Foreign Relations of the United States, 1955–1957, Arab-Israeli Dispute, 1957, Volume XVII

390. Memorandum of a Conversation, Department of State, Washington, October 29, 1957¹

Washington, October 29, 1957

SUBJECT

• Egypt

PARTICIPANTS

• The Secretary
• Mr. Black, President of IBRD W—Mr. C. Douglas Dillon NEA—William M. Rountree

The Secretary, referring to Mr. Black’s tentative plan to visit Egypt, said he thought that if Mr. Black could promote a settlement with the Suez Canal Company, it would be extremely helpful and the United States would be disposed to release frozen Egyptian funds as soon as an agreement was arrived at, perhaps even before the actual implementation of the agreement. The Secretary assumed that Mr. Black would talk with both the British and the French before proceeding to Egypt. Mr. Black said that he planned to do so. He was leaving tomorrow for Paris and then would go to London. If he went to Egypt it would be in about ten days, after conversations had been held with the British and French representatives.

The Secretary commented that the French might be difficult to deal with on this question since they have had an exaggerated idea as to their rights and what might be done to protect them. He had the impression, however, that they had been somewhat deflated in the recent past. Mr. Dillon added that the French had in fact been deflated and wanted to make a deal quickly with the Egyptians in order that the old Suez Canal Company could move in other directions with respect to investments. The Secretary said that although the blocked funds constituted one of the few pressures upon the Egyptians to make a settlement, the French should not assume that they could remain frozen indefinitely. It was likely that we would feel compelled to unblock the funds sometime in the relatively near future. Mr. Black observed that representatives of the Suez Canal Company had developed an interest in investing in an iron ore project in French Africa as well as a tunnel under the English Channel.

The Secretary offered to review for Mr. Black something of his philosophy regarding Nasser and Egypt. He had pointed out to the Egyptians over the past few months and particularly when Ambassador Hussein met with him just before the Ambassador departed for Egypt our attitude toward what Egypt might do to improve relations with the United States. The Secretary had said that he could not outline a specific course of action, but thought it important that the whole point of view of Nasser with respect to the USSR should undergo a substantial change. Nasser seemed to think that he could deal with impunity with the Soviets and did not appear alarmed as to where his policies might take him. He seemed to feel that the United States was urging him not to become too involved with the Soviets simply because we ourselves did not like the Soviet Union. We have tried to persuade Egypt that we felt they were going down a path toward disaster. While the United States did not object to Egypt maintaining friendly relations with the Soviet Union, and indeed in concluding economic agreements and buying reasonable quantities of military equipment, the Egyptians should realize that in such relationships they were taking a chance and must be on their guard; otherwise they were becoming trapped. The Secretary had pointed out that the United States maintained relations with such countries as Finland, Poland, Yugoslavia and India, who themselves dealt with the Soviet Union. Those countries, however, knew in varying degrees the dangers of doing business with the Soviet Union. Finland had been involved in a war with Russia; for eight years Yugoslavia had been subjected to attacks and threats from the Soviet Union; India, although giving the appearance of not being worried was in fact worried about the Soviet Union.

In general, the Secretary said, he had pointed out that Egyptian blindness toward the danger of the Soviet Union had presented a barrier between Egypt and the United States. The United States could not understand it when the Egyptians stated that the Soviets are really nice, that they wanted to help Egypt and that Egypt could accept that help on the assumption that there were no strings attached and no danger involved. The Secretary thought the Egyptians might be waking up a bit, although their attitude was still quite unsatisfactory. He thought the Egyptians might have been embarrassed by Gromyko in New York when he pounded the table and insisted upon the Arabs following the Soviet lead. It was clear to most people that the Syrians had been directed by the USSR with respect to the UN action. The Soviets had achieved a large measure of economic domination of Syria and Syria was on the road to losing its political independence.

Continuing, the Secretary said if the scales would drop from Nasser’s eyes before it was too late, we might work together again. There were certain problems due to Nasser’s blindness and his desire to play one power off against another. … The Secretary said that Nasser had claimed that he had been told by the Secretary in 1953 that the United States would pledge itself to back him as a leader of the Arab World.² The Secretary had never made any such pledge, although in 1953 he had said something to Nasser to the effect that the United States looked upon Egypt as a leading Arab country. Naturally no commitment could possibly be made to Nasser that regardless of circumstances the United States would back him. Nasser’s action in recognizing Red China, in concluding the large arms deal with the Soviet Union, etc. had completely changed the situation with regard to our attitude toward him as an Arab leader. Nevertheless if there should be a change in Nasser’s attitude he could enjoy good relations with the United States. It was not at all impossible that the United States would resume economic ties, a CARE program, the sale of PL 480 wheat, etc. if we felt that our effort would not become wasted because of the blindness of Nasser toward the Soviet Union.

Mr. Rountree added that in addition to our deep concern over Nasser’s attitude toward the Soviet Union, we had also made clear to him our opposition to Egyptian efforts to enforce its own ideas regarding “positive neutrality” upon other countries of the area. We had said that while we recognized the rights of Egypt to decide its own foreign policy we would insist also upon the right of other nations in the area to decide their foreign policy of friendship toward the West without the interference of Egypt. We had also expressed great displeasure over the activities of Egyptian agents in several countries throughout the area where their purpose clearly was to bring about changes in governments and regimes in order to bring into power people amenable to Egyptian leadership.

. . . . . . .

Mr. Black said that when Kaissouni was in Washington he had inquired about the possibility of the Bank becoming interested again in financing the Aswan Dam. Mr. Black had told Mr. Kaissouni he felt that when a situation was established whereby the Bank could extend loans to Egypt, first priority should be given to the expansion of the Suez Canal rather than financing the Aswan Dam. Kassouni had inquired whether, assuming that order of priority, the Bank might later be interested in the Dam. Mr. Black had reminded Mr. Kaissouni that the Secretary had said at the time of the withdrawal of the U.S. offer on the Aswan Dam that the United States might at a later date be willing to consider the development of the Nile on a broader basis, taking into account the interests of other countries through which the Nile flowed.

The Secretary confirmed that he had made such a statement and showed Mr. Black the press release which was issued June 19, 1956.³

In a side conversation with Mr. Dillon and Mr. Rountree, Mr. Black mentioned that Egypt had joined the IFC and had not made its initial payment of about a half million dollars. The Egyptians had said that the money could be taken out of frozen funds if the United States would permit. Mr. Black asked whether this might be done, pointing out his desire and the desire of Mr. Garner⁴ to avoid a situation in which the Egyptians would have to be declared in default. Mr. Dillon and Mr. Rountree responded that they did not see how the funds could be used for this purpose, unless there was a general unfreezing. They mentioned that the Egyptians had in fact employed this device with respect to considerable amounts of money owed by them to others. They had, for example, told the Greek Government that the Greeks might obtain several million dollars owed by Egypt if the Greeks would obtain the permission of the U.S. to unblock the funds. There were also indications that the Egyptians told the Saudis that they would repay the Saudis by transferring to Saudi Arabia a substantial portion of the frozen funds, with the idea that the Saudis would then press the United States to release these funds which belonged to Saudi Arabia.

1. Source: Department of State, Central Files, 398.14/10–2957. Confidential. Drafted by Rountree.
2. See Document 373.
3. For text, see Department of State Bulletin, July 30, 1956, p. 188.
4. Robert Livingston Garner, President of the International Finance Corporation.