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

253. Memorandum of a Conversation, Department of State, Washington, December 21, 1959¹

Washington, December 21, 1959

SUBJECT

• Israel Transit Problem and IBRD Loan for Suez Canal

PARTICIPANTS

• The Acting Secretary
• IO—Francis O. Wilcox
• NEA—G. Lewis Jones
• NE—Armin H. Meyer
• Ambassador Avraham Harman, Israel
• Embassy
• Mr. Moshe Erell, Israel Embassy

Ambassador Harman said the purpose of his urgent visit was to inquire as to the instructions being given to the U.S. Director concerning the consideration being given by the IBRD that afternoon to the question of a loan to the UAR for improvement of the Suez Canal. Foreign Minister Meir had sent a message concerning this matter to the Secretary in Paris² and the Israel Government was now anxious to know the answer.

In reply, the Acting Secretary referred to our gratification that the IBRD has so far managed to keep itself out of politics and in a strictly economic position. The Bank management, he said, feels strongly that for the IBRD to postpone action on the Suez loan at this stage after the application has been approved on economic and technical grounds would be a bad precedent. Accordingly, the Bank is proceeding to present the subject at its afternoon meeting. Under these circumstances, the Acting Secretary said, the U.S. Government sees no alternative but to go ahead and approve the loan, even though we regret very much the incident involving the Greek vessel Astypalea³ and other Israeli shipping difficulties at Suez. The Acting Secretary emphasized that the principle of free transit of the Canal is of vital concern to the U.S. Government as the Secretary had reiterated in his public address at the General Assembly.⁴ The U.S. will continue to make these views known whenever appropriate. Noting our belief that using the Bank as a political instrumentality would not be effective in achieving the objective we all seek, and would meanwhile damage the position of the Bank in helping to ameliorate this and other problems, the Acting Secretary said that the U.S. Director would concur in the Suez loan, making an appropriate statement at the meeting.

Asserting that a commercial banking institution would not grant a mortgage under questionable circumstances such as a conflict concerning the particular property involved, Ambassador Harman said his government felt it would be only prudent for a thorough investigation to be made concerning the Suez loan before approval were to be given. It was public knowledge, he said, that the Secretary General is presently engaged in clarifying the Astypalea incident. Furthermore, the Secretary General has informed the Government of Israel that the IBRD is fully cognizant of his contact with the Suez transit problem and his current negotiations. Accordingly, the Bank should seek a report from the Secretary General as guidance to its directors. In fact, the Government of Israel has made an official request to the director who represents Israel to insist upon such a report.

Ambassador Harman went on to observe that the present predicament was not one of Israel’s choosing. With specific reference to the Astypalea affair, Israel had given ample notice to the Secretary General concerning this vessel’s transit of the Suez. Israel had scrupulously avoided publicity. There had been no apparent objection registered by the UAR authorities. When the story leaked, however, the source was clearly Egyptian.

The Acting Secretary said the Astypalea affair, the importance of which might be debatable, should not be considered a closed incident. To the best of our knowledge the UAR authorities had not yet replied to Secretary General Hammarskjold. Thus the possibility still exists that the ship might be released. Once a reply has been received by the Secretary General a better judgment can be formed.

Ambassador Harman asserted that this was a most unique situation. Since last Friday, the Secretary General had communicated three requests to the Egyptians. The fact that they had not replied was unpardonable. He recalled that there had been weeks and months of negotiations after which the Secretary General had given the Israelis specific advice. The central point, therefore, was that if the UAR authorities behaved as they did without the courtesy of a reply to the Secretary General what would be the implication of proceeding with the approval of the loan as if nothing had happened. To Israel, this would be an act on the part of the IBRD of the highest political order.

Noting that the Bank does not accept this conclusion at all, the Acting Secretary stated that in the Bank’s view it would only be political if the loan action were postponed. The UAR authorities, the Acting Secretary said, must be aware of the Bank discussion and perhaps tend to draw the conclusion that an attempt is being made to assert political pressure through the IBRD. Under these circumstances, they might be finding it difficult to answer the Secretary General objectively. We regret that the UAR has not answered, the Acting Secretary said, but the foregoing might be a part of the reason. The Acting Secretary reiterated that we regret the stoppage of the Astypalea very much for our understanding of the situation was quite similar to that of the Ambassador’s. We consider it a very serious matter and assume that the Secretary General will proceed to address his attentions to it. It is our belief, the Acting Secretary said, that holding up the IBRD loan would not facilitate the release of the Israeli cargo but would rather have the contrary effect.

