CONFIDENTIAL 19. At the Sultan's request a British general, Major-General T. M. Creasey,was seconded to command the Sultan's Armed Forces in succession to BrigadierJ. D. C. Graham. The new Headquarters of the Sultan's Armed Forces and AirForce at Risail approached completion and the naval base in Muscat Cove waswell under way. The Defence Secretary decided that he would turn to Indiafor seconded naval officers instead of Pakistan, and for the supply of considerablequantities of equipment previously purchased in the UK. There were 86 secondedand 129 contract British officers in the Sultan's forces. Economic 20. Defence spending rose to over RO30 million during the year, thoughOman's income from oil only amounted to about RO51 million. Further oil wasfound but it is not yet established whether it will be commercially exploitable.Expenditure on defence in 1973 is expected to reach approximately R034 million.Hitherto the capacity to spend money on civilian development in Oman has beenlimited, but from now on defence and development are competing for availablefunds. The large amount of aid promised by Saudi Arabia proved to be achimera for the time being and by the end of the year all that had materialised,despite a plethora of missions, was promises. A number of UN missions visitedOman but only the barest trickle of multilateral aid materialised, and only theUK and India provided technical assistance, our contribution amounting to£90,000. 21. Trade continued to expand and the money in circulation at the end ofthe year was R013.9 million compared with RO9.4 million at the beginning.Everywhere there were signs of activity: roads and buildings under construction,new vehicles, the number of which grew from 1,029 in July 1970 to over 10,000at the end of 1972; Port Qabus, which was brought into partial operation, takingshape and the opening of the new international airport at Seeb. Direct Britishexports to Oman, which account for 27-30 per cent of Oman's total imports,were up to £16.1 million in the first 11 months of 1972. This is an increase of41.2 per cent over the figures for the same period of 1971. The total for theyear should reach £18 million. The principal dangers were the rate of expansionwhich both in northern Oman and Dhofar led to an inflationary spiral givingrise to discontent and the lack of control in the economic sphere. Conclusion 22. The Sultan's popularity in the country remains generally high. However,his long absences in Dhofar and his tendencies towards late rising and extravagance -his Asprey's bill must be astronomical-are disturbing. He still has a greatopportunity, but has yet to demonstrate whether he has the will and capacity togovern Oman with a sure hand and to carry the Omanis with him. Unless theorgans of government are strengthened soon and the Sultan exerts controlthrough these in a regular way, the outlook could, as the PFLOAG plot uncoveredin December shows, grow increasingly bleak. 23. I am copying this despatch to Her Majesty's Representatives in AbuDhabi, Aden, Amman, Bahrain, Beirut, Cairo, Doha, Jeddah, Kuwait, Sana'aand Tehran, and to Her Majesty's Consul-General in Dubai and the BritishInterests Section in Baghdad. I have, etc., D. F. HAWLEY. CONFIDENTIAL
