'File 61/11 V (D 95) Hejaz - Nejd, Miscellaneous' [‎116r] (248/530)

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THIS DOCUMENT IS THE PROPERTY OF HIS BRITANNIC MAJESTY'S GOVERNMENT
r\' ! / flsUSHiRt HSBIDKNCyJ
" . ^ March 21, 1933.
CONFIDENTIAL. S ection 2.
■ " aOKHDEHTIA UBOS^ _
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[E 1488/1225/25] No. 1.
Sir A . Ryan to Sir John Simon.—(Received March 21.)
(No. 66.)
gi r Jedda, February 28, 1933.
IN his telegram No. 2, Saving, of the 24th February, Mr. Hope Gill reported
briefly on an alleged commercial understanding arrived at between the Saudi
Government and the Soviet during my recent absence from Jedda. So much
secrecy has been observed regarding the negotiations, that I can add little at
present to the telegraphic report as regards the actual facts. The following
particulars are, however, worth recording :—
2. There were two main factors in the position between Ibn Saud and Soviet
Eussia last year, as follows :—
{a) The Russians had supplied in the latter part of 1931 benzine and
petroleum to the value of some £30,000 and had received no payment.
(&) It was understood in the spring and early summer of 1932 that the
Russian Minister was endeavouring to negotiate a general agreement
with the Soviet Government which at that time seemed to turn on
the possibility of the Soviet accommodating Ibn Saud with goods
rather than money, in return for a removal of the embargo on direct
Russian imports into the Hejaz, which, though it had become to some
extent ineffective, still greatly hampered Russian trade. I would refer
more particularly to the correspondence ending with my printed
despatch No. 255 of the 20th June last.
3. The negotiations conducted by M. Turacoulov last year seem to have
produced no result. He brought off the deal reported by Mr. Hope Gill, using
as a lever the claim at (a) in the previous paragraph. It is affirmed that the
Soviet Minister has secured a partial or total removal of the embargo, in return
for an arrangement whereby the old debt to his Government will be met by a
partial or total remission of the customs duty on the new goods to be imported.
What is not clear is whether what is contemplated is a permanent removal of
the embargo or only its removal to the extent of allowing the importation of a
quantity of goods such that the agreed remission of duty will suffice to pay off
the old debt. The new goods are apparently to be sold on the market, but nothing
has been revealed as to the selling machinery to be set up. There is a conflict
of information as to whether the Saudi Government have made any preliminary
arrangements with their own merchants. According to one account, a deputation
of Jedda merchants were consulted during a recent visit to Mecca. According
to another version, rather better supported, they were summoned to Mecca in
connexion with the proposed national bank, on which I am reporting separately,
and were left to discover from their own sources in Jedda how matters stood with
the Soviet Legation.
4. Whatever the true facts and the dimension of the deal, it has already
created a good deal of excitement in commercial circles here. It is understood
that among the goods to be imported from Russia are flour and sugar, the intro
duction of which into the market will hit trade with other countries, including
Australia, which has of late been an important supplier of flour, and India, which
has done an important, though latterly declining, general trade with the Hejaz.
I hear no definite mention of petroleum products in connexion with the arrange
ment with Russia. It seems unlikely that they would be excluded, but the Saudi
Government may be unwilling to commit themselves or their merchants to bringing
more Russian benzine, &c., at present, having regard to their position vis-a-vis
of Shell and American interests.
5. It is worth noting that the Russian Minister's negotiations last year
seemed to be conducted largely with the Minister of Finance, whereas the recent
arrangement is said to have been made with the Ministry for Foreign Affairs.
[739 x—2]