Foreign Relations of the United States, 1949, The Near East, South Asia, and Africa, Volume VI

867N.48/4–2149

Memorandum of Conversation, Prepared Presumably by the First Secretary of Embassy in the United Kingdom (Jones)¹

secret

[London,] April 13, 1949.

Subject: Meeting re Arab Refugees

Participants:	Mr. Michael R. Wright (Chairman), Asst Under-Secretary of State, British Foreign Office Mr. E. A. Berthoud, Foreign Office
	Mr. B. Boothby, Foreign Office
	Sir John Troutbeck (B.M.E.O., Cairo)
	Mr. Norman Young (British Treasury)
	Mr. J. Beith (Foreign Office)
	Mr. A. G. Maitland (Foreign Office)
	Miss C. Waterlow (Foreign Office)
	Mr. J. J. McCloy (President, International Bank)
	Mr. G. C. McGhee (Department of State)
	Mr. G. Lewis Jones (American Embassy, London)

The persons named above met in the Ambassadors’ Waiting Room of the British Foreign Office on April 13.

Mr. Wright opened the meeting by saying that it was strictly informal and that just as he understood that everything said on the American side was subject to confirmation, so, too, everything said on the British side would have to be taken up with Mr. Bevin and was subject to his approval.

Wright said that Foreign Office information is that the total of refugees is now closer to 900,000 than to 800,000, and that we are all faced with the problem that present relief efforts will end next fall (December at the latest). He said that the UK is anxious to pass from the stage of relief to the stage of resettlement. The UK has in mind a number of long-range plans for the social and economic betterment of the Middle East. He thought the necessity for these being implemented as quickly as possible is emphasized by the recent loss to the West of China. He said that the Middle Eastern countries have many problems not very different from those of China and that it would be tragic if for lack of attention from the US and the UK these countries should go the way of China.

An outstanding source of discord and infection in the Middle East, Wright said, is the presence of the 900,000 Arab refugees, who have an “unsettling” effect wherever they are located. The UK would like to marry its development plans with plans for the resettlement of the refugees.

Wright said that he would be frank: the UK is very “distressed” at the possibility that all aid to the refugees should be through United Nations channels. He did not think that the UN is a particularly efficient body for such work, and the UN approach might permit the USSR to obtain a foothold in the Middle East through participation in UN organizations. Also, in whatever form financial help was given, the major contribution would have to come from the UK and the US. Wright said that the UK fully realized, however, that the US has special problems and that in order to satisfy Congress US aid might have to take place under a UN or a PCC umbrella.

Wright said the Foreign Office has carefully examined all of the developments projects in the area and has selected three short-range schemes which they feel could be put into effect very quickly. “In order to show the way”, the UK is unilaterally making a ten-year £1 million loan without interest to the TJ Government for a very simple scheme which would involve resettlement within the next year or two of between 40 and 60 thousand refugees.

The second plan favored by the Foreign Office is the Jordan Canal Plan which would cost £8 million for works and £8 for land purchase, and which would involve agreement between Israel and TJ. In four or five years the Jordan Canal Plan, it is estimated, could resettle more than 100,000 refugees.

The third plan which attracted the Foreign Office was the Gezira Scheme in Syria which, within a few years, could take care of another 100,000 refugees.

The potentialities of Iraq are great, but the works there are larger and more costly than those he had mentioned. Estimates show, however, that within six to ten years it might be possible to settle 200,000 refugees in Iraq.

Wright said that very germane to the refugee problem generally is whether Israel will permit a number of Arab refugees to return to their homes. He said UK policy is that Israel should either take the refugees back or compensate them, but the UK realized that the chances of Israel following either course are extremely poor. How poor will depend upon the pressure which the US Government is prepared to exercise on Israel in this connection.

Wright said that the £1 million interest-free loan to Transjordan was a firm proposition. However, because of the financial position in which it finds itself, the UK will have to consider its financial participation in wider schemes very carefully.

Wright then asked for the views of Mr. McGhee.

McGhee said that the US is anxious to see the refugee problem settled and is willing to “do its part” in such a settlement. However, the US wished to avoid unilateral responsibility in this matter, and this would indicate the necessity for a UN or PCC facade.

McGhee said that he had just toured the various Arab States, had seen the refugees, and had seen the areas where they might at some future time be resettled. He had discussed the question exhaustively with Mr. Ethridge of the PCC and with a large number of officials working in the area. This had led him to adopt certain basic assumptions in working out the slow process of resettlement:

(1) Number of refugees is about 700,000;

(2) Repatriation of a certain number of refugees to Israel (he had in mind 200,000) is of the utmost importance, because such a gesture by Israel would go far to alter the attitudes of the Arab States who now flatly refuse to discuss the refugee question.

(3) Transjordan, Syria and Iraq, in that order, offer the best opportunities for refugee resettlement; only token contributions could be expected from Lebanon and Egypt.

