Foreign Relations of the United States, 1955–1957, Arab-Israeli Dispute, 1955, Volume XIV

461. Telegram From the Department of State to the Embassy in Egypt¹

Washington,December 16, 1955—8:53 p.m.

1282. Following is text US aide-mémoire handed Kaissouni Dec 16 at meeting² attended by British Ambassador and Black of IBRD:

Begin Text: US Government has followed with special interest long felt desire of Egypt to bring into realization High Dam Project which you have described to us as follows:

Project consists of a dam to be built across Nile about 4⅓ miles south of present Aswan dam; powerhouse at dam with initial installed capacity of 720,000 kilowatts which can later be doubled; transmission line to Cairo and necessary inter-connections; conversion of 700,000 acres from basin to perennial irrigation; and reclamation, irrigation, settlement of additional 1,300,000 acres, including provision of necessary roads and other public facilities. Dam will be 364 feet high and 3 1/10 miles long across crest. Reservoir will have storage capacity about 45,890,000 million cubic feet, sufficient to regulate Nile flow throughout year. Construction dam and initial power facilities, including transmission lines and connecting links, expected commence July 1957. Preparatory work will commence earlier.

First stage will take four to five years to complete. Total cost this stage estimated at $275 million of which equivalent $110 million represents expenditures in foreign currencies. Work during this period will include (A) construction of diversion tunnels and permanent coffer dams, which will be incorporated in main dam, and consolidation and sealing of foundations of dam, and (B) relocation of population from reservoir area, conversion from basin to perennial irrigation of lands above-described, and irrigation facilities for about 500,000 new acres principally for food production in order meet needs of rapidly growing population.

Second stage will consist of remainder of Project described above.

View request of Egypt that US assist,USG has studied surveys and reports respecting Project made by World Bank.USG agrees that Project holds great promise for future of Egyptian people.USG desires cooperate in realization.

Bank,USG and UKG have conferred with GOE re manner in which each may assist in financing Project, and UKG and Bank intend to submit proposals, drafts of which have been delivered to USG.

USG for its part proposes to assist in following manner:

1. USG will provide $54.6 million grant, toward financing foreign exchange costs of that portion first stage described in (A) above, on condition proposals of UKG and Bank mentioned above are made and accepted, and on conditions hereinafter set forth.

2. USG in cooperation with GOE,UKG, Bank and other member governments of Bank which may desire participate, will be prepared in due course to consider sympathetically lending its further support through participation in financing of remaining foreign exchange costs of Project, in light of conditions then existing and of progress and performance during first stage of construction, and subject to necessary legislative action. Among conditions referred to will be satisfactory resolution of Nile water rights matter,USG prepared use its good offices this regard.

These proposals made on conditions that:

a) UKG will provide pounds 5.5 million, grant toward foreign exchange costs of that portion of first stage of Project described in (A) above,UKG in cooperation with GOE,USG, Bank and other member governments of Bank which may desire participate, will be prepared in due course consider sympathetically lending its further support through participation in financing remaining foreign exchange costs of Project, in light of conditions then existing and of progress and performance during first stage of construction, and subject to necessary Parliamentary action. Among conditions referred to will be satisfactory resolution of Nile water rights matter;UKG is prepared to use its good offices in this regard.

b) Funds provided by USG and UKG will be made available to Bank, and will be expended under its supervision, in accordance arrangements between GOE and Bank deemed satisfactory by USG and UKG. These arrangements will be embodied in written agreements,USG has requested Bank to enter into discussions with GOE to this end at earliest possible time.GOE will give appropriate publicity to sources and nature of financing, and will furnish to participants such information regarding use of such funds as they may request.

c) Bank will agree to participate in financing of external foreign exchange requirements of Project in amount equivalent to $200 million, on basis of loan agreements to be negotiated from time to time, substantially as set forth in draft of Bank’s proposal mentioned above.

d) GOE will carry out Project expeditiously and economically in cooperation with Bank and will allocate its resources in manner designed to assure high priority to development, carrying on, and completion of Project, and will ensure that necessary local currency costs of Project are met. This connection,USG relies upon assurances which GOE is giving to Bank regarding maintenance of sound and stable economy and avoidance of inflation.

e) International competition under procedures developed by Bank will be method used for selecting contractor or contractors who will perform work on or related to that portion of Project described in (A) above, and for procurement all supplies and equipment for which foreign exchange required for its completion.

These proposals are, of course, subject to review by USG in event extraordinary circumstances intervene.End text

UK Ambassador delivered similar aide-mémoire.³IBRD letter of intent will be delivered after approval Bank Board.⁴

Kaissouni expressed deep gratitude and he, Ambassador and engineers seemed highly pleased outcome negotiations. When informed US had given further consideration question negotiated contract with consortium but concluded it could not agree on any basis other than competitive bidding, Egyptians said they accepted this and would do their best to work out their problems accordingly. They said they considered it possible meet tight schedule necessary if project is to begin in 1957 provided they can with own resources spend approximately $200,000 on preliminary work making preparations for initial operations of contractor when selected. They were assured that Bank, under whose procedures US and UK grants would be disbursed, would be entirely reasonable in considering Egyptian proposals for meeting this problem.

Hoover

1. Source: Department of State, Central Files, 874.2614/12–1655. Confidential. Drafted and approved by Rountree, who signed for Hoover. Repeated to London.
2. No record of this meeting has been found in Department of State files.
3. No copy of the British aide-mémoire has been found in Department of State files.
4. For portions of the text of the IBRD’s letter of intent, see vol. XV, footnote 2, p. 1.