Foreign Relations of the United States, 1964–1968, Volume XVIII, Arab-Israeli Dispute, 1964–1967

105. Telegram From the Department of State to the Embassy in the United Arab Republic¹

Washington, November 14, 1964, 4:08 p.m.

2794. For Ambassador from Talbot. Embtel 1637.² Appreciate fully your concern that presenting Egyptians with alternatives to commodity loan might be regarded as attempt to renege on an agreement whose requirements they feel have been met. Agreeing with Embassy position that continued inaction in field of economic cooperation could bring an end to our policy of seeking to broaden areas of common interest with the UAR and recognizing practical difficulty if not impossibility moving forward on commodity loan, we have sought to provide another basis for moving ahead. The State/AID proposals carried by Macomber supplemented by Aidto 198³ we believe can be presented as an economically useful token of US intent to carry forward on current policies.

Commodity loan is hamstrung by our inability to demonstrate to Congressional and other inquirers’ complete satisfaction second requirement or evidence that U.S. aid does not in fact pay part of foreign exchange costs of a UAR “occupation” of Yemen. We can hardly claim progress on third condition, given presence over 50,000 Egyptian troops in Yemen (latest intelligence community estimate) as against less than 30,000 when Yemen costs discussed with Kaissouni in October, 1963. While UAR-Saudi detente on Yemen hopeful, know from our experiences through 1963 the danger of claiming “major progress” on UAR performance until actual and substantial drawdown takes place. If the UAR should opt for the $20 million program loan, they must understand that we cannot proceed until Egyptian performance permits us to defend the loan against domestic criticism.

This being the case, we propose moving forward by offering an alternative which we believe could be presented to Egyptians as more advantageous and more immediately available. We note that, since our agreement in principle supply $20 million to help meet chronic foreign currency shortage, Kuwaiti loan of over $90 million has been received. Any current balance of payments strains for which UARG had earmarked commodity loan can be covered to some extent by at least part of increases in the FY 65 Title I program requested by UARG over that remaining in the present multiyear agreement. The sector loan-project loan package added to this should serve as adequate symbol of US intent to restore aid momentum.

Neither we nor the Egyptians should labor under illusion that program (i.e., commodity) or project loan for FY 65 is major benchmark passing of which will ensure smoothing of course of future assistance. PL 480 agreement which is core of our economic cooperation program remains to be negotiated for years subsequent to ’65. Our flexibility in this and working toward a future Western approach to counter Soviet influence will to a large degree be dependent on Egyptian action in meeting its commitments under present PL 480 agreement, in managing its economy, and on Egypt’s political posture in the area and on the world scene. We are gratified by recent reports that Nasser and his key lieutenants are giving UAR economic problems their personal attention. Strong argument can be made we should not come between them and their decision to face and reappraise unpleasant economic realities. They know from qualified foreign economists what needs to be done. Their willingness take bitter medicine necessarily will be one of principal determining factors in future US–UAR economic cooperation.

Rusk

1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, AID (US) 9 UAR. Secret; Immediate; Limdis. Drafted by Davies and Symmes; cleared by Officer in Charge of Near Eastern Economic Affairs George M. Bennsky, Jones, and AID Deputy Assistant Administrator for Near East and South Asia Walter G. Farr, Jr.; and approved by Talbot.
2. Telegram 1637 from Cairo, November 11, conveyed Battle’s disappointment with the apparent unwillingness in Washington to proceed with a $20 million commodity loan to the UAR. He concluded: “New administration must give early sign of continuation cooperative effort or a new policy will exist here whether we intend it or not.” (Ibid.)
3. Not found.