The diplomat who said ‘No’ to Saudi oil

Hindsight can be cruel. In 1932, amid a global economic slump, the impoverished Saudis came to London looking for a loan. They also had an offer: would Britain like to try drilling for oil? A disdainful Foreign Office mandarin gave the fateful reply, writes Matthew Teller – no loan, and no drilling.

In the spring of 1932, King Abdulaziz – widely known as “Ibn Saud” – was ready to declare the foundation of a new united Kingdom of Saudi Arabia. To get the message out and to secure the support of the global superpower – Great Britain – he sent his son, Faisal, on a European tour including London.

Faisal arrived at Dover on Saturday 7 May and was soon installed in London’s fashionable new Dorchester Hotel. After a Monday morning audience with George V, he spent most of his visit at leisure, including visits to a Surrey stud farm and RAF Hendon.

It was the King’s personal adviser, Fuad Bey Hamza, who had to raise the delicate question of money with a senior civil servant at the Foreign Office – Sir Lancelot Oliphant.

Revenue from pilgrims visiting Mecca was sharply down. Oil had been discovered in neighbouring Persia and Mesopotamia (Iran and Iraq), but geologists doubted whether Arabia held any reserves.

Hamza asked for a loan.

In reply, Oliphant talked of “difficulties in this time of most stringent economy”.

Hamza said Ibn Saud sought only £500,000 in gold (several tens of millions of pounds in today’s money). Oliphant responded that he would consult the relevant department.

They moved on to other matters, but then Hamza brought up money again.

Ibn Saud “looked to His Majesty’s Government for material as well as moral support”, said Hamza. An American engineer had compiled a report on Arabia’s mineral resources, but Ibn Saud “always preferred to deal with the British, and would welcome the assistance of British firms in exploiting the mineral resources of his country”.

Yet again, Oliphant chose to slam an open door. He replied that “British firms might hesitate to accept a report not drawn up by a British expert”, and expressed doubt “as to the readiness of British firms to sink capital in a little-known country at the present time”.

A wry note added to the minutes at this point by an unknown hand reads: “Nothing venture, nothing have!”

The language then turned rather undiplomatic. Hamza called the rejection “a great personal grief and disappointment”, adding that he had “no alternative but to look elsewhere” – whereupon Oliphant interrupted his guest to “assure him that it was a matter of great regret to His Majesty’s Government also”.

Within 72 hours Faisal and Hamza had departed from Croydon aerodrome on the long journey home.

Oliphant was no fool. In a glittering career at the Foreign Office he guided British relations with Persia and Arabia for more than 30 years, rising to a wartime ambassadorship. His stance, though possibly over-cautious and imbued with colonial high-handedness, made perfect sense at the time.

So his emotions at the news of 31 May, that American prospectors had struck oil in Bahrain – off the Saudi coast – just two weeks after he had sent the Saudis packing, can only be imagined.

Within a year Ibn Saud handed the concession to search for Saudi oil to an American consortium – and in 1938 they discovered the world’s largest reserves of crude. Saudi Arabia was “a little-known country” no longer, and the US had begun supplanting British power in the Gulf.

Saudi Arabia’s Crown Prince Faisal ibn Abdul Aziz Al Saud (fifth from right) in Paris in March 1939

In the words of British Library historian Mark Hobbs, who has researched the 1932 London meetings: “It was one visit that officials probably wanted to forget.”

Click here to see the originals of the documents referred to above:

Oliphant refuses Hamza’s initial request

Oliphant refers to “a little-known country”

Oliphant interrupts Hamza’s statement of “personal grief”

UPDATE: In Round the Bend last week Matthew Teller told the story of an India Office agent in Gwadar who infuriated his boss, Maj George Murphy, by signing off letters with the words “Love to Patrick”. Archivists were puzzled. Who was Patrick? But in the last few days the British Library’s Martin Woodward has found a letter that appears to provide the answer.

Patrick was evidently Master Murphy, the Major’s son. The newly-found document (folio 133 in file IOR/R/15/6/373) will be digitised by the end of the year. Last week’s report has also been updated with reader’s stories of sending, or receiving, over-familiar greetings in the workplace – including one involving the actor, David Niven.

BBC