641.74/1–353: Telegram
No. 1067
The Ambassador in the United
Kingdom (Gifford) to the Department of
State1
priority
3641. From Byroade. Afternoon January 2 we continued talks with British on Egypt and covered following points:
- 1.
Economic Assistance. British said they had looked into this question urgently, particularly from following points of view: (a) Increasing cotton purchases; (b. Stockpiling cotton; (c) Further sterling releases. Results largely negative. Re (a), raw cotton commission operates as independent agency on commercial lines, and HMG cannot interfere. Main difficulty is Sudanese cotton is six pence per pound cheaper. Present indications are that RCCs may [Page 1945] not move into Egyptian market this year. Re (b) HMG has also encountered considerable difficulty. In first place it would require further legislation. Secondly, military not particularly interested since difficult to store and since could continue purchase in event emergency without too great strain on shipping. Re (c), main difficulty re substantial sterling releases is that all other countries in similar position would demand similar treatment.
I said that we had not been able to make much progress re economic assistance either. I said that defense was arranging increase current requirements which would result in purchase 14,000 bales cotton for approximately $5,000,000. We are also expanding scope of industrial survey to be carried out by Cabot. Consideration now being given to possibility limited wheat loan for grant, but this might take some time to work out.
During course of meeting, we inquired whether there would be any possibility of British permitting Egyptians to utilize remaining sterling balances to purchase arms in United Kingdom. British indicated could not make such arrangement, since other holders frozen balances would demand similar treatment. India, in particular, would demand similar treatment. British admitted, in this connection, that they have committed India’s purchase surplus military equipment from frozen balances and said it might be possible to do same for Egypt in event agreement reached re defense. British also pointed out their strong domestic political objections to further sterling releases, in view Egyptian import restrictions. British stated that 10 million pounds due Egypt beginning of year were released yesterday. This draws balance down to 169 million pounds.
- 2.
Military Equipment. Meeting reverted briefly to this matter. British asked us for paper,2 which is in course preparation, explaining why we feel it desirable extend interim arms assistance before negotiations, form of such assistance and items which might be furnished.
British inquired whether, leaving aside for moment question of interim assistance, we objected to phrasing in British military paper transmitted Embtel 3610 January 1. I reiterated that I was not sure this was correct way to go about matter. However, this was question of primary concern to United Kingdom, affecting material to be supplied by them, and I was not sure that I could properly object. Neither did I feel I could agree. I suggested that minutes should make clear that I did not feel I could express opinion re phasing of United Kingdom aid.
Bowker emphasized United Kingdom hope that we would agree in principle that United Kingdom should be principal supplier of arms to Egypt, partly because this is only type of assistance which United Kingdom likely to be able to give and partly because much of present Egyptian equipment is of United Kingdom origin anyway. I said I thought we could agree in general with this concept but that we could not tie ourselves down precisely because of Egyptian request for arms to United States. I further indicated that we thought it would be highly undesirable to make any sort of [Page 1946] decision such as United States having primary responsibility for economic aid and United Kingdom for military assistance.