867N.51/6–1848
Memorandum by Mr. Robert M. McClintock to the Director of the Office of Near Eastern and African Affairs (Henderson)
Mr. Havlik of ED telephoned me this morning to say that his division was studying the request of the Provisional Government of Israel, made to the Export-Import Bank, for a $100 million loan. Mr. Havlik said that Messrs. Ginsberg and Gass of the staff of Mr. Epstein had gone into great detail on the purposes of the loan and indicated that a goodly proportion of the money would be spent on a rather grandiose immigration scheme for the settling of 400,000 Jewish immigrants in Israel. $25 million of the loan, however, would be used for financing current deficits arising out of the military situation in Palestine, such as petroleum supplies and food imports.
Mr. Havlik said that the initial reaction of the Board of Directors of the Export-Import Bank had been to reject the request of the Provisional Government of Israel. However, the Bank was ready to examine the Israelite application for a loan if the Department of State indicated that it had no objection to a loan being granted, provided that it met with the requirements of the Export-Import Bank.
I told Mr. Havlik that I personally was sympathetic to the idea of a loan for the State of Israel, provided it was based on sound business principles and would be repaid. However, I said it was obvious that the granting or withholding of such a credit provided this government with considerable leverage on the government of Israel. We were now at a very delicate and critical juncture in conversations under the auspices of the UN Mediator, seeking to find a peaceful adjustment of the Palestine problem. I would not, therefore, wish to see this government give its approval to the $100 million loan until we were sure that [Page 1121] the conversations between the State of Israel and the Arabs were going forward to a successful conclusion. It was quite easy to envision a situation at the end of the four weeks’ cease-fire, for example, when we might find it necessary to apply diplomatic pressure both to the Arabs and the Jews in order to continue their truce while a more lasting settlement was being worked out.
I asked Mr. Havlik to let me know before approval was given to the Export-Import Bank for the Israelite loan. Mr. Havlik said that in any case the clearance of NEA would be required. I trust that NEA will consult with UNA before final approval is given.