884A.10/10–2151: Telegram
The Ambassador in Israel (Davis) to the Department of State
priority
370. Pls pass Treasury. ReEmbtel’s 348, Oct 12[13],1 361 Oct 17.2 Met Kaplan in Jerusalem Oct 18 as scheduled accompanied by Bayne, Parker and Jones. Gen fin situation reviewed and position set forth Embtel 348 generally confirmed. Causes present crisis described as fol:
- 1.
- Drought. Effects felt increasingly after May and necessitated higher rate wheat imports. Situation aggravated by six months retardation irrigation program because delays allocations steel pipes to Israel.
- 2.
- Immigration. First six months’ figures greatly exceeded planned program. Increases primarily due to Iraqi and Rumanian inflows.
- 3.
- Receipts. Short fall in expected US private contributions and bond sales reflecting “business slow-down in US particularly soft goods industries”. Cash receipts bonds only $60 million against total pledges $80 million. Kaplan regards this experience as confirming his presently more pessimistic estimate such collection as against other more optimistic estimates. He expects lower rate continue at least Jan.
- 4.
- Short-term debt. Following disappointing receipts (point three above) there was excessive flotation short-term commercial bank credits maturing Oct–Dec without cash or alternative credit availability in sufficient magnitude to cover. Preliminary estimates these maturities for this period is $45 million.
Present crisis developed suddenly by coincidence in late September of all above factors. Kaplan requested immed assistance of approx $15 million from MSP appropriation to meet current problem and said if such assistance cld be immed it wld increase its value many fold.
Bayne, Parker and Jones of Emb will meet with Israeli Treas officials October 21 for analysis technical aspects problem during which appraisal impact of defense expenditures on current emergency will also be reviewed. For this discussion program recommendations will be sent forward.
Israel Govt seems interested that these discussions be conducted primarily through Emb here by Israel Treas officials, altho also stated report was being made in Washington thru Israel Emb (apparently as per Deptel 273 October 16).3 Sherman financial advisor NY Supply Mission here primarily this purpose. Emb comment: I believe inclination to deal through Emb Tel Aviv shld be encouraged and that willingness show greater frankness in discussing over-all position, including defense, can best be encouraged this end where statistical data concentrated. Subject to appraisal technical data now being assembled, I believe it wld be in our interest to attempt meet Kaplan request on theory since we are committed to help this country anyway, it wld be advantageous to help them now when they need it most. It wld mean a great deal to them, and incidentally to us, to save them from eventual embarrassment which cld not help but affect adversely their internatl reputation and position in ME. This is on assumption matter is question of timing and will not represent major change in program.