Foreign Relations of the United States, 1952–1954, The Near and Middle East, Volume IX, Part 1

783.5 MSP/9–2353

No. 678
Memorandum of Conversation, by Douglas Worcester of the Office of Near Eastern Affairs

confidential

[Washington,] September 29, 1953.

Subject:

• Discussion on Economic Assistance to Syria

Participants:

• Ambassador Zeineddine—Syria
• Dr. Yassin Zakkaria—Syrian Embassy
• Mr. Jernegan—NEA
• Mr. Gardiner—NEA
• Ambassador Moose—Embassy, Damascus
• Mr. Harlan Clark—Embassy, Damascus
• Mr. Norman Paul—FOA
• Mr. Worcester—NE

Mr. Jernegan stated that at present he was handling discussions for Mr. Byroade on all aspects of aid programs for NEA countries, and he was happy that both Ambassadors Zeineddine and Moose were able to be at this meeting. He recalled the previous discussions which the Syrian Ambassador had had on this subject with Departmental and other agency officials; the purpose of this meeting was to recapitulate and clarify various points, while acquainting the Ambassador with new thoughts developed. Mr. Jernegan proceeded then to elaborate on the following points in an aide-mémoire, a copy of which was to be delivered later to the Syrian Embassy:¹

1. The United States wants to grant Syria military and economic assistance; moreover, we look to Syria for closer cooperation in fulfilling its refugee agreement with UNRWA. For the present, however, we do not insist that these three aspects—economic, military and refugee—be commingled, but are amenable to treating them separately if Syria so desires.

2. While grant economic aid can be used in many ways, it cannot be substituted for any funds which Syria might find available from the IBRD. However, the U.S. believes that with Syria it can devise arrangements with the IBRD for Syria to marshal available resources from all three in the near future.

3. As for specific economic projects utilizing grant aid, the U.S. understands that Syria has three which stand at the stage for execution: a roads program, construction of Latakia Port, and reclamation of Ghab Swamp. Naturally the U.S. is not endorsing these projects to the exclusion of any others which Syria might have in mind, but believes simply that these are the ones closest to leaving the drafting board.

4. The U.S. understands that the IBRD has been discussing terms under which the foreign exchange costs for these projects might be loaned to Syria; we are prepared to assist Syria by advancing funds to meet some or all of the local costs. Also we are prepared to underwrite completion of worthwhile stages in these projects, although amount of funds which we would commit must depend on technical considerations which the U.S. stands ready to study with Syria and the IBRD. Finally, we want to stress the importance of prompt action in determining those commitments, in view of U.S. budgetary limitations and the U.S. Government’s desire to use available funds with reasonable dispatch.

5. In addition to grant economic aid as illustrated in the three projects, the U.S. is willing to provide technical assistance as requested by Syria, and in particular to furnish engineering surveys relative to development of Syrian water resources along the Euphrates and elsewhere.

6. As for the necessary procedures which Syria must undergo to initiate a program of U.S. grant economic and technical assistance:

a. Syria and the U.S. would have to conclude a standard agreement defining the terms under which the assistance would be forthcoming. This agreement would contain the assurances set out in Section 511 (b) of the Mutual Security Act of 1951, and a copy of 511 (b) would be given the Ambassador at this time for study.

b. Syria would be expected to continue its negotiations with the IBRD and to accept the guidance of the Bank in establishing Syrian controls for ensuring the proper execution of projects.

c. Syria would have to agree to embargo shipment of certain materials to countries within the Soviet orbit, since under the provisions of the Battle Act the U.S. cannot supply aid to countries not enforcing such an embargo.

In conclusion Mr. Jernegan reaffirmed the Department’s confidence that future support for aid to Syria could be maintained in the U.S. Government. He stressed, however, that support will not be obtainable unless demonstrable progress in projects is made in the near future. The Congress is reasonable and sympathetic, but it expects to “see dirt fly” in the Near East; the Department will lack persuasion if it goes to the Hill next year with only blue prints again as bona fides.

Ambassador Zeineddine thanked Mr. Jernegan for a very clear presentation. He added that he would like clarification of certain points, however. What about the execution of other projects? Could such take place after Syrian submission of cost estimates and project justifications? Syria has many projects in mind, grain elevators being one of the foremost, but Syria cannot afford the money to blue print projects without knowing if funds will be available for the actual construction. Furthermore, negotiations between Syria and the IBRD might not be completed until the middle of 1954.

