157. Telegram From Secretary of the Treasury Blumenthal to the Department of State1

Blumto 73/1261. For the President from Blumenthal. Subject: Prince Fahd-Blumenthal Talk.

1. After a courtesy call on King Khalid here this afternoon (October [28]), I had an hour’s meeting with Crown Prince Fahd. Fahd made a number of points which I want to summarize briefly for you in this message. I will be reporting more fully later on this talk and my options here.2

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2. On oil pricing, I expressed your deep appreciation for the Saudi moderate position. I said I was happy to be able to tell Fahd that the Shah had told me yesterday that Iran would be willing to accept a price freeze at Caracas if that were the OPEC decision.3 Fahd welcomed this “very good news”. He said the Saudi Government was convinced that a price freeze would be in the interest of the free world. He said they hoped to convince other OPEC members to freeze prices—say, for another year. (He was more positive on this than Yamani had been with me earlier this afternoon). I thanked him and said that the decision on oil pricing in December could have a critical effect in the coming year on the effort of many countries to control inflation and turn their economies around in a positive way. Inasmuch as Fahd had also expressed concern over the dollar, I said an oil price freeze would definitely be helpful, assuring him that the dollar remains fundamentally sound. Fahd reaffirmed that it is not repeat not Saudi policy to use oil as a political weapon, he explicitly denied contrary reports which he said had been carried in Soviet/Arabic broadcasts.

3. On Arab-Israel problems, Fahd very strongly expounded the need to move ahead to Geneva, and emphasized the primacy of the U.S. role in the peacemaking effort. He said the Arabs based their hopes on you. The Arabs wanted peace, and there was still time to work out a just solution. This must include, he said, establishment of a Palestine state on the West Bank and Gaza. Failing that, he said, things would drift back to a situation which could help only the Soviets. I assured him of your continuing commitment to do everything we could to help bring about the Geneva Conference and successful negotiations between the Arab states and Israel, and I promised that I would relay his remarks to you. I stated that while we had an important role to play, you were counting on Saudi Arabia to continue its own very helpful efforts.

4. Fahd made a strong pitch on the F–15. He affirmed that Saudi Arabia had no intention to use arms for aggressive purposes. But it must have an adequate air defense with weapons to match those in the hands of other countries in area which had been supplied by Soviets. He volunteered that the F–16 was not an acceptable substitution. If we did not agree to supply the F–15, Saudi armed forces would want Saudi Government to obtain replacement from other sources. He argued that that would be against interests of both Saudi Arabia and the U.S., noting that if the Saudis made a decision to buy elsewhere, it would be most difficult to turn back to the U.S. at a later time. I told him we were proud of our past collaboration in developing the Saudi armed [Page 520]forces. I noted that you faced a difficult situation in the Congress on this general subject, but I also assured Fahd that you would very carefully consider the questions he had raised.

5. It is clear to me that Fahd wished to convey, during this conversation, his continuing very strong desire for fullest possible cooperation with U.S. Saudi intention to seek a price freeze at the OPEC meeting in December very greatly increases the chances that such a freeze will be decided. As for the F–15 issue, I had the impression that Fahd was voicing his honest concern that we might not be able to come through, and that he mentioned possible need to turn elsewhere as a contingent inevitability rather than as a threat.

Bushnell
  1. Source: National Archives, RG 59, Central Foreign Policy File, P840081–1901. Secret; Niact Immediate; Nodis. Blumenthal was in Dhahran as part of a Middle East trip that included visits to Egypt, Kuwait, Iran, and Saudi Arabia.
  2. Telegram 1286 from Dhahran, October 30. (National Archives, RG 59, Central Foreign Policy File, P840081–1893)
  3. Reference is to the OPEC summit conference scheduled to take place in Caracas, Venezuela, December 20–21.