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

478. Memorandum of a Conversation, Department of State, Washington, July 19, 1956, 4:10–5:07 p.m.¹

Washington, July 19, 1956, 4:10–5:07 p.m.

SUBJECT

• High Aswan Dam

PARTICIPANTS

• The Secretary
• The Under Secretary
• Dr. Ahmed Hussein, Ambassador of Egypt
• NEA—George V. Allen
• NEA—William M. Rountree

The Ambassador called at his request following his return after several weeks consultation in Cairo.

The Secretary began the conversation by saying he wished particularly to discuss the question of the High Aswan Dam, a matter which concerned both Egypt and the United States concretely at the present time. He had reluctantly come to the conclusion that it was not feasible at present for the United States to go forward with this undertaking. There were a number of reasons for this decision, which he hoped the Ambassador would appreciate. The Aswan Dam was a huge project, involving $1,300,00,000 of which $900,000,000 represented internal costs. This represented a heavy burden upon the Egyptian economy. The project involved not only Egypt, but was of direct interest to other states through which the Nile waters flowed. There was no present agreement with the Sudan, Ethiopia, Uganda, etc., covering the use of these waters. While that aspect of the problem could be explored and quite possibly solutions could be found, there were other elements which made it appear far more feasible at this time to consider lesser projects than that presently envisaged.

The Secretary said there were two elements which deserved special mention. First was the long-range impact of the project upon relations with the Egyptian people and Government. Implementation would impose a period of from 12 to 16 years of austerity on the part of the Egyptian people, and a major portion of Egyptian resources would have to be dedicated to this particular work. Over such a period there undoubtedly would be resentment and a feeling by the Egyptians that the limitations imposed tended to interfere with the independence which they so cherished. The situation in the area was troubled, and we thought from the standpoint of our relations with the Egyptians over the next decade, it would not be wise to undertake this project which might superimpose such strained feelings upon the difficulties in relations which now existed. He recognized that the immediate impact of an announcement that the project would receive American assistance might be good, but felt that this would be unlikely to last very long.

The other element, the Secretary said, related to the impact upon our own people. He stated in all frankness that from the United States standpoint developments during the past six or seven months had not been such as to generate goodwill toward Egypt on the part of the American public. He was not referring to various classes of Americans who might be prejudiced for one reason or another, but had in mind the rank and file of the American people and the Congress, who felt it doubtful that the attitude of the Egyptian Government toward the United States and what it stood for was such as to render it feasible and wise for us at this juncture to undertake as partners with Egypt a program of this magnitude. We doubted that we could obtain funds from Congress to carry out the work even if the Executive Branch wished to do so, and commented that no single project in the Mutual Security Program was as unpopular today as the Aswan Dam. He recognized that this unpopularity of the Dam project itself derived in part from opposition of certain groups—for example, persons interested in the effects of a possible increase in Egyptian cotton production in competition with American cotton growers. However, the basic opposition derived from a feeling that the Egyptian Government was working closely with those hostile to us who sought to injure us wherever they could.

Continuing, the Secretary said he hoped that this situation was not a permanent one, that it could soon be improved and that tranquillity would return in United States-Egyptian relations so that we could achieve the kind of cooperative efforts which we earnestly desired. However, as things stood today, the United States Government had come to the reluctant conclusion that we should not participate at this time in a program of this magnitude, the success of which would require a close working relationship. He emphasized that this did not imply any lack of friendship toward Egypt or lack of desire to cooperate with the Egyptian Government and people. We were willing to do everything possible to improve and maintain relations.

The Secretary expressed the view that in light of the existing situation and programs which the Egyptian Government has undertaken, Egypt should get along for the time being with projects less monumental than the Aswan Dam.

The Ambassador inquired whether he was to understand from what the Secretary had said that a final decision had been reached that the United States would extend no assistance for the Dam project, and that discussions on the previous proposal were to be terminated.

The Secretary responded affirmatively. At this point he showed the Ambassador a draft of a press statement which he intended to release later in the day. He commented that he knew that this decision was personally as disappointing to the Ambassador as it was to him to have to make it. He realized that the Ambassador had worked hard to develop and maintain the best possible relations between Egypt and the United States, and expressed deep appreciation for what the Ambassador had done. He expressed the belief that when the Ambassador thought over the things which the Secretary had said, he would realize that the situation had become such as to render it impracticable and unwise to implement the project at the present time. Many things had happened which we of course wished had not happened. Our two countries seemed to be “out of step” in many respects. Successful implementation of an undertaking such as the Dam would be impossible without the existence of the right kind of relationship; without it, it was inevitable that resentments would be engendered. He believed that in the long run the decision would be in the interest of good relations between the two countries, and should not be taken as an indication to the contrary.

