340. Letter From the Under Secretary of State (Dillon) to the Acting Secretary of Defense (Douglas)1

Dear Jim: Since early 1959 the Libyans have been pressing us for a large annual rental for our military bases in their country. They have also indicated in recent months a desire to review our military jurisdiction and customs exemptions agreements and the operation of our technical and economic assistance programs.2 By insisting on such a review they could hamper seriously our military operations in Libya and damage our position there. However, an agreement on the financial aspects of the base agreement would probably ease Libyan pressures in these other fields.

We have tried to avoid multiyear commitments (beyond that contained in the September 9, 1954 Economic Assistance Agreement) [less than 1 line of source text not declassified] by offering the Libyans greater flexibility in the use of funds within our annually negotiated economic aid levels. We were able to secure a year’s respite with an $8 million cash grant last year and were prepared to offer a cash grant of up to $14 million this year. Unfortunately, it is now clear that this technique will no longer work. The Libyans are insistent on a multiyear commitment and will not agree to continued annual negotiation of cash grants. If we are to retain our Libyan facilities, we see no practicable alternative to giving an additional multiyear commitment. We believe the minimum acceptable to the Libyans would be a five year commitment, reviewable at the end of that period, for an annual cash payment of $8 million, but it may be necessary to go to $15 million. In his letter of August 4, 1959 to Mr. Murphy,3 Secretary McElroy stated that “there is an important peacetime military requirement for the use of Wheelus Air Base facilities for an indefinite period and certainly through the duration of the present base agreement.” I would appreciate having the views of the Department of Defense as to whether, in view of this requirement, our Libyan facilities have a military importance which would justify cash payments of as much as $15 million per year for five years. If it is considered judgment that these facilities do have such value (or some lesser value you may indicate), I will [Page 751] proceed to take the steps required by NSC Action 15504 prior to giving such a forward commitment from Mutual Security Program funds.

If we agree to give such a commitment, I would regard $15 million as the upper limit of United States grant economic assistance to Libya in any year, except for our technical assistance program, and if it became necessary to commit this entire sum as an annual cash grant, I would expect to discontinue our economic assistance program. If the commitment could be held to a level lower than $15 million, I would agree that economic assistance might be provided in an amount equal to the difference.

We would seek to negotiate this commitment as a simple, upward revision in the schedule of payments under paragraph “C” of the Economic Assistance Agreement of September 9, 1954, without using [less than 1 line of source text not declassified] any formula which formally tied the cash grants to our use of Libyan facilities. If it became apparent that no agreement could be reached on this basis, we would consult further with you [1½ lines of source text not declassified].

This has become a matter of urgency. The newly elected Libyan parliament is expected to resume its current session on or before April 1. The first order of business is to be a discussion of the budget, which our Ambassador states will certainly involve a public airing of United States aid to Libya. If we have not been responsive to Libyan demands by that time, we must anticipate that this public airing will include the provisions of the base agreement itself. In view of opposition to the base agreement on the part of many members of the parliament, I believe such a discussion would have a most unfortunate effect on our military operations in Libya. Because of these considerations, I would appreciate having your reply to this letter at the earliest possible date.

With best wishes,

Sincerely yours,

Douglas Dillon 5
  1. Source: Department of State, Central Files, 773.56311/3–2660. Confidential. Drafted by Parker on March 21 and cleared by Satterthwaite.
  2. On January 19, Kubar gave Ambassador Jones a lengthy note outlining these points. Its text was sent to the Department of State in despatch 227 from Benghazi, January 23. (Ibid., 773.5–MSP/1–2360)
  3. Not found.
  4. NSC Action No. 1550, approved by the President on May 8, stipulated that no foreign assistance could be offered without determining whether the aid was in accordance with approved policy, whether Congress had approved or appropriated funds, whether the recipient country could support the programs, and what was the probable duration of the assistance. (Department of State, S/SNSC (Miscellaneous) Files: Lot 66 D 95, Records of Action of the National Security Council)
  5. Printed from a copy that bears this stamped signature.