432. Memorandum of a Discussion at the 268th Meeting of the National Security Council, Camp David, Maryland, December 1, 1955, 2:30 p.m.1

Present at the 268th NSC meeting were the President of the United States, presiding; the Secretary of State; the Secretary of Defense; and the Director, Office of Defense Mobilization. Also present were the Secretary of the Treasury; the Attorney General; the Director, Bureau of the Budget; the Special Assistant to the President on Disarmament; the Chairman, Atomic Energy Commission; the Under Secretary of State; Assistant Secretary of State Bowie; the Deputy Secretary of Defense; the Acting Secretary of the Army; the Secretary of the Navy; the Secretary of the Air Force; the Chairman, Joint Chiefs of Staff; the Acting Chief of Staff, U.S. Army; the Chief of Naval Operations; the Chief of Staff, U.S. Air Force; the Commandant, U.S. Marine Corps; the Director of Central Intelligence; Special Assistants to the President Anderson and Dodge; theWhite House Staff Secretary; Mr. Robert C. Sprague,NSC Consultant; the NSC Representative on Internal Security; the Executive Secretary,NSC; and the Deputy Executive Secretary,NSC.

There follows a summary of the discussion at the meeting and the main points taken.

[Here follows a report by the Director of Central Intelligence about the internal situation in Afghanistan, the Soviets’ recent [Page 813]explosion of a nuclear device, and the evolving political situations in France, Berlin, and Thailand.]

2. Assistance to Egypt in Financing the High Aswan Dam

Mr.Dillon Anderson said that before getting on to the second scheduled item on the agenda, the Secretary of State wished to make a report to the National Security Council on the subject of financing the High Aswan Dam in Egypt.

Secretary Dulles expressed the belief that while the forthcoming proposal for U.S. assistance in the financing of this Dam fell within existing national security policy for the area, such large funds were involved that he had believed it right to report the plan to the National Security Council. He said that he would ask Under Secretary Hoover to report on the main provisions of the plan.

Secretary Hoover explained that the State Department had reached the conclusion that it was essential to go ahead with the plan for assisting the Egyptians to construct this Dam. Conversations had been going on both with the International Bank and with the British. The latter had committed themselves to go along with us in helping to finance the project, and had also agreed to go along with our proposal to bring in the International Bank. They had abandoned their previous view of the desirability of a consortium. Secretary Hoover then proceeded to summarize the three major steps which Would be taken in developing the program for providing assistance to the Egyptians.

At the conclusion of Secretary Hoover’s exposition, Secretary Dulles pointed out that while we have been busy working on our own plan for assisting the Egyptians with this Dam, there were strong indications that the Soviet Union in turn was doing its best to bring off a deal with the Egyptians on the Dam. Accordingly, even if the United States made the generous proposal outlined by Secretary Hoover, the Russians might duplicate it, and it was possible that the Egyptians would take the Soviet offer. Nevertheless, it seemed essential to make this serious and liberal offer to the Egyptian Government. If the Egyptians accepted, it would certainly be highly impractical for Egypt to switch to a Soviet satellite status, at least while the project was in the course of construction. Moreover, the presence of so many engineers, technicians, and other people from the free world in Egypt, would constitute a strong influence in keeping Egypt on the side of the free world.

Secretary Humphrey said that without expressing a judgment as to whether or not it was wise to make this offer to the Egyptian Government, he believed that there were a certain number of basic facts which he wished to bring out in order that the National [Page 814]Security Council would have a clear understanding of the implications of the proposed offer to Egypt. In the first place, the over-all cost figure of $1.3 billion for completing the project, said Secretary Humphrey, was just a beginning. To complete this project over a period of from 20 to 25 years would, in his opinion, cost $2 billion. After going into further details to substantiate this cost estimate, Secretary Humphrey pointed out that for the next 12 to 15 years the United States Government was going to have to bear down on the Egyptians in order to induce them to live on the austere basis which would be necessary if this project were to be carried to completion. This was going to be very tough on the Egyptian people, but the austerity was essential if the project was to be brought into production. The United States in turn was going to be under constant Egyptian pressure to provide additional economic assistance in order to cushion the austerity. Accordingly, it was Secretary Humphrey’s guess that we would never get out of this business without additional annual contributions to Egypt above the foreign exchange figure of some $200 million which we would provide by way of foreign exchange for carrying out the project.

