Foreign Relations of the United States, 1952–1954, The Near and Middle East, Volume IX, Part 1

886A.2553/11–454: Telegram

No. 372
The Ambassador in Saudi Arabia (Wadsworth) to the Department of State¹

secret

Jidda, November 4, 1954—noon.

202. For Dorsey. Reference: Aramco–Onassis–SAG discussions. With departures King Saud for Riyadh November 1, Davies for New York November 2 and Onassis for Monte Carlo today, current round of discussions instituted by SAG (my telegram 180, October 24² and 187, October 25)³ and designed seek mutually agreeable formula for modification of rate and priority provisions article 4 Onassis agreement has ended in failure.

This round began October 23. As I see it: SAG has held its own and opened way to face-saving solution through arbitration under article 31 Aramco concession agreement; Aramco has yielded nothing in substance or principle and has gained valuable Royal assurance that, whatever be result arbitration, SAG–Aramco relations will continue on basis full cooperation their joint venture; and Onassis, when finally pinned down on rate issue, has weaseled and outsmarted himself.

On October 26 letter approved by King was addressed Aramco by Minister Finance Surur expressing regret Davies–Onassis discussion should not result in agreement between them and stating curtly that, if none reached in thirty days, SAG would proceed to arbitration. Davies replied same day: He shared regret; fact was Onassis insisted on noncompetitive position and rates higher than those of current competitive tanker market; consequently, if no solution found, Aramco would cooperate with SAG in preparation terms of reference and submission of issues to board of arbitrators in accordance concession agreement; and he would proceed New York to consult his directors this regard. (Note:Duce has texts.)

Following day October 27 Davies met first with King and then Surur (both meetings helpful on clarifying complicated rates question) and had final (third) meeting with Onassis which only confirmed impossibility compromise without sacrifice Aramco principles which Davies would not consider. Upshot Davies-Surur meeting was that Surur addressed letter to Onassis October 29 citing Davies definition competitive market rates and asking his concurrence or comment. Onassis reply October 30 was essence of weasel mentioned paragraph two above; he offered four, partially contradictory answers none of which frankly answered Surur’s question and all of which when analyzed meant rates higher than current competitive market rates for spot or term charters. This turned tide in Aramco favor and led to final cordial Davies-Surur meeting October 31.

Yesterday when calling with Dorsey on Surur, I made passing reference to satisfactory SAG-Aramco understanding that Onassis agreement issues would be arbitrated. Surur concurred as to satisfactory understanding with Aramco but, as to beginning arbitration in thirty days, added “unless prior settlement is reached”. I did not pursue point.

My current estimate of SAG position is that, while it would still be willing accept any compromise agreement reached by Aramco and Onassis, it sees in arbitration: (1) Means to save… face if arbitral decision is that Onassis agreement is violative of Aramco concession agreement and (2) defense against any claim Onassis might make for nonperformance by SAG of terms Onassis-SAG agreement, for it would follow from such arbitral decision that latter was illegal and hence unenforceable, or otherwise put, null and void ab initio.

Wadsworth

1. Repeated to Dhahran.
2. Not printed, but see footnote 1, Document 369.
3. Document 369.