Coll 6/19 'Arabia: (Saudi Arabia) Hejaz-Nejd Annual Report.' [‎7r] (14/540)

Oil .—The construction of a refinery at Dhahran with a capacity of
50,000 barrels a day and a pipeline between Ras Tanura and Bahrain. In
5
joint Anglo-American assistance to King Ibn Sand was essential. Finally, the
State Department and the Foreign Office agreed that the subsidy to Saudi Arabia
should be a joint one shared equally between the United States and His Majesty s
Government and that any approach to the Saudi Government on finance and
supply matters should in future be made jointly. Accordingly a joint supply
programme for 1944 was communicated to the King at Riyadh at the beginning
of August. Briefly it consisted of an overall supply programme comprising
supplies allocated to Saudi Arabia under the Middle Last Supply Centre
programme, supplied through commercial channels and paid for by importing
merchants, and a supply programme of essential commodities supplied by His
Majesty’s Government and the United States in the form of a subsidy. In
addition, His Majesty’s Government undertook to provide £10,000 a month to
cover the cost of Saudi missions abroad and the United States to provide
10 million riyals on credit Lend-Lease. At first the King asked for still further
help, but after some of his requests had been met, gratefully accepted the
programme. It should be noted here that His Majesty’s Government’s contri-
r bution under the joint programme was additional to the sum of £450,000 paid
by them to the Saudi Government as subsidy at the beginning of the year, the
gift of 200,000 sovereigns, and the payment of the balance of the Saudi Govern
ment’s debt to the United Kingdom Commercial Corporation after the deduction
of the 1943 pilgrimage tariff revenue.
24. Anglo-American discussions regarding the 1945 joint subsidy had not
yet begun at the end of the year as the State Department had not yet reached
a decision on the matter.
25. The question of the financial adviser whom the King had asked for
was finally dropped owing to the desire of the United States to create an Anglo-
American economic mission under United States leadership, as they claimed that
the United States commercial interests in Saudi Arabia were greater than those
of the United Kingdom. This contention was refuted by His Majesty’s Govern
ment.
26. Towards the end of the year it became apparent that the King had
indeed begun to realise the necessity for re-organisation and reform of the
finances and administration of the country and there were signs of this which
augur well for the future. (See below, paragraphs 36 and 39.)
27. An agreement was signed in October between the Saudi Government
and Messrs. Gellatly, Hankey and Company, under which the latter granted the
Government a loan of £100.000 against the security of the 1944 pilgrimage
revenues. The purpose of this loan was to provide the Government with funds
which, owing to the collection of the pilgrimage dues abroad, were not imme
diately available to them.
Activities of the United States.
28. Much greater activity in Saudi affairs was displayed by the Americans
during 1944 than in previous years. The staff of their Legation was greatly
increased, and the former Minister Resident replaced by a full Minister, Colonel
William A. Eddy, a member of the Office of Strategic Services, with long experi
ence of the Middle East and a good knowledge of Arabic. In finance and supplies
the United States became an equal partner with His Majesty’s Government as
described above. In addition to the assistance granted to the Saudi Government
under the subsidy, which included ten million lend-lease riyals, some three million
dollars were advanced by the Arabian American Oil Company (formerly the
California Arabian Standard Oil Company). The United States Government
also advanced to the Saudi Government, under Lend-Lease, a further sum of
10 million riyals to meet the riyal requirements of the Oil Company, the Mining
Company, and the United States Legation in Jedda. The dollar proceeds of
these sales to the companies and the Legation were credited to a Saudi account
in Washington, 60 per cent, being retained to pay for the silver content and the
minting of the riyals and the balance placed at the free disposal of the Saudi
Government, with permission to purchase gold if required. The National City
Bank of New York also began negotiating with the Government for the establish
ment of branches in Dhahran and Jedda. In all this the Americans’ desire,
naturally enough, wa's to play mother bountiful to the Saudis in order to
strengthen their position in the country. Notable among increasing American
activities were:—