Foreign Relations of the United States, 1955–1957, Arab-Israeli Dispute, January 1–July 26, 1956, Volume XV

51. Telegram From the Embassy in Egypt to the Department of State¹

Cairo, January 30, 1956—2 p.m.

1432. Reference Embtel 1424 January 28.² Met again last evening with Black and Trevelyan, Black having had in interim two meetings with Kaissouni and Ibrahim, second of which included also Helmy. More important matters covered were as follows:

At first meeting, Kaissouni urged Bank negotiate now regular loan agreement for entire project. Black replied Bank could not do so until after Nile waters settlement. Kaissouni pointed out such agreement could provide that there would be no disbursement loan funds until after settlement. Black rejected this proviso. Kaissouni then urged that when loan agreement made, it be for lump sum rather than series of partial amounts. Black observed this would cost GOE from $4.5 million to $6 million in commitment fees, but did not reject proposition. Kaissouni apparently not much concerned about additional cost. Black explained alternative (described reftel) to Bank letter of intent (i.e. unilateral declarations of intentions) and left with Kaissouni for study new draft document (memo of understanding)³ incorporating such declarations. Kaissouni raised objections which are to be discussed at next meeting.⁴

At second meeting, Helmy reported engineering changes in design High Dam now under consideration, involving relocation inlets to diversion tunnels. Since change in plans entails delay in letting contract for Dam, he proposed that GOE High Dam authority itself (presumably headed by Helmy) assume responsibility for management and coordination of construction which could then be departmentalized and started on schedule. This approach, in which there would be no place for a consortium, would involve the letting of numerous contracts by the authority. Many could be first on competitive basis, but some might have to be negotiated, “in order to save time or money” or because of unique nature of work involved. Helmy asked if this approach would meet Bank’s condition regarding competitive bidding if negotiated contracts involved only Egyptian funds. Black doubted it would meet condition competitive bidding as now set forth in United States and UK aide-mémoires⁵ and said it might therefore entail reconsideration of whole IBRD–US–UK offer.

In his report to us Black expressed irritation over fact that since his arrival Cairo Kaissouni has raised anew (possibly, for Ibrahim’s benefit) many questions which were thoroughly discussed in Washington and regarding which he thought understanding had been reached. He does not know whether or not Helmy’s new approach is serious proposal but suspects Helmy would like to delay matters in order to reinforce his position that only British-German-French consortium able to start Dam on schedule. Black feels it is already about time for him to see Nasser again since he believes no progress can be made until basic issues resolved. If results of further talk with Nasser inconclusive or if GOE not yet ready with final plans for Dam, he would favor returning to Washington, indicating to Nasser Bank’s continuing interest and availability at any time if and when GOE desires resume discussions.

Black has privately asked me to let word leak to “right people” that talks not going well as he feels this may help sweep away underbrush and strengthen his bargaining position. Have complied.

Hart

1. Source: Department of State, Central Files, 874.2614/1–3056. Secret; Priority. Received at 3:24 p.m. Repeated to Paris, Bonn, and priority to London.
2. Supra.
3. On January 11, Black had prepared, in response to Nasser’s objections to the IBRD letter of intent of December 17, a possible alternative in the form of a draft Memorandum of Understanding. On January 19, officials of the IBRD, after consulting with U.S. and British representatives, approved a revised draft Memorandum of Understanding between the Government of Egypt and the IBRD to govern the financing of the Aswan High Dam. This memorandum set forth the intentions of both parties respecting the project, expressed the willingness of the IBRD to disburse U.S. and British funds, and described the general arrangements for floating the specific loans. (Memorandum from Corbett to Hoover, January 19, with attached revised draft Memorandum of Understanding; Department of State, Central Files, 874.2614/1–1956)
4. See infra.
5. For text of the U.S. aide-mémoire, see telegram 1282, vol. XIV, p. 868. No copy of the British aide-mémoire has been found in Department of State files.