412. Memorandum of Conversation1
SUBJECT
- US–UAR Relations
PARTICIPANTS
- Mr. Mahmoud Younes, Deputy Prime Minister of the U.A.R.
- Dr. Mostafa Kamel, Ambassador of the United Arab Republic
- Mr. Nicholas deB. Katzenbach, Undersecretary of State
- Mr. Richard H. Nolte, American Ambassador to the U.A.R.
- Mr. Donald C. Bergus, Country Director for NEA/UAR
The Acting Secretary asked jocularly if Mr. Younes had discovered any oil on his visit to the United States. Mr. Younes had said that he was trying to discover more American explorers for Egypt’s oil. The TENNECO Company was interested in two areas in the UAR. Some difficulties had cropped up in the TENNECO/UAR negotiations but Mr. Younes felt that these could be reconciled. The UAR had a great interest not only in oil production but in such related enterprises as petro-chemicals, insecticides, and fertilizer industries. Mr. Younes had [Page 808] also talked to the leadership of Phillips and Standard of Indiana. With the latter, studies were going forward as to how the best use could be made of the gas which would be a byproduct of the oil operations at el-Murgan Field. He acknowledged that Standard of Indiana had had a mixed experience with the UAR. There had been lengthy delays in previous negotiations. Mr. Younes said he was now in full charge of oil matters in the UAR. There was a brief discussion of the type of arrangement being made between the Egyptian Oil Authority and Phillips. Although the joint company would have three Egyptian and only two American members, it had been agreed that no vote would be binding unless at least one American were in the majority.
Mr. Younes said that as result of his talks with the oil companies he had the feeling that they would like some kind of statement of support and encouragement from the US Government.
The Acting Secretary was then briefly called out of the room. In his absence a discussion between Ambassador Nolte and Mr. Younes ensued as to the practicability of a semi-autonomous Tourism Authority, along the lines of the Suez Canal Authority, which could make binding cost-plus contracts with foreign investors and management organizations in the tourism field.
Mr. Katzenbach then returned and asked Mr. Younes how he viewed the economic picture in the UAR. Mr. Younes replied that the UAR would need two or three years to balance its situation. The Americans could play a great role in this through their oil companies. The UAR hoped to double its oil production next year, achieving an additional 7–1/2 million tons from the Murgan Field. Then Phillips would follow and UAR production would shortly be tripled.
Ambassador Kamel commented that what was crucial was what we did in the meantime. Perhaps it would be as long as five years before the UAR could stand on its feet economically. Ambassador Kamel gave a lengthy expose of his “plan” for the improvement of US–UAR relations. This involved a) CCC roll-over,2 b) encouragement of US private banks to enable the UAR to implement its stabilization agreement with the International Monetary Fund, c) IBRD loans and [Page 809] d) some kind of a consortium to look into the UAR’s external debt situation. Throughout Kamel’s presentation ran the theme that the USSR could only stand to benefit from continuing poor relations between the US and the UAR. He felt that political difficulties between the US and the UAR could be “frozen” while economic cooperation was increased.
Mr. Katzenbach agreed that ways of cooperation must be found. He did not feel that relations between the United States and the USSR were the principal problem in US–UAR relations. He saw the situation more in terms of problems between the UAR and the United States. He was delighted that Egypt had reached an agreement with the Fund. He could not comment on what the International Bank might do. He felt that the Egyptians would have real problems with regard to their current economic situation. These problems entered even into the question of the CCC roll-over. He felt that measures which the Egyptians might take to stimulate private investment were important and was all for them. But US ability to assist had to be considered in terms of the political difficulties between the two countries. These could not be wished away. The US wanted good relations with the UAR.
Mr. Younes felt that this made it the right time for both sides to move forward. Mr. Katzenbach referred to the need for Congressional support for many of the actions which the UAR would like us to do. This could be difficult to obtain. Ambassador Kamel stated there was a need in the UAR for a new start in US–UAR relations. He had carefully explained to Cairo the complexities of US constitutional processes, but now some moves were required on the part of the United States. Presently there existed a genuine vacuum of cooperation. Mr. Katzenbach pointed out that the improvement of relations was a two-way street. Mr. Kamel stated that the US as a big power should exercise more patience.
- Source: National Archives and Records Administration, RG 59, Central Files 1967–69, POL UAR-US. Confidential. Drafted by Bergus and approved in U on May 4.↩
- An April 28 memorandum from Assistant Secretary of State for Economic Affairs Anthony M. Solomon to Under Secretary of State for Political Affairs Eugene V. Rostow enclosed a draft telegram to Cairo authorizing the Embassy to inform the UAR Government of U.S. willingness to negotiate an agreement based on its offer to pay $40 million in principle and interest due in 1967 to the Export-Import Bank, AID, and the Department of Agriculture in exchange for a new $24 million CCC credit. The memorandum states that the Department of Agriculture was concerned that the proposal would open the Department to charges of trying to finesse Congressional constraints on aid to the UAR. It asked Rostow to call Secretary of Agriculture Orville Freeman to try to obtain his clearance. A handwritten note on the memorandum notes that talks within the U.S. Government were aborted by the outbreak of hostilities in the Near East. (Ibid.)↩