Foreign Relations of the United States, 1955–1957, Arab-Israeli Dispute, January 1–July 26, 1956, Volume XV

453. Memorandum From the Assistant Secretary of State for Near Eastern, South Asian, and African Affairs (Allen) to the Secretary of State¹

Washington, July 13, 1956.

SUBJECT

• Aswan Dam

Discussion:

Ambassador Byroade reports that Ambassador Hussein is leaving for Washington on July 13 and has been sent by Nasser principally to discuss the Aswan High Dam. Ambassador Byroade indicates that Nasser now does not consider important the language differences between the US–UK–IBRD offer of December 1955 and the Egyptian counterproposals. In an interview with INS on July 12 Ambassador Hussein stated Egypt has decided to deal with the West on the Aswan High Dam and that he was flying back for the final negotiations.

There is no concrete information on exactly what transpired during the Shepilov visit with respect to the Aswan High Dam. Reports … indicate that a specific Soviet offer was made involving a $400 million loan repayable over sixty years in cotton, without interest.² Other … reports state Shepilov emphasized industrial enterprises. The British have provided us with a report … which alleges that Shepilov made no firm offer on the Aswan Dam but instead talked in generalities regarding development projects.³

… Hussein’s sudden return and press interview tend to confirm the report of the Indian Ambassador. It is possible to speculate that Nasser, having no offer from the Soviet, recognizes that unless he obtains a commitment from the West before his trip to Moscow his bargaining position will be severely deflated and that he may end up with no Dam at all. He also may be exerting pressure on the Soviets to improve their offer. We estimate that Nasser would prefer to conclude an agreement with the West on the Aswan Dam while remaining free to collaborate with the Soviet bloc in other activities in the area and to accept continued Soviet military and economic assistance.

We are faced with the same general alternatives existing prior to Shepilov’s visit to Cairo, that is: (1) await further developments without another approach to the Egyptians; (2) agree to proceed with the Dam on the basis of the US–UK–IBRD offer of December 1955; (3) stimulate a conference of riparian states to discuss unified development of the Nile Valley with the objective of obstructing a Soviet-Egyptian agreement; and (4) withdraw or postpone the offer either publicly or privately.

Prior to news of Hussein’s return we had concluded the best course was to make no further moves at this time in order to keep open the possibility that Nasser would not conclude a deal on his trip to Moscow. We informed the British of this position on July 10.⁴ On July 11 the British Embassy here submitted to us a memorandum from the Foreign Office in which the analysis of the situation and courses open is similar to our own.⁵ The British tentatively favor efforts to stimulate unified development of the Nile Valley.

In view of Hussein’s return it is no longer possible to avoid a further discussion. To proceed with the December offer would be contrary to our entire policy towards Egypt. Also we would be faced with Congressional and public opinion opposition at home, the absence of FY 56 grant aid funds, the opposition of the other riparian states and a serious reaction from pro-Western states in the area, particularly Iraq, Turkey and Iran. Under the circumstances, our best course appears to be to make clear to the Egyptians privately why we are unable to proceed at the present moment, but at the same time hold out the hope of future assistance providing Egypt indicates by actions a desire to cooperate.

Recommendations:

1. That NEA discuss our proposed position with the British before a final decision is made.

2. That you discuss the matter with Ambassador Hussein using as a point of departure your talk with the Ambassador before he left for Cairo (attached).⁶ You could state that the United States remains as interested as ever in helping the Egyptian people with their long term economic development. However, such cooperation is inevitably a two-way street, and before concluding negotiations on the Dam, Egypt should demonstrate by actions a desire to work with us. Since the December offer was made, such factors as the following have entered the picture: the growing reaction in the Congress and among the American people to Egyptian collaboration with the Soviets, the interest of other riparian states in being consulted, the diversion of Egypt’s economic resources to continuous large scale purchases of Soviet bloc military equipment, and the unavailability of grant funds from the FY 56 appropriations. These difficulties are serious but we believe they may be overcome if Egypt really desires to make the Dam possible and is prepared to demonstrate this desire by acts of cooperation.⁷

1. Source: Department of State, S/S–NEA Files: Lot 61 D 417, Omega #9. Top Secret; Omega. The source text bears a notation indicating that Secretary Dulles saw the memorandum.
2. See the enclosure to Document 411.
3. Prepared by the British Ambassador at Cairo, not printed. (Department of State, NEA Files: Lot 61 D 417, Omega #8)
4. See Document 438.
5. See the attachment to Document 442.
6. See Document 353.
7. The following handwritten notation in an unidentified hand appears at the end of the source text: “Not approved.”