Mr. Moffett stated that his original proposal to the President was that this Government advance funds to King Ibn Saud, security for such a loan being oil in the ground in Saudi Arabia. According to Mr. Moffett, the President told him that this Government could not buy "oil in the ground", but that it would be willing to consider the purchase of finished products which could presumably be brought from the Persian Gulf in Danish tankers under the control of the Government and used to build up supplies in our new naval bases. Mr. Moffett said that at the President's request he had drawn up the memorandum 13 which subsequently was sent over here by the White House.

It was Mr. Moffett's understanding that the President was greatly interested in this proposal, which Mr. Moffett described as similar to the Tung oil arrangement made with China.14 Mr. Moffett seemed to feel, however, that the proposal in regard to Saudi Arabia was more sound than the Tung oil arrangement since there would be one hundred percent security.

Mr. Moffett also pointed out that his proposal to the President involved our urging upon the British that they increase the subsidy which they were granting to Ibn Saud. For his strictly confidential information I told Mr. Moffett that I understood that you had recently mentioned this aspect of the matter to the British Ambassador, who would presumably pass the suggestion along to his Government. Mr. Moffett then requested that I bring this whole matter urgently to your attention with a view to reaching a decision as soon as possible. He said that it had been his understanding that if the proposal was approved in principle the President would then ask him to work out the details with the Navy Department and with the Treasury or the LendLease organization.

I am at your disposal to discuss this question whenever you desire. Mr. Moffett hoped that we could give him a reply at an early date, and he stressed the fact that his company could no longer continue to make these large advances to the Government of King Ibn Saud.

WALLACE MURRAY

890F.51/31

Memorandum of Telephone Conversations, by the Assistant Chief of the Division of Near Eastern Affairs (Alling)

[WASHINGTON,] May 13, 1941.

Mr. Moffett telephoned today to inquire whether any action had been taken with respect to the proposal he had made to the President for the purchase of oil from Saudi Arabia and the advance of funds to

13 Dated April 16, p. 625.

14

See Foreign Relations, 1938, vol. II, pp. 568-590, passim.

409021-59-41

the Saudi Arabian Government. I told Mr. Moffett I understood that the Secretary had taken a memorandum which this Division had prepared 15 covering a conversation which he had last Friday with Mr. Murray to the White House for discussion with the President, but that we had no information as yet as to the results of this discussion. Mr. Moffett asked that as soon as we had word we telephone to him.

Mr. Max Thornburg, another Vice President of the Company, then came on the wire and said that Sir Vivian Gabriel, a member of the British Air Mission and a British official of long service in the Near East, had recently discussed with him certain problems relating to Saudi Arabia. Sir Vivian had mentioned particularly the interest which he and Mr. Nevile Butler 16 were taking in the activities of Dr. Chaim Weizmann " in this country. Sir Vivian told Mr. Thornburg that he and Mr. Butler were apprehensive that Dr. Weizmann's activities would have a most unfortunate repercussion in Saudi Arabia and other Arab countries. From there the discussion led to Mr. Moffett's proposal concerning the advance of funds by this Government to King Ibn Saud against the production of oil. Sir Vivian had shown a great interest in this proposal, and only this morning Mr. Thornburg had received a letter from him regarding it. Mr. Thornburg said that on his next visit to Washington he would like to bring Sir Vivian to the Department to meet some of the officials here.

Later in the morning the Secretary's Office telephoned to say that as a result of the conversation which the Secretary had had with the President in regard to the matter referred to in the first paragraph of this memorandum it had been decided to take no action until it was seen what the British Government was prepared and willing to do. This information was passed on to Mr. Moffett, who said that he and his associates would endeavor to see whether they could not induce the British Government to take some action.

890F.51/31

Memorandum of Conversation, by the Assistant Chief of the Division of Near Eastern Affairs (Alling)

[WASHINGTON,] May 15, 1941.

Mr. Thornburg came in today to say that, as he had told us yesterday, Mr. James Moffett had an interview with Secretary of the Navy

Knox yesterday afternoon in regard to the plan of financial assistance to Saudi Arabia. Secretary Knox, according to Mr. Thornburg, expressed the opinion that the plan was purely a political matter and one in which the Navy would not be interested one way or the other at this point. Secretary Knox felt, however, that if the plan was approved as a political matter there was no reason why the Navy Department could not proceed with discussions regarding methods of putting the plan into effect. Apparently Mr. Moffett pressed Secretary Knox to take some further action, and as a result the latter agreed to discuss the matter with Mr. Jesse Jones.18 That discussion, so I understand, is to take place today.

Mr. Thornburg went on to say that the company's representatives in Saudi Arabia had taken up informally with King Ibn Saud the question of sending a message to the President requesting financial aid. Apparently the King was willing to send such a message provided he received some measure of assurance that his request would be acted upon favorably. Mr. Thornburg asked whether I felt that now was the time for such a message to be sent. I told him it was my personal view that it would be better to have the situation explored further here so as to determine whether there actually was some possibility of carrying out the plan. If there did seem to be some possibility of putting the plan into effect then it might be in order for his representatives to advise the King to send such a message.

