148. Telegram From the Department of State to the Embassy in the United Arab Republic0
736.
I. Background
As Embassy aware, we seized with unanswered request by UAR for consideration multi-year PL 480 sales agreement including wheat and other commodities. Multi-year program request from Israel also pending. Under present circumstances we believe UAR multi-year agreement, if undertaken, should precede any other in NE area. UAR’s present efforts execute coordinated plan appear qualify it as possible candidate for multi-year sales arrangement under general criteria announced by U.S. In interest of stabilizing relations with UAR we should not turn down their request without having very sound, comprehensible reasons for doing so.
We recognize that in making long term commitment of this nature some short term bargaining power might be lost but consider that multi-year PL 480 arrangement could provide basis for greater confidence for conduct relations and reinforce existing favorable trends.
We had hoped development of stabilization program for UAR through consultation with IMF might provide appropriate setting for negotiation satisfactory PL 480 arrangement. It now appears unlikely that anything will develop this connection in near future.
Recent indications of willingness of UAR officials, including Vice President Boghdady (Embassy Despatch 220 November 1),1 to examine more frankly relationship of possible U.S. aid to development problems are encouraging. UAR Embassy representatives in recent renewal their pleas for early consideration of multi-year program stressed readiness of UAR explore with appropriate U.S. representatives detailed justification of such a long term commitment by U.S. In this connection Ambassador Kamel informed Talbot December 1 (memcon pouched)2 of high level UARG interest in possible U.S. initiative for international consortium assist UAR economic development combined with high level planning assistance.
[Page 357]We believe that in order achieve maximum understanding and appreciation of significance of U.S. readiness consider a multi-year PL 480 program with UAR, initial information of our intent should be communicated at highest policy-making levels. Accordingly, unless you perceive objection, you should call on President Nasser at early date to inform him U.S. Government prepared consider multi-year Food for Peace sales program provided adequate relationship for such program to UAR’s development plans can be established.
II. Approach to Nasser
In introducing subject with Nasser, you may wish note with satisfaction improvement in US–UAR relations that has attended expanded economic cooperation of past three years and confirm our sympathy for UAR’s sound economic development. You may recall that we were asked conclude single-year arrangement to meet UAR’s urgent requirements for wheat and other commodities pending study of possibility of multi-year program and we agreed. You may wish point out that to date only limited number of longer term arrangements made, such as that with India in which significant contribution to India’s third five-year plan and other essential economic considerations were identified. Establishment of Agency for International Development emphasizes and affirms our interest in using our available resources including food to support well designed and executed programs of economic development. You should stress we prepared in principle work out multi-year arrangement with UAR but have only most general understanding as to extent such major undertaking on our part, amounting perhaps to several hundred million dollars, would be justified on economic grounds. You would propose, therefore, that arrangements be made for technically qualified representatives of both governments explore matter in detail as basis for possible subsequent negotiation of multi-year arrangement. This connection you might wish indicate in general terms such relevant questions as (1) specific economic development projects to which Egyptian pound proceeds would be allocated, and (2) projections over next several years of foreign exchange shortfall occasioned by economic development spending. As necessary should be made clear that in proposing this review U.S. does not seek inject itself into or interfere with UAR policy and planning processes. Rather we seek identify what manner and what extent our food resources will support UAR’s own development effort. May be useful mention that in other connections UAR officials have indicated interest in technical cooperation with respect planning and we of course desire be helpful as possible in this area. In conclusion you might indicate to Nasser that, if this procedure meets his approval, we would be prepared commence these exploratory discussions immediately.
[Page 358]If Nasser refers to need for other assistance or possibility of support through consortium, you may point out exploration of economic development problems as they relate to need for long term food programs would help clarify situation with respect other ways in which U.S. could assist UAR development program.
III. Framework of Proposed Discussions
In talking with other senior UARG officials you may wish point out additionally we envisage discussions which will develop rationale and demonstration of manner in which UAR’s economic development planning will be facilitated by long term commitment in contrast possible availability of commodities under agreements which might be made from year to year. This connection detailed projections should be made of consumption and domestic production of commodities and foreign exchange deficits occasioned by development spending. Existing development plans should be reviewed from point of view of variety of factors of which following are intended as illustrative rather than inclusive: (a) Effect of plan on eventual capacity of UAR sustain consumption from own resources; (b) Appropriate allocation Egyptian pound proceeds to economic development projects; (c) Alternative and complementary sources non-inflationary Egyptian pound financing; and (d) Relative roles Food for Peace, including consideration of Title IV programs on ad hoc basis, and other external financing. FYI. We would not envisage extending discussion at this stage to detailed consideration role our project type development lending nor to possible advantages coordination Western assistance through consortium style approach. Developments bearing on UAR interest in consortium approach and readiness consider more extensive stabilization measures should however be reported. End FYI.
Discussions would also develop information to support country team’s recommendations for commodity composition including details relevant to necessary consultations with other suppliers.
Discussion of relationship multi-year program to broader objectives of mutual interest should also be considered, including support such long term assurances would lend to UAR efforts revise its foreign trade policies and reduce economic dependence on Soviet Bloc.
You should also caution UAR officials as appropriate that all PL 480 sales agreements, whether single or multi-year, subject to availability of commodities. Multi-year agreements also include provision for annual review, both amount of Title I commodities and usual marketing situation. Reviews would take into account U.S. stock position and changes in production, consumption, and stocks of other country.
Department should be kept informed by priority telegram as steps taken. Further guidance as to detailed information to be developed in [Page 359] discussions at either policy or technical level will be provided as requested. We plan concentrate substantive discussion and negotiation this subject in Cairo although will be desirable keep UAR Embassy in Washington generally informed of developments.
- Source: Department of State, Central Files, 811.0086B/12–661. Confidential. Drafted by Duncan (NEA/NE); cleared by Ioanes (FAS) in draft, Gabbert (E/CSD) in draft, Gulick (AA/NESA) in substance, Drake (AA/NE) in draft, Bittermann (ARD) in draft; O’Leary (FAS) in draft, and Strong (NEA/NE); and approved by Talbot who initialed for Rusk.↩
- Not printed. (Ibid., 811.0086B/11–161)↩
- Document 147.↩