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to which the severity of its conclusion is mitigated by the possibilities of the discovery of new reserves or the growth in the use of synthetic fuels, are not currently susceptible of precise determination; but, obviously, in a matter of this kind, the Navy cannot err on the side of optimism.

The largest known oil reserves outside of the Western Hemisphere are located in the Mesopotamian Basin in the area of the Persian Gulf. These reserves are largely undeveloped. It is distinctly in the strategic interest of the United States to encourage industry to promote the orderly development of petroleum reserves in the more remote areas such as the Persian Gulf, thereby supplementing the Western Hemisphere sources and protecting against their early exhaustion at inefficient rates of production.

2. The expansion, or at least the preservation of the continuity, of ownership by United States nationals of oil reserves outside of the continental United States.

The prestige and hence the influence of the United States is in part related to the wealth of the Government and its nationals in terms of oil resources, foreign as well as domestic. It is assumed, therefore, that the bargaining power of the United States in international conferences involving vital materials like oil and such problems as aviation, shipping, island bases, and international security agreements relating to the disposition of armed forces and facilities, will depend in some degree upon the retention by the United States of such oil resources. The strategic interests (military and naval) of the United States will, of course, be profoundly affected by the agreements which issue from such conferences. Under these circumstances, it is patently in the Navy's interest that no part of the national wealth, as represented by the present holdings of foreign oil reserves by American nationals, be lost at this time. Indeed, the active expansion of such holdings is very much to be desired.

In view of the foregoing, it is my own considered judgment that the Government, through the State Department, should work out a program, carefully conceived and far-reaching in its effect, which would result in the greater use, now and in the peacetime years ahead, of petroleum products made from oil produced in the Mesopotamian Basin and other overseas areas. At the same time, the good offices of the State Department should be used to the greatest possible extent to promote the expansion of United States oil holdings abroad, and to protect such holdings as already exist, i. e., those in the Persian Gulf

. area.

You may be sure that in the development of such a program and in carrying it out, this Department will cooperate in every way possible. Sincerely yours,

FORRESTAL

890F.51/12-2044 Memorandum by the Secretary of State to President Roosevelt 77

WASHINGTON, December 22, 1944. Subject: Proposals for the Extension of Long Range Financial As

sistance to Saudi Arabia. In a memorandum from the Secretary of State dated April 3, 1944, which you approved, it was recommended that lend-lease funds be used for the extension of increased economic assistance to Saudi Arabia and that subsequently Congressional approval be sought for the provision of direct financial aid.

Largely because of wartime conditions, Saudi Arabia is experiencing budgetary deficits. These may be expected to continue for the next few years until oil royalties and a revival of normal trade provide sufficient sources of revenue to meet essential governmental expenditures. Meanwhile Saudi Arabia is dependent for survival upon help from abroad. If such help is not provided by this Government, undoubtedly it will be supplied by some other nation which might thus acquire a dominant position in that country inimical to the welfare of Saudi Arabia and to the national interest of the United States.

An American national interest, basically strategic in character, exists in Saudi Arabia for the following reasons:

1. A strong and independent Saudi Arabian Government in the Near East, where two great world powers come in contact, is less likely to fall victim to war-breeding aggression than a weak and disintegrating state vulnerable to economic and political penetration.

2. The vast oil resources of Saudi Arabia, now in American hands under a concession held by American nationals, should be safeguarded and developed in order to supplement Western Hemisphere oil reserves as a source of world supply.

3. The military authorities urgently desire certain facilities in Saudi Arabia for the prosecution of the war, such as the right to construct military airfields and flight privileges for military aircraft en route to the Pacific war theater.

King Ibn Saud has indicated that he prefers to rely upon the United States for the assistance his country needs and that he would adopt a much more independent attitude toward third countries if he were assured that this Government will extend adequate aid on a long-range basis. This cannot be done through lend-lease (a) because the Foreign Economic Administration is unwilling to continue it beyond the present fiscal year; and (6) because there is no assurance in any case that lend-lease would be available on a long-range basis.

77 Drafting of this memorandum was undertaken by the Office of Near Eastern and African Affairs, after which it was discussed informally with officers of the War and Navy Departments; on December 1 the draft was forwarded by the Director of the Office of Near Eastern and African Affairs (Murray) to the Secretary of State for approval (890F.51/12–144). The memorandum was submitted on December 13 by Secretary Stettinius to Secretary of War Stimson and Secretary of the Navy Forrestal for approval, with covering letters which constituted an acknowledgment to Secretary Stimson's letter of October 27 and Secretary Forrestal's letter of December 11. By December 20 both of the Secretaries had expressed concurrence in the proposals contained in the memorandum and in the view that it should be transmitted to President Roosevelt as soon as possible; the memorandum was sent to the President on December 22.

Your approval is requested of the following steps to be taken in order to enable this Government to extend adequate long-range assistance to Saudi Arabia for the purpose of affording protection' to the American national interest in that country and of obtaining wartime facilities urgently needed there:

1. That the Congress be requested to appropriate funds for use in meeting the urgent financial requirements of Saudi Arabia to the extent deemed necessary by the Secretary of State:

2. That the Secretary of State inform the President of the ExportImport Bank that you desire the Bank to make a commitment in principle of its intention to extend, after the necessary study, development loans to finance long-range projects for the improvement of economic conditions and living standards in Saudi Arabia;

3. That the military authorities, after consultation with the Department of State, give immediate consideration to such projects as it may be advisable for them to undertake promptly in Saudi Arabia in order to provide interim assistance by means of such measures as the construction of airfields and related installations, the dispatch of training missions and equipment, and the construction of strategic roads, together with other facilities.

