources of supply. Mr. Weir agreed with this analysis.

Mr. Weir asked about present US policy regarding sale of “blowpipe” type hand-held rocket launchers. Mr. Dickman replied that the US was concerned that should sales of these weapons be made to Arab countries, they might wind up in the hands of terrorists. It was for this reason that we had expressed our concern to the British regarding possible UK sales of such equipment to Arab countries. Mr. Weir replied that they had received no expression of interest from Arab states about these weapons. Mr. Weir remarked that there was presently intense competition to sell missiles to Abu Dhabi. The UK was pushing the Rapier and the French the Crotale.

Mr. Weir asked if there were any new developments in US arms sales to Saudi Arabia. Mr. Dickman replied that there were no significant developments. In April the Saudis had signed a letter of offer for equipping and training the National Guard. The published figures about this deal were incorrect. We did not have a clear idea of how much it would cost since it would extend over 5½ years. As for aircraft, Phantoms appeared to be out of the running but no firm decisions had been reached. The Saudis apparently had purchased Mirages but these would not be for their use. The main constraints to arms sales continue to be Saudi Arabia’s limitations in manpower and management. Mr. Weir said that as far as British programs were concerned, these were now going well. The Lightnings’ problems have been solved and the British have been able to keep personnel within manpower ceilings. However there were still a few financial problems.

Mr. Weir said the Shah had hopes of purchasing through-deck cruisers from the UK. These were essentially small aircraft carriers. The problem, Weir said, was that these carriers do not yet exist. Whether they are built will depend entirely on the Labor Government’s current budgetary review of defense expenditures. The Shah indicated that he will only buy ships which have been tested and used by HM’s Navy, yet he is pressing for their early delivery. Mr. Sober said that the Shah had come to us with a similar request for what we call a sea control ship. He wishes to acquire the capability to operate well into the Indian Ocean with large destroyers. Mr. Sober said that we really had not yet had time to focus on this request. There might be some practical problems, because purchase of these vessels would require a quantum jump in Iran’s naval complement. There is some question whether she has the manpower to handle this increase. Mr. Morton noted that as with the British, the ship the Shah asked for has not been built yet.

Noting that the UK considers its military/security assistance to include the presence of military and civilian personnel, even if reimbursed by foreign governments, Mr. Weir gave the following breakdown of non-Embassy UK military and civilian government personnel in the Gulf:

Kuwait—135-man military training team and 20 civil servants. Total 155.

UAE—100 officers with Abu Dhabi Defense Force (contract and seconded), 60 officers with Union Defense Force, 14 with Dubai Defense Forces, 65 military assistance technicians, 70 civilian technicians, 5 police. Total 314.

(Mr. Wright noted that when we last met, the UAE had been pressing rather hard for a reduction in the British presence. Since then, this pressure had completely disappeared. Shaykh Zayid had recently told them that he wished to retain British personnel in the UAE especially his seconded Chief of Staff. It was true that the number of security personnel in the UAE had declined slightly.)

Bahrain—90 officers and technicians and 15 police. Total 105.

Qatar—95 civil servants, 15 officers and technicians and 9 police. Total 119.

Oman—160 seconded officers, 103 contract officers, 50 civil servants, 90 SAS officers plus about 500 officers and technicians at the RAF base at Masirah and about 300 at Salalah.

Mr. Weir said that the grand total of official non-embassy British personnel in the Gulf and Oman came to 1,958. He stressed that the figures for Oman were very sensitive; HMG would not like them to appear in public. In response to queries in parliament, HMG had not provided such detail about its presence in Oman.

Mr. Weir noted that the Labor Government was presently conducting a worldwide budgetary defense review designed to cut UK spending down to a percentage of GNP more aligned with that of other EC countries. He was optimistic, however, that this would not result in significant cuts in the UK presence in the Gulf because most British personnel in the Gulf were not paid for by HMG.

