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

711.83/5–549

Policy Statement on Egypt Prepared in the Department of State¹

secret

[Washington,] May 5, 1949.

A. Objectives

Our general policy in the eastern Mediterranean and the Middle East, which stems primarily from our conviction that this area is of fundamental importance to our security, is directed toward developing and maintaining stability there. Our fundamental objectives toward Egypt are to restore the cordial relations which existed for many years between the US and Egypt and to enable it to develop and maintain its political and economic stability free from outside interference.

B. Policies

As a result primarily of our Palestine policy, as well as our inability to support the extreme demands made by the Egyptians before the Security Council in connection with an attempted revision of the Anglo-Egyptian Treaty of Alliance of 1936, much of the amity between the US and Egypt built up over many years was dissipated. Now, however, it is becoming increasingly clear to many Egyptian leaders that, despite our Palestine policy, Egypt’s interests and particularly its future security can be best served through close cooperation with the US. An encouraging development is Egypt’s very recently expressed desire to consolidate its position with the west. Informal queries regarding the possibility of a broad treaty relationship with the US, UK and perhaps France indicate a decided change in the thinking of Egyptian leaders. Furthermore, Egypt’s realistic approach to the problem of Palestine in negotiating and signing an armistice with Israel despite its unabated opposition to the creation of that state evidences in a significant measure its leaders’ acceptance of the governing factors of US policy. The attitude of Egypt toward the formation of an eastern Mediterranean bloc will also in all probability be conditioned upon the degree of support that might be afforded by the US.

1. political

We continue to look with favor upon Egypt’s cooperation with other Arab states, the Arab League and the UN, and upon Egypt’s insistence on complete independence politically and economically.

Although we have never sought to undermine the special treaty position which the UK enjoys in Egypt, we would regard as outmoded any revision which left Egypt subservient to the UK. We would not object, however, to an amicable arrangement for continued British military responsibilities in the Canal Zone.

Although the Security Council still remains seized of the dispute over a revision of the Anglo-Egyptian Treaty of Alliance of 1936, the matter has not been brought up by either party since the debates in 1947. We hope that recent strategic considerations relating to the security of Egypt may enable Britain and Egypt suitably to revise the treaty. We believe, however, that it would be premature to consider recurring informal suggestions that this treaty might be supplanted by a broader treaty of alliance including the US and possibly France.

We also hope that the UK and Egypt can come to an agreement on the more recent dispute between them regarding the administration of the Sudan, particularly the actual setting up by the Government of the Sudan of a Legislative Assembly and an Executive Council. We regard these British efforts as sound transitional measures providing for greater participation of both Sudanese and Egyptians in the Government of the Sudan.

The US continues to recognize Egypt’s interest in the disposition of the former Italian colonies, particularly Libya, and we will support reasonable adjustments of the Egyptian boundary with Cyrenaica favorable to Egypt to which the British may agree if they obtain trusteeship over Cyrenaica.

We strongly urged Egyptian participation in the armistice negotiations at Rhodes and when these negotiations appeared to have reached a stalemate we urged upon both parties conciliatory attitudes which, when adopted, led to the signing of the armistice. We shall, if necessary, continue to impress upon the Egyptians our desire that they cooperate with the Palestine Conciliation Commission in its efforts to find a formula for peaceful solution of the Palestine problem.

Both in our short-term and long-term policies toward Egypt we continue to insist upon non-discriminatory treatment for US interests and nationals. Although we reserve entire independence of action with regard to our representations to the Government of Egypt, we have of late constantly consulted with and advised the British of contemplated action on major issues of vital interest to both countries.

We look upon a strengthening of our informational-cultural program in Egypt as an important means of stimulating the growth of US-Egyptian understanding, by familiarizing Egyptians with US institutions and ideals and by demonstrating US interest in the welfare of the Egyptian people. We view the Fulbright Agreement now being negotiated with Egypt, the only Arab state in which funds for this purpose are available, as an important step toward fuller and closer US-Egyptian friendship.

