Memorandum by the Under Secretary of State (Acheson) to the Secretary of State

Mr. Secretary: The attached file concerns the need of creating some sort of fund to be used for carrying out United States political and strategic objectives in the Middle East.

The Department has repeatedly come up against situations involving basic objectives of American policy, with which our Government is not prepared to deal except on the basis of obtaining specific Congressional authorization in each case. In several instances it would [Page 44] be embarrassing and difficult to justify publicly an appropriation for the particular purpose. One example is our inability to comply with the desire of the King of Saudi Arabia for loans of about ten million dollars per annum, to meet government expenditures until revenues begin to accrue from petroleum development projects. Similarly American economic officers in the Middle East such as Dean Landis and Colonel Harold Hoskins, have repeatedly complained that it is impossible to execute any consistent long-range economic program on which the local governments can rely unless the authority of the executive branch extends further than writing diplomatic notes and making loans on a strictly commercial basis.

The Office of Near Eastern and African Affairs and Colonel Hoskins (in his letter of resignation26) have suggested substantially similar proposals to meet this need. The substance of the proposals is that the Congress should create a fund (amounting roughly to 100 million dollars per annum) to be used in the discretion of the President upon the joint recommendation of the State, War and Navy Departments for the purpose of furthering the political and strategic interests of the United States in the Middle East. Loans from the fund would not be made on a commercial basis.

I believe that something along this line is important to enable us to maintain an effective voice in the dynamic and difficult problems of the Middle East. If you have time I recommend that you read the admirable presentation by Mr. Merriam, Chief of the Near Eastern Division, contained in a draft memorandum for the President which he prepared some time ago and is attached hereto.

I should appreciate receiving your views as to whether there would be any possibility of obtaining this type of authority from Congress and accordingly whether the Department should make a concerted effort at this time to prepare and back such legislation.27

Dean Acheson
[Page 45]

Draft Memorandum to President Truman28

From the various memoranda which have reached you from this Department, and from other sources, I feel sure you are aware that the Near East is a highly dangerous trouble-spot. We feel in the Department that this Government is inadequately provided with the means for exerting its influence for peace and security in that area. Among recent developments indicative of the unstable situation in the Near East, the following may be mentioned:

Soviet Russia has informed the Turkish Government of its desires with respect to Turkey which, if granted, would mean the impairment of Turkey’s sovereignty and freedom of action.29
In Iran, a friendly, independent country, Soviet troops have occupied the northern part of the country, British troops the southern part. Britain and Russia are under obligation to remove their troops not later than six months after the end of the Japanese war,30 but each mistrusts the other and Iran mistrusts both.
In Syria and Lebanon, the French failed, as a result of British action, in an attempt to thwart by force the exercise of effective independence by those countries. The French are now using other forms of pressure, including financial pressure, to accomplish their purpose.
Both Arabs and Jews are becoming more restive in Palestine and disorder may break out at any time which might spread throughout the Arab World.
In Saudi Arabia, where the oil resources constitute a stupendous source of strategic power, and one of the greatest material prizes in world history, a concession covering this oil is nominally in American control. It will undoubtedly be lost to the United States unless this Government is able to demonstrate in a practical way its recognition of this concession as of national interest by acceding to the reasonable requests of King Ibn Saud that he be assisted temporarily in his economic and financial difficulties until the exploitation of the concession, on a practical commercial basis, begins to bring substantial royalties to Saudi Arabia.
Great Britain and France, which since the last war have exercised spheres of influence in most of the Near East have failed to [Page 46] take adequate steps to look after the welfare of the masses. The peoples of the region remain for the most part ignorant, poverty-stricken and diseased.

Moreover, the position of the British and French in the Near East has been greatly weakened as the result of the two world wars. Soviet Russia is showing marked interest in the area and is proceeding along its customary cautious but firm and calculating lines, to move into the picture. Hence, there is danger that the Near Eastern peoples in the absence of any indication of a tangible nature that the United States is prepared to play an active role in raising their economic and cultural levels will look to Soviet Russia for a cure of their economic and social ills and as the mainspring of power in the Near East.

It seems to us to be important that this area, because of its resources and geographical position athwart the sea and air routes between East and West, should be in the hands of a people following the paths of democratic civilization rather than those of Eastern dictatorships. The British publicly and officially admit that they are no longer able to keep the Middle East in order without our help. We are inclined to believe that a policy of inactivity or “drift” on our part will result in a progressive deterioration of the influence of democratic civilization in the Near East.

In view of certain characteristic British failings, we must, however, lend our assistance in a manner which would be in accord with the principles to which we have publicly adhered. If we are to serve our higher long-range political, economic and strategic purposes, our activities in the Near Eastern area must be based upon the political, educational and economic development of the native peoples and not merely upon the narrow immediate interests of British or American economy.

At the present moment, this Government has but three non-military tools with which to work in the Near East and to place sufficient American impress on the region to win and hold it for the Western World. Those tools are:

Note-writing by the Department of State;
Propaganda regarding the high principles to which we claim to adhere;
Government loans made on a commercial basis and repayable in dollars.

These tools are hopelessly inadequate.

