Foreign Relations of the United States, 1952–1954, General: Economic and Political Matters, Volume I, Part 1

Eisenhower Library, Eisenhower papers, White House Central files, 1953–61

Memorandum to the President by the Director of Foreign Operations (Stassen)

secret

Washington , December 9, 1954.

• Subject:
• Transfer of Funds Within the Authority Provided by Congress Under the Mutual Security Act to Meet Certain New and Increased Needs for Mutual Security Assistance.

1. Certain situations have recently arisen which, under applicable NSC decisions and in accordance with the foreign policy guidance of the Secretary of State, require (a) the initiation of several foreign aid programs which were not specifically contemplated and provided for at the time when the current Fiscal Year Mutual Security Program was first presented to the Congress and (b) an increase in the level of aid planned for several countries when the Congressional presentation was made. The implementation of these new and enlarged programs is dependent on certain fund adjustments among the various appropriation accounts in the Mutual Security Program.

2. The following two provisions of the Mutual Security Act of 1954 give the President authority to transfer or otherwise to apply funds available for other purposes in order to finance assistance programs necessitated by these new situations:

A. Section 501 provides that the President may transfer, whenever he determines it to be necessary for the purposes of the Act, not to exceed 10 per centum of the funds made available pursuant to any provision of the Act to any other provision of the Act, provided that no appropriation can be increased through transfers under this section by more than 20 per centum of the amount of such appropriation.

B. Section 401 of the Act provides that not to exceed $150 million of the total funds made available under this Act may be used in any fiscal year without regard to the requirements of this Act or any other Act for which funds are authorized by this Act, in furtherance of any of the purposes of such Acts, when the President determines that such use is important to the security of the United States.

3. There are presently unobligated Mutual Security funds which can be utilized to meet these new and increased requirements without significant damage to the other activities for which they are now earmarked, provided, but only provided, that new funds are appropriated next year to cover such activities. The possibility of making such temporary diversions arises among other things from the delay in German rearmament, the ending of the Indochina War, and a number of other factors which have kept the rate of obligation below the rate authorized and appropriated by Congress. The approximate gross amount of unobligated funds as of this date is $4.3 billion. The major portion of these funds is for military purposes.

4. It is therefore recommended that the President determine that it is in the interests of the United States to meet these new and urgent needs and that by employing the several powers referred to in paragraph 2 above, he utilize military assistance funds for such purpose. It is further recommended that Congress be requested, as part of the Fiscal Year 1956 Mutual Security Program, to appropriate funds to restore the specific military assistance appropriations from which funds are diverted to meet these additional needs.

5. Consultation with respect to these proposed adjustments has been carried out with the leadership of both political parties in the Congress. The reaction has been uniformly favorable.

6. The specific transfers which are necessary and a summary of the reasons for each such transfer are as follows:

A. Egypt—$20 million.

With the conclusion of the Suez agreement,¹ the aid commitments in the President’s letter to General Naguib became operative. Thereupon, and in view of the decision of the Egyptian Government not to request any arms aid immediately, the Department of State has concluded, and FOA concurs, that a $40 million program of economic assistance should be carried out. Since our FY 1955 appropriation request allowed for only $20 million for economic aid to Egypt, additional funds in the amount of $20 million must be found.

B. Iran—$30 million.

With the successful conclusion of the oil settlement, it is in the United States national interest to assure economic and political stability in Iran until the oil revenues begin to flow in adequate amounts to support the economy. It is estimated that $30 million will be required for this purpose over and above amounts otherwise available and needed for assistance to Iran. We believe that the additional $30 million required for this purpose can properly be provided as a loan and not a grant. Such loan would be administered through the Export-Import Bank, but Mutual Security funds are needed.