In response to a further inquiry concerning the U.S. views, the Acting Secretary stated that we have Israel’s interest very much at heart as well as our own and that of the World Bank. While we do not wish to see the Bank’s reputation damaged, we are also interested in Israel’s rights. The Acting Secretary reiterated our conviction that one way not to gain Israel’s rights for some time to come is to hold up the loan. It is safer in our opinion, he said, to preserve such influence as the Bank and the Secretary General may have to press for a prompt and favorable solution to the transit problem.

Noting that Israel does not object to the Suez loan at a later date, Ambassador Harman said that Israel does not wish to see the Suez used as an instrument of discrimination against Israel for it could subsequently be used against other countries for political purposes. He stressed that an assumption had been reached that the transit problem was being solved. IBRD President Black had personally expressed his satisfaction at the way Israel had behaved. Now it was clear, according to the Ambassador, that the problem was not settled at all and that the assumptions on which the item had been placed on the IBRD agenda were not valid at all. There had been a complete reversal since the Astypalea incident.

The Acting Secretary expressed the view that it was correct to assume that an effective basis for resolving the transit question had been generally agreed upon. He felt that the stopping of the Astypalea might be a set-back but it did not mean that the whole concept was “out the window”. He added that he felt it was not in Israel’s interest to press for a postponement of the Suez loan as hard as it has been doing.

Ambassador Harman observed that any prospect for resolving the Suez transit problem as previously planned was now at best a vague hope. Even UN officials were now speaking in terms of “only a possibility” rather than a “probability”. He stressed his conviction that the IBRD meeting approving the Suez loan would destroy any chance of converting the possibility to a probability.

The Acting Secretary replied that the U.S. judgment of the results of the IBRD action was directly contrary to this Israeli view. The U.S., he said, felt that postponement of the loan by the Bank would insure the failure of the Secretary General’s attempt to obtain an effective basis whereas approval of the loan would enable us all to continue our efforts with hope for success. The Acting Secretary said it was clear that Israel and the U.S. were in full agreement on the objective and our only difference was on the best tactics to achieve this objective.

In response to the Ambassador’s inquiry as to whether the U.S. would “pursue” the transit question through other channels, the Acting Secretary said the U.S. would make every effort we can which would be effective. He noted that the matter is in the hands of the Secretary General and that we would not wish to harm what Mr. Hammarskjold is doing. We would be guided by the judgment of the Secretary General, whose prestige is deeply involved in this matter, as to when and whether the U.S. Government might be helpful.

Before departing, Ambassador Harman asked whether the U.S. thesis that development projects be considered on their economic merits alone might apply also to other issues (obviously referring to the question of U.S. help to Israel in its water development program). The Acting Secretary said that he had been talking about the World Bank and that the two subjects were different in character. Nevertheless, as soon as he would have the opportunity, following his recent travels, to familiarize himself with recent developments concerning Israel’s water problem he would be pleased to talk further with the Ambassador concerning this subject.⁵

1. Source: Department of State, Central Files, 986B.7301/12–2159. Confidential. Drafted by Meyer, initialed by Jones, and approved in U on December 30. A briefing paper for the conversation is ibid.,NEA Files: Lot 61 D 43, Tel Aviv. A summary of the conversation was transmitted to Cairo in telegram 2510, December 21. (Ibid.)
2. Herter was in Paris for the NATO Ministerial and Heads of Government meetings, December 15–22. Although the specific message has not been identified, on December 19 and 20, Ambassador Reid reported that Meir requested Herter be apprised of her concern that the IBRD loan be approved at this time. (Telegrams 604 and 605 from Tel Aviv; ibid., Central Files, 986B.7301/12–1959 and 986B.7301/12–2059, respectively)
3. On December 19, Ambassador Harman had discussed the Astypalea with Jones, Meyer, and Wahl along these same lines. A memorandum of their conversation is ibid.,NEA Files: Lot 61 D 124, Middle East–Suez Canal.
4. For text of Herter’s address to the General Assembly, September 17, see U.N. Doc. A/PV.797, pp. 9–14.
5. Later in the day, the International Bank for Reconstruction and Development unanimously approved the Suez Canal loan.