Foreign Relations of the United States, 1961–1963, Volume XVIII, Near East, 1962–1963

321. Memorandum From the Department of State Executive Secretary (Read) to the President’s Special Assistant for National Security Affairs (Bundy)⁰

Washington, September 6, 1963.

SUBJECT

• The Next Stage in the US-UAR Relationship

We expect the UAR to take advantage of the presence of Minister of Planning Kaissouni in Washington for the IMF and IBRD meetings to pursue current UAR requests for economic aid. The United States reply should be framed in the light of the present status of the overall US-UAR relationship.

A topical survey of how that relationship stands today is enclosed. Some of the topics in this enclosure might be used as a basis for discussion in the meeting of Ambassador Badeau and Assistant Secretary Talbot with the President at 4:00 P.M., September 10.¹

Marion A. Baldwin²

Enclosure³

THE US-UAR RELATIONSHIP—SEPTEMBER, 1963

1. Basis

Broad spectrum of common objectives: Anti-communism; continued flow of Arab oil to the West; expansion of trade between UAR and West; economic development; UARG stability (Nasser regime at least as good for USG as any likely successor); Western access to Near East sea and air routes (Suez Canal and tourism are big foreign exchange earners for UARG); cultural exchange (UARG appreciates advantages of Western education); Arab nationalism (regarded as best defense against communist penetration); UAR involvement in Free World system; constructive US-UAR dialogue.

2. Areas of Disagreement

a. USG and UARG have reached temporary working compromises on:

1) Israel—UARG preserves state of war, including boycott and Suez blockade. However, in response to USG representations, and at some cost to its prestige, UARG has eschewed extreme propaganda, has tolerated Israeli use of Tiran Straits, and has kept border quiet.

2) Cold War—USG has accepted UARG neutrality in principle. UARG has assumed more neutral stance in practice. It conducted constructive economic conference in Cairo, abandoned pro-Soviet stands on Cuba and Congo, favored Indian side against China. (UARG will continue to take actions we may construe as unneutral, both to strengthen its hand against Israel and to remind USG of countervailing force.)

b. Following areas of disagreement are now uppermost in US-UAR dialogue:

1) Pan-Arab Militancy—UAR revolutionary activity against rival Arab regimes conflicts with USG desire for orderly political change.

2) Payments Problem—Because of extreme statism, top-heavy development and military expenditures, and over-ambitious consumer-goods programs, UARG does not make best possible use of own resources or foreign aid.

3) Arms Race—UAR-Israeli weapons competition threatens peace of area.

3. US Aid

a. Rationale—US-UAR economic cooperation advances common objectives and is essential basis for maintaining our capacity for diplomatic action.

b. Current Levels—FY 1963: Technical Assistance—$2.3 million; Supporting Assistance Loan—$10 million; Development Loans—$36.3 million; PL-480, Title I—$105.5 million; PL-480, Title III—$20 million; Ex-Im Bank—$12.5 million.

c. UAR Requests for 1964—Faced with impending payments gap, UARG has requested $30 million commodity loan.

d. US Response for 1964

1) Already Projected—Multi-year PL-480 Agreement commits USG to Title I sales of approximately $150 million in each of FY-64 and FY-65. A planning figure of $15–25 million for Development Loans was presented to Congress for FY-64. Technical Assistance and PL-480, Title III are projected roughly at FY-63 rates.

2) Pre-conditions—USG should make clear in non-provocative and non-censorious way that it must condition favorable response on satisfactory UAR economic performance: UAR should respect US commercial interests and claims and reduce unproductive drains on foreign exchange (Yemen).

3) Commodity Loan—Department preparing recommendations for at least partial compliance with $30 million request. Turn-down would jeopardize present relationship. These proposals not yet presented for AID consideration.

4) IBRD—Department recommends USG support IBRD as major source UAR development finance.

4. USG Political Objectives

Attachment of explicit political conditions to US aid program would defeat its purpose. However, present US-UAR relationship is based on compromise.

a. UARG should be expected to demonstrate receptivity to USG representations on following outstanding issues:

1) Cease air attacks on Saudi territory.

2) Accelerate disengagement from Yemen.

3) Encourage YARG to keep Aden border quiet.

4) Help expand base of YARG.

5) Moderate propaganda against Saudi Arabia and other area states.

6) Take constructive steps prevent area arms escalation and curtail ventures in missilry and other sophisticated military programs that drain resources needed for economic development and give UAR unfavorable image.

b. For its part, USG might:

1) Continue press SAG to cut off aid to Yemen royalists.

2) Work for eventual UK recognition of YARG.

3) Back UN effort to strengthen UNTSO.

4) Continue correspondence between the President and Nasser. Last communication in this series was message from President. Ambassador Badeau might carry back to Cairo oral or written message from the President about Yemen and arms limitation.

5) Let UARG know that, if Nasser should attend GA, President would be pleased to see him in Washington or in New York for an informal working meeting.

0. Source: Department of State, Central Files, POL UAR-US. Secret. The covering memorandum and its enclosure were drafted by Jones and cleared by Davies, Badeau, Williams (AID), and Jernegan.
1. No memorandum of the conversation has been found. A September 10 memorandum from Komer to Bundy reads as follows: ”FYI, when Badeau saw JFK this afternoon, we cleared following items of business: 1. A soft negative to impending UAR request for $30 million B/P loan. We won’t say ‘nem nem soha’ but indicate domestic traffic just won’t bear any more at this point; besides we can’t do anything until after AID bill through. 2. JFK approved letter for Badeau to give Nasser [see Document 324] on what I expect will be final tailing off of Cane exercise. I don’t really think Nasser will come through, but no harm trying.”
2. Baldwin signed for Read above Read’s typed signature.
3. Secret.