458. Telegram From the Department of State to the Embassy in France1
Tedul 2. Re Aswan Dam. At meeting yesterday afternoon2 with Egyptian Delegation, Ambassador Makins, and Black of IBRD, I verbally outlined details of proposed financing for project along lines my memorandum to you of December 12.3 Egyptians appeared to welcome proposal warmly in all details except US requirement for competition in awarding contract. They reacted violently to suggestion that US public funds could not be used for purpose of a “negotiated” contract between Egypt and UK-French-German combine of contractors claiming that such procedure would cause delay of at least a year in initiation of project.Black countered by stating that IBRD did not believe any such delay would result.
Egyptians then proposed that they would pay for portion of contract embodying “fees and services” to consortium out of own funds amounting to $20 million on condition US would divert equivalent amount toward auxiliary irrigation aspects of project and thereby avoid direct expenditure of US funds on this item. Meeting adjourned with our promise to consider this proposal although I stated we were most doubtful this was a feasible solution, as it would be considered a subterfuge.
After the meeting Makins told me he already had instructions to make a strong démarche on US today in favor of negotiated contract with consortium. I explained to him that there would be violent reaction in Congress to such a procedure, especially where it involved payment of US public funds without competition to a British-French-German combine of contractors with a foreign government in which the US would have no opportunity to evaluate soundness or propriety of the deal. We were, furthermore, getting unfavorable impression of the Egyptians’ insistence on such procedure together with their refusal even to consider ways whereby competitive procedure could be expedited.Black firmly supports the US position regarding competitive procedure and has advised me privately he feels that our acquiescence in “negotiated” contract would have serious repercussions. It is his opinion and mine that Egyptians and UK will eventually agree to our position if we remain firm. There is not slightest question in my mind that Egyptians are [Page 864] being strongly pressured by the UK in their present attitude of demanding a closed contract for the consortium.
ICA and others in Washington also feel we would be under great criticism by Congress and public generally if we acquiesced to such a proposal. You will remember ICA difficulties on grain elevator contract in Pakistan last year. I discussed the matter with Governor Adams and we are considering discussion with the President later this morning.4 We do not doubt that Eden will again approach the President on behalf of the consortium.
I intend to continue a firm but courteous line on this aspect of the negotiations if you agree, and in such event I would appreciate your taking a parallel position with Macmillan in Paris. You may wish to discuss this matter with Humphrey and Hollister, both of whom I understand feel strongly on the subject.