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

347. Letter From Secretary of State Dulles to Foreign Secretary Lloyd¹

Washington, October 15, 1956.

Dear Selwyn: In view of our talks in London about the Users’ Association and the dues,² I should like to try to straighten the matter out or at least to make clear our point of view.

The Users’ Association was designed to try to bring about practical cooperation with Egypt at the working level, and in a sense to replace in this respect the Universal Suez Canal Company.

At the time when I advised your Government and the French Government of our willingness to join the Association, I made this clear, in a memorandum of September 11, 1956, which was handed to Sir Roger Makins³ and which I understand was at once transmitted to London and also to the French Embassy, Washington. This memorandum includes the following statement regarding the functions of the Users’ Association including payment of dues to it, and payment therefrom of appropriate compensation to Egypt.

“… practical cooperation on the part of Egypt can only be effectively achieved if the users are organized so that they can deal jointly with Egypt and Egypt deal with them jointly … [the users’ association] would receive the dues from ships passing through the Canal, which would be used to defray the expenses of the organization and to pay appropriate compensation to Egypt for its contribution to the maintenance of the Canal and the facilities of transit …”⁴

We were informed that this concept of SCUA was accepted by your Government, and Prime Minister Eden in his speech to Parliament the following day (September 12, 1956)⁵ said in substance the same thing. With reference to payments to Egypt, he said:

“It is contemplated that Egypt shall receive appropriate payment from the association in respect to the facilities provided by her, but the transit dues will be paid to the users’ association and not to the Egyptian authorities.”

At my press conference the day following the Prime Minister’s speech (September 13, 1956),⁶ I stated:

“We believe that, under present circumstances, practical cooperation with Egypt can be effectively achieved only if the users are organized so that they can deal jointly with Egypt and Egypt deal with them jointly.

“We are thus prepared to participate in a users’ organization on the basis which I indicated. It is our thought that the users’ association would, among other things, provide qualified pilots for the users’ ships; would initially receive the dues from the ships of members of the association passing through the Canal, which sums would be used to defray the expenses of the organization and to pay appropriate compensation to Egypt for its contribution to the maintenance of the Canal and the facilities of transit; and so far as practical arrange for the pattern of traffic of the member vessels through the Canal.

“It is our hope that perhaps practical on-the-spot arrangements for cooperation can be achieved without prejudice to the rights of anyone. This may provide a provisional de facto working arrangement until formal agreements can be reached.”

The United States has always made it clear that under our laws we could not actually direct that payments be made to SCUA, but that we could require that any payments to Egypt in connection with transit of the Canal be made only through SCUA. We thought this would have the practical effect of bringing about payments to SCUA as agent for the shippers.

We also pointed out that it was at least dubious whether we should attempt to impose our Treasury regulations upon ships of other than United States registry, but that we would try through persuasion to bring about a conformity of practice between United States registry ships and ships of United States ownership under foreign flags.

I dealt with these matters, you will recall, in my press conference of September 26, 1956,⁷ when, in answer to a question, I stated:

“It is planned …⁸ that we will take steps to amend the present Treasury license so as to preclude any direct payments to Egypt, and to permit such payments to Egypt only as they might occur through payments to the Users’ Association. Of course, you know the Users’ Association, under its charter, is authorized to make certain payments over to the Government of Egypt, because we do not expect Egypt to help maintain the Canal entirely out of its own funds. And there could in that way be payments to Egypt through the Users’ Association which would act, you might say, as an agent for the vessels. But outside of that, we would not expect that there would be any payments to Egypt by United States flag vessels. We do not have in mind extending that to vessels which are not of United States registry. That involves possible questions of conflict of laws and until we know more clearly what the views might be of the countries of registry, we do not expect, certainly initially, to impose a restriction upon those vessels. We would hope that they might find it desirable voluntarily, to conform to the same practice as United States flag vessels.”

We always assumed that any action that we took in this respect would be taken also by the British and the French, with the result that we would have substantially similar Treasury regulations.