The Ambassador said that in Cairo he had met a number of times with Nasser and discussed with him all of the points which the Secretary had mentioned before the Ambassador’s departure. He had found Nasser anxious to reach an agreement on the basis of the December offer. Discussions with the Sudan upon an agreement on the Nile waters were progressing nicely, and Nasser was hopeful that they would soon be concluded on a reasonable basis. The Egyptian Government had always been aware of the need for such an agreement with the Sudan, but had not contemplated negotiating an agreement with Ethiopia which had never been able to make appreciable use of the Nile waters. Ethiopia, he said, had never previously concerned itself with matters affecting the Nile in Egypt, and had never made any previous claims. Nasser had hoped that it would be possible to start the project without delay. He realized that it was a huge undertaking, involving large sums of money, but all studies had shown the project to be the only solution to the population problem and also to the problem of providing adequate power. He did not ignore the difficulties involved. The Egyptian people had heard much about the scheme and expected it to be undertaken at once. The Ambassador shared the view of the Egyptian Government that the project was of such importance that the Egyptian people would not resent the sacrifices which its implementation would entail. By spreading the expenditures over a number of years, and with reasonable foreign aid, the burden upon the Egyptian economy could be held to manageable proportions. He thought that this project clearly would be far more effective than other smaller schemes in meeting Egyptian needs.

The Ambassador said he had earnestly hoped that for the good of Egypt the project could be financed by the World Bank and by the United States and British Governments. He had felt that if we cooperated with Egypt on a project of this nature a better atmosphere would be created which would result in the elimination of many things which had caused misunderstandings between our two countries.

Referring to the question of Egyptian arms purchases from the Soviet Bloc, the Ambassador expressed a view that the commitments made were not nearly as substantial as the United States had been led to believe, and that payment could be made as scheduled without endangering the Egyptian economy or jeopardizing success in financing the Dam project. He commented that the numbers of military items, such as planes and tanks, acquired by Egypt had been grossly exaggerated.

The Secretary observed that the initial cost of procuring substantial military equipment was, we had found, only one factor in determining the economic burden resulting from their acquisition. The upkeep was a most significant item.

The Ambassador responded that even with the new acquisitions the Egyptian army was still small compared with its population; smaller than that of Israel. He said Nasser had informed him that Egypt had actually acquired only eighty MIGs, rather than 200 as reported in the United States. At the same time, Israel has received eighty more modern planes which were superior to those purchased by the Egyptian forces. He said that Israel had deliberately played this up in an effort to get more military equipment from the United States and other Western countries.

In his conversations with Nasser, the Ambassador said, he was assured that Egyptian recognition of Red China was not in retaliation for anything done by the United States, nor did it represent an effort to hurt the United States. Nasser had felt that if the United Nations should impose an embargo on arms to the area, Israel would always find some way of acquiring military items outside the embargo and that it was incumbent upon Egypt to endeavor to do the same. By establishing diplomatic relations with Red China, a way was open for Egypt to obtain needed equipment in these circumstances.

Regarding Egyptian policies in other Arab countries, Nasser had assured the Ambassador that Egypt had never pressed any country to procure Soviet arms and had, in fact, advised Saudi Arabia to continue to obtain its requirements from the United States. He had, moreover, advised Azzam Pasha before the latter’s visit to the United States to endeavor to persuade King Saud to maintain his good relations with this country. Nasser had specifically instructed Egyptian teachers and other subjects abroad not to interfere with the internal affairs of the countries in which they resided, and was convinced that claims that Egyptian representatives were working against the United States were completely false. It was absolutely not true, the Ambassador said, that the Egyptian Government had tried to obstruct an agreement between the United States and Saudi Arabia on the Dhahran Airfield or to impair Libyan-American relations. In summary, the Ambassador said that Nasser was exceedingly hurt that he had been accused of doing things which he had not done, where there was no proof to substantiate the allegations.

The Secretary said he hoped that these reports which he had mentioned to the Ambassador were not correct, and that Nasser earnestly wished to carry out policies consistent with friendly and cooperative relations with the United States. The Ambassador would realize, of course, that our Government was bound to be responsive to the American people and to the Congress. A good many things had happened to account for the feeling that had grown up which made it difficult for us to undertake with Egypt a project such as the Aswan Dam. We naturally heard many stories from various sources, some of whom are enemies of Egypt. We of course do not believe these stories unless we have independent proof.

