127. Telegram From the Embassy in Egypt to the Department of State1

1683. As indicated Embtel 16642 I agree in general with Trevelyan’s views set forth in Embtel 1667.3 Proposed substitute (Embtel 1668)4 for aides-mémoire would appear meet requirements for publicity and omission of definition of first phase would seem to be warranted by decision not start project until after Nile waters settlement. In some ways simplification of approach seems to us good. Department will of course have to give fuller consideration possible pitfalls than can be adequately done here. I question however Trevelyan’s feeling that new draft alters in practical manner basic problem of Soviet participation which it seems to us existed [Page 236] even under previous drafts. Doubtful that omission first phase will enable Bank to resist effectively expenditure Egyptian funds on separate parts of project (e.g. generators) and therefore possibility expenditures such funds in Soviet Bloc. Nor would proposed substitute prevent Soviet grant aid from meeting Bank condition regarding availability additional foreign exchange when required. It is even questionable in our opinion whether Soviet aid in form of loan repayable in cotton is precluded for GOE might argue repayment such loan in cotton which could not be disposed of otherwise would not impair GOE capacity to service Bank loan. I have even greater doubts regarding willingness Bank to assume responsibility of excluding Soviet participation.

If Nasser were able to obtain firm commitment from U.S., U.K. and Bank which would assure financing High Dam regardless political developments I have no doubt but that he readily agree exclusion Soviet participation but in absence such commitment think this unlikely. Nasser has consistently sought to avoid any possibility of getting GOE into position where in order obtain continued financing from West GOE might become subject to political pressures. So long as we unable to give firm commitment regarding financing project it seems to us not likely possibility of Soviet participation can be altogether precluded.

There is growing feeling here that U.S. about to supply arms for Israel. Unfortunately emotions on that issue cannot be separated from any of our other dealings with GOE and we are in bad negotiating period. Nevertheless would hope committee in Washington would review new developments coming out of Trevelyan’s discussions and advise as soon as possible.5

  1. Source: Department of State, Central Files, 874.2614/2–2456. Confidential; Priority. Received at 8:44 p.m.
  2. See footnote 2, Document 121.
  3. Document 123.
  4. Document 124.
  5. The Department informed Byroade that a staff working group was studying Vice President Salem’s comments concerning the aides-mémoire as well as Trevelyan’s draft letter. (Telegram 2076 to Cairo, March 1; Department of State, Central Files, 874.2614.2–2456)