This I made clear in a memorandum handed to the United Kingdom and French Governments on September 27, 1956.⁹ In this memorandum we asked whether the British and the French were willing to take similar action, and specifically what their regulations would prescribe. Only on October 5 did we receive a reply from your Government. On October 1 we had received a reply from the French Government, but in neither case was the reply fully responsive to our inquiry.¹⁰

There still seems to be a difference of opinion between us as to how the dues, if collected by SCUA, would be handled. It is apparently your view that the dues should be impounded with SCUA and no part of them paid over to Egypt. That is quite contrary to the ideas which we have had and expressed from the beginning, and, as I interpret it, differs from what Sir Anthony Eden said on September 12 pursuant to prior agreement with us that SCUA would seek a working arrangement with the Egyptian Canal authorities, in pursuance of which an appropriate portion of the tolls would be paid over to Egypt.

I gather that it is now your view that SCUA should serve as a means of exerting pressure on the Egyptian Government by withholding dues. Our idea, made clear from the beginning, is that it was to be a means of practical working cooperation with the Egyptian authorities, which would seek to establish de facto international participation in the operation of the Canal.

If there is any misunderstanding between us in this respect, it cannot, I think, be due to any failure on our part to have made our views clear both before the idea of SCUA was announced, immediately afterwards, and continuously since then.

We believe that SCUA can be a valuable organization if it is organized and carried out in accordance with what I thought were our joint views.

In considering how it should operate in relation to Egypt and how much should be paid to Egypt, I think we must take account of the fact that:

(1) We do not want to create a situation where, due to differing past practices by ships of different registries, alteration in the method of paying dues would lead to the debarring only of United States ships. If this happened, it would face us with the alternative of altering our Treasury regulations, which would be a humiliating concession, or seeing United States ships alone forced to go around the Cape, which would be an intolerable discrimination unacceptable to our shippers and indeed to our nation.

(2) What would happen if, following the payment of dues to SCUA and their impounding, all our ships were denied access to the Canal? This is a contingency that we cannot ignore in our planning. I have made it perfectly clear that the United States does not intend to “shoot its way through the Canal”. In these circumstances, and assuming that you share this view, we would have to face the economic consequences of going around the Cape. This we have discussed fully with you. So far as the United States is concerned, we can accept those consequences and help you to accept them by Exim Bank loans, but this situation, I understand, is not desired by your Government for quite understandable reasons.

I really believe that we need to make an effort to think together along these lines or otherwise there will be a growing impression that we are at cross-purposes, which is obviously undesirable.

Sincerely yours,

John Foster Dulles¹¹

1. Source: Eisenhower Library, Dulles Papers, Misc. Papers-U.K. (Suez Crisis). Secret. Delivered to the British Delegation in New York on October 15 and transmitted to London in telegram 2753, October 16. (Department of State, Central Files, 974.7301/10–1556)
2. The entry for October 13 in Dulles’ Appointment Book indicates that Dulles met alone with Lloyd at 12:15 a.m., on Sunday, October 14. The two were later joined by Mrs. Dulles, Phleger, Dixon, and McCardle. (Princeton University Library, Dulles Papers) No account of this conversation has been found in either Department of State files or the Eisenhower Library. According to the account of the conversation in Lloyd’s memoirs, Dulles told Lloyd that while the dues should be paid to SCUA, that organization would then pass on 90 percent of them to Nasser. Lloyd had told Dulles that he was horrified by this proposal which would give to Nasser a larger proportion than he was currently receiving. (Suez 1956, A Personal Account, p. 162)
3. Attached to Document 208.
4. Brackets and ellipses in the source text.
5. For text of Eden’s remarks, see House of Commons, Parliamentary Debates, 5th Series, vol. 558, cols. 10–11.
6. For the transcript of Dulles’ press conference, see Department of State Bulletin, September 24, 1956, pp. 476–483.
7. For the transcript of Dulles’ press conference, see ibid., October 8, 1956, pp. 543–549.
8. Ellipsis in the source text.
9. See telegram 2248, Document 268.
10. A summary of the French response is in Document 290. A summary of the British response is cited in Document 309.
11. Printed from a copy that bears this typed signature.