In response to Mr. Weir’s question, Mr. Sober said that we had no plans for military representation in the Gulf. Our temporary military sales mission in Kuwait was generating a push for a more permanent military presence there, but we in the Department have resisted this. We did not believe that if MIDEASTFOR left Bahrain this would necessarily lead to an increased US military presence elsewhere in the Gulf. Mr. Dickman noted that we had recently assigned a military attaché to Sanaa but this did not signify any basic change in policy.

Mr. Sober noted that while Saudi Arabia and Iran formed the keystone for area stability, mutual cooperation between these two states was not progressing in a satisfactory manner. They do not agree on oil prices, and when the Shah offers cooperative developmental lending schemes, Faisal does not respond. Mr. Wright said the Iranians were taken aback by Saudi slowness—particularly in view of the rapidity of their own responses when the Shah decided upon a course of action.

Iranian Initiatives in the Gulf

Mr. Sober asked if HMG could provide any information on current Iranian military activities in Oman, noting that some fairly heavy equipment was apparently being moved into the area. Mr. Weir emphasized the Shah’s abiding interest in the security of the Straits of Hormuz and in making Iran into an Indian Ocean power, but added that he did not believe that the Shah wished to set himself up permanently on the western shore of the Gulf. However, it was obvious from Khalatbari’s remarks in the CENTO meeting, May 22, that the Shah made an exception of Oman, given its extreme strategic importance to Iran. The FCO had initially been somewhat concerned that the Shah did not inform them of the arrangements he had made with Qabus and about which they had learned through other sources. However, they had now had productive discussions with Iran. The Omanis, Weir said, have asked the Iranians for F–5’s, not Phantoms. While in London recently, Omani Foreign Minister Zawawi requested UK permission for Iran’s using the RAF air strip at Masirah to station four F–5’s beginning this fall, while the dirt air strip at Midway in Dhofar is improved to handle F–5’s.

It should take a year for Midway to be made usable for F–5’s. Eventually, a squadron of 16 Iranian F–5’s is envisaged for Oman, Weir said. HMG realized the likely negative Arab reaction that the stationing of Iranian planes in Oman would produce, but judged that the consequences of turning this request down would be worse. Weir noted that the RAF base at Masirah was an air strip and did not have a maintenance capability for F–5’s. The influx of Iranian air craft at Masirah would probably place a heavy burden on the relatively small British presence there. Also, the stationing of the F–5’s might require the stationing of some American personnel. Mr. Sober said that we hoped this could be avoided. Mr. Weir said that the FCO had been concerned some time ago that Oman was about to buy Mirages but that they now had managed to postpone if not eliminate Omani consideration of this overly sophisticated aircraft.

Mr. Weir said that the UK-seconded Omani Chief of Staff, General Creasey, recently went to Tehran to discuss an additional deployment of Iranian troops in Dhofar which had been requested by Qabus. Creasey and the Iranian Chief of Staff, General Azhari, did not entirely agree about the deployment of troops but this matter was later settled by a discussion between the British Ambassador and the Shah. Azhari wanted the Iranian forces to have control of the whole central sector of Dhofar. The UK thought this was tricky because it was in the central sector that the Sultan was carrying out most of his hearts and minds campaign. Iranian troops unfortunately had a tendency to shoot anything in sight, including the natives’ cattle. The Shah and the British Ambassador agreed that the troops would be confined to the road between Midway and Salalah and some points east rather than covering the points from the Midway/Salalah road all the way west to the Hornbeam line. Weir added that there was a possibility that some of the new Iranian troops would be involved west of the Hornbeam line but not at Simba or near the border. The Iranians would add another thousand troops to the 1200 they now have in Dhofar.

