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

242. Telegram From the Department of State to the Secretary of State, at London¹

Washington, August 30, 1959—9:11 p.m.

Tosec 25. Secto 24, August 29.²IBRD Loan to UAR.

1. IBRD staff not yet informed in detail results Rucinski Mission Cairo. Full information expected be available only upon his return about September 7. However, Bank official informed Department in confidence today IBRD “fairly satisfied” with financial and economic phases of discussion. Official stated no date yet set for IBRD Board consideration loan; Black expected “feel out” attitude Board members and if significant opposition to UAR application arises will probably defer bringing it formally before Board. UAR likely press for formal consideration during visit Washington Min Econ Kaissouni arriving September 26. (Cairo press recently stated Kaissouni will conclude IBRD loan while in U.S.)

2. Issue Israeli transit through Canal already linked with loan in U.S. press, and in this context group of 13 congressmen (six from N.Y. and N.J.) have written Black³ urging IBRD not grant loan while Canal “being used for belligerent action by a nation which insists on remaining in a state of war with a neighbor.” Formal consideration by IBRD Board would be roundly condemned by domestic elements responsive to Israeli interests, particularly in view importance GOI attaches to issue. Coincidence granting loan with UN discussion transit issue would be likely intensify interest in and acrimony of debate on matter. Arab bloc will probably enjoy at least tacit Sov Bloc support. Western Europeans, Latin Americans and Afro-Asians (with number exceptions among latter) expected support principle freedom transit while, like UK, avoiding public opposition IBRD loan to UAR.

3. Latest conversation with Black (approximately two weeks ago) indicates he did not believe feasible conclude loan negotiations with UAR, while Inge Toft remained Port Said and that once Rucinski mission successfully concluded, should UAR send negotiating team Washington immediately, bank might have to “drag feet” until Inge Toft out of way. Since it is clear that he is reluctant bring loan before Board while Inge Toft issue remains unsettled, as this provides unfavorable climate for enlistment private capital he hopes will participate in loan, we believe Black willing defer action as long as postponement possible on technical and economic grounds. If canvass mentioned shows majority of Board members favor action, however, and if, as appears likely, substantial agreement on technical aspects of loan will have been reached between Rucinski and UAR officials, subsequent deferment of formal consideration could be ascribed by UAR to “imperialist-Zionist” pressure. As purpose of loan is carry out “Nasser Plan” for Canal improvement which has been presented to UAR public as cornerstone of overall economic development program, postponement on non-technical grounds would involve prestige of UAR Government and likely provoke sharp anti-West reaction.

4. Manner in which Suez transit issue handled in next few weeks will depend in considerable measure on tactics chosen by Israelis in seeking UN consideration transit problem and Inge Toft case (Deptel London 1700).⁴ Israel Embassy has asked us what measure US would be willing take respect four possible courses Israel might choose: 1) raise in SC; 2) seek inscription on GA agenda special item on freedom of passage; 3) raise transit issue during general debate in GA; 4) request maritime powers make formal statement outside of UN in support freedom of transit. While we expect inform Israelis it is for them to decide whether or not to raise transit issue as well as to decide on most appropriate forum and mode of presentation we will point out to them possible hazards of formal UN consideration. Department believes at minimum we will at some point find it necessary reiterate our support for freedom of transit perhaps on lines our earlier declarations in SC.

We believe also that before consummation of loan it will eventually be necessary for UAR reaffirm its support for freedom of transit possibly by inclusion in loan agreement with IBRD some reference Egyptian declarations of 1957, Security Council resolution for 1956, or 1888 Convention. This obviously best handled by Black who can explain such provision to UAR as necessary to obtain assurances persuade investors soundness of security loan.

In light foregoing suggest you may wish inform Lloyd: 1) Tactics of handling transit issue next few weeks will depend in part on strategy selected by Israelis, but we will seek avoid acrimonious airing of issue and will be prepared, if such statement would seem helpful, to reaffirm in some form our support for principle freedom of transit. 2) Re Suez loan we continue wish to avoid any appearance attaching any political conditions. 3) We recognize difficulties which would be posed by loan issuance at time freedom transit issue under debate in UN with Inge Toft cited as evidence UAR failure observe principle. We are, of course, desirous loan announcement should not be withheld in manner tending excite UAR hostility, while at same time, we recognize that announcement before transit issue resolved or while UN debate in progress could be embarrassing to both US and UK. Timing of loan announcement obviously important to Black as well as to interested nations. Therefore as occasions arise US and UK should each discuss matter very privately with Black.

Final Comment: Black informed us that toward end present trip to Europe he intends to visit London so as to be available for any comment British care to make. We feel that it is essential that British put their views to Black in straightforward manner which we do not feel they have done so far. We recommend they be given no encouragement in their endeavor to shift burden of opposition to US. We do not feel that US can take stronger position than UK; therefore, unless UK prepared to make their views clearly known to Black, if necessary through official action their Executive Director, we feel that loan is likely to be approved by IBRD some time this fall.⁵

Dillon

1. Source: Department of State, Central Files, 886B.10/8–2959. Secret; Priority. Drafted by Dillon, Thacher, and Stookey (NEA/NE); cleared with Hart and UNP; and approved by Dillon.
2. See footnote 1, Document 89.
3. A copy of this letter, August 26, is in Department of State, Central Files, 986B.7301/8–2659.
4. Telegram 1700, August 28, reported that the Israeli Chargé had called on Jones to discuss the Suez transit question and had raised the possibility of taking the matter to the United Nations. (Ibid., 986B.7301/8–2859)
5. On September 1, Black, who was also in London, reviewed the status of the IBRD negotiations with the UAR. A summary of the conversation was transmitted in Secto 45 from London, September I. (Ibid., 886B.10/9–159)