Egyptian legislation designed to give the Ministry of Education direct control over virtually all educational activities is still awaiting royal approval. The crux of the bill as it affects foreign school is its prohibition of religious instruction of children in any faith other than their own even with their parents’ consent. Foreign educational institutions in Egypt look on this bill as a possible infringement on their rights and as contrary to both the spirit and the letter of the Declaration of Human Eights approved in the General Assembly by both Egypt and the US. Although we view with some concern the probable results of this restrictive legislation, we feel that it would be unwise to make official representations regarding it pending further clarification of the underlying motives of the government and its plans of implementation. Certain recent pronouncements of responsible Egyptian officials regarding implementation indicate the possibility of a more liberal attitude than was originally manifested.

Intensive study is now being given to the problem of action regarding the personal status of Americans in Egypt after the expiration on October 14, 1949 of the Montreux Convention, together with the American reservation regarding consular courts. Consideration is also being given to an orderly disposition of the numerous cases before the Mixed Courts which will remain unsettled at that time. Although we are not opposed to informal discussions of these matters in Cairo among the diplomatic representatives of interested foreign governments, we would prefer a unilateral approach to the Egyptian Government should it appear to be wise to offer any suggestions regarding them.

2. economic

It is our policy to foster the creation in Egypt of conditions conducive to expanding multilateral world trade consistent with the principles of the ITO Charter, and to encourage the Egyptian Government to take measures which will contribute to improving the economic and social conditions of the Egyptian people, lending our assistance where appropriate. Some of the obstacles which we face in the implementation of our policy are of Egyptian creation, such as narrow and nationalistic economic measures taken by the Government, and can be overcome only through constructive influence, patience and education as we seek to make the Egyptians aware of the harmful effects of such actions. Other obstacles, such as those created by the dollar shortage and the limited convertibility of sterling, have broader causes and may be overcome as world economic conditions improve.

In giving renewed and increased attention to the economic and social problems of Egypt and the other Middle East countries we should keep in mind the views and objectives set forth in the “Summary Memorandum of Informal Conversations Relating to Social and Economic Affairs in the Middle East”,² drawn up following discussions between US and UK officials in Washington in the fall of 1947 and providing that the two governments will work in close conjunction in the development of economic and social policy in the Middle East, and we should strive to increase our exchange of information and views with the British in Cairo, London and Washington, and with other leading like-minded countries with economic and social interests in Egypt.

We should encourage Egypt to ratify the Charter for an International Trade Organization which its representatives signed at Habana, although we doubt that the matter will be given serious, consideration until the Charter has been ratified by the US. We should also encourage Egypt to come into the General Agreement on Tariffs and Trade signed at Geneva in 1947 by urging it to participate in the next round of tariff negotiations under the agreement, which we expect will take place early in 1950. We should not discourage Egyptian participation in any customs union or free trade area which is in accord with the provisions of Article 44 of the Charter. Participation in possible Arab League preferential arrangements not in accord with the Charter should be the subject of discussions with the Egyptians and might be protested on the basis of our 1931 Executive Agreement with Egypt on customs duties.

We should not make any representations with regard to Egypt’s recent short-term barter or bilateral agreement³ with various governments. We should, however, informally keep Egyptian officials aware of our view that barter and bilateral agreements, particularly if long-term and if developed into a network, divert trade into uneconomic channels and reduce the volume and benefits of world trade.

We should take active steps, with due regard for the political atmosphere in Egypt, to bring about negotiation of a Treaty of Friendship, Commerce and Navigation prior to the expiration in October 14, 1949 of the Montreux Convention. We should notify the Egyptian Government of our concern that no date for negotiation, has been set and endeavor to obtain a more specific idea of its reaction to the general principles enunciated in the draft treaty presented to it in September 1946. A shorter draft, incorporating the same principles, can then be drawn up to serve as the basis for negotiation.

