358. Message From Secretary of State Dulles to Foreign Secretary Lloyd1
Dear Selwyn: I have your letter of October 15 which apparently crossed mine to you of the same date. I greatly appreciate what you say about the steady support which we gave you in the Security Council proceedings. I agree with your appraisal of the result. I think it particularly important that the discussions continue to be confined to the UK, France, and Egypt, with Hammarskjold assisting.
As regards SCUA I am disturbed by your apparent suggestion that the original idea of SCUA must now be abandoned in favor of some new and to me ill-defined concept. It has never occurred to me that the basic purpose of SCUA has been or should be changed. You seem now to envisage it primarily as an instrument of pressure. I conceive it as a collective effort by users to enable them better to [Page 758] work out a satisfactory practical settlement with Egypt, because it represents the combined views and business of its member users.
I quite admit that the original concept has changed quantitatively in the sense that SCUA may not have to assume as heavy an operating burden, for pilots and the like, as it was first thought might need to be the case.
But I do not feel that this revolutionizes the character of SCUA. The basic purpose, as I have always conceived it, was to achieve an “on-the-spot” working arrangement with Egypt which would, in fact, amount to an international participation in the operation of the Canal under conditions which would protect the Canal users from covert discrimination and lead into a permanent satisfactory settlement. It would insulate the Canal operations from Egyptian policies designed to favor or hurt the shipping or cargoes of various nations and prevent making the Canal an instrument of Egyptian foreign policy.
This basic concept, it seems to me, remains sound. The purpose of SCUA, as set out in the basic Declaration creating it, is to help the member nations get through the Canal on an efficient and nondiscriminatory basis. The same purpose was expressed in the public statement issued following the Second London Conference on September 21.
The Resolution which you and the French introduced at the UN, and which we were supporting, calls upon SCUA and the competent Egyptian authorities to “cooperate to insure the satisfactory operation of the Canal”.
I cannot feel that the primary purpose of SCUA to cooperate with Egypt has changed. Certainly, I feel, no such change can be assumed unless the members of SCUA agree to it.
Of course, as you say, SCUA was intended to strengthen our collective hand, and not to weaken it. But would this not come from ability to represent locally the combined interests of the principal users so that the flow of revenue to Egypt could be stopped if there were discrimination? Thus there would come about a fair working arrangement, initially on a provisional basis, which could be the prototype of a permanent satisfactory arrangement. I believe this was the view of those who joined SCUA and that it is still their view.
That brings us to the question of dues. You calculate that Egypt is getting less than half of the dues because you and the French and others who follow your lead are now paying dues into the old Canal Company account.
As I see it, and as it has been reported to me from Egypt, the Government of Egypt views dues payments in London and Paris to the old Company as, in effect, payments to Egypt in the sense of [Page 759] diminishing to that extent Egypt’s debt for compensation to that Company or its shareholders. Hence, Egypt views the present payments which you permit as payments to it, despite the fact that in form they are being paid to London and Paris accounts of the Company. Egypt will presumably accept the situation until it judges that accounts are even.
As to payments currently being made under protest by U.S. flag vessels in Egypt, you will recall that to pay in Egypt is only to continue the practice followed when the Canal was being operated by the Universal Company, and continuance of this practice furnishes the basis for freezing the more than $60 million of Egyptian funds in U.S. banks.
Nevertheless, I appreciate your feeling that payment of dues to SCUA should not result in larger immediate cash receipts by Egypt than it is now receiving, unless and until Egypt has come to an acceptable interim arrangement with SCUA for the operation of the Canal.
This would mean that the present method of paying dues would be continued until SCUA has reached such an arrangement, following which the dues would be paid to SCUA for disbursement in accordance therewith. Or, if it is considered to be desirable that payments of dues to SCUA begin at once, this can be done with SCUA handling the dues as now, pending an acceptable interim arrangement with SCUA; that is, the dues paid now to Egypt would be paid to Egypt through SCUA, and the dues not now paid would be impounded by SCUA pending such an arrangement.
We must have in mind that the U.S. Treasury regulations cannot compel payment of dues to SCUA. They can provide, and it is so proposed, that no Canal dues shall be paid to Egypt except through SCUA. As dues are paid by ships and not by governments, it is to be anticipated that payment will be made to SCUA only if the ships believe that such payment will discharge their obligation for tolls, and that, in fact, the ship will get through the Canal.
The new system which I think we envisage would require the management of SCUA to negotiate with the Egyptian Canal authorities for such practical “on-the-spot” cooperation as would assure the purpose of SCUA, namely, expeditious and impartial transit through the Canal. This arrangement would doubtless call for a payment to Egypt, as has been clearly contemplated from the beginning. The amount of this payment would, I suppose, in part be a matter of straight negotiation, but in general I suppose it would be designed roughly to compensate Egypt appropriately for its contribution to the maintenance of the Canal and the facilities of transit. The negotiation would determine what funds would be withheld for [Page 760] Canal improvements and items other than the current costs and to pay off the old Company and its shareholders.
I do not know precisely what percentage of the dues received by SCUA would be paid to Egypt. I never intended to propose any specific percentage because I have no factual knowledge as to how much of the dues will correspond to a legitimate Egyptian share, since that, in turn, depends on the nature of the cooperative arrangements which will be established.
Perhaps I have misunderstood you and have wrongfully inferred that you felt that all, or virtually all, of the tolls should be impounded and Egypt faced with the alternative of letting the ships go through for the time being without any payment whatsoever or face the alternative of either force or a boycotting of the Canal.
This latter concept is, I feel, so different from the original one that it could not be adopted without reconsideration by the SCUA members as a whole. However, I hope and believe that we are still sticking to the original concept and that we merely face a misunderstanding as to how to apply it. Perhaps this letter will be helpful in clearing up the matter.
I do not comment on your observations on Anglo-American relations except to say that those relations, from our standpoint, rest on such a firm foundation that misunderstandings of this nature, if there are such, cannot disturb them.
Faithfully yours,
- Source: Department of State, Central Files, 974.7301/10–1956. Secret. Transmitted Priority to London in telegram 2851, October 19, 8:39 p.m., which is the source text, with the instruction: “Eyes only Aldrich and Dillon. Please deliver following message urgently to Lloyd from Secretary”. Telegram 2851 was drafted by Dulles and repeated to Paris.↩
- Telegram 2851 bears this typed signature.↩