It is clear that unless the situation is handled firmly and adequately, a situation might well develop in the Near East which would result in another World War. This is said with all due respect for the United Nations Organization. The development of such a situation could not be prevented merely by the reaching of temporary [Page 47] understandings among the Great Powers at the expense of the Near Eastern peoples. Any cooperation among the Great Powers based upon a policy of joint exploitation of the population of the Near East cannot be permanent. Long range policy and planning looking to the political independence and the development of these areas, together with adequate means of implementation of such policy are essential.

The blunt fact is that, in the existing circumstances, we have sore need for funds to be used in political and strategic situations in which repayment with interest, in dollars, cannot be guaranteed because currency exchange and trade do not happen to run in the right direction.

Three specific cases might serve to illustrate our difficulties.

1. Saudi Arabia. For nearly a year we have known that some money—about ten million a year for the next five years—would be necessary to obtain an economic stability in that country sufficient to give a reasonable security to American interest in the vast Arabian oil fields. This project, together with subsidiary projects, has been shunted around month after month in the Government departments while the interested officers were trying to determine whether the Export-Import Bank could safely make a loan, or whether legislation should be sought, involving the risk that it might become a football for special, short-sighted interests. We have attempted to work through the Army, but the King of Saudi Arabia has now stated flatly that he wants us to work through the civilian agencies.

This is an outstanding example of the fact that we lack money for long-range, general political and strategic use for the purpose of winning the peace in that crucial part of the world. The official in the Department directly responsible for Saudi Arabia has just resigned after fourteen years service abroad and in Washington,31 because of his feeling that he is unable to do anything constructive and of his unwillingness longer to assume responsibility for the protection of American interests in that country.

2. Palestine. It is not necessary to stress the dangers of this situation. Whatever short or long-range solution is put forward, unless it is associated with the expenditures of large sums in connection with the carrying out of a far-reaching development plan applied not only to Palestine, but also to neighboring countries, will surely result in bitter altercation and bloodshed. It will also result in domestic political repercussions, and heavy pressure from the Near Eastern countries.

3. In the case of Syria and Lebanon, where our policy has been to assist these countries in attaining their independence, some financial assistance is required to help them get on their feet economically. [Page 48] Otherwise the French through their control of the bank of issue and of financial resources, may by economic means succeed in compromising the political independence of the Levant States to such an extent as to cause uprisings in the whole Arab world. The Levant Governments are aware of the situation and have appealed to us for a Training Mission and for equipment for their gendarmeries in order to maintain internal order.32 We have no way to meet this request.

Under existing conditions our policies in these situations are not worth the paper they are written on because we have no prompt and effective means of carrying them out. These are all cases in which for want of a nail, the shoe may be lost, and for want of a shoe the horse may be lost. It would not be going too far, in the opinion of this Department, for this Government, in the interest of peace and security, to spend up to $100,000,000 a year for several years until the Near East is safely stabilized politically and strategically.

Obviously, we can no more win the peace than we could win the war if we must go to Congress to justify and obtain piecemeal appropriations for political and strategic purposes. Would it be politically possible to prevail upon Congress to provide a discretionary Presidential fund for such purposes, to be administered jointly by State, War, and Navy, which should also be in a position to recommend to the President by joint action, the expenditure of money for these purposes which may be available in other appropriations.

We plan to discuss with the War and Navy Departments, either by means of the existing State, War, and Navy Coordinating Committee or otherwise, the ways and means for planning and carrying out our long-term political and strategic objectives abroad and particularly in the Near East. The conclusions reached will, of course, be placed before you for your consideration and concurrence.

  1. To the Secretary of State on September 5, 1945, not printed. Colonel Hoskins had made a similar suggestion in an undated memorandum, a copy of which he had transmitted to the Director of the Office of Near Eastern and African Affairs (Henderson) on July 23, 1945 (890F.001 Abdul Aziz/7–2345).

    With the departure of Colonel Hoskins from Cairo, the Department designated John P. Dawson as Acting Economic Counselor there, as of September 26, with the same concurrent assignments as those previously held by Colonel Hoskins. Finally, in telegram 334, February 25, 1946, the Department informed Cairo that the Office of Regional Economic Counselor was being temporarily discontinued “in view of the curtailment of its activities through elimination of supply and other wartime controls” by the Middle East Supply Center (800.50–Middle East/2–2546).

  2. In an undated memorandum to Mr. Henderson, Mr. Acheson stated: “I have talked with the Secretary who believes that this cannot be done at present.” (890.50/10–945) The memorandum was received in the Office of Near Eastern and African Affairs on October 18, 1945.
  3. Prepared by the Chief of the Division of Near Eastern Affairs (Merriam) and submitted to the Director of the Office of Near Eastern and African Affairs (Henderson) early in August 1945.
  4. For documentation on this subject, see pp. 1219 ff.
  5. For documentation on the evacuation of foreign troops from Iran, see pp. 526 ff., passim.
  6. W. Leonard Parker, who resigned as Assistant Chief of the Division of Near Eastern Affairs on June 30, 1945.
  7. For documentation on this subject, see pp. 1199 ff.