McGhee Files: Lot 53 D 468: “Economic Assistance”
Memorandum by the Assistant Secretary of State for Near Eastern, South Asian, and African Affairs (McGhee) to the Secretary of State1
Subject: Suggested action for presentation of a program of economic assistance to the Near East in the light of the Israeli request for a grant in Fiscal 1952 of $150 million.
[Page 643]Discussion:
(1) We now have “markings” from the Bureau of the Budget on our program for grant aid to the Near East; out of a total of $50,000,000 approved by the Bureau of the Budget for the area, including a contribution which may be as high as $30,000,000 to the United Nations Arab refugee program, $1,000,000 is earmarked for Israel.
(2) Since the preparation of that program, the Israelis have requested a grant of $150,000,000. This request is intended to be the first installment of a three-year program amounting to $1½ billion which Israel will seek from United States grants and other sources. This program will involve the immigration into Israel of 500,000 Jewish people. It has not been demonstrated that it is in our national interest for the United States Government to assume even partial financial responsibility for such immigration.
(3) The items that go to make up the $150 million are set forth in the Note of March 22:
“Approximate List of Purchases to be Financed with Requested Grant-in-Aid
| A. Materials, fixtures, and equipment required to be imported for the construction of 70,000 housing units | $30,000,000 | ||||||||||||||
| B. Supplies required to restrain the inflationary pressure of the investment and defense programs | |||||||||||||||
|
105,000,000 | ||||||||||||||
| C. Shipping and insurance services | 15,000,000 | ||||||||||||||
| Total | $150,000,000” |
The foregoing list, as regards certain items, is clearly excessive, and probably reflects the desire of the Israelis to stockpile basic items. Item A is based on the presumption that the United States will assist in the financing of the immigration policy discussed above. Item B(a), Wheat, represents roughly 50% more than the import requirements of Israel, based on 1950 actual imports and taking Israel’s projected population growth into account. Item G, Petroleum, represents per capita requirements double those of the United Kingdom, approximately nine times those of Greece, and 18 times those of Turkey. Similar inflation occurs elsewhere in these figures.
[Page 644](4) Balance of payments figures, however, suggest that Israel, even without a large immigration program, is likely to require grant aid in order to prevent a considerable reduction of the living standards of its present population. We cannot justify a figure with precision at this time, but a reasonable amount would appear to be at least $25 million. Such an amount could be justified on a project basis. Israel’s requirements for grant aid are of course related to an unknown; the amount that may be subscribed privately for the country’s needs.
(5) Our policy of impartiality requires an adjustment of proposed aid to the Arab states if Israel is to receive a substantial grant. Thus it might be opportune to combine legislative proposals providing for grants to Israel in a regional program which will include proposals looking to a final settlement of the Arab refugee problem.
The Israeli Note refers to Israel’s obligations to the refugees. It is most unlikely that a direct settlement by Israel of the refugee claims for compensation can or will be made in any reasonable period of time. If in the long run the United States is to pay this bill, it will be preferable for the United States to provide funds promptly and directly for refugee resettlement and to administer these funds either directly or through United Nations mechanisms.
An indication of United States willingness to make adequate funds available for refugee resettlement could go far to ease local tensions and to make the Arab states themselves take resettlement seriously. This view has been expressed to us by Arab leaders in Syria and elsewhere. We cannot get far with a total reintegration budget of $30 million for 1952. It is therefore suggested that our legislation be written to provide authorization for a further $50 million to be available for refugee resettlement over and above our presently proposed contribution to the United Nations Relief and Works Agency. We recognize that the $50 million could not be disbursed in 1952; however, the availability of such a fund would enable us to move forward vigorously, as we could convince the Arab states that we mean to see the program of refugee resettlement through. Precedents exist for such a fund. The Arabs have demanded such an evidence of our intentions before they will agree to accept the influx of such large numbers of refugees for resettlement.
Such a proposal, presented in conjunction with the program already “marked up” by the Bureau of the Budget, would satisfy our essential criterion—impartiality.
We therefore submit the following recommendation:
Recommendation:
That we be authorized to present a revised program to the Bureau of the Budget for economic aid to the Near East increasing the present figure of $50 million for the Near East by $50 million, $25 million of [Page 645] which is to be earmarked for Israel and $25 million for Arab refugee resettlement, plus a further $25 million to be authorized for Arab refugee resettlement. Appropriations for this final $25 million will not be sought at this time.2
- Memorandum drafted by Mr. Gardiner.↩
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A notation on the source text indicates that this paper was concurred in by H, E, and UNA. “S/FA does not fully concur and is submitting separate comment.” The S/FA paper is infra.
Attached to another copy of the memorandum above is a note of April 21 from Mr. Bonesteel to Mr. Bissell which indicates that by that date Mr. Acheson had approved the memorandum for interdepartmental clearance. (S/ISA Files: Lot 52–26: “Israel”)
Information on clearance of the specific memorandum above has not been found in Department of State files, but in a memorandum of April 25, to Mr. Gordon, Mr. Bonesteel stated in part that by then an increase in economic aid to Israel and the Arab states had been “cleared” by the Defense and Treasury Departments. (S/ISA Files: Lot 52–26: “Israel”)
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