Office of the Historian

67. Telegram From the Mission at the United Nations to the Department of State1

New York, February 7, 1957—8 p.m.

Delga 685. London for James W. Swihart.2 Verbatim text. Re Suez Canal. We conveyed to Cordier Department’s views regarding interim arrangements Thursday morning for Suez Canal as contained in Gadel 133.3Cordier said he and SYG would study them carefully and take them into account since they are anxious to keep as close to US views on this as is possible. During course day, Ramsbotham (UK) informed GADel that UK Embassy had been in contact with Dept and that we here were to be asked to set forth views in support “Neutral Agency and Fifty-Fifty” scheme. We confirmed such approach made to SYG.

Late Thursday afternoon Hammarskjold via letter to Lodge sent us working paper given below. It is also being given to UK, France and Norway for their reactions. Cordier says it is a working paper on which SYG wants our views. Paper is for internal Secretariat use only and its purpose is to clarify certain points at issue.

Would appreciate Department’s views urgently.

“Working Paper—7 February 1957

1.
An early arrangement of a provisional character for the collection of all payments for transit through the Suez Canal seems essential in order to avoid a possible conflict when traffic through the Canal is resumed. The arrangement should be such as to avoid any prejudging of the forthcoming negotiations on the general settlement. It should [Page 107] further take into account the situation established in the course of previous negotiations which have been accepted by the main parties as a starting point for new negotiations.
2.
The situation after the London Conference in August was summed up by Mr. Menzies in the following terms:

‘From the outset, you will have observed that the eighteen nations have not attempted to arrive at any joint opinion as to the validity or otherwise of Egypt’s nationalization decree. The London conference felt that to have a debate on this point would be fruitless, since the conference possessed no authority to make any judicial determination.

‘It was therefore considered much more practical to work out constructive proposals which assumed that the act of nationalization had occurred and that the problem of the payment of compensation to the Suez Canal Company would be properly dealt with, with provisions for arbitration in the event of difference, and that what was needed was the establishment of principles and methods for the future.’

3.
It is of interest to note further that Foreign Minister Pineau expressed himself at the London Conference as follows:

‘Il y a des points sur lesquels nous considerons que l’accord doit etre facilement acquis, encore qu’il comporte pour certains, dont nous sommes, des sacrifices evidents. Ces points sont les suivants:

‘a)
la propriete du Canal et de ses installations est reconnue a l’Egypte, ce qui entraine en faveur de celle-ci le principe une relevance adequate.
‘b)
la Compagnie Universelle devra etre convenablement indemnisee et elle pourra devenir par exemple une sorte de holding gerant son propre portefeuille.’

4.
The Security Council’s decision, 13 October, stated in point 6: ‘in case of dispute, unresolved affairs between the Suez Canal Company and the Egyptian Government should be settled by arbitration with suitable terms of reference and suitable provisions for the payments of the sums found to be due.’ In the 4th point the Security Council stated that ‘the manner of fixing tolls and charges, should be decided by agreement between Egypt and the users.’ These points make it clear that also the Security Council worked on the basis of the assumption that Egypt’s ownership of the Canal would be respected (an assumption correlated with the Council’s own decision, as endorsed by Egypt, that the Company would get full compensation).
5.
If a proposal for provisional arrangements is to be put forward by the Secretary General, it seems necessary for him to base his proposals on the assumption referred to above, as another stand would involve a retreat from the starting point for previous negotiations and the working hypothesis maintained all through the ‘progress so far made’.
6.
It follows that a provisional arrangement should meet the three following objectives:
a)
It should eliminate the risks for a collision by being acceptable to the users as well as to Egypt;
b)
It should not prejudge the position of any one party on operational, institutional or general financial questions (beyond the extent to which this may be considered as having resulted, in a provisional way, from previous negotiations);
c)
It should be based on the working hypothesis implicit in those negotiations, from London and onwards, that Egypt is owner of the Canal.
7.
The preceding argument indicates that payments should be made to an account held in the name of Egypt, but that the disposal over such an account, might be qualified either (a) by an agreement between the parties, or (b) by reserves made in connection with payments to the account. A general provision for the account would be that no one, by paying to the account, has committed himself to any specific stand on those questions which were covered by the Security Council and in the exchange of letters between the Secretary General and the Foreign Minister of Egypt based on the resolution of the Security Council.
8.
The immediate question is, on the basis of this argument, what rules for disbursement from the account might be considered acceptable by Egypt and by the users. The simplest solution would be that all disbursements, except those necessary for current expenditures, would be suspended pending a settlement of outstanding questions. Other formulae are, however, possible.
9.
A special question refers to administrative arrangements for the account and for the collecting of tolls and charges. Where should the account be held? Through what agents should payments to the account be made?”
Lodge
  1. Source: Department of State, Central Files, 974.7301/2–757. Confidential; Priority. Received at 12:18 a.m., February 8. Repeated to London.↩
  2. First Secretary of the Embassy in London.↩
  3. Document 61.↩