The Ambassador said that the primary Egyptian needs were to build an adequate armed force for defense and to develop the Egyptian economy. In both of these, Egypt needed help. Egypt would have been happy to obtain arms from the United States, and would be most thankful for assistance in the economic field.

The Secretary reiterated the desire of the United States to assist Egypt but thought that for the time being the Dam project should be “put on the shelf” while we tried to develop a better atmosphere and better relations.

The Ambassador said that he wished at that point to speak entirely personally. He sincerely hated to see the Russians take advantage of the present situation. He knew they were making a “very generous” offer on the Dam, an offer which would be far more advantageous from the purely technical and financial points of view than that made by the World Bank and the Western Powers. He had hoped to have the matter settled before Nasser went to Moscow. Nasser had said nothing to Shepilov when the latter was in Cairo, but in the Ambassador’s judgment the risks would be very great if no deal were concluded before the Moscow visit. He had advised Nasser not to accept the Soviet offer even if the World Bank-United States-United Kingdom participation was not decided upon, but there were strong pressures which Nasser might not be able to resist.

The Secretary said he realized the implications of what the Ambassador had said, and the decision to withhold American assistance had not been taken lightly. He knew it was possible that the Russians would make an offer which might look attractive. However, we all knew that living conditions in most of Russia and the Soviet satellites were extremely bad, and that there was a tremendous demand in the USSR for an improvement. Any government which in that situation would deny its people relief from their heavy burdens in order to give aid abroad obviously would be doing so for political purposes. The United States could help others extensively without adverse effect upon its people, because of the tremendous magnitude of its national production. The Soviets may make a generous offer and Egypt might accept it, despite the risks which would be involved, although we hoped that that would not happen. He hoped the truth would be recognized that only if the Soviet Union believed it could obtain great political advantages in Egypt would it be making a generous offer, despite needs at home. He did not, however, believe that the Soviets would succeed because he felt confident that the Egyptians would be acutely aware of dangers to the independence which they have striven so hard to achieve. From the United States viewpoint, we could not undertake to try to match the Russians in any offers which might be made to Egypt or to other countries. We had to think of each proposition on its own merits, operating in ways which commend themselves to the American people.

The Secretary commented that our foreign aid program had been injured more by the proposal to assist in financing the Aswan Dam, in light of our relations with Egypt, than by anything else. He thought the first thing for us to do was to get back as quickly as possible on a basis of good relations. There need be nothing permanent about our present difficulties; it was our earnest desire to improve the situation as rapidly as possible. We did not wish to give the impression that the decision regarding the Aswan Dam was in any way unfriendly or represented a retaliation for actions of the Egyptian Government. He still saw a bright future in Egyptian-American relations. As the Ambassador knew, the present Administration had not allowed itself to be unduly pressured by any special groups in relation to its policies toward Egypt. As he had previously told the Ambassador, we regarded Egypt above all as an Arab state entitled to a position of leadership in the Arab world. We had done nothing to impede Egyptian prestige and influence. The United States had, in fact, not joined the Baghdad Pact largely because we did not wish to assume a position in this matter which would appear to enhance the prestige of other states and leaders in the area to the detriment of Egypt and Nasser. Smiling, the Secretary commented that there was a somewhat growing feeling in some of the Arab countries that Egypt wished to dominate them, but he had no evidence that Nasser wished to rule countries other than Egypt.

The Ambassador responded that there were two points he wished to make. First, Nasser had said he had no intention of being friendly with the Soviet Union at the expense of friendship with the United States. Secondly, Egypt had no intention of dominating other Arab states; their primary objective was to get rid of colonialism and certainly Egypt did not want to impose Egyptian colonialism in lieu of others.

Upon leaving, the Ambassador inquired what he might say to the representatives of the press who were awaiting his departure. After some discussion he said that he would tell the press that he would leave to the Secretary any comment concerning the business discussed.²

1. Source: Department of State, Central Files, 874.2614/7–1956. Secret. Drafted by Rountree on July 20. The time of the meeting is from the Secretary’s Appointment Book. (Princeton University Library, Dulles Papers)
2. On July 21, a summary of this conversation was transmitted to Cairo. (Telegram 139; Department of State, Central Files, 874.2614/7–2156) Text of the press release was transmitted to Cairo niact and to London priority at 5:59 p.m., July 19. (Telegram 127 to Cairo and 360 to London; Ibid., 874.2614/7–1956)