Foreign Relations of the United States, 1977–1980, Volume VIII, Arab-Israeli Dispute, January 1977–August 1978

26. Memorandum of Conversation¹

Washington, April 4, 1977, 1–2:45 p.m.

SUBJECT

• Secretary’s Luncheon with President Sadat

PARTICIPANTS

• Egypt
• President Anwar al-Sadat
• Ismail Fahmy, Deputy Prime Minister and Minister of Foreign Affairs
• Hassan Ahmed Kamel, Chief of the Presidential Cabinet
• Hamid al-Sayeh, Minister of Economy and Economic Cooperation
• Ashraf Ghorbal, Ambassador to the United States
• Dr. Ahmed Esmat Abdel Meguid, Permanent Representative to the United Nations
• Osama al-Baz, Chief of Cabinet to the Deputy Prime Minister and Minister of Foreign Affairs
• Fawzi Abdel Hafez, Private Secretary to the President
• Lieutenant General Mohammed Said al-Mahy, Aide de Camp to the President
• Ahmed Fouad Teymour, Grand Chamberlain
• United States
• The Secretary
• Warren M. Christopher, Deputy Secretary
• Philip C. Habib, Under Secretary for Political Affairs
• Hermann F. Eilts, American Ambassador to Egypt
• Alfred L. Atherton, Jr., Assistant Secretary, NEA
• Harold H. Saunders, Director, INR
• Arthur R. Day, Deputy Assistant Secretary, NEA
• Nicholas A. Veliotes, Deputy Assistant Secretary, NEA (Notetaker)
• Zbigniew Brzezinski, Assistant to the President for National Security Affairs
• William Quandt, Director, Middle Eastern Affairs, NSC

[Omitted here is discussion unrelated to the Middle East.]

The Secretary asked for the President’s evaluation of the situation in Iraq. Sadat replied with the following anecdote: He sent Vice President Mubarek on a tour of Arab countries, including Iraq. He was met at the airport in Baghdad by his Iraqi counterpart (Saddam Hussein, who he described as the real power there). As the two got into the limousine for the ride into town, the Iraqi pulled a pistol out and put it on the seat between them. Sadat thought that story was the best commentary he could make on the internal situation in Iraq. Secretary Vance asked if the Iraqis will try to block a peace settlement. Sadat replied by noting that there were two “elements” in the Arab world which will never accept a settlement: Iraq and Libya. He said that they were not important. He differentiated between the two, noting that the Iraqis were much more rational and are willing to discuss their differences and at least, in effect, agree to disagree. Qadhafi is demented. He repeated that these two countries could not stop a settlement since they “cannot change the balance in the Arab world.” Brzezinski asked for Sadat’s analysis of trends in the PLO, and specifically if the PLO could accept 242 in the near future. Sadat replied that the PLO could attend Geneva with Israel, and make a deal to create a Palestinian state in Gaza and the West Bank. He noted that cooperation with Israel was required under these circumstances, since the two parts of this state would be split by Israel. He added that the PLO has accepted a link with Jordan, and noted that the only difference between Egypt and the PLO on this is his urging the PLO to explicitly accept a link of a Palestinian state with Jordan before negotiations commence at Geneva. (NOTE: There was some confusion as to exactly what Sadat said at this point, and this represents the best reconstruction of several of the U.S. participants.)

Mr. Habib asked if Sadat saw a Palestinian-Jordanian link in the context of single sovereignty. Sadat replied there was no problem there. In response to a question by Brzezinski, Sadat noted that Hussein’s position would not be undermined in the context of a Palestinian-Jordanian entity. In response to a further question, Sadat repeated his previous reply, elaborating it to the extent of noting that the achievement of a Palestinian-Jordanian link in the context of a settlement would be viewed as a “success” for Hussein.

The Secretary asked Ambassador Eilts if he had any comments he wished to make on economic issues which could usefully be discussed. Eilts replied that there is a need for both Egypt and the United States to accelerate the disbursement of U.S. economic assistance. He pointed out that delayed disbursements could risk giving the impression that we were programming more assistance than Egypt could absorb and this could threaten our future assistance levels. He also pointed out that it was politically important for the Egyptian public to be able to perceive as soon as possible significant tangible economic benefits from the close Egyptian alignment with the United States. The Ambassador also noted that President Sadat has recognized the need for more expeditious action on the part of his government and that we had to be equally aware of the need for quicker action on our part. Minister of Economy Sayeh noted that the GOE was establishing a purchasing mission in Washington, in the Embassy, with the aim of working closely with AID to eliminate procurement bottlenecks. Ambassador Eilts noted that there were bureaucratic problems on both sides and vexing, time-consuming problems at the technical levels. We also must be conscious of our problems in this respect. President Sadat stated that he had told the Prime Minister² to create an “authority” with full power to expedite things and cut red tape from the Egyptian side. Ambassador Ghorbal suggested a need for “one man” in the Prime Minister’s office who would be charged with the responsibility for this function. He also took the occasion to point out the desirability of earmarking local currency proceeds from the sale of CIP commodities to finance the domestic costs of both World Bank and AID projects. Sadat commented that the “authority” he had mandated was needed to avoid a repetition of bureaucratic hold-ups, citing the unfortunate bus case, which was pending from early 1976.³ There ensued a brief discussion of this problem, with an emphasis on the need to overcome technical delays in the future.

