Foreign Relations of the United States, 1955–1957, Suez Crisis, July 26–December 31, 1956, Volume XVI

263. Memorandum of a Conversation, Department of State, Washington, September 25, 1956, 3:40 p.m.¹

Washington, September 25, 1956, 3:40 p.m.

SUBJECT

• Suez Canal

PARTICIPANTS

• Sir Harold Macmillan, Chancellor of the Exchequer, UK
• Sir Roger Makins, British Ambassador
• The Secretary
• Mr. Prochnow
• Mr. Phleger
• Mr. Wilcox
• Mr. Elbrick

The Secretary said that he wished to make several points concerning the payment of Canal dues. He said that the United States was prepared to amend the Treasury license to make it unlawful for American flag vessels to pay Canal tolls directly to Egypt rather than to pay into a blocked account or into SCUA. The impact of this would be relatively slight since few U.S. flag vessels regularly transit the Canal. In 1955, for example, U.S. flag vessels amounted to only 2.7 per cent of the total net tonnage. At present British and French vessels are allowed through the Canal on payment in blocked funds and action by the United States, as described above, might precipitate a change in that situation which would require British and French vessels to go around Africa. This in turn would mean a great economic loss to the two countries and the United States must know definitely, before it acts, whether the economic consequences of its action are understood and are acceptable to France and to the United Kingdom. He pointed out that if Nasser is prepared to take the offensive and to prevent ships from transiting the Canal unless payment is made to Egypt, the loss to Egypt would be minor but the loss to Europe would be very significant. It is important, therefore, that the French and British realize the possible consequences and that the fiscal and economic officials of their Governments are fully aware of the implications. Both the British and French Governments will receive an inquiry along these lines tomorrow morning. The Secretary pointed out that if we take the action indicated in connection with the payment of Canal dues the cost to the United States will not be very great, but he believed that the results would not be too agreeable for the United Kingdom. It had been estimated that it would cost between 500 and 600 million dollars to reroute tankers and to supplement the oil supply from the Western Hemisphere in the event the Canal was not used. The impact on cargoes other than oil had not been estimated. He was inclined to question the effectiveness of the action of rerouting ships and doubted that it was the best way to put pressure on Nasser. He pointed out that refusal to use the Canal will not be highly effective and that in time it is probable that many ships would change their registry in order that they might use the Canal.

Mr. Macmillan felt that the rerouting of ships around Africa is not an acceptable solution of the problem. He said that British economy cannot stand more borrowing on the scale envisaged. The Secretary said—with reference to the possibility of extending U.S. aid—that it is difficult to gauge what the attitude of Congress will be when it reconvenes next year and pointed to recent expressions of Congressional opinion against granting further aid to Western Europe. Mr. Macmillan said that it was apparent to him that the rerouting of ships around Africa would hurt the Western Powers more than it would hurt Nasser. He felt that something must be done to make Nasser lose face and he did not believe rerouting would accomplish this.

The Secretary said that it might be better to let the present situation continue but the French are violent on this subject and feel that such a course would provide a success for Nasser. If we take action to reroute ships and that action proves ineffective we would be faced with the humiliating prospect of backing down to permit ships again to move through the Canal. He questioned whether we should embark on such a problematical course and thought that other means of deflating Nasser should be explored. Nasser is now facing a difficult economic situation due to loss of trade and tourists and further action might be taken to accentuate this situation. While he believed that there were more effective ways than that now being proposed to handle this problem he wished to assure Mr. Macmillan that the United States is not going back on its promise to support the French and the British. He merely wished to assure himself that the British are aware of the possible consequences of the action contemplated.

Mr. Macmillan said that, while Nasser is undoubtedly becoming worried himself, he is in a much stronger position than the British. The Middle East is no longer the strategic area that it once was but the oil is vital to the economy of the United Kingdom. He felt strongly that if we manage to get through this crisis we must establish a more forward looking policy for the area which would help the countries dispose of their resources and employ the proceeds wisely.

Sir Roger Makins said there had been a stream of communications between London and New York on the subject of the approach to the Security Council on the Suez question. He understood that the French Government had produced a draft resolution (which he had not yet seen) which was to be discussed with his Government in London. (The Secretary said that Ambassador Alphand had mentioned the draft to him this afternoon “on a personal basis”.) Makins said that the question of procedure is being discussed in New York by the French, British and U.S. representatives to the United Nations. The Secretary said that it was imperative that we seek an agreed position and mentioned particularly the question of the participation of other parties in the Security Council debate. He felt that it would be wise to carry on tripartite conversations in New York. He said that he did not know the exact purpose of the reference of this matter to the Security Council by the British and French and he wondered whether it was their intention to rush the matter through the Council. He said he thought that there should be a genuine effort to seek some solution and asked whether the United Kingdom would be willing to negotiate with Egypt under the aegis of the UN. Makins said that he had no indication that this was the case.

1. Source: Department of State, Central Files, 974.7301/2–556. Secret. Drafted by Elbrick. The time of the meeting is from Dulles’ Appointment Book. (Princeton University Library, Dulles Papers) Macmillan visited the United States between September 20 and October 1. While in Washington, he attended a meeting of the International Monetary Fund.