811.516 Export-Import Bank/8–1549
Memorandum by the Assistant Secretary of State for Near Eastern and African Affairs (McGhee) to the Assistant Secretary of State for Economic Affairs (Thorp)
On August 15 the recent decision of the President temporarily to postpone further allocations under the $100,000,000 Exim Bank loan to [Page 1312] Israel1 was discussed with Messrs. Rusk, Porter (US Rep. PCC), Ethridge (Former US Rep. PCC), Satterthwaite, Hare, Dort,2 and Whitman.3 This is not a question of cancellation of the unallocated balance of $49,000,000 on the original $100,000,000 Exim Bank loan to Israel. It is merely a question of temporary delay of further allocations against the $49,000,000 balance.
It was agreed that early peace in Palestine, which was anticipated when the Exim Bank loan to Israel was first made in the spring of 1949, has not been achieved. Even though the Palestine Conciliation Commission has been working in the Near East and in Switzerland during the past seven months, a peace settlement does not seem any closer today. In spite of limited proposals put forward by both parties regarding minor aspects of the Palestine question, no real basis for agreement under the auspices of the PCC seems to exist at the present time. In view of these factors it was agreed that the Exim Bank should suspend further allocations under the loan for the time being.
It was agreed that the Secretary of State, as a member of the Board of the Exim Bank, should inform the Board that before further allocations are made the Department of State would like to review the Situation regarding any specific request for funds for the purpose of determining whether the allocation would be appropriate in the light of present circumstances. It is understood, for example, that a $5,000,000 request is pending for the Port of Haifa. It would need to be determined whether the availability of these funds for the Port of Haifa would be justified in the absence of progress towards peace in Palestine.
It was also agreed that the Secretary of State should inform the Board that the PCC plans to set up an economic survey mission for the purpose of studying the economic situation in the Near East, particularity the situation with regard to the repatriation of refugees in Israel and their resettlement in the neighboring Arab states, and for the purpose of making recommendations regarding overall economic [Page 1313] projects for the Near Eastern area. In the absence of peace in Palestine and pending the recommendations of the Economic Survey Mission it would be wise temporarily to suspend further allocations, as such allocations might subsequently be integrated with the recommendations of the Mission itself.
It is hoped that these arguments will convince the Exim Bank of the economic grounds on which the Department’s views are based and that the Bank will take a similar line in such conversations as it might have when Israeli representatives approach the Bank regarding new requests.
Recommendation:
It is recommended that you discuss this matter along the foregoing lines with appropriate officials of the Exim Bank.
- The Department, on August 5, advised the American Delegation at Lausanne that “Current conversations between reps Eximbank and Israeli reps Washington will shortly make it clear that further allocations under Eximbank loan have temporarily been postponed.” (telegram Unpal 218, 811.516 Export-Import Bank/8–549) In reply, on August 8, Mr. Porter stated that he had “not injected ExImBank loan into discussions here. Because of Shiloah’s firm position re refugees and territories do not believe any discussions in this regard would result in more than minor changes in basic position. Believe maximum effect will be obtained when Israeli Government learns from Bank officials that full economic cooperation with US not feasible under existing situation.” (Palun 267, 501.BB Palestine/8–849)↩
- Dallas W. Dort, Special Assistant to Mr. Thorp.↩
- Roswell H. Whitman, Associate Chief of the Division of Investment and Economic Development.↩