Foreign Relations of the United States, 1952–1954, Western Europe and Canada, Volume VI, Part 2

752.5 MSP/10–2253: Telegram

No. 908
The Ambassador in Spain (Dunn) to the Department of State

secret
priority

Madrid, October 22, 1953—4 p.m.

331. Deptel 330, October 19.¹ Subject: Development Tentative Fiscal Year 1955 Aid Program.

We believe that $240 million balance of $465 total aid should be programmed over two year rather than three year period as follows:

1. For fiscal year 1955, total aid $170, of which $140 for MDAP and $30 million economic aid.

2. This would leave $70 million as amount necessary to program after fiscal year 1955 in order to fulfill our formal commitment to Spanish Government. For present planning purposes, we would propose that this entire $70 million be considered as going to MDAP in fiscal year 1956, thus completing program in magnitude envisioned in exchange of notes with Spaniards.

3. While we have repeatedly discouraged Spanish Government re prospects for large amount of economic aid after current fiscal year, there is no doubt that the government, as such, expects some economic assistance and Spanish people certainly do. An amount in excess of that proposed above could readily be justified on purely economic grounds but we believe the $30 million proposed might suffice to maintain the friendly cooperation necessary to the construction and operation of the joint military facilities.

4. Whether or not it will be possible with the $85 million economic aid provided this year together with the $30 million proposed above for fiscal year 1955 to provide adequate defense support for US objectives, including the preservation of economic stability, it is not now possible to say. Certainly, however, it can be said that this amount should be regarded as an absolute minimum.

5. Re objectives of economic aid program in fiscal year 1955, we concur your general statement fifth paragraph reference telegram with possible exception of hydroelectric power. Our tentative reservation re hydroelectric power development stems not from any doubt as to its necessity but rather from some doubt as to its proper order of priority in relation to the other major deficiencies in the economy which require attention.

6. In arriving at conclusions outlined above, we have, following your suggestion, regarded requirement for counterpart for base construction as important, but subsidiary, consideration. Under our agreement with the Spanish Government that 60 percent of all counterpart generated by economic aid can be used for military facilities construction program, $69 million in pesetas would be available for this purpose if $30 million in economic aid in fiscal year 1955 were to be added to the $85 million now appropriated. This amount of disposable counterpart does not seem likely to be sufficient to cover completely the peseta cost element of the first phase of the construction program but it will, nevertheless, cover a major part of these costs and thus contribute greatly to US military objectives.

7. The fact that $69 million in peseta equivalent is less than the total amount of local currency likely to be required is of somewhat less importance since we believe Spanish may agree to purchase up to $20 million in surplus US wheat and other grains with pesetas on understanding that this would be in addition to fiscal year 1954 economic aid. Believe Spaniards would agree that pesetas accruing to US would be used for base construction and possible telecommunications system supporting bases. Please hold this latter point in greatest confidence since we have not discussed with Spaniards. We shall be exploring this aspect further with Dr. FitzGerald when he arrives Madrid.

8. JUSMG have seriously considered the time phasing of the MDAP aid proposed in paragraphs 1 and 2 above and regards the suggested phasing as most realistic appraisal now possible.

Dunn

1. Telegram 330 requested the Embassy’s views on the disposition of the remaining aid promised to Spain in return for the bases. (752.5 MSP/10–1953)