Mr. Jernegan replied that the U.S. could not commit itself in advance to just any project, but he reiterated that we are ready to contemplate assistance on other projects which are equally as worthwhile as the illustrative three, and which are sufficiently advanced in planning. He indicated that grain elevators could be considered feasible. In reply to the Ambassador’s further question on IBRD controls, Mr. Jernegan and Mr. Gardiner said that such controls would of course satisfy the U.S. but should be thought of as a guarantee to Syria that the finished product would meet the requirements.

Ambassador Zeineddine continued to propose projects. There is need in Syria for an agricultural bank; the existing institution advances credit only to established farmers upon the strength of a mortgage. The loans are insufficient for farmers to develop their land by modern methods of conservation and mechanization. A new bank with greater credit facilities could promote good principles of land utilization. Two other advantages would accrue: a progressive, landless element would be enabled to purchase farms, and consequently land reform would be initiated through a procedure which the Ambassador thought was much better than division of existing rights and claims. The latter procedure provokes bitterness and evasion. Therefore, since Syria does not have the capital to create the bank, and since the project cannot be “blueprinted” and is outside the scope of IBRD, could the U.S. earmark a portion of present funds in order to later finance this demonstrably laudable project? Also, could the U.S. earmark funds for Syrian participation in two regional projects—the Mediterranean-Persian Gulf highway, and an Arab Development Bank which could finance revival of the Hejaz Railway and water harnessing on the Euphrates?

Mr. Gardiner asked how ownership of the Arab Bank would be evolved, and how such matters as interest and dividends would be settled, or indeed reconciled with Islamic views.

Ambassador Zeineddine thought the Arab Bank might function as a non-profit juristic person with multi-national directors. Saudi objections to the interest angle could be overcome; “learned opinion” does not forbid rent, but the use of money acquired from money for the purpose of making a further profit. He believed the Iraqis might now go along. Additionally, if Aramco were to advance more money to Saudi Arabia than could be utilized readily, Ibn Saud might be persuaded to deposit such funds in the Arab Bank.

Mr. Jernegan said that the Department was interested in all of the ideas which the Ambassador had presented. At some later date we might be disposed to cooperate toward their fruition. He reiterated that none of them, however, were organized sufficiently to justify the earmarking of U.S. funds. The Arabs have yet to reach agreement on the highway and the Development Bank. As for the Yusuf Pasha Barrage plan, it would take probably two years just to make an engineering survey to determine the feasibility of construction. To repeat—it is vital that Syria utilize the available funds for readied projects. In addition, surveys can go forward on others, and when completed be the basis for project construction requests in the following years.

Ambassador Zeineddine reverted to the agricultural credit bank. He believed its plans would be worked out soon, and with its importance to the overall economic welfare of Syria, why couldn’t the U.S. earmark funds to establish it? Also, Syria would like to send a number of students abroad to agricultural schools, preferably here but possibly in Europe as well; could funds be set aside for their expenses? Mr. Jernegan explained that the student question was covered by technical assistance rather than grant aid, and at any rate would involve only a relatively small amount of money. Mr. Gardiner suggested that Syria might get funds for the agricultural credit bank by allocating the equity and the profits which would accrue eventually from the three projects outlined earlier by Mr. Jernegan.

The Ambassador countered that Syria intends to use such profits for projects of social welfare. To Mr. Jernegan’s interjection that Syria might be interested in an industrial bank like the one set up by IBRD in Turkey, he replied that apparently the IBRD was not ready to do so. However, he would be happy to discuss an agricultural-industrial bank with FOA officials.

He concluded by saying that it was very important for the U.S. to make the terms of a Syrian agreement as “easy” as possible. President Shishakli is beholden to public opinion. The street element in Syria must not be able to portray the agreement as an instrument of colonization or imperialism. After all, it is the essence which is wanted in the agreement, and not so much the form. For instance, since Syria does not and has no intention of shipping materials to the Soviet bloc, why belabor the point?

Mr. Jernegan expressed his confidence that an agreement could be evolved to the satisfaction of both countries. Possibly the Syrian Government could comply by a simple acknowledgement of the terms of our agreement. Ambassador Zeineddine thanked the group and said that he would forward our views to his Government. He mentioned that he would like to return later in the day and discuss the Israel-Syria controversy and the Tunisia-Morocco question.

1. Dated Oct. 1. (783.5 MSP/10–153)