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

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

Cairo, January 29, 1956—8 p.m.

1424. Met last evening at British Embassy with Black and Trevelyan.² Black gave following report:

(1) Reviewed briefly his one hour morning conference with Nasser which he described as very pleasant. Had sought meeting alone with Nasser but Kaissouni and Ibrahim (Minister National Production) also present. No discussion controversial points. Black explained purposes, organization, and operation of Bank, and emphasized Bank’s willingness even eagerness assist on high dam. Cited loan practices with other countries including India. Nasser responded Nehru had told him India’s experience with bank had been very satisfactory but Nasser in examining India’s agreements with bank had not found therein such conditions as contained in Black’s draft letter of intent re Egypt.³ Black replied situations not comparable. Bank’s loans to India covered a number of projects, not single project such as high dam, magnitude of which relative to Egypt’s total financial resources, called for special care required to assure such resources used to best advantage. Black also emphasized to Nasser bank and GOE “in exactly same boat” in requiring all possible assurance of continued future USG support since it could not afford have its label on an unfinished project. However bank satisfied USG had gone as far as it could and in fact considered US–UK offer most generous. Nasser arranged for Black to continue discussions, on specific points, with Kaissouni and Ibrahim indicating, however, be available to Black any time. Black understood to have met Kaissouni today.

(2) During stop-over in London, Black visited by French officials who made rush trip from Paris to indicate their Governments desired help bank on high dam and prepared to guarantee to GOE twelve year supplier’s credit up to $60 million without need French Cabinet approval. Black states he replied that in his personal views such an offer would upset his mission. Bank prepared to lend up to what it regards as limit Egypt’s borrowing capacity and French loan would merely mean smaller IBRD loan. Furthermore, French loan terms not such as bank considered proper. Also informed French that while he could speak only for IBRD he believed French loan might prove embarrassing to US and UK who were offering grant aid. If France desired be helpful, it too might offer grant aid. French representatives replied such offer would require parliamentary action and not possible in present circumstances. One of these representatives, formerly commercial counselor Cairo (Herrenschmidt) is coming to Cairo presumably to discuss proposal with GOE. In this connection Black mentioned also report (Department’s 1661, January 27⁴) that German credit for high dam involved in new trade agreement now under negotiation between West Germany and Egypt. Black is disturbed by these developments, feeling they may divert GOE attention from realities of situation.

(3) Stated if GOE insists on long-term commitment from IBRD re high dam financing, he would have to insist in return on conditions contained in his draft letter of intent and GOE would have to be made to realize this. Phraseology could be changed but not substance. If he should return to his Board and ask them to yield on these conditions, bank’s relations with member countries would become seriously complicated. It would be charged that bank was yielding because of Soviet aid offer to Egypt and other member countries would expect concessions from bank. Such charges would adversely affect market for IBRD bonds, which is source of funds for its development loans. Black prepared, on basis meeting with his Board just prior departure, to propose if necessary following alternative to GOE: Unilateral separate declarations of intent by GOE and by bank. On basis recent remark by Kaissouni, British Ambassador questioned whether GOE would favor this alternative.

(4) Regarding GOE objection to condition that all expenditures on high dam, including those involving Egyptian funds, must be on basis competitive bidding, Black pointed out this condition insisted upon by USG not bank, although expenditure bank funds must in any case be subject to competitive bidding.

(5) In conversation with Black prior conference with Nasser Kaissouni urged IBRD loan be made in lump sum rather than in series of partial amounts. Black replied he prepared to discuss this later but pointed out it would involve unnecessary cost, since ¾ of one percent interest would have to be paid on committed funds during period of some years before they could be used and he could demonstrate it would make no financial sense to GOE.

Trevelyan and I meeting with Black and staff again tonight. We expect to hold these evening meetings with him regularly during his visit.

Hart

1. Source: Department of State, Central Files, 874.2614/1–2956. Secret; Priority. Received at 11:11 p.m. Repeated to London, Paris, and Bonn.
2. On January 24, Nasser had invited Black to Cairo for further discussions concerning the financing of the Aswan High Dam project. Black accepted Nasser’s invitation and arrived in Egypt on January 27.
3. See footnote 2, Document 1.
4. Not printed. (Department of State, Central Files, 462A.7441/1–2756)