Secretary’s Memoranda: Lot 53 D 444: April–June, 1951
The Under Secretary of State (Webb) to the Director of the Bureau of the Budget (Lawton)1
My Dear Mr. Lawton: The Department has presented to the Bureau of the Budget a program for economic aid to Near East and African countries and to Iran in the amount of $88 million. The Iran segment in this program, not yet considered by the Bureau, amounts to $24 million. The balance of the program of $64 million was marked by the Bureau to $50.3 million. New factors have arisen since the preparation of this program.
1. We were advised on April 20 by our Missions in Damascus, Beirut and Cairo that the Arab League have gone on record as favoring a massive program of resettlement of Palestinian refugees in the Arab states. The Arab League points out that the amount of the reintegration fund ($30 million for 1952 fiscal), established by resolution of the General Assembly, is entirely inadequate for the purposes intended. They have made the views of their members clear that they do not wish to embark on an enterprise of this magnitude without reasonable assurance from the United States and the United Kingdom of our intentions to continue such a program to conclusion. The report of the United Nations Relief and Works Agency for Palestine Refugees in the Near East has estimated that reintegration of refugees will require at least $150 million over a five or ten-year period. The figure of $150 million is a minimal estimate based on an average cost of a thousand dollars per family.
[Page 121]2. The relief budget for fiscal 1952 for the United Nations Relief and Works Agency as approved by the Assembly was prepared in the autumn of 1950. Since its preparation, prices of food and related articles have risen steeply. It is now estimated that the unit costs of relief (per refugee per month) have risen from an average of $1.75 in mid–1950 to a figure of $2.50 today. Therefore, it is most unlikely that the relief operation can be carried out in fiscal 1952 at the cost of $20 million budgeted by the General Assembly.
3. There are then two grounds for reconsideration of our approach to relief and reintegration of the Arab refugees from Palestine. In view of the difficulty and delicacy of negotiations which have been patiently carried out for many months by the United Nations agency and by United States Chiefs of Mission in the Arab states in efforts to persuade Arab governments to accept the principle of resettlement, there is every reason now to attempt to meet the Arabs by indicating our intentions to carry on with this program. It is obvious that the sooner reintegration takes place, the sooner will costs of direct relief be diminished pro tanto.
There is some reason to believe that the United Kingdom will follow our lead if we embark on a program of this magnitude. United Kingdom authorities have indicated in the past that they were prepared to contribute to this endeavor in a ratio of $1 to every $3 contributed by the United States.
4. The Export-Import Bank has indicated that it intends to make no further loans to Israel beyond the $135 million loan already established. In the rationale of our original Israeli program, it was made clear that the program of assistance to Israel was limited to technical assistance in view of Israel’s lines of credit from the Export-Import Bank, as well as Israel’s ability to raise funds from private sources to balance its international accounts.
5. Israel has formally indicated to the Department its need for grant assistance. While it is very difficult to assess the appropriate magnitude of an aid program to Israel, in view of unknown factors in Israeli balance of payments probabilities, a case can be made for direct assistance to Israel. Most appropriately, this assistance should take the form of projects otherwise bankable which cannot now be so financed in view of the fact that Israel’s future credit appears already fully pledged for the servicing of loans already made.
6. An overriding consideration of United States Government policy, as determined by the National Security Council, is the need to treat the countries of the Near East on an impartial basis. Senator Connally has already been informed in a letter from the Secretary that it is the Department’s intention in the light of this policy to include consideration for assistance to Israel in a regional program.
In the light of the foregoing, we wish to revise the program in accordance with the following tabulation:
| Items already marked by the Bureau of the Budget, including $25,000,000 for Palestine refugees | — | $50.000.000 |
| Additional assistance for Palestine refugees | — | $50,000,000 |
| Grant aid to Israel | — | $25,000,000 |
The Department proposes to seek only $50,000,000 appropriations at this time for Palestine refugees out of the total $75,000,000 authorization.
In justification of the item relating to the Arab refugees, it should be made clear that the magnitude of this problem has already been sketched in the report of the United Nations Palestine Relief Agency submitted to the General Assembly in October 1950. It was then made clear that reintegration of refugees should involve a sum of at least $150 million and that a program would require from five to ten years to complete.
Settlement of the refugees is an essential element in the stability of the Near East. Inaction would seriously impair the security interests of the United States. Assistance in solving the problem of the refugees will contribute in the long run to improvement of Israel’s relations with her Arab neighbors; assistance to the Arab refugees is in a real sense direct assistance to Israel.
The action of the Arab states referred to in the paragraph numbered (1) above makes it clear that if we are to move forward we must do so in bold and decisive terms.
Expenditures for resettlement will involve, among other categories, cost of road construction, housing, tools, seed, livestock and other agricultural facilities for the rural population among the refugees. It will include housing and light industrial equipment for the non-rural refugees.
Funds made available for resettlement will not be disbursed unless there is a clear and definite understanding with the government concerned and with the refugee himself that, following the expenditure of these funds, relief operations in respect to the resettled population cease finally on a date to be agreed upon.
While Israel has formally admitted its obligations to the refugees, the financial condition of Israel will not permit Israel from its own resources to make any substantial contribution to this program for many years to come. The case on humanitarian grounds and on grounds of United States security to take prompt measures to assist the refugees in their present plight is so strong that we cannot afford to wait until Israel accumulates the funds to pay its debt.
That portion of the fund required for direct relief can of course be thoroughly documented in concrete terms based on the experience of the United Nations Relief and Works Agency for Palestine Refugees.
The case for grant aid to Israel in the amount of $25 million is justified on balance of payments grounds. It is further justified for illustrative purposes on a project basis, and a revised list of projects, [Page 123] including technical assistance projects already marked by the Bureau, can be made available to you promptly.
Sincerely yours,
- Drafted by Arthur Z. Gardiner, Special Assistant to the Assistant Secretary of State for Near Eastern, South Asian, and African Affairs.↩