In view of Egypt’s dollar shortage, we should continue to explore measures to supplement Egypt’s dollar earnings. One such measure would be to abolish or to expand the US import quota on cotton having a staple length of 1⅜ inches or longer. The Egyptians strongly protest the continuation of the quota on long-staple cotton which we also feel is undesirable. The Tariff Commission, the US agency responsible for recommending any change in the quotas, is however required by law to conduct its investigations under stipulations of the Agricultural Adjustment Act making supply in the US the only basis for establishing and continuing import quotas. Therefore we have not been formally presenting the Tariff Commission with any arguments based on commercial, financial or political considerations. We are prepared to discuss with the Egyptians the cancellation of our right to purchase cotton with Egyptian pounds acquired under the Bulk Sale (Surplus Property) Agreement⁴ provided that the Egyptians guarantee to protect such Egyptian pound holdings against loss from devaluation or currency conversion.

While appreciating the importance to US-Egyptian trade of dollars made available to Egypt by the UK, it is our policy not to intervene in or attempt to influence Anglo-Egyptian financial negotiations. In view of Egypt’s dollar shortage and its position with relation to the sterling area, we do not believe we should protest at this time the discrimination against American commercial interests in Egypt resulting from Egyptian foreign exchange and import control policies. We recognize that the problem is not peculiar to Egypt, but an aspect of the general problem of the dollar shortage and the limited convertibility of sterling.

The Egyptian Company Law and the Mining Law are two examples of nationalistic measures which do not in themselves discriminate against American as distinct from other foreign companies but which through unreasonable provisions tend to discourage American as well as other foreign companies from carrying on operations in Egypt. We have not protested the provisions of these laws although we stand ready to make representations with respect to any unduly restrictive or discriminatory use which may be made of the exceptionally broad powers left to the discretion of the administrators. We should take every appropriate opportunity to suggest to the Egyptians that they give consideration to their amendment. In the case of the Mining Law, we feel the petroleum provisions should be amended in such a way that the law would leave no uncertainty as to the security of a concession, that it would define those rights and obligations now encompassed in the regulations, that it would remedy the impractical provisions of the present law and that it would ensure the operator the right of disposing of this product on the world market at a competitive price after domestic requirements are satisfied.

The Egyptian petroleum market has been characterized in the past by cartel arrangements tightly controlled by several of the major companies. Owing to pressure from the Egyptian Government for increased supplies and with greater availability of Middle East oil more companies have recently come into the market. It is our policy to encourage this trend and, where American companies are involved, to discourage any tendency for them to join in market-sharing arrangements with the established suppliers.

We look forward to the negotiation of a tax treaty with Egypt. Meanwhile, we favor reciprocal exemption by executive agreement of the earnings of aircraft and shipping companies.

In spite of the relatively small number of industrial workers (about 300,000) in Egypt, unsatisfactory social, economic and employment conditions create a potentially explosive situation capable of being exploited by intelligent and determined Communist activity. Communist cells are known to exist among the workers, partly as a result of which the government has adopted an extremely firm position whenever labor unrest of serious proportion has developed. Up to the present, however, unions have not reached the point of being in any sense effective social, economic, or political forces, and qualified Egyptian opinion today sees the activities of extreme nationalist and religious groups, rather than labor unrest, as the greatest immediate danger to political stability.

Labor and social legislation in Egypt is both comprehensive and liberal, but badly administered. The Ministry of Social Affairs is relatively weak and ineffectual. Current information indicates some improvement in the real wages of industrial workers during the past few years, which, combined with somewhat brighter current prospects of implementation of portions of the labor and social legislation, raises the hope that some improvement in the living and working standards of Egypt’s industrial workers may be in prospect. Every effort should be made to induce the Egyptian Government to move in this direction.

While Egypt must assume primary responsibility for devising and implementing solutions to its economic and social problems, aggravated by the military activities in Palestine, the US should lend its encouragement and assistance to the greatest possible extent. We should: 1) informally encourage the Egyptians to initiate projects which will increase food production and distribute more widely the benefits of improved public health and educational facilities; 2) assist directly in such projects by making available, on a cooperative basis, technicians and demonstration materials to Egypt and bringing Egyptian nationals to the US for technical training, under the procedures to be established for implementing the technical assistance program; 3) urge the Egyptian Government to take reasonable measures which will attract private investments and commercial activity in Egypt, especially when it can help provide capital for sound economic development projects toward which the UN or the US may have provided technical assistance; 4) support moderate individual Export-Import Bank loans for sound short-term and self-liquidating projects, particularly to finance the purchase from the US of essential equipment not readily obtainable elsewhere; and 5) support International Bank loans for long-term development projects, such as the proposed Nile River development plan and related irrigation and drainage programs, all involving further control of the water supply of Egypt and the Sudan.

