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

240. Telegram From the Department of State to the Secretary of State, at Geneva¹

Washington, July 17, 1959—8:46 p.m.

Tosec 327. From Dillon. Geneva Secto 316.² Re questions raised your reftel, Black discussed projected Canal loan to UAR with me July 14. Black said he understood UK prepared proceed with loan. He told me there would be no mention of transit issue in Bank loan agreement with UAR but noted no loan would be made until Inge Toft issue settled.³ He also said that initial IBRD team sent Cairo last April to survey UAR economic situation with reference UAR loan application had returned with satisfactory report. Black asked me whether there would be any objection to sending an IBRD team of engineers to UAR for further detailed study. I replied this appeared in order provided it were not done too quickly. Black also said might be difficult split loan into smaller first phase and larger balance but that total would in any case not exceed $100 million. We understand Black does not plan bring loan before IBRD Board for formal consideration at least until September.

Dept has been in close touch British Embassy this question in recent months and understands points British concern. As result British mid-April inquiry, Rountree on May 1 gave British Minister informal memo⁴ setting forth preliminary US position as follows:

1. US prepared support UAR loan applications IBRD for sound projects including Suez Canal development.

2. While Egyptian attitude re 1956 Security Council resolution (embodying 6 principles) and Egyptian Declaration of April 24, 1957 did not fully meet desired requirements for operating Canal, these Declarations have provided generally acceptable legal framework within which operation of Canal has been relatively satisfactory.

3. UAR has not, however, given full effect either 6 principles or Egyptian 1957 declaration due special circumstances resulting Arab-Israel problem.

4. While would appear desirable have IBRD obtain UAR agreement cease all discrimination re Canal transit, we believe, subject Black’s views, it might be politically unwise for Bank attach conditions to loan which would link Bank financing to politically difficult UAR concessions on Israel problem. Specific questions re observance 1956 Security Council resolution would appear matters for UN decide.

5. US believes IBRD should: (a) move forward if possible on what we understand is immediate UAR interest in partial financing existing Canal improvement contracts without attaching special conditions; and (b) defer question of including, in a major loan agreement, more specific guarantees than currently exist with respect transit issue until such time as loan brought up formally before IBRD Board when it should be carefully considered in light continuing UAR practice re Canal transit.

In further discussions this question with British Embassy during June, we have expressed desire continue consultations with UK this question but have indicated formal consideration UAR application by IBRD still appeared some months off and that preliminary US position seemed generally valid. Embassy London has reported British discussed question with Black when latter in London early July at which time UK expressed dissatisfaction over slowness desequestration British property Egypt. British said would find it awkward if loan proposal put to IBRD Board as early as August which they understood was possibility and reportedly expressed hope to Black that consideration proposal could be delayed until better evidence Egyptians intend honor commitments.

Would appear from foregoing Black in general agreement our position re undesirability attaching political conditions any IBRD loan for Canal development but that no loan will be made until Toft issue settled. Meanwhile routine Bank procedures, including engineering survey, will consume sufficient time keep application from coming formally before IBRD Board until September at earliest. Opportunity will thus be provided observe (a) practice of UAR with respect transit issue, following recent discussions this question in Cairo by Hammarskjold, as well as (b) final disposition Inge Toft case which currently being pursued by Danes with UAR.

Should you discuss this question further with Lloyd, suggest you draw on preliminary Dept position as above outlined. Might be helpful point out Black’s view (which we share) that there should be no mention transit issue in any loan agreement but that final IBRD decision on loan will obviously be taken in context continuing UAR practice with respect transit issue.

Dillon

1. Source: Department of State, Central Files, 986B.7301/7–1559. Secret; Priority. Drafted by Brewer on July 16; cleared with Sisco, Hart, E, EUR, U/MSC, and S/S; and approved and signed by Dillon. Repeated to London and Cairo. Herter was in Geneva for the Four-Power Foreign Ministers Conference.
2. Secto 316, July 15, reported that Lloyd had asked about the U.S. position on an IBRD loan for Canal improvement and for a summary of where the question stood. (Ibid., Conference Files: Lot 64 D 560, CF 1315)
3. Regarding the impoundment of the Inge Toft, see Documents 92 ff.
4. Not found, but a memorandum of the conversation between Rountree and the British Minister on May 1 is in Department of State, Central Files, 986B.7301/5–199.