28. Telegram From the Department of State to the Mission at the United Nations1

Gadel 112. Delga 510.2 Following background information may be helpful in discussing US policy relating blocked funds with Mr. Hammarskjold:

US blocking order on GOE assets in this country arose out of Egyptian nationalization of Suez Canal Company. Order applicable to assets of both Suez Canal Company and GOE was established pending clarification of then existing situation including determination of ownership of these assets.
So far as facts concerned, believe GOE greatly magnifying importance US blocking order since funds affected amount only about $40 million, less 7 percent Egypt’s total foreign exchange holdings. Moreover, since the time of blocking, GOE has obtained a drawing from IMF of $15 million, which supported by US.3 Re sterling: UK blocking order immobilizes nearly 60 percent of Egypt’s foreign exchange assets. Government of Egypt may have about $30 million in freely accessible exchange in addition to about $170 million gold used as currency cover.
US does not consider that events since issuance this order have brought clarification or resolved problems which gave rise to blocking order.4

  1. Source: Department of State, Central Files, 974.7301/1–1957. Confidential. Drafted by Shaw and approved by Wilkins who signed for Dulles.
  2. In Delga 510 from USUN, January 15, Lodge forwarded accounts of conversations which he had had with Hammarskjöld and Pearson concerning the Israeli withdrawal question. Among other points, Hammarskjöld had advised Lodge that in order to avoid an adverse turn in Egyptian policy, the United States should give Egypt the feeling that it was not “on the British horse” and that its stand during the crisis was not temporary. Hammarskjöld especially emphasized the need for the United States to indicate to Egypt that once a settlement was reached concerning Suez, there would be no reason to continue to freeze Egyptian assets in the United States. Consequently, Lodge requested that the Department of State authorize him to indicate to Fawzi some loosening in the U.S. position regarding Egyptian assets. (ibid., 684A.86/1–1557)
  3. During the Secretary’s Staff Meeting on January 15, Rountree explained that it had been decided not to oppose a further Egyptian withdrawal from the International Monetary Fund because the British had taken a similar action in the recent past. (Notes of the Secretary’s Staff Meeting; ibid., Secretary’s Staff Meetings: Lot 63 D 75, Mon., Tues., Wed. Meetings)
  4. At this point in the source text, the following phrase was deleted from the original draft of the telegram: “and believes substantial progress more likely occur if assets remain blocked rather than released in hope such progress.”