C. Pakistan—$55.6 million.

The consummation of the Mutual Security agreement with Pakistan following on the Turkey–Pakistan defense agreement opened up an important gain in United States security interests in the Near East–South Asia area. A study of the requirements for assistance and the conferences with the Prime Minister and Chief of Staff of Pakistan in Washington led to the conclusion that there should be a total program for Pakistan which would be $55.6 million above the level possible with funds now available for this area.

D. Guatemala—$3.7 million.

The emergence of Guatemala from Communist domination found the new friendly government facing a critical condition. To meet this condition, and to stabilize the political and economic situation quickly, this new government required assistance from the United States substantially in excess of the amount planned in our request to Congress last spring. Compliance with this request would appear to be very much in the U.S. national interest.

E. Haiti—$700 thousand.

A devastating hurricane created urgent needs for food and other relief. The cost of transporting the necessary food, as well as the costs of both transportation and procurement of other emergency supplies, must be borne by Mutual Security funds and, of course, no specific funds had been appropriated for this purpose.

F. Coal Fund—$20 million.

The effective utilization of coal in the Mutual Security Program requires a separate fund. Details of the proposed operation of this fund are outlined in a memorandum herewith attached.

G. Italy—$15.5 million.

The successful Trieste settlement gave rise to certain requirements in Italy which, in the United States national interest, should be met in the amount above.

H. Yugoslavia—$4.8 million.

The successful settlement of the Trieste dispute² and the Yugoslav drought have combined to create certain requirements which call for the provision of an added amount of aid which cannot be financed from the regular appropriation but which is needed to carry out what is regarded to be the minimum program necessary for Yugoslavia during this fiscal year.

I. Spain—$15.5 million.

In view of the reduction in Spanish export earnings as result of a drought and a citrus frost and in view of the importance of assuring a reasonably stable economy in a country where such extensive United States base construction is being undertaken, it is considered that $15.5 million must be added to those funds now available for the purpose in order to carry out an adequate program in Spain during the current year.

J. Danube Flood Relief—$1.2 million.

Payment of the ocean transportation costs of the agricultural products made available to the Danube Relief Program under the President’s decision of August 12, 1954, and the President’s determination of October 25, 1954, requires that funds in the foregoing amount be made available for this purpose by use of the authority cited in paragraph 3 above.

7. Attached hereto is a proposed Presidential determination and authorization which, if executed by the President,³ would have the effect of making available from military assistance appropriations the funds necessary to carry out the programs listed above. The concurrences and comments of the other Departments and Agencies concerned are indicated on the usual carbon copy of the proposed action paper.

8. Financing the added requirements referred to above will not significantly increase actual expenditures under the Mutual Security Program during Fiscal Year 1955.⁴

Harold E. Stassen

1. For documentation on the Suez agreement, see volume ix .
2. For documentation on Trieste, see volume viii .
3. The proposed Presidential determination and authorization, not printed, carry the signatures of Secretaries Dulles and Wilson, Rowland Hughes, the Director of the Bureau of the Budget, and Stassen. There is no Presidential signature; however, in a letter to Senator Alexander Wiley (R.–Wis.), Chairman of the Senate Committee on Foreign Relations, dated Dec. 10, Stassen stated that President Eisenhower “has now taken the formal action necessary under the Mutual Security Act of 1954 for the transfer of funds to meet certain new and increased needs for Mutual Security assistance. At the President’s request, I am sending you a copy of his memorandum of determination.” Stassen’s letter to Senator Wiley is in the Eisenhower Library, Eisenhower papers, White House Central files, 1953–61.
4. Attached to the source text is an undated and unsigned memorandum entitled “Memorandum on $20 Million Coal Procurement Fund,” in which the proposal was set forth to establish a coal procurement fund from appropriations for assistance authorized by the Mutual Security Act of 1954. The fund was to be utilized to finance coal shipments to any friendly country where an economic need existed, whether or not such country was directly eligible for assistance under the Mutual Security Act. The Presidential determination and authorization discussed in footnote 3 above provided for the establishment of this fund.