197. Memorandum of a Conversation, Secretary Dulles’ Residence, Washington, September 9, 1956, 5:45 p.m.1

SUBJECT

  • Suez Canal

PARTICIPANTS:

  • Sir Roger Makins, British Ambassador
  • Mr. J. E. Coulson, Minister, British Embassy
  • Mr. Arthur S. Flemming, Director, Office of Defense Mobilization
  • The Secretary
  • NEAWilliam M. Rountree

The Ambassador called on the Secretary at the latter’s home on Sunday afternoon to receive a copy of the Secretary’s outline of a proposal for a Suez Canal users association.2 After reading the paper, the Ambassador described it as an intensely interesting and constructive document. The Secretary and the Ambassador then discussed, for the purpose of clarification, various aspects of the outline. Ambassador Makins said that the British Government had been very interested at Mr. Dulles’ thinking on this matter, and had raised certain legal questions which seemed clearly set forth in the document so that he did not have to discuss them further.

The Ambassador inquired as to what conditions he should set forth regarding the paper when he telegraphed it to London. The Secretary replied that he thought secrecy should be maintained and that, for the time being until we had agreed upon this point, it should not be given to the French. The Secretary said that in considering how we might proceed to implement the plan, he thought it most important to assume the most effective posture vis-à-vis Nasser. We might recall the latter’s failure to cooperate in achieving a solution to the problem and state that in the absence of such cooperation we had decided to organize our efforts to utilize our rights under the Treaty. It might be stated, moreover, because of our inability to rely on the conduct of Egypt, we had considered alternative arrangements to the use of the Canal. If we could disclose in some appropriate way that we were prepared to reroute tankers, build new pipelines, construct large tankers, etc., that would show Nasser that he did not have a strangle-hold on the countries whose [Page 449]traffic moves through the Canal, and thus destroy his philosophy as set forth in his book. The Secretary thought that steps seeking alternatives to the use of the Canal would require cutting down the production of oil in certain Arab countries, which could not fail to understand that their consequent loss of revenue was the result of Nasser’s folly. He thought it important, however, that reductions in production should not be allowed to affect Iran or Iraq. If the other producing countries income was reduced, they would become even less enthusiastic regarding Nasser. At this point the Secretary gave Ambassador Makins a copy of the memorandum prepared by Mr. Flemming3 which set forth the oil supply position within the context of movements through the Suez Canal.

The Secretary said our basic purpose was to show that there were alternatives to capitulation to Nasser on the one hand and to the use of force on the other. We could set up the user organization, we could maintain economic pressures, we could seek alternatives to the Suez Canal and take other steps which would have an appreciable effect on the situation. The diversion of tankers could either take place as a deliberate act on the part of the Western countries to demonstrate to Nasser that we had no dependency upon the Canal, or as a result of denial by Nasser of passage through the Canal. However, either would bring about great economic consequences which the British and French should consider carefully and be prepared to meet.

The Secretary observed that the various things that we could do short of employment of military force could be presented in a way to carry a tremendous sense of restrained power. He earnestly hoped that the British would agree that this was a far better alternative than the use of force.

The Ambassador said he entirely agreed, and had already clearly represented his views in this respect to London. He inquired whether some United States Government order would be needed to enable the oil companies to undertake a program which would be required to meet European requirements if tankers did not transit the Canal. Mr. Flemming responded that authority for this already existed. The planning work which was now being done was under that authority. The Petroleum Authority would have authority to proceed if need be. If it were deemed necessary to proceed, the companies would be informed and the consent of the Attorney General would be obtained. Mr. Flemming said that he was going tomorrow to New York to meet with the oil committee4 and he hoped to have them put us [Page 450]in a position very soon to make a public announcement if circumstances should render it necessary to proceed with the plan. The Secretary said he had told Mr. Flemming that we might want to say something about our ability to meet any contingency after Mr. Eden’s speech on Tuesday or Wednesday. The Ambassador agreed that it was extremely important to be ready to implement the plan. London, however, would want to look carefully at the financial aspects before deciding when the plan should be implemented.

The Secretary observed that the UK had pressed for action which would have had great economic consequences and he had asked whether the British were prepared for the consequences incident to their plan. As yet, he had no answer to that important question. It must be recognized that the economic consequences of bringing about hostilities would be infinitely greater than the consequences merely of a diversion of shipping from the Canal.

The Ambassador said that he was in some difficulty in his relations with the French. Mr. Alphand had been extremely anxious to see him to talk about the Canal users plan but he had not felt free to do so since the United States had not yet discussed the matter with the French. Moreover, the French Prime Minister and Foreign Minister were expected in London tomorrow and would want to go into the matter. He inquired what he should do.

The Secretary said that of course the French, as a result of Mr. Lloyd’s discussions with Mr. Pineau in Paris, knew in a general way of the plan. He thought that the Ambassador might provide the French with a paraphrase of the Secretary’s paper which might be better than giving them our own text.

Ambassador Makins said he was sure the French would raise the question of compensation of shareholders. The users plan did not cover compensation, and he assumed that that would have to be worked out separately. The Secretary agreed.

The Ambassador recalled that the Canal pilots had been asked to stay on until after the conclusion of the Menzies mission. The Company now contemplated saying soon that the injunction had now been lifted and the pilots were free agents and could either stay or leave as they wished. The Secretary said that an extremely important element of our new plan was that the pilots would be employed by the association. He felt it vitally important to keep them together until the association was organized. The Ambassador replied that London thought the pilots would be available for the new plan. Mr. Rountree inquired whether the two matters should not be coordinated. It would seem to him that the pilots should not leave Egypt until after the plan was ready for implementation. The Ambassador said he agreed and would make the point again to [Page 451]London and suggest that the pilots be held until the users plan had been worked out.

  1. Source: Department of State, Central Files, 974.7301/9–956. Secret. Drafted by Rountree.
  2. Infra .
  3. Not found in Department of State files.
  4. Reference is to the Middle East Emergency Committee, composed of representatives from certain U.S. oil corporations.