Coll 6/10 'Hejaz-Nejd Affairs: Financial Situation and Internal Situation' [‎500r] (1006/1310)

THIS DOCUMENT IS THE PROPERTY OF HIS BRITANNIC MAJESTY’S GOVERNMENT
LAS 1ERN (Arabia). * - Septemter 29, 1931.
CONFIDENTIAL.
Section 1.
[E 4911/2064)/25] No. 1 .
Mr. Hope-Gill to the Marquess of Reading.—(Received September 29.)
(No. 361.)
My Lord, ^ Jedda, September 9 , 1931.
I 100K occasion of the recent visit of the Under-Secretary for Foreign
Affairs to Jedda to ask him what he could tell me about the benzine contract,
which his finance colleague was supposed to have signed with the Soviet Legation.
His face fell, his manner lost its habitual assurance, and he retired into 1928 to
gain time. He reminded me that in that year Ibn Saud had instructed him to
broach with Mr. Bird, the subject of fostering British trade with the Hejaz as an
offset to the Soviet attempts to break into the closed Hejazi market. Yes, I said,
a favourable commercial treaty was sought as a quid pro quo. No, he said, he
had been misunderstood, more than that had been hoped for; but he did not
specify what. Instead, he passed on to expatiate on the brave show that the
King had put up against Soviet pressure, unaided and alone, until circumstances
had at last become too strong for him. (Here 1 reminded him that the show was
made not so much for our bright eyes as for the black looks of the Nejdi brethren
and the Hejazi tradesmen at the mere mention of bolshevism and Soviet goods.
He gave me right—up to a point.)
2 . At last, however, His Majesty had been forced to yield in one particular '
to the Soviet pressure. Unable to make a satisfactory contract on the one side j
for State fuel needs, and threatened on the other,by the withdrawal of the Soviet
Legation from Jedda, his Ministers had made the best of a bad job and contracted ,
to buy £30,000 worth of Russian benzine, and on very favourable terms too. I
suggested that they had been both bluffed and led into the way of further
concession. He admitted the first as a possibility, but denied hotly that any further
concession was possible When I reminded him that in spite of the total denial
of entry to Russian goods, Russian matches were sold openly everywhere and
Russian cement was not unknown, he made the curious statement that it was quite
true that the prohibition was enforced and that at the same time there w r as a four- !
fold duty on all Russian goods—a position easily understood in Jedda. He then
said frankly that the financial situation was rotten, but he did not think it was
hopeless. He himself had received no salary since March.
3. I have since received sidelights on the benzine contract from Herr de
Haas, the German trading consul. He has recently returned from leave, having
spent a month of it in Moscow haggling with the Soviet authorities for the right
to run their contract on a commission basis. Under pressure of his threat to
undercut them with still cheaper Roumanian oil, they played him wdth long
negotiations up to the point of agreement, which they then refused; having in the
meantime succeeded in securing their contract in Jedda, by negotiation with the
Hejazi Government through their Minister. So keen were they to have it signed
before Herr de Flaas could return to Jedda to seduce Sheikh Abdullah Suleiman
with his yet cheaper Roumanian oil, that tw T o commercial plenipotentiaries
arrived here with the same object. Comrade Jurgieff, representing Wosgostveg
(Eastern Trading Society), came up from the south from Hodeida, and shortly
afterwards Comrade Hertig (or Gertig), of Sojusneftiexport (Soviet Naphtha
Export, a branch of Sojusneftsyndikat), arrived hot-foot from Europe. I
understand that the exact terms of the contract are the purchase by the Hejazi
Government of 60,000 8 -gallon cases of benzine at 6 s. 6 J. a case c.i.f., and 40,000
8 -gallon cases of kerosene at 5 s. 3J. a case c.i.f., their total cost of £30,000 to be
paid in four equal instalments at two-month intervals, the first quarter to be paid
on delivery. This is now expected shortly.
4. I'learn that in anticipation of the delivery, Sheikh Abdullah Suleiman has
already concluded an advance sale in Mecca of 2,000 cases of benzine at £1 apiece.
This is the normal market price in the Hejaz, and show r s a clear profit to the
sheikh’s treasury of 200 per cent., with the added benefit of cash down against an
unmatured debt. It is surprising that the Hejazis have not fallen sooner to such
[246 ff—1]