Secretary Humphrey then said that there was another fundamental fact which the National Security Council would do well to ponder. All of us here were believers in a free society based on free economic competition. But what we would be doing in Egypt would be tantamount to creating a completely nationalized project which would have the effect of handing over the economy of Egypt entirely into the hands of the Egyptian Government. In Secretary Humphrey’s view, the results of this move could not be more completely Communistic if it had been the deliberate attempt of the United States to make it so. Moreover, the by-product, in the shape of additional cotton and other products from the newly developed agricultural lands, would result in additional competition with the U.S. for markets.

In any event, continued Secretary Humphrey, these were certain fundamentals which the Council should keep in mind. This fashion of assisting in the building of the High Aswan Dam amounted to a terrific example of the United States devoting itself to building up a socialized economy in Egypt for all the world to look at. All this was bound to have enduring repercussions. Is this, inquired Secretary Humphrey, how we propose to compete with the Soviet Union in the forthcoming economic struggle? Of course, Secretary Humphrey admitted, Russia could very well make all kinds of promises to Egypt to finance the projected Dam. If accepted, Russia would send in her people in large numbers. They would run all over Egypt, ultimately Communize it, and then say they were unable to go through with the project. This, said Secretary Humphrey, seemed to [Page 815]be the alternative we face; but nevertheless real difficulties were going to be raised for us if we adopted the proposal for assistance which had been outlined earlier.

At the conclusion of Secretary Humphrey’s comment, the President said he would like to reply first to the point raised by Secretary Humphrey regarding the increased competition between U.S. and Egyptian cotton raisers which would result from the completion of the High Aswan Dam. The President pointed out that the building of the Dam would inevitably take a good many years. In less than fifty years the population of the United States would increase by something more than 50,000 [50,000,000?] people. This population increase would help our own farmers and soften any blow which might result from increased Egyptian production.

Secondly, the President said he would comment on Secretary Humphrey’s point about contributing to the development of a socialized economy in Egypt. The President pointed out that the United States itself had never and would never venture on any enterprise of the scale of the High Aswan Dam except through the instrumentality of the Government and Government financing. This had been true of the Hoover Dam and a great many similar projects, all of which had been financed with Federal funds. Accordingly, it did not seem to the President that the United States was actually departing from its traditional principles in assisting the Egyptians with their project, although he admitted that this was a sobering decision for the Government to make.

Secretary Wilson wondered whether it might not be possible to enlist a certain amount of private Egyptian capital to assist in financing the Dam. If this were done, a certain number, at least, of private citizens in Egypt would have a stake in the completed project.

In reply to Secretary Wilson’s inquiry, Secretary Hoover repeated that the basic cost of the enterprise was $1.3 billion. The new land made available for cultivation as a result of the construction of the Dam, would be privately and not collectively worked. Of this total of $1.3 billion, the sum of $400 million or $500 million would be necessary to provide foreign exchange. This sum would be provided by the International Bank, the United States, and the United Kingdom. The other $900 million would have to be raised by the Egyptians in Egypt. It was bound to include a certain percentage of private capital. Moreover, continued Secretary Hoover, the Egyptians appeared to be aware of the heavy burden they are facing for the future, although Secretary Hoover admitted that the United States would probably have to intervene from time to time with additional assistance if the Egyptians were to carry this burden.

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Secretary Dulles said that there was one other important aspect of this proposal which needed to be brought out. He felt that implicit in this proposed program of assistance would be the fact that the Egyptians were going to reach some genuine understanding with Israel. Certainly the Egyptians could never undertake so large and costly an enterprise as this and simultaneously carry on a great armament competition or a war with Israel. The necessity for this understanding with the Israelis couldn’t be explicitly stated by us as a part of our assistance agreement, but Secretary Dulles was sure that it could be made obvious in the course of development.

