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

237. Telegram From the Embassy in the United Arab Republic to the Department of State¹

Cairo, April 5, 1959—noon.

2918. Conveyed substance Deptel 2961² to Nasser yesterday afternoon.

Contents paragraphs numbered one through four re cotton covered in detail with no effort gloss over difficulties. Nasser took well, observing one reason why he so interested in selling cotton was that foreign exchange produced thereby could be used entirely according plans of UAR Government whereas foreign exchange generated by other means had to be used for agreed projects. If free world could somehow absorb some of Egyptian cotton would be tremendous help in stabilizing situation and he would therefore be very appreciative if we could be of assistance finding outlets even though we could not give direct relief. He said would have Kaissouni discuss this aspect of matter as well as representation Cotton Advisory Committee with economic counselor of Embassy.

Paragraph 5 outlining our desire for improved relations and reaction to current anti-Communist campaign obviously fell on attentive and receptive ears. Nasser also seemed interested when I reviewed various and numerous steps we had taken in past year and its sizeable cumulative importance in dollars and pounds. In this connection I particularly stressed that assistance which reduced need for foreign exchange, e.g. PL 480, does in fact have effect similar to that if we bought cotton. More than one way of skinning cat.

At this point, Nasser evidently had impression I had finished what I had to say and he launched into discussion of implications his anti-Communist campaign (being reported separately). However, when I eventually indicated had some more say and gave him contents paragraphs 6 and 7 he was obviously impressed, especially when point made, as instructed, that this approach essentially on our own initiative although in knowledge of what we believed was in accord with UAR needs as revealed in various conversations with UAR officials. Up to this time Nasser had steered clear of mentioning assistance needs and at one point even suggested UAR in quite good shape meet its problems without outside help and even had plans meet situation if Soviets withdrew aid. However, when point made that we taking the initiative, he visibly melted and admitted he had not wished raise question. King Hussein might feel free make such requests but he (Nasser) was in different position. It was only recently that he had been quarreling with US; now he quarreling with others. How would it look if he now asked for help? We would probably say, “What’s that man up to now?” However situation quite different if matter could be approached on basis what we can do or willing do without prior UAR request.

Ensuing discussion re economic needs was not in very sharp focus but following were highlights:

(1) Nasser evinced great interest in various PL 480 items covered in Deptel 2972³ although he obviously did not have background on list as whole. In fact lack such full knowledge seemed increase impact on him since came in nature surprise. He did indicate however he had been thinking of seeking additional PL 480 wheat with approximate value LE 15 million. He said Kaissouni would be authorized undertake specific discussion proposed list as soon as we were prepared proceed.

(2) Nasser indicated that field supposedly pre-empted by Soviet loan agreements was really wide open.

Especially emphasizing need for economic development in Syria in order meet drive being made by Soviets to make Iraq showcase of Communist assistance, Nasser said supposed Soviet aid to Syria was “mirage”. Economic agreement negotiated by Khaled El-Azem had been very vague as contrasted with specific agreements with UAR and activity to date had consisted largely of series proposed studies of excessive length; in that connection only actual activity was several small irrigation schemes. As consequence, it was decided during his recent visit in Syria to by-pass Soviets in respect railway and fertilizer projects which had figured in Soviet-Syrian agreements and to get on with the job independently. In fact, Egypt had agreed furnish some support from its own budget.

As regards Egyptian region Soviet agreements, including high dam, the amount to about LE 102 million but thus far only LE 27 million used. Now question whether Soviets will renege. One thing certain and this is that, if price of fulfillment is political subservience, UAR would willingly forget whole thing because “we do not,” said Nasser, “intend to industrialize our country merely to hand it over to Communists”.

(3) Nasser was interested in possible assistance we might give through IBRD, Export Import Bank and especially DLF which he obviously saw as being best adapted to UAR needs and also more competitive with Communist bloc offers. Stressing essentiality of economic development and aim in that connection to double national income in next twenty years, Nasser mentioned five-year plan which he said would require expenditure of LE 300 million of which half would be in foreign currency. This above savings capability of Egypt and some form foreign assistance obviously required.

Seeing way Nasser’s eye brightened at mention DLF, with which he previously unfamiliar, I took occasion inject word of caution by observing DLF in initial stages and modest funds appropriate for that purpose now committed, although efforts being made enlarge capital.

(Comment: I wish take this occasion once again express strongly held personal view that vastly preferable extend low interest or soft loans to outright grant assistance. Latter inevitably smacks of charity or paying off and difficult feel assured of motives of persons or governments who willing receive on that basis, due allowance being made of course for exceptional circumstances such as emergencies. Former or contrary maintains concept of helping those who help themselves and, even though may not always be possible maintain this concept with ideal purity, it would seem advisable direct our efforts in that direction as much as possible. If this line reasoning has validity, role of such institution as DLF could have great significance.)

(4) Nasser specially stressed desire work with West Tartous or Banias (he seemed foggy on exact location), fertilizer plant in Syria, and pipeline to new Syrian oil field. Problem was high rate (7 percent) of German interest. If arrangement could somehow be made reduce interest rate to two and one-half percent as given in Communist bloc agreements or even three percent would open way for full cooperation with West Germans. In fact, if this could be arranged, he would be glad increase amount of West German loan from present LE 44 million to LE 80 or even 100 million. He indicated that, if there was some way USG could assist in this regard, it would constitute important move toward cooperation with West.

(5) Nasser also referred to certain other specific projects in which he suggested USG might be of assistance, e.g. increase power of Damascus broadcasting station from 20 to 300 or 400 kilowatts and arrangement for institution television system in Egyptian region, including certain local manufacture, this being project in which he said understood RCA had been interested along with certain Czech and Hungarian companies.⁴

Hare

1. Source: Department of State, Central Files, 886B.2321/4–559. Secret; Limit Distribution.
2. Supra.
3. Telegram 2972, April 3, reported that a Title I supplement of $23.4 million had been approved for negotiation with the UAR. (Department of State, Central Files, 411.86B41/4–359)
4. Hare reported the political aspects of his discussion with Nasser in telegrams 2920 and 2922, April 5 and 6, respectively. (Ibid., 780.00/4–559 and 686B.00/4–659)