345. Memorandum of a Conversation, Department of State, Washington, June 24, 19571


  • Israel’s Economic Situation2


  • Mr. Eshkol, Israel Minister of Finance
  • Mr. Abba Eban, Ambassador of Israel
  • Mr. Sherman, Economic Minister, Embassy of Israel
  • The Secretary
  • NEWilkins
  • NEDonald C. Bergus

Mr. Eshkol expressed thanks for past United States assistance to Israel. In the nearly ten years of Israel’s existence the country had grown from a population of 800,000 to nearly 2,000,000. Exports had risen from $40 million to $200 million. Large sums had been mobilized from Jewish communities throughout the world. There had been between three and four hundred million dollars in private investment in Israel. Israel was halfway along on the road to self-sufficiency; the rest of the journey might take another twenty years. There was now a hew wave of immigration from Poland, Hungary and Egypt. This was a new financial burden as most of the immigrants arrived without means. Prior to this development, Mr. Eshkol had been able to manage Israel’s finances in the face of declining United States aid. Now he no longer saw his way clear to do so. He therefore felt it proper to approach the United States and ask special consideration for Israel’s problems. The United States had such channels for aid as the proposed development fund, surplus agricultural commodities, the American Doctrine, the Export-Import Bank, and remaining fiscal year 1957 funds. He asked America’s help.

The Secretary replied that Mr. Eshkol would find in the Department and elsewhere in the United States Government a large measure of sympathy for Israel and its problems. The concern we had was not over whether we would like to help Israel but over our own problems in this regard. We were facing a critical review of our foreign aid programs and we did not know where we would come out. It was uncertain whether, if we obtained the necessary legislation for the economic development fund, this would add to our capacity to assist Israel. The Secretary did not wish to speak with finality on this subject, but the fund was intended primarily for states which had yet to demonstrate a capacity to borrow. Israel perhaps should look more to the Export-Import Bank.

The Secretary continued that it was not sound for a country to base its policies on help from other governments. This was abnormal. Of course it might be maintained that Israel’s situation was abnormal. Whether Israel should have an immigration policy which could recreate economic problems might be a matter for Israel to decide but this question had international repercussions. There was the apparently genuine concern of the Arabs at increased immigration into Israel and its implications with respect to possible territorial expansion. This concern would be heightened if the United States provided financial support for such immigration. There was also the question of the resettlement of Arab refugees in Israel which would have inevitably to be dealt with as one of the aspects of an overall Arab-Israel settlement, which we assumed Israel favored.

[Page 656]

The Secretary concluded that this did not show a lack of sympathy but he felt the Israelis should be under no illusions as to the prospects of assistance from the United States Government. We wished to assist Israel and would continue to do so within the limits of our policies and available funds. There seemed to be a general trend in the United States favoring a declining level of foreign aid. Israel should not base its policies on a contrary assumption. Mr. Eshkol’s views would help the Secretary in his thinking on this matter.

Mr. Eshkol stressed that Israel’s “historic duty” was to provide a haven for these Jewish refugees from behind the Iron Curtain and that should Israel be unable to receive them they might seek to come to the United States. He discounted Arab concern at Israel immigration stating that the Arabs really wanted to see Israel driven into the sea. Perhaps an increase in Israel strength would force the Arabs to sit down at the peace table.

The Secretary inquired as to what extent the Jews from Poland and Hungary were Communist in thinking. Mr. Eshkol replied that those who were Communist stayed in those countries, those who sought to come to Israel had had enough of Communism.

  1. Source: Department of State, Central Files, 784A.5/6–2457. Confidential. Drafted by Bergus.
  2. During another conversation on June 24, Rountree told the Israeli Delegation that he was not hopeful that the United States would be able to provide Israel with additional assistance from special fiscal year 1957 funds, although the Department of State was still studying the situation. (Ibid., 784A.5–MSP/6–2457)