The US continues to be the only country with which the Government of Egypt has concluded a formal air transport agreement. Our policy is to coordinate our action with and lend appropriate support to other states, particularly the UK and France, in their current negotiations for bilateral air transport agreements with Egypt. We are encouraging the UK and France as well as other states to insist to the greatest extent possible that the terms of their agreements with Egypt be modeled closely along the lines of the so-called Bermuda agreement.⁵ This is important to the maintenance of our aviation policy in the Middle East. As in the case of other Arab States, through whose territory our air lines operate, we seek modification of their present policy which attempts to prevent air lines, through the threat of revocation of landing and traffic rights, from serving both Israeli and Arab territory. We also seek improvement in the standard of air navigation and communications and airport facilities in Egypt.

C. Relations With Other States

Soviet-Egyptian relations have been officially correct but Egyptian leaders have shown no inclination to tolerate any extension of Soviet influence either in Egypt or elsewhere. In fact, the strict banning of all Communist activity, including numerous arrests of both foreign and Egyptian Communist agents, and Egypt’s alignment in the UN with the western democracies on virtually all issues except Palestine, indicate fear and distrust of the USSR and a basic attitude of unfriendliness toward it. Nevertheless, the past three years have seen a considerable increase in Communist penetration in Egypt directed chiefly against British and American “imperialism.” In most instances the Soviet Legation in Cairo has been outwardly discreet in its propaganda activities; the Czechoslovak and Yugoslav Legations appear to be the chief foreign centers of Communist infiltration. The propaganda is constant and well-planned to appeal to the existing discontent and frustration of important segments of the population, attempting to reconcile the usual Communist line on all questions with alleged Egyptian national interests and aspirations.

Despite the recent armistice, Egypt’s relations with Israel remain and for some time to come will continue to remain embittered. The Egyptians still distrust Zionist ambitions and point to Israel’s refusal in the armistice negotiations to abide by the UN resolutions of November 1948. In our efforts to promote the stability of Egypt and the area, this fundamental conflict constitutes the greatest obstacle to the achievement of our objectives. We should continue to enlist Egyptian cooperation in its solution with particular reference to refugees, boundaries and the internationalization of Jerusalem.

The formation in 1945 of the Arab League,⁶ like the rise of intense and even xenophobic nationalism, is a manifestation of new and important forces at work in the Arab world. The future of the Arab League is uncertain. Its failure effectively to organize military resistance in Palestine is considered by influential elements, including its Secretary General, to have been nearly fatal to it. The need for closer Arab unity and cooperation, however, is still paramount in the minds of increasingly large segments of the population of the Arab world who claim that a re-evaluation and reorganization of the League, including possibly certain basic constitutional changes, must take place in order to give it effective authority. In the near future, however, it may be anticipated that individual states will be primarily concerned with their own particular political interests. For some time, therefore, the contribution of the League to regional cohesiveness may be chiefly along cultural, economic and social lines. An integrating force is the awareness of the danger of the spreading of communism for which Egypt with its great contrasts of wealth and poverty and its lack of basic liberalism provides a fertile field.

Egypt’s relations with the UK have improved and there has been a softening in its previous anti-British feeling. Egypt’s reverses in Palestine, the deterioration of Egypt’s internal security, and the increasing unpopularity of the palace regime have led some popular leaders to regard British support as a stabilizing factor. The palace has secretly shown its interest in improving Egypt’s relations with the UK but has so far proposed no definite formula for overcoming the anticipated popular reaction against any revision of the 1936 Treaty of Alliance that did not provide for complete withdrawal of British troops from Egypt and for the unity of Egypt and the Sudan. Specific evidences of the new friendliness of the Egyptian Government toward the UK are cooperation with the UK in connection with the Nile development scheme and the resumption on an informal basis of joint pilot training.