Weir said that at the CENTO meeting Khalatbari had asked to see Callahan to express the Shah’s anxiety over reports that political pressures from the left wing of the Labor party might lead to a reduction in the British presence in Oman. Weir said that Callahan told Khalatbari he could forget about this problem. Khalatbari told Callahan that the Shah was very anxious to have a quick end to the Dhofar war. Weir commented that in HMG’s view, it would be almost impossible to completely eliminate the rebel presence from the area between the Hornbeam line and the PDRY border so long as PDRY could send supplies across the border and offer the rebels safe haven. He added that the Shah probably wanted to end the war quickly to avoid Arab criticism. Foreign Minister Zawawi had come back from a recent trip with a too glib view that the Arabs would not object to a dramatically increased Iranian presence in Oman.

Weir noted that one way around this problem was to increase the Arab contribution to the Sultan’s war effort. The Sudan had offered to supply a battalion of troops to Oman; a Sudanese military mission was presently in Muscat discussing the possibility with the Omanis. Weir commented that surprisingly enough the Saudis had recently raised with the UK Ambassador in Jidda their concern that the new Labor Government would change policy and withdraw British troops from Oman. The Saudis said they hoped this would not be the case. They added that it would be difficult for them to send troops to Oman because it could arouse Arab suspicions of Saudi Arabia’s playing an “imperialist” role in the southern part of the Peninsula.

In response to Mr. Dickman’s question, Mr. Weir confirmed that rebel activity in Dhofar had been relatively low. He guessed that this was largely because rebel supplies had been severely cut. He estimated the present number of rebels to be about 500. Mr. Weir doubted that Iran’s increased presence in Dhofar would goad the Saudis to do something. Rather, the Saudis would probably repeat their argument that they did not want to become involved for fear of being called imperialists. Mr. Weir estimated that even though the number of rebels was small, given the topography of western Dhofar, it would be very difficult to eliminate them. Even if the rebels were suppressed, he wondered whether the Iranians would leave quickly since the Shah might well wish to maintain a military presence in Oman.

Mr. Dickman asked about Oman’s air defense requirements. The US had turned down an Omani request to do an air defense survey, since the UK had already done one and concluded that the cost and the manpower requirements of a sophisticated air defense system were well beyond Oman’s capability. However, we now understood that HMG was offering to sell to Oman air defense equipment and radar. Weir replied that the Sultan’s request for an air defense system dated back to over a year ago when the UK sent a preliminary mission to study Oman’s air defense needs. The mission had come out against a full air defense system but recommended that if the Sultan really pushed for some air defense, the UK should propose a limited scheme including mobile radar. At that time two constraints were paramount in British eyes: (1) Oman’s financial position. Oman was spending too much on defense, over half its budget. (2) Manpower—any sophisticated air defense system would require considerable foreign expertise; HMG would be reluctant to have a significant increase in British manpower in Dhofar because of possible parliamentary criticism. Weir noted that with the vastly increased oil revenues the financial constraint had been eliminated. Oman’s 1974 budget called for £72 million for defense, but this was only a quarter of the £275 million expenditure envisaged.

Arab League Conciliation Commission on Dhofar

Mr. Weir said the Committee’s visit to Oman had gone well. Its formation was basically helpful to Oman. PDRY was unhappy about it. The Committee had asked the Sultan for permission to visit Dhofar. Qabus had replied he would welcome its visit if it also could visit Hauf, the main guerrilla staging point in PDRY. Wright added that the fact that Oman had received the Committee and PDRY had not was a plus for Oman. Generally, Oman seemed to be doing fairly well in an Arab context. Omani Foreign Minister Zawawi had told the British that Boumediene had been very sympathetic to his presentation on Dhofar. Now even Libya had offered to send officers to Dhofar but the Sultan was leery of this, given the Iranian presence there.

