867N.51/10–1248
Statement To Be Made by the Alternate Department of State Member to the Board of Export-Import Bank With Regard to the Israeli Loan1
On June 2, 1948 the Provisional Government of Israel made a request for an Eximbank loan of $100,000,000. This request was made during the first truce in Palestine, which was of only 30 days duration. The State of Israel had just been established, and its future seemed uncertain.
Since that time a number of changes have taken place in the political, military, and economic situation of Israel.
The second truce of indefinite duration was arranged and has now been in effect since July 18. While the UN observers have reported many violations of the truce on both sides, at present there is little reason to believe that the truce will not continue or be replaced by an armistice under the Bernadotte Plan. The Palestine problem is soon to come up for discussion in the General Assembly of the United Nations on the basis of Count Bernadotte’s final report, which the Department believes constitutes a generally fair basis for the solution of the problem.
In the meantime, the Provisional Government of Israel has taken the following steps:
- a)
- it has taken firm hold of the machinery of government;
- b)
- it has gained and in general maintained effective control of the territory under its occupation.
- c)
- it has also consolidated its internal political position and appears successfully to be bringing under control the dissident elements which previously threatened internal order and security;
- d)
- it is making definite plans for elections for a Constituent Assembly, probably to be held in the latter part of this year.
Attention is drawn to the following statement which appears in the conclusion to Count Bernadotte’s final report to the United Nations “A Jewish state called Israel exists in Palestine and there are no sound reasons for assuming that it will not continue to do so.”
From a military standpoint, there is much less likelihood now than at the time the original request for the loan was made that the Arabs will undertake a large scale military attack against Israel.
The prospects for economic viability and growth of the Israeli [Page 1469] economy are favorably affected by the increased prospects for a lasting political settlement. In addition the improved political conditions may be expected to result in a decrease in the drain of military expenditures on the resources of the Government.
In view of these changes in the situation of Israel the Department of State believes that the Export-Import Bank should give renewed consideration to loan applications from the Provisional Government of Israel. As an initial step in this direction, the Department suggests that the Bank invite the Provisional Government of Israel to submit new loan applications covering some selected specific projects for resettlement and economic development.
- Drafted by Messrs. Satterthwaite, Roswell H. Whitman, Acting Chief of the Division of Investment and Economic Development, and Joseph B. Knapp, Director of the Office of Financial and Development Policy. A memorandum of October 14 by Mr. Whitman states that Mr. Lovett approved the statement and that it was made to the Bank’s Board of Directors on October 13. The Alternate State Department Member was Garrison Norton, Assistant Secretary of State for Transportation and Communications.↩