711.56373/9–1452: Telegram

The Minister in Libya (Villard) to the Department of State1

secret

165. At my invitation, Pitt-Hardacre, Brit financial adviser to Libyan Govt, spent evening with me in discussion of Libyan demand for additional compensation under base agreement. He said he had been asked as result of parliamentary attitude to explore basis for collecting revenue estimated lost through exemptions enjoyed by US, and had therefore prepared memorandum accompanying ’s letter (Benghazi tel 34, Sept 2).2 He believed Libyans fully entitled to these revenues. Figures submitted were definitely on conservative side and as commercial proposition should appeal to American business instincts.

During course of our discussion Pitt-Hardacre made fol statements:

1.
Origin of demand was extent of US aid to Israel. Parliament felt that Libya deserved more than $1 million in return for base rights, considering that Israel contributed no such facilities for Western defense yet received many times that amount from US for econ assistance.
2.
UK contribution to Libya this fiscal year totaled approx pounds 1.5 million for exactly same mil facilities accorded US. Therefore, US should not balk at increasing its contribution.
3.
There was no doubt whatever Libya had capacity to absorb more econ aid. All kinds of development projects, among them Karamanli Mole, were crying for money and on urgent basis, regardless of what might have been said during past discussions of Libyan ability to handle foreign assistance for econ development.
4.
Agreement would certainly have been rejected if submitted to last session of Parliament and will certainly be rejected next session unless provision for econ aid is increased.
5.
Provisional govt which initialed agrmt had no power to commit govt which came into being Christmas Eve 1951.
6.
If payment for econ aid should begin only on date of ratification Libyan Govt would make vehement protest. Govt understands contrary to be the case and takes it for granted payment will be retroactive [Page 552]to Dec 24. Otherwise US would be in position of tenant paying no rent during interval before ratification and Libyans would then have to present bill for occupancy on basis of memorandum transmitted by PriMin. Development agency budget for current fiscal year has already provided for expenditure of million dollars from US.
7.
If it were impossible to increase figure $1 million, additional compensation might be achieved by higher rentals for base facilities or some special econ contribution guaranteed over term of years not Point IV, which might terminate any time.
8.
Alternative might be US joining development fund, even if special act of US Congress required for this purpose. US would be welcome member and would have vote in proportion to its contribution. It could thus outvote UK if, for example $2 million were granted by US for econ aid.

On strictly confidential basis Pitt-Hardacre disclosed that UK was being asked to subscribe fixed sum annually as grant in aid to Libyan budget rather than indeterminate amount each year to cover expenditures. Cyrenaican budget estimates alone for next fiscal year came to pounds 2 million and expenditures have already created a deficit. With fixed amount known in advance, Federal Govt could say to provinces only so much would be available, thus limiting demands and avoiding uncertainty over sterling requirements. Counselor Brit Legation Pyke (on loan from Treasury), who has worked closely with PittHardacre, has departed for London in determined attempt negotiate this arrangement. If he fails he intends to resign, as does Pitt-Hardcare.

Both Kirkbride and Pitt-Hardcare ascribe initiative to Libyans in request for additional compensation from US, but thinking such as above may have bearing on matter. Pitt-Hardcare would not specify amount to be suggested as UK fixed contribution, but if limitation is to be placed on UK payments and more funds for econ development are required, US becomes obvious source of contribution to make up difference (London’s 14 Sept 4 to Tripoli, rptd Dept 1275).3 I have feeling as result this conversation that Libyans might be willing drop question of duration of agreement if their request for additional compensation could be met. It is increasingly clear they attach greatest importance to latter.

Villard
  1. This telegram was repeated to London.
  2. Ante p. 545.
  3. Not printed; it reported that the Foreign Office had expressed concern over Libyan dissatisfaction with the terms of the base agreement. The Embassy commented that, while it was possible that individual British advisers in Libya might not be helpful to the United States, there was no evidence that the British Government was trying to undermine the base agreement or cause it to be altered. It added that, “from standpoint overall Anglo-American relations, Emb dismisses possibility Brit would engage activity this nature as govt policy.” (711.56373/9–452)