Foreign Relations of the United States, 1961–1963, Volume XVII, Near East, 1961–1962

254. Memorandum of Conversation⁰

Washington, April 19, 1962, 12:05 p.m.

SUBJECT

• Economic Aid for the U.A.R.

PARTICIPANTS

• Dr. Abdel Moneim Kaissouni, Minister of Economy, United Arab Republic
• H.E. Dr. Mostafa Kamel, Ambassador, United Arab Republic
• The Secretary
• AA/NESA—Mr. William S. Gaud
• NEA—Mr. Howard R. Cottam
• NE/E—Enoch S. Duncan

Ambassador Kamel reviewed the improvement of U.S.-U.A.R. relations since 1958 and the importance of a free and stable Egypt which he described as unaligned in the domain of the Free World. He stressed the value of avoiding issues on the question of Israel and maintaining tranquility in the area. He noted the quiet which had prevailed for more than three years except for the recent incidents, because of which, he said, both sides must be strongly counseled to avoid recurrence. He defined the essential goals of Dr. Kaissouni’s mission as follows: (a) agreement with the IMF for a stabilization program during the present visit; (b) agreement on a multi-year PL 480 sales program; (c) U.S. support for and help in organizing a consortium to meet the current foreign exchange problem; and (d) U.S. help for a consortium support of the U.A.R. ‘s longer term economic development.

In welcoming Dr. Kaissouni, the Secretary confirmed the serious interest of the U.S. in relations with the U.A.R. The nonalignment of Egypt causes the U.S. no concern. The U.S. interest is in the security of a society of independent states. He observed that the Ambassador had put the points in an appropriate order of priority. If a stabilization arrangement can succeed, it will open the way for other things.

Dr. Kaissouni noted that discussions with the Fund had been prolonged and the problem of the U.A.R. is immediate. He believed the two or three points of difference with the Fund were negotiable. He stressed the value of assistance given at the right time and hoped for good offices of the U.S. with the Fund. The current payments gap, including the cost of trade liberalization under a stabilization program, would be about $120–$130 million of which up to $60 million might come from IMF arrangements, leaving the balance for a consortium.

A consortium for the current foreign exchange problem was essential but so too was assistance for the economic development program. Social and humanitarian problems of Egypt would not permit postponement. The planned eight per cent annual growth rate might be debatable but however much progress was to be made, the U.A.R. would need foreign loans and other assistance. There were available credits and offers from a number of countries, but organization and rationalization of the approach was needed as well as verification of the availability of additional funds. The development program problem was not so much one of an immediate requirement for expenditure as of assuming the basis for going ahead.

In response to the Secretary’s question, Dr. Kaissouni gave first priority in the development program to industry, including communications, electric power and the like, noting that these involve greater foreign exchange costs than does agricultural investment. Agriculture, however, could not be expanded as rapidly. Although land reclamation was in progress, gains in this area were dependent on availability of increased water from the High Dam about 1967.

The Secretary said the U.S. was prepared to help on the IMF stabilization program. Following some discussion of priorities and level of needs, the Secretary stressed that the U.S. has been pressing its friends abroad very hard to increase their aid and that the U.A.R. should understand that development of consortium support would mean effort on its part. He asked whether there had been discussions with other capitals.

The Ambassador and Dr. Kaissouni noted recent efforts to improve relations with various European countries, including release of the French Mission members and negotiations for settlement of claims with Switzerland and Italy. Dr. Kaissouni also acknowledged the validity of Mr. Gaud’s comment that development consortia should be headed by an international agency and that the recipient country had to be prepared for considerable probing into the soundness of its economic plans. Dr. Kaissouni recalled that he had participated in detailed negotiations relative to the proposed High Dam consortium and knew the potential of the IBRD and the implications of this type of approach. The Ambassador stated that, while the U.A.R. would do its part, a gesture from the U.S. side was of critical importance.

Discussion of a multi-year PL 480 sales arrangement brought out that there was no objection in principle by either side although details might take a little time. Mr. Cottam noted that an interim arrangement to ensure continuation of wheat supplies might be desirable and that consideration of this possibility has already been initiated.

In conclusion, the Secretary said he wished to talk with Dr. Kaissouni again before his departure. The U.S. side would do all it could for positive steps during Dr. Kaissouni’s visit and hoped he would leave encouraged by the results.¹

0. Source: Department of State, Central Files, 811.0086B/4–1962. Confidential. Drafted by Duncan and approved in S on April 27. The time of meeting is from Secretary Rusk’s Appointment Book. (Johnson Library)
1. On April 20, Dr. Kaissouni met with Ambassador Bowles. (Memorandum of conversation; Department of State, Central Files, 611.86B/4–2056; briefing memoranda, transmitted by Talbot to Bowles on April 17; ibid., 033.86B11/4–1762)