Foreign Relations of the United States, 1955–1957, Near East Region; Iran; Iraq, Volume XII

250. Telegram From the Department of State to the Embassy in Egypt¹

Washington, July 2, 1957–6:25 p.m.

19. Embtels 3871,² 3879.³

1. Preliminary discussions with industry indicate pipeline parallel Canal not economically attractive. Following appear significant objections from financial point of view:

(a) Cost of terminal facilities including improvement and expansion roadsteads Port Said and Suez;

(b) Time lost in tie-up of ships at loading and unloading terminals, which greatly in excess time required for transit of Canal;

(c) Industry source states pipeline operations per 100 miles more expensive than equal distance by sea;

(d) Failure of Egypt to insure cooperation between Suez Canal Authority and representatives of shipping and trade would suggest that users not likely have any control over services and charges of Canal; this in turn would be likely result in corresponding lack of participation in control charges for pipeline operations since these would probably be fixed on basis of Canal tolls.

2. In addition to questionable economic advantages deriving from this proposal, Department not enthusiastic about plan under present circumstances since would result in increasing Western dependence upon Egyptian operation of transit facilities. Acquiescence of USG in Egyptian operation of Suez Canal is trial measure based on hope Egypt will achieve a regime governing Suez Canal in conformity with six requirements of Security Council Resolution of October 13. Projects designed to increase reliance on Suez Isthmus route should be regarded in light of efforts to obtain reasonable assurance that rights and interests of international community in Suez will be safeguarded.

3. In April Onassis forwarded copy of pro forma agreement regarding construction, operation and management of pipeline facility between Gulf of Suez and Port Said, which Department acknowledged without comment. No favorable disposition toward this proposal indicated by Department.

Foregoing may be used as basis for oral discussion with Greek Ambassador.

Dulles

1. Source: Department of State, Central Files, 880.2553/6–2857. Confidential. Repeated to Jidda.
2. In telegram 3871 from Cairo, June 28, Ambassador Hare informed the Department of State that Greek businessman Aristotle Onassis had informed the Embassy that the Egyptian Government had decided to proceed with a project to construct a pipeline parallel to the Suez Canal. Onassis told the Embassy that the next step was to ascertain whether potential users of the pipeline were interested in having the pipeline built, which would facilitate financing. (Ibid., 880.2553/6–2857)
3. In telegram 3879 from Cairo, June 28, Hare reported further on Onassis’ interest in constructing a pipeline parallel to the Suez Canal and conveyed a request from the Greek Embassy in Cairo to find out the U.S. attitude toward the scheme. (Ibid., 880.2553/6–2857)