US-Saudi Relationship

Mr. Sober explained that although Prince Fahd’s visit to Washington is temporarily postponed, it could well be rescheduled within the next ten days. Mr. Sober stressed (1) that talks with the Saudis are not aimed at setting up a bilateral oil deal, but rather to re-emphasize the continued importance the two countries attach to their long-standing policies of close bilateral cooperation, and (2) that the initial objectives of the Fahd visit were to institute two Joint Commissions: an Economic-Commercial-Technical Commission and a Defense Commission. There were numerous ideas currently afloat about these commissions, Sober continued. Regarding the Defense Commission, for example, we would like to see if Saudi logistic coordination with Iran can be worked out. As for the economic/commercial/technical aspects, these were no secret. In fact, Sober said, many countries have been suggesting this sort of approach to the Saudis. The USG would see what it could do to promote industrialization and other fields of cooperation. We could act as a catalyst for US industry to participate in joint ventures. Mr. Sober stressed that the entire subject of Saudi-US commissions was subject to further talks between the two governments. The Saudis continue to be sensitive over the Middle East situation in general and disengagement in particular, lest they come under attack from their Arab brethren.

Mr. Weir commented that our efforts with the Saudis sound very much like the recent European-Arab dialogue—the object being to engage the Arabs—particularly the oil-producing Arabs—in cooperative ventures which will make it more difficult for them to resort to confrontation at some future date. Mr. Dickman pointed out that a major reason for our wishing to respond to Saudi requests for assistance was to provide incentives needed to encourage the Saudis to continue increasing their oil production. Mr. Sober noted that our principal interest in this matter was economic and financial; the Saudis place higher priority on a joint defense commission than do we. He replied in the negative to Weir’s question as to whether any qualitative change in our defense supply policy vis-à-vis Saudi Arabia was contemplated. Sober emphasized that the USG did not envision a military alliance or the stationing of US forces in Saudi Arabia other than that within the framework of existing USMTM arrangements.

Mr. Weir said that we seemed to be working on very parallel lines. The UK had recently sent representatives to discuss joint projects. It had been difficult for HMG to do this because of fear of favoring some firms over others. However, the firms had eventually agreed among themselves who should be represented. Mr. Sober remarked we had not yet had to face this but it could pose considerable difficulties for us when we did, especially Congressional reaction. Mr. Wright said that HMG had made it quite clear that the group that did go to Saudi Arabia was not in any way exclusive. Mr. Dickman remarked that a problem for us was that on the one hand Saudi Arabia has hundreds of proposals from various companies, but it prefers to work on a government-to-government basis. This is difficult for us to do.

Mr. Weir then gave details of the UK offer to form an industrial consortium with Saudi Arabia, which has recently been “put off” by the Saudis on the grounds that they are not ready to provide personnel and formally institute such a body. It seems, Weir said, the Saudis do not wish to get out ahead of their talks with the US. [At] any rate, he continued, a British proposal was made in detail involving four UK firms:

Burmah Oil	(Petrochemicals)
Rio Tinto	(Aluminum Smelting)
ICI	(Fertilizers)
GEC	(Power/Desalination)

The Two Yemens

YAR: Mr. Dickman expressed the view that tension between the two countries had lessened. Although intermittent incidents continued to occur, YAR President Iryani was wisely continuing a policy which combined the carrot and stick through unity discussions. These unity talks served to let off some political steam even though unity still appeared to be an unrealistic goal. The new Prime Minister, Makki, did not appear to be very effective. However, his leftist reputation was useful in muting pressure within the YAR from the left. Makki had apparently managed to gain at least tacit Saudi approval, even though the Saudis were not happy with the choice. We understood that the Saudi quarterly subsidy had been increased from 20 to 30 million Saudi riyals following Makki’s visit to Riyadh.

Mr. Weir interjected that former Prime Minister al Ayni, when complaining to him some time ago about the ineffectiveness of Saudi assistance to the YAR, had indicated that increased subsidies would be the key to effective Saudi assistance, and thus the increase was significant.

There was a brief discussion between the two sides as to how generous Saudi assistance to the YAR had been. Mr. Dickman suggested that the Saudis have been more forthcoming than the Yemenis generally acknowledge or the British perhaps realize.

