Office of the Historian

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

Washington, July 2, 1956.

SUBJECT

  • Further Economic Support for Karamanlis Government

Background

. . . . . . . . . . . . . .

The Karamanlis Government has requested US economic aid for FY 1957 totaling $128.2 million (compared to about $33 million extended in FY 1956). Karamanlis believes that this level of assistance is essential for Greek political and economic stability and for maintenance of its defense establishment.

The U.S.S.R. is increasingly active in the political and cultural field in Greece, and there are signs that it may offer economic assistance.

Discussion

. . . . . . . . . . . . . .

Karamanlis could increase his domestic political strength and his ability to resist Soviet wooing if he could make conspicuous moves in economic development… His Government has recently announced an expanded investment program, but realization of projects thereunder will be restricted by financial limitations.

US economic assistance could take the form of ICA aid or of surplus agricultural commodities under PL 480; it could also include the partial financing of development projects by the Export-Import Bank. The proposed US aid program for Greece in FY 1957 includes:

a.
Defense support aid of $25 million, subject to Congressional action;
b.
PL 480 Agreements tentatively totaling about $35 million.

In addition, the Export-Import Bank has told Westinghouse that if it secures the contract the bank will grant a $7.2 million credit to cover the foreign exchange cost of the steam electric power station [Page 569] in the Ptolemais lignite development project. Bidding is now between Westinghouse and a Swiss competitor.

Except for the last possibility, US economic aid to Greece is not readily visible to the average Greek. More tangible participation by the US in development projects of direct benefit to the Greek people, especially to the rural population … is desirable.

The Greek Government announced on June 19 that it will invite bids for the construction of a nitrogen fertilizer factory, a part of the development plans for the Ptolemais lignite deposits (Tab B2). Foreign exchange cost of the plant is estimated at $20 million. It will produce about 70,000 tons of nitrogen annually, supply farmers with needed fertilizer in quantity and provide nitric acid and other chemicals to Greek industries. It is anticipated that the plant would save about $17 million annually in foreign exchange. The Pittsburgh film, Koppers, Inc., has surveyed the project and considers it feasible.

Recommendation

That the Export-Import Bank be asked to give sympathetic consideration to financing the foreign exchange cost of this nitrogen fertilizer factory.3

  1. Source: Department of State, Central Files, 881.00/7–256. Secret. Drafted by Laingen and Lincoln on June 29.↩
  2. Despatch 1073 from Athens, June 21, not printed. (Ibid.,102.798/6–2156) In a June 28 letter to Rountree, Cannon expressed concern over expanding Greek economic relations with Soviet bloc countries. In an effort to offset the possibility that Greece might sell its surplus of low-grade tobacco to the Soviets in exchange for agricultural machinery or industrial goods, Cannon mentioned the nitrogen fertilizer plant. The Ambassador noted: “I think that our financing of a nitrogen fertilizer plant is almost ‘tailor-made’ for our purposes. This project would fit perfectly the interests of the United States, by establishing another concrete and visible economic link between us and the people of Greece.” (Ibid., Athens Embassy Files: Lot 64 F 5, 500–USOM Rf. 320 Greek-Soviet)

    Tab A, not found attached, is a memorandum of June 4 from Murphy to Rountree. (Ibid.,NEA/GTI Files: Lot 59 D 36, Karamanlis Visit 1956)

    ↩
  3. Hoover approved the recommendation on July 5.↩