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

246. Memorandum of a Conversation, Department of State, Washington, September 28, 1959¹

Washington, September 28, 1959

SUBJECT

• U.S. Economic Assistance to the UAR

PARTICIPANTS

• Dr. Abdel Moneim Kaissouni,
• UAR Minister of Economy
• Dr. Mostafa Kamel, UAR Ambassador
• The Under Secretary
• NEA—Parker T. Hart
• NE—William D. Brewer
• NE/E—Enoch S. Duncan

The Under Secretary remarked, and Dr. Kaissouni agreed, that U.S.–UAR relations were greatly improved over the last time Mr. Dillon had seen Dr. Kaissouni in 1957.

Dr. Kaissouni referred to planning for economic development in both the Syrian and Egyptian regions of the UAR and commented that these plans in their latest format were scheduled for publication around the beginning of 1960. In connection with these plans, there were four major topics in U.S.–UAR economic assistance relationships on which he wished to obtain the Under Secretary’s views.

1. Development Loan Fund:—Dr. Kaissouni wished to ascertain the degree to which the United States could assist the UAR through this mechanism. Could not a specific gross sum be allocated for UAR projects? Dr. Kaissouni understood the preference for the project approach but understood there had, in fact, been exceptions.

In addition, Dr. Kaissouni noted that Mr. Mohammad Rushdi, Chairman of the Board of Bank Misr, was visiting in Washington, and it was hoped that some of the projects in which the Misr group is interested might be financed by DLF.

Also, railway development, television, and telecommunication projects had been recently added to the list of items² for which U.S. financial help was sought.

The Under Secretary said that the United States was most willing to be of assistance through the DLF and wanted to do all possible to get started. He explained that the procedures required reflected the view of the Congress that loans should be designed to aid in a country’s economic development rather than to provide assistance for political reasons. Therefore, DLF was not geared to operate on the basis of general listings of projects. Even though there had been a few exceptions in which allocation of total amounts had been undertaken, the details of the various projects still had to be worked out, since loans were actually made on an individual project basis. He recalled that such commitments had been made in the case of Turkey and the Philippines and noted that in both cases sufficient worthwhile individual projects had not yet been worked out to give effect to actual loan operations in the magnitudes envisioned. He contrasted this operation with Pakistan where there had not been an overall figure set but DLF resources had been brought quite effectively to bear on the problem on a project-by-project basis. In the case of the UAR, it was important for the UAR itself to determine priorities among the projects it had listed both with respect to the time in which they could or should be implemented and according to the importance the UAR attached to each. The U.S. is not prepared to assign these priorities. The U.S. concern is rather that the projects presented will make an effective contribution to economic development. The Under Secretary contrasted this to the Soviet practice of willingness to select from a list of projects.

Mr. Dillon indicated that DLF would not be able to act on the basis of a list and general description, such as that provided by Ambassador Kamel on September 24. The Under Secretary emphasized that detailed applications should be worked out and said that it would be valuable for Dr. Kaissouni to meet with Mr. Brand, the new head of DLF. DLF might also send out a senior officer to consult with UAR in the early stages of the development of their applications.

Mr. Dillon suggested that review of the DLF report of its operations would be helpful in evaluating the role DLF might play in the UAR. He recalled his conversation with an emissary of President Nasser in May³ and discussion of what might be a reasonable level of DLF operations in a given country’s case, considering its size and level of economic development. He had mentioned Turkey and Iran to the emissary as roughly comparable in size to the UAR and noted the level of DLF operations in these. Mr. Dillon confirmed to Dr. Kaissouni that this was still our view and expectation in the case of the UAR, provided good projects were submitted.

2. P.L. 480:—Dr. Kaissouni referred to a request for wheat and barley for the Syrian Region and expressed hope that something might be done shortly. He noted also that a further list of commodities for possible Title I sale to the Egyptian region had just been presented and mentioned especially maize and tallow.⁴ He said that timing was important, for example in the case of maize, if they were to avoid complications in supply. If tallow should not be available under P.L. 480, Dr. Kaissouni hoped earnestly that something could be done to provide this commodity from other sources.

The Under Secretary said he had inquired as to the status of P.L. 480 operations and could confirm that a program for Syria had been agreed to by the several agencies concerned. Negotiating instructions were now being sent to the Embassy in Cairo.

He observed that, on the basis of technical study, the interagency group had agreed to offer the full 75,000 tons of barley requested but, in view of Syria’s normal wheat exporting position, preferred to offer only 75,000 tons of wheat for immediate agreement. This was because of the great difficulty that might be posed if the need were misjudged and stocks accumulated in Syria with consequent pressure to export. A commitment not to export until after the beginning of the next crop year, mentioned by Dr. Kaissouni, was not a complete answer to the problem since an overshipment under P.L. 480 might simply result in accumulation of stocks pending expiration of the export ban. The list of other commodities was already under study but would be given particularly careful and prompt attention in view of Dr. Kaissouni’s observations regarding the importance of timing with respect to maize. Inclusion of tallow will be dependent on the supply situation, Mr. Dillon noted, explaining that the shipment of tallow to the UAR in June, 1959 had been financed with Special Assistance, not P.L. 480 funds.

3. Use of P.L 480 104(g) Local Currency Loan Funds:—Dr. Kaissouni recalled the substantial quantities of local currency accumulating from P.L. 480 sales agreements and for which loan agreements had been signed. He observed that at one time the UAR had thought to sterilize these funds, particularly since as a practical matter the equivalent Egyptian pound resources could be had by the government through use of treasury bills. After considerable reflection, however, the decision in principle had been made to utilize the P.L. 480 104(g) funds since this would contribute to the atmosphere of cooperation associated with the P.L. 480 operation. The subject had been discussed with the Embassy, and the UAR had planned to utilize substantial quantities of these funds in the development project budget in the fiscal year which began July 1. Dr. Kaissouni smiled and commented that one of the projects in this budget was the Aswan Dam and suggested that the U.S. might wish to specify that the U.S. local currency funds were being associated with other projects.

The Under Secretary said that he believed ICA would be prepared to agree, although ICA’s terms of reference might require them to earmark utilization of these funds. This would not necessarily be in extensive detail such as specifying a road from one spot to another. The earmarking might be for road building in more general terms. This would be given as prompt attention as possible, however.

4. Technical Assistance including Expansion of EARIS:—Dr. Kaissouni said he hoped that the U.S. could give favorable consideration to a number of technical cooperation project proposals which had been discussed with the Embassy in Cairo, including expansion of the EARIS operation. He expressed particular interest in the problems of improved systems for irrigation which might conserve water and referred to a sprinkler system of irrigation which had been under discussion with an American group.

The Under Secretary said he thought the technical cooperation program was mainly a question of working out details although he had not followed too closely the specific questions that were being considered. He said that appropriations in general permitted a level of technical cooperation on a world-wide basis at about the level of the previous year, but that this did not necessarily mean that expansion of a program in any one country could not be considered if worthwhile projects were available.

1. Source: Department of State, Central Files, 786B.5–MSP/9–2859. Confidential. Drafted by Duncan. Two other memoranda cover other parts of this conversation. In them, Dillon informed Kaissouni of the U.S. position on the IBRD loan and discussed Soviet bloc resale of Egyptian cotton. (Ibid., 986B.7301/9–2859 and 440.86B9/9–2859)
2. A copy of this list is attached to a memorandum of conversation between Dillon and Kamel on September 24. (Ibid., 786B.5–MSP/9–2459)
3. See footnote 3, Document 239.
4. The list referred to in footnote 2 above.