'File 10/37 Bahrain Petroleum Company - Dollars' [‎2r] (5/44)

-- MX
I
the two telegrams of POth
we^e sent to the Resident
any discussion.
all oyer the Sterling Area from dollar sources are being
restricted to essertials. Expenditure on dollar inessentials
anywhere in the Sterling Area will prejudice that recovery.
Vhile it is not suggested that full recovery will he attained
v y the end-of the Furopean Recovery Programme, Sterlin"; Area
dependence on dollar aid will it is hoped he eliminated and
comparative freedom to import dollar goods at will, he
restored to the■countries comprising the Sterling Area. The
present struggle in which up are engaged to improve Sterling
Area and European productiveness vis-a-vis the U.S.A. will also
of course benefit the Shaikhdoms in a more plentiful supply of
goods from Eurone and the Sterling Area when that struggle
succeeds. To fritter dollars away on inessentials will delay
recovery and hence lessen the gross supply of goods from all
sources in future years. Another argument is that dollar
inessentials are at present expensive; it would he foolish
to spend oil royalties on them now when by waiting much better
terms can be obtained.
The general aims of our import policy are set forth in
to the Colonies, copies of which
May
and w v ic 10 might
also te of use in
tc
Finally it should be pointed out that the participation of the
Shaikhdoms in the Sterling Area is not complete. They enjoy
al' the benefits but do not have to alide by all the rules
governing the ot v er members. Thus exchange is granted freely for
Imports from the S'erling Area and from most other countries
outside the Western Hemisphere, ard for essential imports from
the Western Hemisphere, but merchants in the Shaikhdoms are not
ol liged to surrender the r 'oreign currency proceeds o^ their exports
to the Exchange Control.
The Shaikh of Kuwait will soon tegin receiving substantial
dollar payments under the concession in the Neutral "one which
he has recently granted to an American Company. When that
happend we shall have to insist that these dollars must le used
for Kuwait's requirements before we make any available out of
the pool In fact we hope that Kuwait should soon be self-
supporting in dollars. this will need more thought when the
time comes, 1 ut it is as v ell that the Residert should have
it in mind.
I believe that the danger of ext eme pressure by the
Shaikhs for dollars is not imminent, provided their immediate
essent^l needs ^re granted. We mu. c t ultimately provide goods
of th^ right so-'t in sufficient quantities to neet the b^ 1 1
represented by the Shaikh 's earnings from oil royalthe
Resident'^: task in effect is to persuade the Shaikhs to wait for
the day when sterling convertibility is restore without promisin
any date for this, and meantime to convince them that their
essential dollar ncjeds will be net, and all reasonable demands
from outside hard currency countries will \e granted.
Yours sincere 1 y,
(SGD) ILLEGIBLE
Esquire,
Office.