711.90F/1–1747

Memorandum of Conversation, by the Director of the Office of Near Eastern and African Affairs (Henderson)

top secret
Participants: Secretary Byrnes
Mr. Acheson, Under Secretary
Mr. Henderson, Director, NEA
Crown Prince Saud, Saudi Arabia
Ambassador Sheikh Fuad Hamza
Sheikh Asad al-Faqih, Saudi Arabian Minister to the United States

[Here follows a discussion of political problems in the Near East, particularly in connection with the agitation by Trans Jordan for a Greater Syria; for the text of this part of the memorandum, see page 738.]

Financial Assistance

The Saudi Arabs stated that it was the desire of King Ibn Saud to modernize Saudi Arabia and to elevate the living standards of the population of the country as soon as possible. In order to carry out such a program, it was necessary for Saudi Arabia to obtain loans and technical assistance. Saudi Arabia desired to turn exclusively to the United States, in which it had confidence, for financial and technical assistance in the realization of its plans for economic development. Saudi Arabia had recently obtained a loan from the United States,2 but the King had felt that the terms of the loan were not satisfactory. The loan, for instance, was of so short a term that the King had been compelled to curtail its size since he would not be in a position to pay back large sums of money within the short period of ten years. The [Page 1330] King would like to have from the United States a large loan repayable over a period of say fifty years,3 which would enable the Government to begin carrying out at once its program for improving the economy and raising the living standards of the country. The King had asked the Crown Prince to endeavor to obtain from the President and the Secretary of State assurances that the Government of the United States was in principle agreeable to such a loan.

The Saudi Arabians were informed that the Government of the United States viewed with favor the extension of long-term development loans in the Middle East of the very character outlined by Prince Saud. The International World Bank was in a better position, however, than the Import-Export Bank to extend loans of this kind. The Import-Export Bank was short of funds. Furthermore, Congress had not intended that it engage in the business of granting long-term development loans. The loan which the Import-Export Bank had already extended to Saudi Arabia was of a relatively short-term character because it was primarily a loan for budgetary assistance rather than for economic development.

The Saudi Arabians replied that the King did not wish Saudi Arabia to be “internationalized”; he did not want an international loan; he did not wish to be indebted to countries other than the United States. He trusted the United States and he preferred to do business with that country rather than with other foreign countries or with an international entity. Would it not be possible, they asked, for Prince Saud to be able to take back with him to the King a statement that in principle the Government of the United States was in favor of American long-term loans to Saudi Arabia for use on certain development projects such as, for instance, the railway from Dhahran to Riyadh?

It was pointed out to the Saudi Arabs that the Executive Branch of the American Government was not in a position to give any undertakings in principle on behalf of the Import-Export Bank. They were told, however, that if sufficient data could be made available, it might be possible for the Department of State to assure the Prince before his departure from the United States that the Department of State would in principle be willing to support the extension of long-term credits to the Government of Saudi Arabia for certain specific development purposes. Whether it would be preferable for such credits to be extended through the Import-Export Bank or through the International World Bank could be the subject of future discussions. It [Page 1331] was suggested that this matter might be discussed more in detail between Saudi Arabian representatives and members of the Department before the departure of the Prince.

[Here follow a discussion of Palestine and the closing paragraph; for the texts of these parts of the memorandum, see pp. 1007 and 741, respectively.]

  1. For information about the $25,000,000 line of credit to the Saudi Arabian Government approved by the Export-Import Bank on January 3, 1946, see telegram 2, January 4, 1946, to Jidda, ibid., 1945, vol viii, p. 999.
  2. According to a memorandum by Richard H. Sanger of the Division of Near Eastern Affairs, Ambassador Hamza, in a conversation with Department officers later the same day, stated that King Abdul Aziz Ibn Saud sought a loan of approximately $50,000,000 for a period of about twenty-five years (890F.51/1–1747). For information concerning discussion of this subject at the White House on: January 16, see footnote 1, p. 738.