D. Policy Evaluation

In the past we have succeeded in establishing cordial relations with Egypt. The two main obstacles confronting us in our efforts to restore such relations are the Palestine problem and the existence of an extreme Egyptian nationalist sentiment. The deteriorating effect on American-Egyptian relations of our support of the partition plan for Palestine can hardly be overemphasized. This fundamental divergence between Egypt and the US has been somewhat tempered of late by the realization by some Egyptian leaders of the necessity of conforming, to a certain extent at least, with the exigencies of US and UN policy in the area. Insofar as this new trend in Egyptian-US relations adds to the prospect of greater security in the area, it should be regarded as an encouraging contribution to the attainment of our basic objective. We think that the opportunity remains for us to continue to give friendly advice and counsel which would serve to temper Egyptian tendencies toward extreme nationalism.

We are following closely a number of unresolved problems. One relates to securing from the Egyptian Government military air transit rights desired by the Department of the Air Force to facilitate flight operations affecting the US Air Base at Dhahran, Saudi Arabia. From June 15, 1946 to June 15, 1948 these rights were granted for periods of six months only,⁷ but we did not request a further periodic renewal in view of the known adamant objections by the Egyptians, who have, however, indicated their willingness to consider applications for individual flight clearances. This arrangement is unsatisfactory to the Air Force which is greatly inconvenienced by having to use alternate routes which are more expensive and hazardous than the one over Egypt. We hope that there may be a sufficient change in the Egyptian attitude in the near future to enable us to renew our request for periodic military air transit rights.

Since the establishment of martial law in Egypt on May 15, 1948, pursuant to military activities in Palestine, we have been confronted with many difficult problems relating to the inspection and seizure of in-transit cargoes destined for Palestine, both at Egyptian ports and through the Suez Canal.⁸ Our protests and those of other powers that seizures of cargoes at Egyptian ports are contrary to international practice and, in the case of cargoes transitting the Canal, are also violations of the Suez Canal Convention of 1888, have been and continue to be unheeded by the Egyptian Government. As a result, the American Export Lines has decided not to send its ships to Egyptian and Palestine ports on the same runs. Other aspects of this problem are the announced Egyptian decision that “all boats carrying aid to the Zionists of Palestine might be refused servicing in Egyptian ports,” and its orally stated intention to refuse fueling and other port facilities to all vessels belonging to a single operator if any of its ships has called at an Israeli port. Our Embassy at Cairo has succeeded upon several occasions in diverting the authorities from strict enforcement of this policy. There is no indication that the signing of the armistice of Rhodes will have any direct or immediate bearing on the Egyptian shipping policy, but it is possible that present restrictions may become outmoded even if not officially lifted before the abolition of martial law.

1. Department of State Policy Statements were concise documents summarizing the current United States policy toward, the relations of principal powers with, and the issues and trends in a particular country or region. The Statements were intended to provide information and guidance for officers in missions abroad. They were generally prepared by ad hoc working groups in the responsible geographic offices of the Department of State and were referred to appropriate diplomatic missions abroad, under cover of formal instructions from the Secretary of State, for comment and criticism. The statements were periodically revised.
2. Foreign Relations, 1947, vol. v, p. 614.
3. For information regarding the barter agreement of March 3, 1948, between Egypt and the Soviet Union, see editorial note, ibid., 1948, vol. v, Part 1, p. 85.
4. For documentation on this agreement, see Foreign Relations, 1946, vol. vii, pp. 69 ff.
5. For documentation on this subject, see Foreign Relations, 1946, vol. i, pp. 1450 ff.
6. For documentation on this subject, see Foreign Relations, 1945, vol. viii, pp. 25 ff.
7. For documentation on the securing of military air transit rights through an agreement with the Egyptian Government on June 15, 1946, see Foreign Relations, 1946, vol. vii, pp. 80 ff.
8. For additional documentation on Egyptian restrictions on shipping through the Suez Canal, see pp. 91 ff. and 594 ff.