Secretary Vance asked Mr. Atherton to make sure that we expedited these matters from our side. Mr. Atherton replied that we are working closely with Bob Nooter, who as AID Deputy will be in a position to help in this respect. Mr. Atherton emphasized that we will do the necessary in order to follow closely and expedite matters, with a view to asking the Secretary’s personal intervention when this is necessary. The Secretary underscored that he wanted NEA to be on top of this, and that he wished to become personally involved when necessary to move things along.

In answer to the Secretary’s query about other economic issues, Ambassador Eilts noted that the Investment Board had taken some decisions concerning American firms wishing to invest in Egypt but that there were some problems associated with the boycott. Sadat commented that he was determined to move ahead on these investments, although he recognized that he “could have trouble with the Arabs”. The Ford project⁴ was identified as the one most potentially troublesome in this respect. President Sadat asked Foreign Minister Fahmy to comment. Fahmy pointed out that he saw no problems with approving and implementing the Goodyear and Xerox investment projects, noting that if these could be achieved it would be easier for the GOE to handle Ford. Minister of Economy Sayeh noted that Ford would not agree to invest until it was assured that it could export to the Arab world. Fahmy noted that he had told the Ford Board Chairman that export of Ford products produced in Egypt to the rest of the Arab world was really not the problem of the GOE. This was a commercial problem for Ford to work out with the other countries concerned. Fahmy also noted that Ford lacked adequate financing initially, and this contributed to the delay. According to Fahmy, his position on exports was accepted by Ford.

Ambassador Eilts stated that our concern has been to achieve one major U.S. private investment. With this precedent, others would follow more easily. Fahmy agreed, noting that Ford and Goodyear investments would be real breakthroughs.

At this point Secretary Vance delivered an informal toast to President Sadat. Sadat replied in the same cordial and warm manner.

Secretary Vance asked Sadat’s views on the situation in Yugoslavia after Tito. Sadat replied that it would be very difficult and reviewed the various centrifugal tendencies present in that country. He concluded that he was very worried about Yugoslavian national cohesion after Tito. Mr. Brzezinski suggested that Sadat would like to hear the Secretary’s views on the results of his recent visit to Moscow.⁵ Sadat said he would be very interested. The Secretary summarized our discussions with the Soviets on SALT and the Middle East, noting we had agreed to Gromyko’s proposal that he meet with him in Europe in mid-May to discuss these issues. Sadat agreed with our general policy of engaging the Soviets as co-chairman enough to save their face, while not putting them in the position to play too active or important a role in the real negotiating process. As concerns SALT, Sadat expressed the belief that with time, the Soviets will be willing to negotiate if they know we mean business. In this respect, he recalled the Soviet reaction when he kicked them out of Egypt in mid-1972, and, subsequently, abrogated the treaty of friendship. While the Soviets were railing against Egypt in public, Gromyko told Fahmy in a completely private conversation that if, and when, Egypt was prepared to resurrect the treaty, the USSR was prepared to “give you anything you want in the military and economic field.”

1. Source: Carter Library, National Security Affairs, Staff Material, Middle East File, Trips/Visits File, Box 103, 4/4–5/77 Visit of President Sadat of Egypt: 3/30/77–4/5/77. Secret; Nodis. Drafted by Nicholas Veliotes on April 8 and approved in S on April 18. The meeting took place in the James Madison Room at the Department of State.
2. Mamdouh Salem, Egyptian Prime Minister from April 16, 1975, to October 2, 1978.
3. A reference to Egyptian complaints about buses that the Egyptian Government had purchased from General Motors in early 1976. (Telegram 4539 from Cairo, April 6, 1976; National Archives, RG 59, Central Foreign Policy File, D760129–0643)
4. In February 1976, the Ford Motor Company proposed an approximately $150 million joint venture with the Egyptian Government to build diesel engines and assemble trucks and tractors. (“Ford Motor Suggests $150 Million Project to Be Built in Egypt,” Wall Street Journal, February 4, 1976, p. 7)
5. Vance visited Moscow from March 27 to March 30 to present an arms reduction proposal to Brezhnev and Gromyko. During the trip he also visited Brussels, Bonn, London, and Paris.