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

279. Memorandum of a Conversation, Department of State, Washington, December 6, 1957¹

Washington, December 6, 1957

SUBJECT

• Pella’s Consultation with the Secretary: The “Pella Plan”

PARTICIPANTS

• Italian
  • Signor Giuseppe Pella,
  • Italian Vice Premier and Foreign Minister
  • Ambassador Manlio Brosio
  • Ambassador Massimo Magistrati
  • Ambassador Attilio Cattani
  • Minister Egidio Ortona
  • Signor Carlo Perrone–Capano
  • Signor Luciano Favretti
  • Signor Giuseppe De Rege
  • Signor Gabriele Paresce
• United States
  • The Secretary of State
  • Governor Adlai Stevenson
  • Mr. Robert Murphy
  • Mr. C. Douglas Dillon
  • Mr. C. Burke Elbrick
  • Mr. G. Frederick Reinhardt
  • Mr. Gerard Smith
  • Dr. D. A. FitzGerald—ICA
  • Mr. Mansfield Sprague—Defense
  • Mr. Stuart Rockwell—NE
  • Mr. W. T. M. Beale, Jr.
  • Mr. B. E. L. Timmons—RA
  • Mr. H. G. Torbert, Jr.—WE
  • Miss Constance Harvey—WE
  • Mr. James B. Engle —WE

The Secretary opened the second (wider) meeting with Italian Foreign Minister Pella by expressing our great pleasure that Signor Pella had been able to rearrange his trip in order to pass through Washington to consult on the NATO Heads of Government meeting.² Summing up for the benefit of the new participants what had taken place during the conversation with Signor Pella at the previous meeting (just concluded in the Secretary’s office), the Secretary said he and Signor Pella were in accord on the importance of the Heads of Government meeting and particularly the necessity that it should give a new emphasis to NATO. He then invited Signor Pella to follow any procedure at this meeting that he desired.

After expressing in English his appreciation for the opportunity to continue his conversation with the Secretary, with the participation of other United States officials and Governor Stevenson, Signor Pella continued in Italian that he did not wish to abuse the occasion by bringing up particular subjects but he thought the problem of economic assistance to the Middle East was a matter of importance to NATO. He summed up the ideas (known as the “Pella Plan”) which he said the Italian Government had expressed on the subject (what he said corresponded closely to his recent letter to the Secretary, with enclosures).³ He estimated that the Plan would provide funds amounting to about $70 million per year for some fifteen years. He wanted the United States to know that the Italian Government was suggesting the Plan within the framework of the already existing United States aid effort in the area. He said that the 20 percent European contribution suggested in the Plan was only an “indicative” figure and could be increased. Referring to a rumored American idea of basing a development plan on contributions of petroleum companies, Signor Pella suggested that guarantees of reimbursement by the Middle Eastern countries might be based on the subsoil resources of the loan recipients.

Signor Pella said his Plan had two aspects:

1. Financial/administrative. He conceded that the fund would be created largely with United States resources, though these would come out of reimbursements from previous loans. He realized that the United States would bear the major burden and that it had to keep in mind its bilateral relations with each of the Middle Eastern countries. He understood that the United States was anxious to avoid the creation of new organs for economic development, but thought a solution might be found through establishing a special section of the IBRD or of the Export–Import Bank to administer the Plan.

2. Political/economic. This would be the problem of programming, that is, the search for the methods to be used and the countries to be the beneficiaries of the Plan.

After speculating whether the Plan might embrace the Northwest African countries and those on the Eastern flank of the Arab world, Signor Pella made clear that nothing in his Plan was intended to be dogmatic. His Government would be willing to see everything in the proposed plan changed if only it could serve to establish a triangular formula (the United States–Europe–Middle East) as the basis for solving Middle Eastern economic problems.

The Secretary said we had studied Signor Pella’s Plan with great interest and were intrigued by the thought of cooperation between the United States and Europe on assistance to Middle Eastern countries. We agreed with Signor Pella that this should not be a distinctly NATO operation. The question of how to implement the concept set forth by Signor Pella involved certain problems. We are not sure that to bring in the Marshall Plan reflows would be the best formula. This would tend to make the basis of our assistance to the Middle East almost accidental. It happens that repayments on the Marshall Plan loans were now beginning at the same time that this Middle Eastern problem was coming up; there is not any necessary relationship between the two. For example, Ireland, which was an important recipient of Marshall Plan loans, has not much interest in the Middle East. Italy was the fourth largest beneficiary of Marshall Plan loans and has, of course, an interest in the Middle East.

The Secretary then referred to the concern of our Treasury Department that the capital and interest payments on the Marshall Plan loans be made. If the loans were not repaid, this would give rise to an expectation of an impending general moratorium on the payments of debts due to the United States. This might have an effect on the atmosphere of confidence and it could cause suggestions that the same principle be extended to United States loans other than the Marshall Plan loans. The Secretary said we thought contributions to Middle Eastern development should be made on the basis of criteria other than the Marshall Plan loan repayments. He pointed out that the United States was presently contributing economic assistance to the Middle East (the Arab countries and Israel, but not Pakistan) in sums much greater than Marshall Plan reflows. To gear our contributions to the Marshall Plan reflows might diminish rather than increase our assistance to that area, even if there were a European supplement of 20 percent. The Secretary also pointed out that, since French assistance to Morocco and Tunisia was already considerable, they might not feel like increasing their contribution to that area, particularly in view of the financial position of the French Government (which was precarious, despite the flourishing French economy). The Secretary thought it likely that the French Government would itself want to receive loans rather than to extend credits abroad any further.

The Secretary expressed doubt whether it would be possible for the NATO Heads of Government meeting in ten days’ time to come to any very definitive conclusion in this matter. He said there would probably be discussion in the United Nations framework today whether the United Nations should take initiatives in this direction. The Secretary said this problem was extremely complicated, especially as there were so many possible ways of proceeding. He thought any program which would combine the interest of Western Europe and the United States and the Middle Eastern area, while bringing Germany in more actively and enlisting a greater use of the resources and capacities of the other European countries, should be studied. The Secretary believed it would be impracticable to try to make any decision on this matter at the coming NATO meeting—above all, because this subject did not come within the scope of a NATO function. In conclusion, he thought the concept of trying to work something out with the Middle Eastern area was all right.

Other topics which came up during this meeting are covered in separate memoranda of conversation.

1. Source: Department of State, Central Files, 880.0000/12–657. Confidential. Drafted by Engle.

2. For a memorandum of the conversation with Pella on December 6 concerning the NATO Alliance, see vol. IV, p. 242. Memoranda of conversations with Pella on December 6 concerning Soviet purchases of surplus commodities and Egypt are in Department of State, Central Files, 661.80/12–657 and 774.00/12–657.

   The NATO Heads of Government met in Paris, December 16–19.

3. Reference is presumably to Pella’s undated letter to Secretary Dulles that was forwarded to Ambassador Zellerbach in Rome on October 28. See footnote 2, Document 263.