Mr. Thornburg indicated that he was going to discuss this whole question with some of his British friends with a view to seeing what, if any, action they proposed to take with a view to extending further assistance to Ibn Saud. In this connection Mr. Thornburg stated that it was his understanding that the British Government had agreed about a year ago to grant the Saudi Arabian Government a credit of £400,000, one-half of which was to be used at once and the balance in the autumn of 1940. More recently, so he understood, the British had agreed to open a similar credit for use during the calendar year

1941.

890F.51/31

Memorandum by the Secretary of the Navy (Knox) for
President Roosevelt

WASHINGTON, May 20, 1941.

Recently you sent me a memorandum concerning the matter of giving some financial assistance to King Ibn Saud through the medium

18 Federal Loan Administrator.

of purchasing $6,000,000 annually of petroleum products for the next five years.

I have had an investigation made of the oil produced in Saudi Arabia and find that its quality is not suitable for Navy use. The gasoline has a very low octane number, about 70, which corresponds to a second grade gasoline. It could not be used in airplanes and normally could not be used for ordinary purposes.

The Diesel fuel oil has an octane number of 55, but on account of its high sulphur content Navy men say it is inadvisable to use it and do not recommend it. The sulphur content runs between 1.5 and 1.9%. Navy specifications have a maximum limit of sulphur of 1%. I am told the sulphur would have a very deleterious corrosive effect on the exhaust system.

This high sulphur content also operates against the use of the fuel oil for Navy purposes. In the case of fuel oil, the sulphur content is 3.9% and the Navy specifications have a limit of 1%.

I appreciate the gravity of the situation in the Middle East and if needful, would be glad to see the small sum of money under question devoted to securing the military support of King Ibn Saud. I do not believe, however, there is any sound business reason for mixing that help up with the purchase of the type of oil produced in that field. FRANK KNOX

890F.51/21

Memorandum by the Chief of the Division of Near Eastern
Affairs (Murray) 19

[WASHINGTON,] May 29, 1941.

Mr. Butler, Minister-Counselor of the British Embassy, called today with regard to the situation in Saudi Arabia. Mr. Butler recalled that several days ago the Secretary had mentioned to Lord Halifax the apparent financial difficulties in Saudi Arabia and had intimated that the British Government might wish to look into the matter to see whether it would be desirable to afford King Ibn Saud financial assistance. Subsequently the British Embassy had learned of Mr. Moffett's proposal for the purchase of petroleum products from Saudi Arabia for the use of the American Navy. The Embassy had gained the impression that if the British Government were willing to make a further contribution to Ibn Saud's finances, the American Government might then be willing to give consideration to the "Addressed to the Secretary of State and to Assistant Secretary of State

Berle.

purchase of these petroleum products, the proceeds of which would be turned over to King Ibn Saud with a view to further supporting his regime.

Mr. Butler stated that a telegram had now been received from the Foreign Office stating that the British Minister at Jedda fully agreed that King Ibn Saud's financial situation was bad and that he greatly needed assistance. The British Minister at Jedda also expressed the view that King Ibn Saud had been perfectly loyal to the British and deserved support. Accordingly, the British Government had taken steps immediately to increase the grants which had been previously made to King Ibn Saud. These grants, which had amounted to £800,000, were to be increased by £200,000. The British Government expressed the hope that it would now be possible for this Government to give further consideration to the possibility of granting financial support to King Ibn Saud. Mr. Butler said that he understood that the proposal which had been made by Mr. Moffett was more or less of a commercial proposition but that, although he had no direct instructions to say so, it was the hope of the British Embassy here that financial aid could be extended even if not on a commercial basis. In this connection Mr. Butler strongly stressed his belief that, with the international situation as it was, the financial position of Saudi Arabia should be considered entirely as a political matter and not a commercial matter.

I stated that I would bring the foregoing to the attention of the appropriate officers in the Department.

In as much as the British Government has now increased its subsidy to King Ibn Saud the question arises whether we may not wish to pursue with Mr. James A. Moffett the proposal which he made to the President some weeks ago. A recent memorandum from the Secretary of the Navy to the President 20 indicates that the oil produced in Saudi Arabia is not up to the standards required by the United States Navy. However, we have gathered in informal discussions with officials of Mr. Moffett's company that his organization probably would be willing to furnish oil from American production fields to build up naval supplies in the West Indies, turning over the proceeds to King Ibn Saud. The company would eventually obtain a reimbursement by taking royalty free oil from its fields in Saudi Arabia. In the event you desire to have us pursue this matter further we can get in contact with Mr. Moffett or some of his associates. Possibly you may wish to discuss the matter with the President.

WALLACE MURRAY

20

Supra.