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

420. Telegram From the Department of State to the Embassy in Tunisia¹

Washington, April 5, 1960—3:53 p.m.

1281. Joint State–Defense Message. Deptel 1277.² This message outlines terms on which U.S. prepared furnish agreed items of equipment and training within framework Team’s recommendations. Embassy’s and CINCEUR’s comments invited:

A. Department recognizes advantages making clear to Tunisians that we strongly favor adoption three-year phased program which Team recommended. At same time we cannot offer terms with regard payment or prices beyond current year. However, Embassy may in its discretion provide assurances to Tunisians as outlined below with respect financing program as a whole. In its discussions Embassy should avoid any form of commitment beyond that explicitly set forth herein.

1. U.S. is willing provide entire multiyear program on a cash dollar sales basis, under usual conditions U.S. law. This would mean that Tunisia can acquire from U.S. such matériel as it needs at favorable prices, as established by U.S. military services on basis age and condition, with price advantages accruing from inclusion in large-scale procurements and without any prorated surcharge for design, development, etc. These prices would, however, be set on same basis as for other countries eligible to make such purchases.

2. Since funds are appropriated on one-year basis and because of other considerations (of which Embassy is aware), not possible commit ourselves provide any portion program beyond the first year except on straight cash dollar sales basis per “1” above. However, with respect to first year portion, we willing provide first year training at no cost to Tunisia and first year increment matériel on local currency credit basis and at a price reduced sharply even from favorable cash price at which Embassy would be authorized offer remainder of multiyear program under paragraph “1” above.

3. Embassy could in addition, if circumstances warrant, affirm U.S. interest in assisting Tunisia carry out Team’s recommendations and could state its expectation that, when question is reviewed each year, U.S. would be disposed make it possible for Tunisia obtain on more favorable terms than straight cash purchase for dollars equipment needed implement Team’s recommendations.

B. A total of $3.5 million is available from FY 60 funds pending agreement as to items and quantities which will be supplied to Tunisia under FY 1960 portion of program, representing estimated cost of equipment, handling charges and training recommended by Team as first increment of three-year program. To permit obligation procedures be completed here it imperative that GOT agreement to definitive FY 60 program be received prior June 1. Embassy would therefore seek early agreement on first year increment to be furnished. Modifications should be avoided or reduced to an absolute minimum. If after reviewing report GOT indicates desire purchase first year portion of three-year program as listed in report or with only minor changes, Embassy should request from Washington cost and availability data which will be furnished as rapidly as possible but without breakdown of cost of individual items. Embassy would then be able negotiate necessary sales agreement at an over-all price of not less than approximately 50 per cent of over-all cost figure in return for local currency payable over five years with interest (not to exceed 4 per cent) or with waiver of interest. In this negotiation Embassy would seek to obtain maximum repayment terms consistent with our over-all objectives in Tunisia. The Tunisian Government should understand that the conditions set forth in the exchange of notes of November, 1957³ will apply to this transaction.

Embassy will note that it will be able to agree after negotiation on terms which represent a substantial price concession to Tunisia. President Bourguiba’s proposal with regard to waiving of payment sums due for previous transactions has been carefully studied. These sales were made under provisions requiring deposits of proceeds to miscellaneous receipts of U.S. Treasury from which they could not be withdrawn without charge to appropriations. Even if it were desirable to seek retroactively a Presidential determination permitting renegotiation of sales contracts or to waive debts owing to USG there is considerable doubt as to legality such measures. However, it would seem possible to depict concessions we are prepared to make on present transaction as being responsive to President Bourguiba’s request. Defense records show total sales of $3,390,274; billings in Oct. 1958 of 62,580 and in Feb. 1960 of 522,819.02; no payments.

Herter

1. Source: Department of State, Central Files, 772.5–MSP/4–560. Secret. Drafted by Chase on March 31; cleared by Porter, Wilson, and the Department of Defense; and approved and signed for Herter by Satterthwaite. Also sent to CINCEUR. The source text incorporated many of the measures recommended in the Annex to Dillon’s memorandum to Eisenhower; see footnote 4, supra.
2. Telegram 1277, April 4, authorized the Embassy to give the Tunisian Government French translations of sections of the survey team report. (Department of State, Central Files, 772.5/4–460) The report has not been found.
3. Texts of the notes are in despatch 241 from Tunis, November 7, 1957. (Ibid., 772.56/11–757)