366. Telegram From the Embassy in Lebanon to the Department of State1

2465. Following my return from leave I have carefully studied results of painstaking joint examination made by US and Lebanese financial experts of Lebanese budget position. Embtels Toica 220,2 Toica 2243 and Embtel 24044 are pertinent in this regard. Country [Page 630]Team likewise most gratified to receive Department’s thoughtful Icato 2325 which furnished opportune policy guidance.

I have discussed Lebanese aid and budget problem with a number of responsible people including most recently President Chehab, with whom I had a long and frank conversation last night. I find in Chehab and his more alert ministers, as well as in a variety of disparate elements (e.g., such widely differing characters as Emile Bustany and Kamal Jumblat), a persistent belief that if Lebanese Govt can promptly initiate a program of planned expenditure, particularly in public works sector, pump will be primed for a rapid return of Lebanese economy to normal. From aspect of internal security and interest economics, Chehab and his ministers are keenly anxious to commence a program which would relieve destitution and provide work at such neuralgic points as Tripoli, certain regions in the mountains and the depressed area of Tyre and Sidon. We concur that there is need for such an exercise of leadership, and if it is made possible by our aid we should share in political dividends which will accrue.

Before making our specific recommendations I should like to recall certain basic facts which condition our judgment of situation:

(1)
Lebanon for first time in its brief history has a president who is incorruptible. Likewise, for first time in Lebanese history all ministers of govt are men of personal integrity. This is thus a unique situation in which content [intent?] of top management in this country is to run an honest administration. We should be naive, however, to believe that throughout ranks of bureaucracy there will be an equal standard of public conduct. Nevertheless, from aspect of how US taxpayers funds are used, we do have at present time in Lebanon an honest chief of state and an honest Cabinet.
(2)
One political observer has remarked to me that US area-wise has an unusual, although perhaps fleeting, opportunity to use an imaginative and bold aid program for Lebanon with a view to furthering US policy interests elsewhere. This observer points out that [to] many Moslem Arabs Karami is identified as a follower of Nasser. Although it would seem strange outside Arab world, there is validity to argument that if Karami asks for and receives a grant of US aid it will be interpreted in other Arab countries as indication that US is a friend of free Arab nations and that USSR is not sole purveyor to Arab nationalism.
(3)
So far as political impact is concerned, a cash grant of US aid made now (and which Karami and company would play up as being without strings attached) will have great effect in Lebanese leadership circles, including particularly Moslems who have been inclined to regard past US gestures in offering aid as designed with politically [Page 631]ulterior motives. As indicated in preceding paragraph, an offer of such US aid made now we think will also have impact politically outside Lebanon.
(4)
In my conversations with Chehab and his ministers I have indicated belief that if Lebanon with our immediate assistance can get its economy back on the road there should be no further requirement for aid of an extraordinary nature. Such future assistance as US might subsequently be called upon to offer would then be in the way of technical assistance along lines foreshadowed Icato 232, plus judicious resort to DLF.

Given this analysis of situation, I recommend that we at once make available to Lebanon sum of ten million dollars of grant aid as a one-shot, non-recurring operation. This would not fully meet their own estimate of complete deficit for Lebanese fiscal 1958, which, as indicated Embtel 2404, comes close to 37 million pounds, but it would be generally accepted not only by the experts but by ministers and public opinion as being a grant-in-aid which in effect closes books on recent civil war, places government in a solvent position and moves Lebanon up to the point of a new year starting in January 1959 from which it can move forward under its own momentum. The figure of ten million dollars is in our considered judgment the minimum amount which can achieve these objectives with major credit accruing to the US.

I believe this offer of a grant-in-aid would be generally interpreted throughout Arab world as a corollary of US policy in intervening by military means to assist Lebanon to maintain its integrity and independence. This likewise should have considerable political impact beyond borders of Lebanon. Fact Moslem Karami asked for and accepted such aid would silence usual output of Cairo and Moscow radios.

What we are in effect asking for is a one-shot non-repeating aid operation made for political considerations but with sound long-term economic justification. This will cost ten million dollars and will not recur. After that ICA operation Lebanon will be principally confined to winding up past pipeline business, reallocating and reducing past project commitments and to responding to anticipated requests by GOL for intelligent technical assistance or DLF aid. What we are trying to do in effect is to turn a completely new page in history of our aid for Lebanon and to start a new year in 1959 which is definitely a new year. I trust Department and ICA–W will concur in this recommendation [Page 632](which has approval of Country Team) and that affirmative instructions will be issued forthwith.6

McClintock
  1. Source: Department of State, Central Files, 783A.5–MSP/11–2558. Confidential; Priority.
  2. Toica 220 from Beirut, November 10, a joint message to State and ICA, indicated that technical discussions with Lebanese officials on the calendar year 1959 budget had begun. (Ibid., 883A.10/11–1058)
  3. Toica 224 from Beirut, November 17, also a joint message for State and ICA, reported that Embassy officials had suggested to Finance Ministry representatives that a submission be prepared listing Lebanon’s cash requirements for the 4-month period of November through February as a starting point in considering U.S. aid. (Ibid., 783A.5–MSP/11–1758)
  4. In telegram 2404 from Beirut, November 19, the Embassy reported that Lebanese officials had submitted an estimated Treasury balance sheet which “dashed” prior optimistic hopes on the part of the Embassy that an early agreement could be reached on the question of U.S. budget support. (Ibid., 783A.5–MSP/11–1958)
  5. Icato 232 to Beirut, November 13, a joint ICA–State message, instructed the Embassy to sound out the Lebanese Government on the question of a technical assistance program to determine whether a basis existed for continuing a program within the budget constraints which were necessary. (Ibid.,883A.00–TA/11–1358; included in the microfiche supplement)
  6. In telegram 1990 to Beirut, November 28, the Department and ICA concurred in the Embassy’s recommendations, and authorized the offer of $10 million as a “one time grant operation.” (Department of State, Central Files, 783A.5–MSP/11–2558; included in the microfiche supplement)