The Secretaries of War and the Navy concur in the foregoing proposals.

[Annex]

SUPPLEMENTARY NOTE TO MEMORANDUM FOR THE PRESIDENT ENTITLED

“PROPOSALS FOR THE EXTENSION OF LONG-RANGE FINANCIAL ASSISTANCE TO SAUDI ARABIA”

It cannot be stated with certainty at this time the funds which will be needed to meet the urgent financial requirements of Saudi Arabia. It is estimated, however, that the budgetary deficits of the Saudi Arabian Government will continue for approximately five years. If the war should continue for several years more and if the return of normal trading conditions should be delayed unduly, the maximum sum to meet these deficits is estimated at $57,000,000. Should the war end in the near future, and should more favorable economic conditions obtain, only about $28,000,000 will be needed. A reasonable expectation, however, is that the sum of $43,000,000 will suffice to meet these budgetary deficits over a five-year period until Saudi Arabia becomes financially self-sufficient.

890F.51/12–2444 : Telegram

The Secretary of State to the Minister in Saudi Arabia (Eddy)

WASHINGTON, December 24, 1944—2 p. m.. 283. ReLegs 375, December 21, 6 p. m.78 You should seek a private audience with King Ibn Saud at the time of his forthcoming visit to Jidda. During this audience you should inform the King that a comprehensive plan has been worked out for the extension by the American Government of substantial financial and economic assistance to Saudi Arabia on a long-range basis but that, before this plan can be explained in further detail to the King, it must be submitted for approval to the legislative branch of this Government, which is expected to give consideration thereto in the near future.

Notwithstanding the instructions contained in Department's 130, July 12, 6 p. m., you should not inform your British colleague that you are about to convey the foregoing information to the King, in as much as he has continued to discuss American affairs privately with Saudi Arabian officials (reLegs 352 November 24, 3 p. m.) as illustrated particularly by his private discussion with the Deputy Foreign Minister regarding the radio station matter. (ReLegs 349, November 21,1 p. m.79)

Shortly prior to the appointed time of your private audience with the King, the Department proposes to inform appropriate British officials in Washington (1) of the general nature of the message you are going to convey to the King, and (2) that you are not advising your British colleague thereof because of his apparently deliberate failure to cooperate with you regarding similar matters. You should therefore inform the Department as soon as possible of the date of your proposed audience with the King in order that British officials in Washington may be informed at the proper time.80

STETTINIUS

Files of the Division of Middle Eastern Affairs : Lot 57-D178
Memorandum of Telephone Conversation, by the Secretary of State

[WASHINGTON,] December 30, 1944. Lord Halifax telephoned me this morning and during the course of our conversation I mentioned to him the disappointment which we had felt to learn that the British Minister to Saudi Arabia, Mr.

78

80

Not printed. 79 Post, p. 769.

No exact date had been settled upon before the end of the year, although agreement had been reached that the King would grant a private audience to Minister Eddy during the royal visit to Jidda early in January.

Jordan, had been returned to his post.9 The Ambassador seemed to understand and asked if I would leave it in his hands.

E[DWARD] S[TETTINIUS]

REPRESENTATIONS TO SAUDI ARABIA AND THE UNITED KINGDOM REGARDING PROPOSED ESTABLISHMENT OF A DIRECT RADIOTELEGRAPH CIRCUIT BETWEEN THE UNITED STATES AND SAUDI ARABIA

811.7490F/7–744 : Airgram The Minister Resident in Saudi Arabia (Moose) to the Secretary

of State

JIDDA, July 7, 1944–9:00 a. m.

[Received July 1848 a. m.] A-57. In continuation of the Legation's airgram No. A-54, June 22, 4:45 p. m., 1944.91 A few days ago, Messrs. F. Ohliger and R. Lebkicher, representing the Arabian American Oil Company, 92 met King Ibn Saud at Al-Kharj, and among other things, discussed the need for direct radio communications between Saudi Arabia and the United States.

The King favors the establishment of such a service, and is ready to take the first steps in that direction, but he wishes to move cautiously and to cause no irritation to the Cable and Wireless, Ltd., holder of a monopoly concession on Saudi Arabia's telegraphic communications with foreign countries.

The first measure contemplated by the King is to secure a modification in the present concession which will permit the Saudi Government to communicate by radio with countries not served by the Eastern Telegraph Company, Ltd., the company operating a cable service into Saudi Arabia. After establishment of this principle, negotiations would be opened through the oil company for the construction and operation of a radio station, either by the oil company or by some American radio system.

In the course of the conversation, it appeared that the present monopolistic concession in favor of the Eastern Telegraph Company, Ltd. (The Cable and Wireless, Ltd.), was granted by the King on the in

90

Minister Jordan, who had been on leave, returned to Jidda about midNovember.

91 Not printed. 92 The Arabian American Oil Company (Aramco), known until January 1944 as the California Arabian Standard Oil Company (Casoc), was owned entirely by two American corporations, the Standard Oil Company of California and the Texas Company. Floyd Ohliger was the general manager of the company in Saudi Arabia ; Roy Lebkicher was a representative of the company who worked closely with the Saudi Arabian Government in matters of mutual interest.

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