(4) Resettlement of refugees is the Middle Eastern development program.

(5) Re financial aspects it must be recognized that Point Four will be of use only for technical assistance; that in addition to foreign exchange, any program will require providing the local government with local currency; and that Arab States themselves can not be relied upon to make sacrifices to help with a problem not of their making.

(6) Best approach to Arab Govts would be to stress the development aspect for their benefit and not to stress the refugee aspect. Nevertheless, the rise in the standard of living in each Arab country will be the index of its ability to absorb refugees. By the same token, so far as the US is concerned, emphasis on development may be a kind of Pandora’s Box which might lead to a flood of demands from South American and other countries for extensive development programs.

(7) Before the US can make any moves with regard to development and resettlement in the Arab countries, the US must have reasonable assurances that the Administration will have funds available for this purpose. To proceed without such assurances would be to risk letting the Arabs down and lowering US prestige disastrously.

(8) The number of private and UN agencies involved in the refugee problem now and potentially are such that planning on an area basis will be necessary in order to assure proper priorities between the various projects.

Mr. Wright then asked Mr. McCloy to speak.

McCloy said that the International Bank does not deal in relief matters; its sources of supply would immediately dry up if it tried to do so. The Bank must have reasonable prospects for repayment and “it takes a good deal of imagination to see such prospects in the Middle East.”

One idea which had occurred to McCloy was exploring, as a possible factor which might tip the scales in favor of certain projects in the Middle East, the idea of a consortium of countries which would underwrite the Bank’s loan. He suggested possibly the UK, US, and France. He admited that there is no precedent for this in the US, but he did not think guaranteeing such a loan without appropriating funds would be improper for Congress if it chose to do so.

McCloy explained that the UN does not interfere with the Bank’s business.

McCloy said that one factor inherent in Middle Eastern countries is that large scale foreign investment would almost inevitably have such an inflationary effect that it would frustrate the investment itself.

McCloy took up McGhee’s idea of planning on an area basis and said that he hoped that this planning group would not produce another report. The World had too many such reports and he understood that another one from the Middle East is “on the fire” in the UN Secretariat. It was his thought that it was much better to build one small dam at a time rather than to embark on a grandiose five-year plan for the entire area.

Mr. Norman Young said that there was no sense in the UK loaning sterling to Iraq for local expenses when Iraq has large sterling sums at its disposal in London. He pointed out that on account of the British balance of payments position it would be extremely difficult for the UK to make further loans to the Middle East involving the provision of capital equipment goods on credit. The Treasury was, moreover, opposed in principle to lending for conversion into local currency since it was considered that this must inevitably result in inflation.

Sir John Troutbeck suggested that it might be possible to use the very large oil royalties now being accrued by the Persian Gulf Sheikhdoms for regional development, since very little scope for such development exists within the Sheikhdoms themselves.

McGhee then discussed attached “working paper” in detail.

At the end of McGhee’s remarks, the Chairman said that he found the idea of using PCC as the UN facade very attractive. It had the advantage of being a going concern, to which UN has already given broad responsibilities. He said that Mr. Bevin is extremely interested in the development of the Middle East and in the refugee problem and that, consequently, the Foreign Office would like to go over McGhee’s working paper with Mr. Bevin. He was glad to note from a remark made earlier by McGhee that the US looked with favor upon the £1 million UK Pilot Project in Transjordan.

McCloy said that he did not like the idea of another special survey of Palestine. He said there are a number of active expert groups connected with the UN, including FAO, WHO, etc., who have funds and experts. He thought these agencies might be called upon to supply any technical advice required and that to his mind, in view of the work which has already been done on various ME projects, “a couple of engineers” would be enough.

Wright said the McGhee’s idea was “selection” rather than “survey”. He suggested that it amounted to a “small PCC working group”.

Sir John Troutbeck said that he felt that there was a vital need for statistical information regarding all phases of the refugees. McGhee said this was a problem which he felt should be tackled at once and suggested that if the Foreign Office could name a suitable individual (such as Mr. Mills of the Colonial Office) he felt quite sure that the PCC would welcome an opportunity to avail itself of his services. He was going to look into the possibility of a similar expert being supplied from Washington.

The meeting ended with an expression of appreciation to McGhee for his lucid exposition of the problem. Wright said the Foreign Office would keep in touch with McGhee through the British Embassy in Washington and through Lewis Jones.²

[Here follows an account of the further telephone conversation between Mr. Jones and John Beith of the Eastern Department later the same day.]

1. Transmitted to the Department by London in despatch 702, April 21. The despatch noted that Mr. McGhee participated “in a series of conversations” regarding, the Arab refugee problem and that the memorandum printed here recorded the most important of these conversations.
2. Attached to this memorandum was an undated working paper entitled “Proposed Plan of Action”; for the version of April 27, see p. 939.