The United States and Saudi Arabia: Ambivalent Allies by David E. Long

Author:David E. Long [Long, David E.]
Language: eng
Format: epub
Tags: History, General, Middle East
ISBN: 9780813302089
Google: IFQ6AAAAMAAJ
Goodreads: 4030935
Publisher: Westview Press
Published: 1985-08-26T00:00:00+00:00

In addition to these tasks, SAMA was also charged with regulating commercial banks and managing the Kingdom's reserves. SAMA opened its doors on October 4, 1952, and immediately embarked on a currency reform that included buying silver riyals at $.725 per ounce from a stabilization fund. The latter was created from dollars held by the Federal Reserve Bank of New York as collateral for silver the United States had transferred to Saudi Arabia under the Lend-Lease program, which was released for this purpose.23

Under its first governor, George Blowers (an American who had formerly been with the State Bank of Ethiopia), SAMA addressed the country's monetary problems with skill and imagination. One measure to stem riyal fluctuations was the issuance of Saudi gold sovereigns. The Saudis had previously ordered but had not circulated their own gold sovereigns. SAMA quickly began putting them into circulation at a ratio of forty riyals to one sovereign, making Saudi Arabia the only country in the world at that time with a fiduciary gold coin. (The sovereigns were withdrawn in 1954 after an influx of "counterfeit" gold sovereigns from abroad.)

Even more imaginative was the issuance of "Hajj receipts." In July 1953, SAMA inaugurated the issuance of scrip in denominations of 10, 100, and 1,000 Saudi riyals. Hajjis could obtain the scrip in exchange for their foreign currencies and redeem it at any local bank, thus facilitating currency transactions during the pilgrimage session. Because Hajj receipts were not considered legal tender, their acceptance was not resisted by the general public as the issuance of paper currency would have been; and at any rate the Hajj receipts were fully backed by gold and silver. By August 7, 1953, SR23 million worth of Hajj receipts had been issued; by September 10, only 30 percent of that had been redeemed.24 By 1955, when a rise in the world price of silver caused Saudi riyals to be smuggled out of the country, "Hajj receipts" had become accepted as currency throughout the country.

When King Saud succeeded his father in 1953, U.S.-Saudi economic relations began to suffer along with political relations. In 1954, the Kingdom revoked the Point Four agreement, and all Point Four personnel were ordered to leave the country on the grounds that the $1.7 million allocation was too small in comparison with the sums given Israel.25 When Faysal replaced his brother as prime minister in 1962 and as king in 1964, economic relations improved, but by and large the Saudis had begun to acquire economic technical assistance from the marketplace. For example, the country's first five-year development plan, drawn up by the Central Planning Office (later the Ministry of Planning) and approved in September 1970, was drafted in large measure with the technical assistance of the Stanford Research Institute of California.26

U.S. government technical assistance to Saudi Arabia during the 1960s was mainly focused in the military field (see Chapter 3) and in minerals exploration. In 1963, the United States Geological Survey (USGS) and Aramco, under joint U.S.-Saudi sponsorship, published a geological map of the country.

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