Foreign Relations of the United States, 1955–1957, Arab-Israeli Dispute, January 1–July 26, 1956, Volume XV

408. Memorandum From the Assistant Secretary of State for Near Eastern, South Asian, and African Affairs (Allen) to the Secretary of State¹

Washington, June 23, 1956.

SUBJECT

• Israel request for increased economic aid

Discussion

In the attached letter (Tab A),² Ambassador Eban states that the U.S. has the “legal and financial capacity” to make increased financial aid available to Israel, either under the Mutual Security Act³ or in combination with Public Law 480, and he asks that a decision to provide such aid be made urgently in view of the expiration of the fiscal year on June 30. This letter is the most recent in a series of approaches made by the Israelis to the Department (Tabs B, C, and D).⁴

The legislative authorization under PL 480 has been exhausted for the current fiscal year. While some third–country currencies accumulated under PL 480 are available, the Israelis have informed us that their proposal for a triangular transaction designed to obtain some French francs (Tab B) is still under discussion with the French and cannot be submitted as yet for our consideration.

Israel has received the full amount of aid which was included in the Mutual Security program presented to the Congress for this fiscal year. Some funds could conceivably be made available to Israel from transfers within the Mutual Security Act, but this would be administratively difficult to accomplish and would probably be unwise at this time. We are unable to make any firm judgment as to Israel’s legitimate needs for Mutual Security assistance in advance of a decision on Israel’s request for a loan from the Export–Import Bank.⁵ Even if clearly warranted, additional financial assistance could hardly be granted at a more inopportune time, in view of the negotiations in progress on the Dhahran Air Base and of Shepilov’s presence in the Near East.

Recommendations

1. That you inform the Israelis:

a. We are not in a position to make an additional allocation of aid before June 30;

b. Israel’s interest in assistance for FY 1957 will be kept in mind, but no decision can be taken until after the Congress concludes its legislative action.

2. That if it is not convenient for you to inform the Israelis yourself, you authorize Mr. Murphy or Mr. Allen to do so.⁶

1. Source: Department of State, Central Files, 784A.5–MSP/6–2356. Confidential. Drafted on June 21 by Troxel and concurred in by Barnes.
2. Not printed. Eban’s signed original of the letter to Dulles, June 18, is ibid., 611.84A/6–1856.
3. Reference is to the Mutual Security Act of 1955.
4. Tab B is Document 377. Tab C is a memorandum of conversation between Dulles and Eban on June 8, not printed. (Department of State, Secretary’s Memoranda of Conversation: Lot 64 D 199) Tab D is an aide–mémoire from the Israeli Embassy to the Department of State, June 3, not printed. (Ibid., Central Files, 611.84A/6–356)
5. See Document 194.
6. A notation on the source text indicates that Secretary Dulles approved Murphy or Allen informing the Israelis. In a conversation on June 28, Allen informed Shiloah that the United States was unable to make any additional economic aid available to Israel before the conclusion of the current fiscal year on June 30, and that the Department of State would be unable to determine the level of assistance for Israel during Fiscal Year 1957 until after Congress had concluded its legislative action. (Memorandum of conversation by Bergus; Department of State, Central Files, 611.84A/6–2856)