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.

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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.

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.”