SAUDI OIL REVENUES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001900030074-4
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 6
• Document Creation Date: December 20, 2016
• Document Release Date: August 18, 2005
• Sequence Number: 74
• Publication Date: September 13, 1974
• Content Type: MF

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Approve,. Release .05112114 CI,..5.0875.01900030074-4
Approved For For Release 200k41?6111,6.9frriaf'85T00875R0019000300.74-4,
SAUDI OIL REVENUES
Saudi Arabian oil revenues recently have risen to
nearly $2 billion a month. Practically all payments
are based on the tax rates and royalties applicable to
company-owned oil. Tax payments are made three months
after lifting and royalties payments one month after
lifting. Payments for oil owned by Jidda as a result
of the recent partial nationalization of the industry
are currently under negotiation. Once agreement is
reached, the oil companies will owe Saudi Arabia an
estimated $3 billion in back payments for oil already
lifted. The table shows payments made to the Saudi
central bank for taxes and royalties so far this year.
Payments to the Saudi Arabian Government
1974
Million US $
1st Qtr. 2nd Qtr. July August September
2,000 5,000 1,750 2,000 1,850
est. est. est.
Most Saudi funds are invested in short-term loans
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and deposits in the Eurodollar market. The current trend
in new investment is toward medium- and long-term opportu-
nities. Jidda is apparently considering moderate purchase
of government securities and increased purchases of stocks
and real estate in developed countries. Aid and prefer-
ential loans to developing nations are :also on the rise.
CIA/OER
13 Sept 74
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SAUDI OIL PRODUCTION IN AUGUST ?.WHAT HAPPENED?
Saudi Arabian oil production last month was about 8.2
million b/d, or about 800,000 b/d below the record reached
last May and more than 1.5 million b/d below capacity.
Aramco's August production probably averaged about
7.9 million b/d. This was slightly above the 7.7 million
b/d estimated by some oil company officials but 600,000 b/a
below the nominal "ceiling" set by the Saudi government.
Output was down sharply during the first half month, but
jumped back up during the final 10 days of the month.
The companies have publicly attributed the cutback to
a three-day period of poor weather and their inability to
reschedule enough tankers to.make up for the shortfall.
Aramco has declared that the cutback was not a voluntary
decision. However, this year there has been a dramatic
reduction in worldwide demand for oil products by consumers
because of high oil prices. The oil industry's refining
and distribution system appears to be saturated. Loaded
tankers are operating at reduced speeds and in effect are
being used as floating storage. It seems to us that the
real reason for reduced liftings in Saudi Arabia is the
current over-supply of crude oil. This is further indicated
by the reduced flow of Saudi oil by pipeline to the eastern
Mediterranean, since this was unaffected by weather. There
was no attempt by the Saudi government to lower production.
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After mid-month the company rapidly boosted production
to bring up the monthly average presumably because adverse
publicity resulting from the cutbacks was so great. Aramco
production is now running about 8.6 million b/d.
Total Saudi production is currently about 8.9 million
b/d. The remaining 300,000 b/d of production is an estimate
for the Saudi's share in the Neutral Zone. There have been
no reports of reduced liftings from this area.
CIA/OER
13 Sept 74
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THE BANKING SITUATION .IN EUROPE
The European banking structure is currently going
through a period of acute stresses for several reasons:
Tight money policies throughout Europe are causing
some liquidity problems.
The recent spdieof bank failures has caused a loss
of confidence in swall banks and has resulted in
a shift of business to larger, more reputable in-
stitutions creating severe liquidity problems for
some smaller European banks.
The Herstatt failure and losses by other banks in
foreign exchange dealings has reawakened awareness
of the perils of unregulated foreign exchange trading
in a period of floating rates.
The Eurocurrency market is being straIned by having
to intermediate short-term "petrodollar" deposits
into longer-term loans to oil-consuming countries.
Pew people view the current situation as critical'
however.
Herstatt has been the only major bank to fail so
far. The other failures involved extremely small
institutions, and reflect a more laissez-faire at-
titude on the part of some European central banics
than is taken by the Federal Reserve or the Banx
of Englana, wnicn might cover up prospective raiiures
by arianying mergers.
Despite the current tight money policies, the
huropewl goveLnments are onviously aware of the
perils of goiny too fai anu wouid loosen up if there
were a severe liquiuity shortage.
Banks dre now appioaehing foreign excnange trading
witn moie caution, anu some governments dre taking
steps to regulate trauing or monitor it more closely.
iviany people feel tnat tne Eurouciliar marxet, which
nas proven to be quite ilexibie in the past, will
adapt to the changing uonaitions.
CIA/OER
13 Sept 74
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MEMORANDUM FOR:
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FORM NO.
1 AUG 54
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Distribution: (S-6462)
1 - D/OER
5.- 6
Deputy Assistant to DCI
Attached is the information you
requested this morning to answer a
reporter's questions.
101 REPLACES FORM 10- 101
WHICH MAY DE USED.
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13 Sep 74
(DATE)
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(13 September 1974)
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