PDRY: Mr. Dickman reviewed the US view of the PDRY situation, noting that the internal struggle continues with Salim Rubai Ali unable to take a more moderate position until he is successful in neutralizing the influence of NF Secretary General Ismail. Dickman observed that the opening of the Suez Canal would offer increased commercial opportunities for Aden Port and that this might result in some moderation of PDRY attitudes toward the West and an easing of PDRY’s radical ideological attitudes.

Mr. Weir suggested that it might be possible for PDRY to create a free enterprise port economy in Aden while leaving the hinterland under a socialistic system. Turning to HMG’s relations with PDRY, both Weir and Wright described them as poor and very circumscribed. The main British preoccupation in PDRY was to get Aden to lay off in its support for PFLOAG subversion in Dhofar and the Gulf.

In response to Mr. Sober’s hypothetical question of how the US might handle any approach by PDRY for improved relations, there was a discussion of the “carrot-stick” argument. Mr. Weir noted that the Kuwaitis were the main proponents of the carrot approach but the FCO was skeptical that economic aid to PDRY would improve its behavior. The UK had consistently advised the Saudis that the proper approach to PDRY was first to get a PDRY commitment to cease making trouble with its neighbors and then and only then consider financial help. Mr. Wright noted that PDRY had approached the FCO last year about having a more meaningful relationship but Aden was told that as long as it supports PFLOAG and the Dhofar rebels, there was not very much that HMG could do.

Mr. Sober reviewed the general US position on resuming relations with Arab countries that had broken relations with the U.S., pointing out that while we welcomed sincere approaches to restore relations, we are not prepared to pay an economic price as a quid pro quo for restoration. Mr. Dickman said that we were at the moment reviewing what if anything we might do to respond to recent feelers from PDRY for a dialogue. When Congressman Findley had been in Aden, there were pretty broad hints that the PDRY was interested provided the US would help get the Saudis off of PDRY’s back and indicated a willingness to provide some economic assistance. What would the British think if we were approached by PDRY to open an Embassy or as an alternative an interests section?

Mr. Weir felt that if the US were to resume diplomatic relations with PDRY, it would get very little out of it at this time, other than some reporting. The UK had virtually no dialogue with PDRY authorities. Mr. Wright, on the other hand, thought there might be an advantage to have a US Embassy. It would serve as a counter to the heavy communist presence and it might ease President Ali’s attempts to take a more moderate course. While he did not think that opening the Canal would be all that spectacular for Aden’s economy, he did note that BP was quite bullish. It felt that Aden provided unique bunkering facilities. With regard to an interests section, Wright said that HMG would be delighted to have an American join the Embassy staff in Aden but wondered if the US might not find a better interlocutor.

The British side felt that the “stick” approach had worked thus far. PDRY’s economy was in desperate shape. If it received aid from both the communists and the west, PDRY would more likely continue its subversion than hold back. Weir emphasized that it was important to bear in mind the Arab support Oman now has; conversely PDRY’s isolation from the other Arabs is a helpful factor in the Omani situation. Any US–PDRY rapproachment might disturb this desirable balance and one should be careful in rescuing PDRY from its isolation. The British noted that Congressman Findley’s mission to Aden, while helpful in obtaining Franklin’s release, did little for two other Americans presumably jailed by Aden. Dickman noted that Findley had asked about and been promised a reply concerning Torhan and Kopp.

Gulf States

UAE: Mr. Weir stressed that the HMG is considerably more optimistic about the viability and political cohesion—and hence future stability—of the UAE than the FCO had indicated in its talks last September. The British had previously noted the ambitions of Shaikh Faisal bin Sultan (Under Secretary of the Abu Dhabi Ministry of Defense). However, the Iranians seemed to have scared off Shaikh Faisal from any pretensions he may harbor to replace Shaikh Zayid by telling him that they did not see any substitute to Zayid. Weir added that they believed there appeared to be growing cooperation between Zayid and Shaikh Rashid of Dubai. While Dubai still does not contribute to the UAE budget, Rashid’s relations with Zayid were much better now than they were a year ago. Mr. Dickman said that we generally agreed with this British assessment, having felt that the British were perhaps too pessimistic last year. The fragility of the UAE remains but growing prosperity and economic activity provides a stimulus to leave things as they are.

