356. Telegram From the Embassy in the United Kingdom to the Department of State1
2170. Eyes only Secretary; Paris eyes only Ambassador. I called on Lloyd this morning with view to eliciting further information his thinking at time as to basic Brit position Suez problem and their real intentions (Deptel 2786).2 Barbour accompanied me and Adam Watson was present with Lloyd. I opened conversation by professing to be confused divergence between US and UK positions revealed your correspondence with Lloyd re payment Canal tolls (Deptels 2753 and 2785).3 I noted that I could not understand Brit concern over a reasonable portion of Canal toll receipts being paid by SCUA to Egypt, having in mind that SCUA’s control over such receipts would not be prejudiced by such payment. I said I consequently would appreciate further exposition Brit reasoning in its opposition to such payment.
It developed that there is a clear demarcation in Brit thought between the role they envisage for SCUA in a final settlement and the means by which they intend to utilize SCUA in the interim to maintain pressure on Egypt to come to a final solution.
Lloyd believes there is no misunderstanding between the US and the UK that SCUA’s purposes in connection with a final settlement will be to provide practical operative cooperation with Egypt and maintain the valuable, if not exclusive, sanction for Egypt’s compliance with the final agreement, of control over financial payments to it. This seems basically to be an extension to permanency of the concept of SCUA as a provisional mechanism the US has had since the beginning. When such a final settlement is reached he would not be surprised to see 90 percent of the tolls go to Egypt through SCUA. The divergence seems clearly to relate to [Page 752] the interim period wherein the Brit and French anticipate negotiating directly with the Egyptians for a final settlement. Lloyd is optimistic that the Egyptians will come forward with something which will serve as a basis for further such negotiations within the next ten days or so. Meanwhile, and so long as the negotiations continue with Egypt. His concept is that pressure must be maintained on Egypt, and that that pressure means essentially that there must be no financial increase in Egyptian receipts. Aside from this negotiation concept, without which he believes it will be impossible to obtain Egyptian agreement to a satisfactory final solution, he regards it as impossible from the internal political standpoint for him to defend in Parliament the unblocking of presently frozen funds which would result in augmentation of Egyptian revenues from Canal dues above the 40 percent they are now receiving. The maximum he could envisage defending is around 10 percent although he might go to 20 percent. He was impervious to the suggestion that he could justify such an increase on the grounds that his government has simultaneously achieved the inauguration of SCUA as a practical instrument for maintaining control over Canal revenues. He was unresponsive to the comment that if we are agreed on the ultimate role SCUA should play, it would seem highly undesirable and unrealistic to ask it to take action on an interim basis which would be contrary to our ultimate aim and might not only postpone progress toward those purposes but involve provocations and risks of creating unacceptable consequences.
On basis this conversation and other evidence available here, I would consider it undesirable to respond further in writing to Lloyd’s statement. I believe the situation is fundamentally less divergent than the two communications so far exchanged would suggest, at least in relation to the long term. As to the interim, I feel that flexibility exists and that the possibility of a further round of direct UK-French-Egyptian negotiations may make the resolution of this toll problem less urgent than would otherwise be the case. While, as I have indicated in recent messages, I do not believe that the depth of Brit determination in regard to the Suez problem as a whole has appreciably lessened, I do feel that the govt is disposed to try to promote a solution through negotiations rather than the contrary. Indeed, it would be unrealistic for them in their present internal political situation to expect to make political capital in the country out of a solution on any other basis.
In summary, the Brit ultimate objective is, according to their professions and I think realistically in the light of their internal situation, to achieve a settlement involving the Egyptian operation of the Canal under adequate safeguards against discrimination, etc., which would include machinery for the resolution of disputes by [Page 753] international arbitration and sanctions for Egyptian compliance with arbitral awards. Lloyd probably would not acknowledge such a conclusion at this point, but the trend of Brit thinking and other developments is obviously toward the acceptance of SCUA financial control over Canal moneys as the ultimate sole sanction. For the interim, pending agreement with Egypt, their objective can be succinctly stated to maintain maximum pressure on Egypt by any means available, and in any case to do nothing which lightens financial or other pressures under which Egypt now is. As far as Canal tolls are concerned, in this interim period, Brit thinking is that SCUA should function as a receiver of the assets for an estate under litigation, all or the maximum amount possible less minimum essential living expenses for the heirs being held in escrow pending final settlement. It would be the Brit intention to advise the Egyptians of the fact that this was being done which would minimize any provocative implications arising from arrangements. They do not conceive of this position as a change from the original SCUA concept and maintain that there was no such implication in Lloyd’s letter of October 15. They do not demand that an increasing amount of tolls be arbitrarily denied to Egypt even in this interim negotiating period where they are looking for the maximum amount of leverage. They simply feel that in this same period it would be bad negotiating tactics and disastrous from their internal political situation to put Egypt in a better position than it is now by reason of the coming into operation of SCUA.
- Source: Department of State, Central Files, 974.7301/10–1956. Top Secret; Priority. Received at 6:25 p.m. Repeated to Paris.↩
- Document 351.↩
- Telegrams 2753 and 2785 transmitted, respectively, Dulles’ letter to Lloyd and Lloyd’s letter to Dulles, Documents 347 and 348.↩