251. Memorandum of a Conversation Between the Secretary of State and the President of the International Bank for Reconstruction and Development (Black), Washington, December 11, 1959, 1 p.m.1
Mr. Black raised a number of points of considerable interest. I had asked him to lunch at the suggestion of Jack McCloy who thought that I could elicit from him some suggestions with respect to Egypt that would be worthwhile. We began by talking about the Aswan Dam and he told me that he had had some interesting conversations with the Germans with respect to the different stages inherent in the building of the Dam.
When this problem was first studied by the Bank, the Bank came to the conclusion that there was no economic justification for the construction of a part of the Dam plus the irrigation works and the power plant but that whoever was committed to the first stages would have to carry it through to the end or else the original investment in a single phase would be useless. He had estimated that the total would cost over a billion dollars. The Russians have, of course, committed themselves to the first phase which includes the building of two coffer dams and a diversionary channel. The amounts involved are about $250 million. Work has begun on these but the Egyptians have no assurance that anything further will be done beyond this point.
Apparently Erhard2 had had some talks with the Egyptians and had given them a completely unjustified assurance that if Germany shared in the second stage costing about $100 million for the building of the low dam, the Western Powers would agree to the completion. Mr. Black tried to disabuse him of this idea [21/2 lines of source text not declassified]. He was very much opposed to trying to impose Western construction on Russian construction [1 line of source text not declassified]. I told him that I agreed with him fully. It was much better for the West not to get involved in the Aswan Dam and to let the Germans work out their own problem by themselves.
I did this on the basis of a second proposal which was put up to Mr. Black, and in which he was very much interested. This had to do with the carrying of water from the Mediterranean to the declivity in the desert in the area of El Alamein. This would involve the digging of a channel about 450 miles along to a point where the land dropped very suddenly some 450 feet. At that point a power station would be built and the engineers who made preliminary surveys claimed the [Page 568] water that would flow into the declivity would not be a problem because it would evaporate as fast as it flowed so that only a salt flat would be left.
Mr. Black told me that the Siemens Company of Germany had made an engineering study of this and that while the Bank would have to make its own study, he felt that possibly this was a project that was well worthwhile. The amount of power which could be produced from this project would be almost as great as that at the Aswan Dam and it could be carried to Cairo and Alexandria over much shorter high tension wires than from Aswan. In addition, the Alamein project could be completed much sooner than the Aswan Dam project and could become a better impact project as far as the Egyptians were concerned than Aswan. However, Mr. Black said he would not give serious consideration to this until the financing of the Suez Canal widening had been completed, which he hoped would be done shortly after the meeting of the Board of Directors on December 21st.
We discussed at some length the difficulties that he was going to encounter and we likewise discussed Israeli objections to financing of the Suez improvements without some assurance by the Egyptians with regard to freedom of transit. However, he was willing to go ahead and take the chance even though he was counting on the banking institutions in the U.S. taking a considerable share of this loan. Incidentally, he mentioned that the loan should be as fine a loan as a bank could ask for; the interest rate would be over 5% and backing for it would be a first lien on all Canal tolls.
Mr. Black discussed at some length our relations with Nasser and his great sensitivity. He mentioned how unfortunate it was the President could not go to Egypt and hoped that it would be possible for me to find some excuse to go. I told him this was very improbable and he then suggested we find some excuse for Secretary Anderson to take a trip to Egypt which he felt would be very reassuring to Nasser in terms of the normalization of our relations.