Turning to the question of the Abu Dhabi boundary dispute with Saudi Arabia, Mr. Weir said there was no evidence of any progress. The Qataris were quietly optimistic about their good offices, but did not expect any forward movement soon. The FCO did not think that anything had taken place at the Islamic Conference in Lahore when Zayid and Faisal had met. The British representatives had the impression that the Saudis were showing even greater caution. The Saudis were concerned lest they make an agreement with the UAE and find shortly thereafter, revolution taking place with a radical regime taking over in the [UAE.?] Mr. Dickman said that the U.S. was continuing its efforts to get both sides to settle this issue without taking on a role as a mediator.

Bahrain: It was agreed that the establishment of a constitutional government and a National Assembly was basically a healthy move. The ruling family, the British felt, was fairly optimistic that orderly constitutional development would occur even though the introduction of democracy to Bahrain was a calculated political risk. Mr. Weir noted that the al Khalifa family might come to feel the need to put the National Assembly genie back in the bottle but this would probably not be possible. On balance, Weir thought the Assembly would become more of a nuisance than a threat to the Bahrain regime. Mr. Weir added that Bahrain’s relative economic weakness, the history of labor unrest, and the Sunni-Shia divisions in addition to the relatively advanced social and educational infrastructure make constitutional development in Bahrain somewhat riskier than the similar earlier experiment in Kuwait. However, Weir noted that the British had been more worried about the stability of Bahrain in the 1950s than they are today.

In response to Mr. Dickman’s question regarding possible pressure on expatriate UK security personnel to terminate their services in Bahrain and Qatar, Mr. Wright said there has been no such pressure, unless one were to count the traditional attacks in the communist and leftist press against Ian Henderson, Bahrain’s Security Director. Henderson has for years, ever since his anti-Mau Mau days, been on the verge of resigning. Mr. Weir mentioned, however, that the UK’s 60-man assistance team in Sharjah, which is not doing very much, may disappear in the course of economy cuts stemming from London’s current defense review.

Asked about Mideastfor, Mr. Sober noted (1) we have not been pressuring the Bahrainis on this issue in the conviction they will ask our Navy to stay on if this is politically possible; (2) we hope the progress now apparently achieved by the Secretary towards a Syrian-Israeli disengagement will give the GOB the leeway it feels it needs, but (3) if we still have no positive signal from them in about one month, we will have to ready ourselves to withdraw. Mr. Dickman added that, although Shaykh Isa obviously wants MIDEASTFOR to stay, the fact that Bahrain is now a parliamentary emirate creates a new situation to which he must pay close attention.

Iraq

The British side said they had very few opportunities to read the Iraqi mind. The Iraqis were very uncompromising on the Palestine issue. They wanted closer relations with the West, not for political reasons but for entirely pragmatic reasons of their need to have access to Western technology and goods. Iraq’s relations with the Soviets remained very close even though there were some occasional strains. The FCO did not have any information regarding the recent exchange of visits by the Soviet and Iraqi Ministers of Interior. However, there was no indication that the Soviets had obtained any special base privileges. Mr. Wright noted that there was a wide gap between the FCO and the British business community. The latter found business in Iraq was profitable and the Iraqis paid well. The businessmen felt that the FCO had been unimaginative and bureaucratic in its dealings with Iraq since diplomatic relations had been restored.

1. Summary: Department officials met with British Embassy officials to discuss strategy and current policy in the Gulf region.

   Source: National Archives, RG 84, Doha Embassy Files: Lot 79F187, POL 1–2, Gulf. Secret. Drafted by Dickman, G. Quincy Lumsden, and Stephen Buck (NEA/ARP).