Office of the Historian

784A.5 MSP/12–2051: Telegram

The Ambassador in Israel (Davis) to the Department of State

secret
priority
Tel Aviv, December 20, 1951—6 p. m.

609. Yesterday I presented McDaniel to PriMin Ben-Gurion, MinFin Kaplan, MinComIndus Joseph, and Econ coordinator Naphtali. In conversation with Kaplan and Avriel, principles bi-lateral agreement were discussed. In this connection, McDaniel strongly recommends and I concur, that no commitments on subject-matter agreement be made to Israel auths Washington pending further conversations here. Particularly we wld wish to avoid recurrence such statement re counterpart as appears in text draft interim note (Deptels [Page 970] 406 Dec 11 and 422, Dec 10)2 “the sums in this Israel Govt account shall be held or used for such purposes as may be agreed upon between our two govts in furtherance of relief and resettlement of refugees”.

McDaniel emphasized desire that 5 percent of all pounds deposited by Israel Govt under exchange notes and contemplated bi-lateral agreement shld be credited USG for its use within Israel for such purposes as USG may elect. Kaplan and Avriel made no objection, merely observing that such funds shld be used within Israel.

ReDeptel 436, Dec 13,3 we consider it important that counterpart funds be available to both Emb and Econ Aid Mission for all purposes which USG may elect. If, as indicated in Deptel 436, such funds “not intended cover all Emb admin and operating costs, but only those broadly associated with implementation aid program”, an impossible personnel situation as well as admin difficulties wld inevitably arise.

Issue must also be faced squarely that present exchange rate is unrealistic and operates, in effect, as heavy tax on US personnel and govt.

McDaniel proposes include in agreement language to safeguard right of officer in charge US Emb jointly with officer in charge of aid mission to fix realistic exchange rate for 5 percent counterpart funds credited USG. When realistic rate so established, it shld be made available equally to Emb and aid mission personnel, and for admin and operating expenditures.

Davis
  1. Not printed; it transmitted the draft text of the note which was sent on December 7 to Ambassador Eban; see footnote 1 to telegram 544 from Tel Aviv, December 4, p. 952.↩
  2. Not printed; it confirmed the exchange of notes with the Israeli Embassy in Washington on December 7 (784A.5 MSP/12–1051).↩
  3. Not printed.↩