381. Airgram From the Embassy in Lebanon to the Department of State1

G–96

In recent weeks indications have reached members of the Country Team that the Government presided over by Saeb Salaam, made up in some part of Ministers who have never previously held portfolios, will ultimately make formal requests for U.S. economic assistance far exceeding any expectation cherished by interested agencies in Washington.

The Country Team will in due course summarize the informal soundings already made by various Ministers and will make recommendations as to the attitude it feels the United States Government should take. In general it can be said that new Ministers, anxious to make a political name for themselves, are over-prone to look to Point [Page 661]IV assistance without an adequate background such as was possessed by the two Karame cabinets and a realization that the United States does not feel that Lebanon needs grant aid of the type previously furnished under the auspices of Point IV.

At the same time there is a definite malaise in the country. The continuous manifestation of strikes for higher pay is causing serious concern to the Government and to impartial observers. Although certain sectors of the economy are flourishing, others are depressed. The cost of living has steadily risen and in many cases wages have not maintained parity with the increase in the price of daily bread.

Fortunately President Chehab is aware of the past measures which the United States has taken to aid Lebanon and of our very reserved view on the need for future assistance to Lebanon. Nevertheless political pressures will build and in my judgment we will receive requests for aid far in excess of our desire to respond affirmatively.

Generally typical of this attitude was the position revealed to me this morning by the Acting Minister of Finance, Maurice Gemayel, who is a very sincere friend of the United States. Gemayel portrayed a dark picture of Lebanon’s economic future unless the Government should embark upon a new rationale involving nation-wide reform of the entire economy. He also intended to use Professor Higgins’s report as the basis for an extensive program of fiscal reform and said he would call upon Higgins to return to Lebanon to draft the necessary legislation.

The Acting Minister of Finance showed me charts indicating past and projected future revenues and expenditures. It was clear that he was attempting a scientific approach to the problems confronting the Ministry of Finance; but whether he would find the financial means to make possible the carrying out of the reform program seemed much in doubt. The Minister spoke of asking for American assistance both in the field of low interest, long term loans and cash grant aid, but was unable to estimate amounts under either heading.

I told Maurice Gemayel, as I had previously remarked last week to the Minister of Planning, that so long as Lebanon had an 85% gold coverage of its currency, practically no public debt and a non-functioning of the income tax system which resulted in most Lebanese not paying any income tax, it was perhaps a bit too much to expect American taxpayers to fork over large sums for Lebanon, particularly when the customs revenues for the past two years had been the highest in history.

Despite the impact of such an answer, it is certain that we will be called upon once more to go through the not very rewarding process of convincing the Lebanese that Charles Malik’s promise of “unlimited, unconditional American aid” is a figment of Lebanese political imagination. I said somewhat wearily this morning to Maitre Maurice [Page 662]that I wished the Lebanese Embassy in Washington had to carry some of the burdens of furthering Lebanon’s interest vis-à-vis the United States.

It is very apparent to the Country Team that if the contemplated winding up of USOM/L is carried out as was apparently forecast by ICA/W earlier this year, there would be unfortunate political repercussions seriously affecting U.S. prestige in Lebanon which would likewise make us vulnerable to Soviet countermeasures taking advantage of the situation. ICA/W will recall that during the heyday of Point IV, the Americans practically pushed their way into Beirut because it was a good base of operations and a pleasant place to live. Likewise during the period when the Department of State was seeking to “sell" the Eisenhower doctrine, Judge Richards practically bartered ten million dollars of economic aid in return for the sole joint communiqué by an Arab Government supporting the premises of that doctrine. In 1958 the United States went to immense expense and risk in sending an expeditionary force to Lebanon and in addition gave $12.5 million of cash grant aid to this small client country. Despite the unremitting efforts of the undersigned to put the aid picture in a proper and much restricted focus, where in fact it is today, for the United States abruptly to eliminate the USOM mission would in my considered judgment invite invidious comparisons with what we do elsewhere and might even leave Lebanon in a resentful frame of mind, ready to deal with the USSR on terms prejudicial to our interest. Withdrawal of USOM/L would also arouse an outcry in the Christian half of the Lebanese population and would exacerbate Christian–Moslem differences.

I continue to feel that we should endeavor to restrict the aid program for Lebanon, but not to wipe it out altogether. Ultimately, as I have told high officers of the Department and ICA, I would anticipate a much truncated USOM/L as a branch of the Embassy, the Mission Director to become a regular Counselor of Embassy for Economic Aid Affairs.

McClintock
  1. Source: Department of State, Central Files, 783A.5–MSP/10–2060. Confidential.