Foreign Relations of the United States, 1952–1954, General: Economic and Political Matters, Volume I, Part 1

700.5 MSP/12–1852

Memorandum of Conversation, by the Deputy Director of the Office of African Affairs (Cyr)

secret

Washington, December 18, 1952.

• Subject:
• 1954 Budget for Foreign Aid Program

• Participants: S/MSA—Mr. Battle
• NEA—Mr. Gardiner
• AF—Mr. Cyr
• Economic Officers from other NEA Offices

In Mr. Longanecker’s¹ absence, I attended a meeting this noon at which Mr. Battle explained a recent action of the Budget Bureau on the 1954 budget for the foreign aid program.

He informed the group that the budget had been tentatively cut by the Budget Bureau from 7.8 billion to 5.8 billion dollars. This drastic reduction, he said, will require a review of programs with a view to accommodating our thinking to the new figure. But first he wanted to know of any appeals that should be made from the Budget Bureau’s action so that he might draft today a letter from the Secretary transmitting such appeals to the Bureau of the Budget.² In my opinion the discussion produced no basis requiring appeal on the part of AF.

The following facts, however, will be of interest to you. The military section of the proposed budget was most drastically affected. Funds for Arab economic programs were cut from $55 million to $40 million. This is the item which supposedly carries some $2,000,000 of special economic assistance for Libya.

I pointed out to Mr. Gardiner after the meeting that the seriousness of AF’s need for this $2,000,000 will depend upon the progress made in our Libyan base negotiations. I said that if we are successful in obtaining an agreement on the basis of available Air Force funds, the $2,000,000 item in the 1954 budget may be reviewed solely in the light of the merits of the Libyan economic program on which it is based (in which case, I think Libya would stand little chance of getting the $2,000,000). On the other hand, however, if the Libyans insist on a larger amount than the Air Force has made available, the $2,000,000 item in the 1954 budget may become a matter of paramount importance to AF and will, in my opinion, have to be assigned a very high priority in the list of Arab-States requirements. In this latter event, there would be no question of determining the availability of these funds for Libya on the basis of the merits of the economic program outlined in the budget, but rather on political grounds. Mr. Gardiner seemed to accept my thesis and indicated that he will proceed on this basis.

Mr. Battle also reported that the $76 million requested for dependent overseas territories had been reduced to $25 million. The Budget Bureau explained that it had discussed this item with the Ex-Im Bank and that the latter had agreed to adopt a more liberal policy in respect to loans for such areas in the future. The Budget Bureau had, therefore, decided to cut the amount for the dependent overseas territories to $25 million with this understanding. This item, of course, represents the remains of the Bayne Plan. In response to a question as to whether or not NEA should appeal this reduction in the letter which Mr. Battle proposes to draft, I stated that, in view of the Administration’s stricter approach as reflected in the Budget Bureau action on more important items, a State Department appeal on this particular item would not be warranted. Mr. Battle said that he heartily concurred in this view.

Mr. Battle urged strongly that the Budget Bureau action and any of the figures involved therein not be divulged to anyone because of the serious political repercussions that would result, particularly in European countries.³

1. David E. Longanecker of the Office of African Affairs.
2. No such letter has been found.
3. The notes of the Secretary’s Staff Meeting held on Dec. 23, 1952, read in part as follows: “Mr. Battle reported that the Secretary met with the President and other Cabinet members yesterday on the MSP budget. The $5.8 billion Bureau of the Budget marking was raised to $7.6 billion. Mr. Battle explained that he did not have complete details but was informed by the Secretary that the French figure was raised by $200 million; the Indian program raised by $200 million; Pakistan by $50 million; and $100 million was granted to MEDO.” (Secretary’s Staff Meetings, lot 63 D 75, “Documents, Sept–Dec 1952”)