Foreign Relations of the United States, 1955–1957, Soviet Union, Eastern Mediterranean, Volume XXIV

304. Memorandum From the Director of the International Cooperation Administration (Hollister) to the Under Secretary of State (Hoover)¹

Washington, December 12, 1956.

SUBJECT

• Greek Economic Aid²

I have been apprised by Mr. Seager of the general nature of the talks on November 15, 1956, as these bore on the question of economic assistance to Greece, and have a copy of the note presented by Prime Minister Karamanlis.³

I am unable, however, to respond as affirmatively as I should like to your request that on political grounds $10 million be made available to Greece in the form of “global PA’s” rather than in the form of surplus agricultural commodities, because certain collateral problems have arisen in our consideration of this proposal, namely:

1. The Department of Defense advises that the Greek military establishment is short of certain supplies, particularly POL, because of the inability of the Greek Government to provide them and has requested that we consider financing these necessary supplies with Defense Support funds. If, in spite of the other problems mentioned below, it is decided to issue global PA’s to Greece for some $10 million, it is possible that we could use the occasion of such issuance to obtain satisfactory assurances from the Greek Government that it would indeed provide the necessary supplies, including POL, to the Greek armed forces.

2. It is quite clear that Greece will need, before the end of this fiscal year, surplus agricultural commodities even in excess of the $10 million in question. If we issue global PA’s for $10 million as you suggest, the question will then arise as to the financing of needed surplus agricultural commodities. We could, of course:

a. Ask the Greeks to finance these imports, but in this event they might just as well finance the commodities for which they are asking global PA’s;

b. Provide them under Title I, PL 480. This in turn raises two questions, first, whether this may be done legitimately in view of the normal marketing requirement of PL 480, and, secondly, the very limited authority remaining under the existing legislation. While the amount of existing commitments against PL 480, Title I, is not clear, it appears that authority remains for less than $100 million of commodities at CCC costs, which are the governing values. The latest request from Greece, together with the wheat imports that otherwise would be financed from Section 402, would require about $45 million of this remaining authority (about $26 million at market prices). Since there are a number of other urgent requirements for Title I programs, for example, Korea, Turkey, Pakistan, The Philippines, Peru, Burma, and Indonesia, which greatly exceed the amount of the remaining authority, I do not believe that ICA could urge, or for that matter the Department of State or the Department of Agriculture would be willing to support, the commitment of such large proportion of the remaining authority for Greece.

c. Increase the Defense Support program to Greece by $10 million, thus providing for the issuance of $10 million of global PA’s plus $25 million of financing on surplus agricultural commodities. Here, again, we face a dilemma because of the number of high priority competing demands for our reserve funds.

While I recognize the political desirability of responding to the Greek request as soon as possible, it seems to be clear that we cannot at the moment take the action which you hoped could be taken, i.e. to make available to Greece $10 million in non-agricultural PA’s, unless you consider the matter of such high political significance as to require an increase in the Greek Defense Support program from $25 million to $35 million. I would appreciate advice to this effect if that is the case.⁴

John B. Hollister

1. Source: Department of State, Central Files, 781.5–MSP/12–1256. Secret.
2. On November 29, Hoover forwarded a memorandum to Hollister that expressed the hope that ICA could make the remaining $10 million in Department of Defense aid allocated for Greece available through global PA’s rather than in the form of surplus agricultural commodities. (Ibid.,881.00/11–2956)
3. See footnote 2, supra.
4. In a December 31 memorandum to Murphy, Rountree referred to Hoover’s memo of November 29 and Hollister’s reply of December 12. According to Rountree the “virtual exhaustion” of resources under P.L. 480 had recently become apparent and had forced the Department to change its position on the use of Defense support assistance for Greece. Rountree added that Allen had been informed of the situation and until he replied there was little reason to continue discussions in Washington. (Ibid., 781.5–MSP/12–3156)