Foreign Relations of the United States, 1958–1960, Arab-Israeli Dispute; United Arab Republic; North Africa, Volume XIII

232. Memorandum From the Assistant Secretary of State for Near Eastern and South Asian Affairs (Rountree) to the Acting Secretary of State¹

Washington, February 7, 1959.

SUBJECT

• Further Relaxation of Restrictions in Economic Field in our Relations with the UAR

Discussion:

The Secretary authorized us on April 15, 1958 to begin implementation of a four-stage program designed to place US–UAR relations on a more normal basis. A copy of the program as approved is attached (Tab B).² Since that time, all measures outlined under stages I and II of the attached program have been taken. In addition, in response to a request which originated with President Nasser, we agreed on December 24, 1958, to sell 300,000 tons of wheat and flour to the UAR under the PL 480 program. We now consider that it would be appropriate and desirable to undertake a further step in our program to normalize relations with the UAR by agreeing to a long-standing UAR request for the release of the remaining unutilized balances of FY 1955 funds already obligated under the US aid program. We believe this step would be very effective in what our Embassy in Cairo describes as “keeping up the momentum” of our improving relations with the UAR.

Resumption of our interrupted economic aid program was envisioned as part of stage III of our four-stage program. It was contemplated that this stage could be initiated when it had become clear that the UAR wished actively to pursue a more friendly relationship with the US and that the apparent trend toward realization of the dangers of the penetration of the Near East by international Communism was continuing. On the latter point, the campaign against Communists in the UAR and elsewhere in the Arab countries which was launched by President Nasser’s Port Said speech of December 23, 1958 is an encouraging sign. In this connection, there is reason to believe that our prompt response to Nasser’s request for wheat was a factor in the timing of the recent anti-Communist drive.

In addition, there have been signs during the last six months that Nasser may realize that policies which foster widespread area instability are not invariably in the interest of the UAR. UAR representatives played an important role in the drafting and passage of the Arab resolution at the special UNGA in August, 1958 which was followed by some relaxation in area tensions, including slight moderation of provocative UAR propaganda. Although clearly desirous of maintaining its primary position among the Arab countries, the UAR has since that time apparently been devoting its major current effort towards solving internal administrative and economic problems in part occasioned by the Egyptian-Syrian union. The UAR approved our request in November, 1958 for the over-flight of Hawker Hunter aircraft, as well as MATS aircraft carrying spare parts, for King Hussein, and reportedly has now removed remaining restrictions on transit to and from Jordan. Ambassador Hare has reported a distinct improvement in US–UAR relations as well as belated recognition by the UAR of the Communist danger. As you know, I received the same impression during my recent Near Eastern trip. While these items are not conclusive, we believe that they reflect in part a desire on the part of President Nasser, to which he has frequently given voice in recent months, for an improvement in US–UAR relations.

The UAR has shown an interest in the blocked economic aid funds in the past and would no doubt react favorably to their release. On August 25, 1958 the UAR Ambassador brought the matter up with you.³ It was subsequently decided that such additional measures as the release of these funds should not be implemented until an opportunity had been provided for evaluating the UAR’s reaction to the constructive programs already undertaken. The blocked funds in question consist of $8 million remaining committed to Egypt, of which (a) $5.5 million represents FY 55 Development Assistance committed mostly for highway, waterway, and railway improvement projects; and (b) $2.5 million represents technical assistance funds from FY 56 and prior years. We recommend that you authorize initiation of activities utilizing both DA and TC funds in order to provide maximum flexibility in meeting the UAR request for the release of these funds. It is proposed that the following approach be taken. With respect to the $5.5 million of Development Assistance funds we should indicate willingness to release these funds immediately for use as presently obligated or for revised uses as mutually agreed. Regarding the resumption of a TC program we should take the view that the US commitment to Egypt (UAR) under the TC program called for the delivery of services rather than money. In the light of this the US would be prepared, if the UAR genuinely desires a Technical Cooperation program, to reinstitute any and all normal TC activities which are mutually agreed as being capable of effective implementation. It would be understood that funding for such activities would be derived from existing funds only insofar as FY 59 obligations are concerned. If the UAR would agree, future funding would be derived from funds appropriated in subsequent fiscal years and would not be limited by the amount of $2.5 million presently in the pipeline. Funds from the pipeline not required for the TC program in the current fiscal year would become available to meet urgent requirements in other countries.

Because of our close coordination with the British with regard to US policies toward President Nasser, we would propose to inform the British in advance of the decision to release these funds.

Recommendations:

1. That you authorize NEA to inform the UAR Ambassador that, with reference to his request to you regarding the release of suspended US economic aid funds, the Department is gratified to authorize release of these funds at this time. We would point out to the UAR Ambassador that details regarding the release of these funds should now be the subject of working level US–UAR discussions in Cairo.⁴

2. That you authorize NEA to inform the British of our decision before it is conveyed to the UAR Ambassador.⁵

3. That you sign the attached telegram (Tab A) to Ambassador Hare informing him of our decision.⁶

1. Source: Department of State, Central Files, 611.86B/2–759. Confidential. Drafted by Brewer on February 4 and initialed by Rountree. Concurred in by ICA, W/MSC, E, EUR, H, and Murphy who wrote on the source text: “This would have more appeal to me if the objective were stated as the promotion of our objectives in the ME rather than to ‘normalize’ US–UAR relations.” Dillon wrote next to this comment: “For public posture here, I agree.”
2. Not found, but see Document 202.
3. See footnote 3, Document 218.
4. Dillon initialed his approval on February 13. Next to his initials, Dillon wrote “Subject to satisfactory results from consultations with UK.” The British were consulted on February 14 and asked the United States to delay the announcement until the signing of the UK–UAR financial agreement. (Telegram 2447 to Cairo, February 20; Department of State, Central Files, 786B.5–MSP/2–2059)
5. Dillion initialed his approval on February 13.
6. Not found attached, but at 10:01 p.m. on February 13, telegram 2358, approved by Dillon, was sent to Cairo outlining the proposal in this memorandum. (Department of State, Central Files, 786B.5–MSP/2–1359) Following the signing of the U.K.–UAR financial agreement, Rountree, on March 2, informed Ambassador Kamel of the release of the additional assistance. (Memorandum of conversation, March 2; ibid., 786B.5–MSP/3–259)