As far as the question of money was concerned, Secretary Dulles said the amount to be contributed by the United States did not really involve a great deal larger contribution than the United States would probably be obliged to spend in this area if we continued the present level of our existing assistance programs. It merely meant that our expenditures to assist Egypt would serve a more useful and fruitful end. His one great worry, said Secretary Dulles, was that a number of other nations would expect help from the United States similar to that which would be given to Egypt. Secretary Humphrey broke in to express hearty agreement with Secretary Dulles’ fears. Nevertheless, said Secretary Dulles, there was no sound reason why the United States could not assist in financing projects similar to the Dam in various other underdeveloped countries—provided the International Bank would assist, provided our contribution was no greater proportionately, and provided the projects which we were to undertake to assist in construction were as sound and useful as this Dam in Egypt. There was a certain obvious advantage to the United States in undertaking such conspicuous and useful projects as the Dam, and all in all, he believed the outlook not as forbidding as might now appear at first glance.

Secretary Humphrey expressed grave doubts as to whether other projects in other underdeveloped countries would be as meritorious as the High Aswan Dam. Moreover, he said he would prophesy that at least a half dozen other countries would insist that the projects for which they sought U.S. assistance were every bit as meritorious as the Egyptian project.

The President intervened to point out his view that the International Bank would be of great help to us in screening the various projects suggested by other countries. If these projects seemed of doubtful value and U.S. assistance had to be refused, some of the onus would fall on the Bank and not all of it on the United States Government. . . . It all seemed to Secretary Humphrey a case of “damned if you do and damned if you don’t.”

Secretary Wilson spoke in support of the proposed plan of U.S. assistance, and said that the only thing that really worried him about [Page 817]it was the “socialistic aspect”. Secretary Dulles added that what really worried him was the fear that Egypt would turn down our proposal and accept a Soviet counter-proposal.

Secretary Hoover said he felt compelled to point out to the Council one very discouraging aspect of this proposal. When the High Aswan Dam project was finally completed and in operation, the arable land available to Egypt would be increased by 30%. On the other hand, by that time the population of Egypt will have increased to such a point that the addition of the new arable land would accomplish no appreciable improvement in the Egyptian standard of living.

At this point the President, smiling, turned to Secretary Humphrey and asked him if he remembered the famous World War I cartoon: “If you knows a better ’ole, go to it.” Secretary Humphrey replied that he guessed he “died hard”.

The National Security Council:2

a.
Noted:
(1)
The statement by the Secretary of State of his conclusion that the United States must contribute substantially to the financing of the proposed High Aswan Dam in Egypt and of the reasons therefor.
(2)
The statement by the Under Secretary of State outlining the plans for contributing to the financing of the High Aswan Dam which would involve, in addition to an IBRD loan of about $200 million, assistance by the US and UK of the order of $200 million over a period estimated at about 10 years with the hope that the UK share would represent about 20 percent.
b.
Noted the President’s approval, after discussion of the U.S. policy implications, of proceeding with the above-mentioned plans.

Note: The above action, as approved by the President, subsequently transmitted to the Secretary of State.

[Here follows discussion of the foreign policy implications of United States and Soviet missiles, and the status of the United States intercontinental ballistic and intermediate range ballistic missile programs.]

S. Everett Gleason
  1. Source: Eisenhower Library, Whitman File,NSC Records. Top Secret; Eyes Only. Drafted by Gleason on December 2. The time was taken from the President’s Daily Appointments.
  2. The following paragraphs constitute NSC Action No. 1482. (Record of Actions by the National Security Council at its Meeting held on December 1, 1955, and approved by the President on December 21, 1955; Department of State,S/SNSC (Miscellaneous) Files: Lot 66 D 95,NSC Records of Action)