348. Letter From Foreign Secretary Lloyd to Secretary of State Dulles1
My Dear Foster: May I begin by saying how much I have appreciated your steady support in the Security Council proceedings. I feel that on balance we have come out of them well. Despite the veto, we have the moral support of all but the two Communist members of the Council for the affirmation that the 18 Power proposals conform to the agreed requirements, and for the view that it is now for the Egyptians to produce comprehensive and precise proposals. We have the same authority for the recognition of SCUA and the acknowledgment of its right to receive dues. At the same time we have avoided the risk we admittedly ran in going to the Council, namely that we might be faced with a demand for the reference of the issue to some wider negotiating committee or some process of mediation.
In this context your brief statement late on Saturday night,2 to the effect that the Secretary-General still had authority to suggest further informal talks, was helpful. For my part, I am certainly willing to continue for a limited time the effort to find a basis for negotiation with Egypt.
But if we are to have any prospect of arriving at a settlement by negotiation, we must have at our disposal some means of pressure as a counterpoise to Egypt’s physical possession of the Canal. Unless we can create a reasonable equilibrium of bargaining power, I do not see what incentive Nasser will have to make any substantial concessions. And of course such concessions are essential to agreement.
This brings me to SCUA, which seems to me to offer the best means of providing us with the necessary bargaining power. And here I must say at once that I have been deeply disappointed to find how far apart our conceptions of the purpose of the Users’ Association now are.
I have looked again at the documents. I think you will agree that the original idea was that SCUA should organise itself to play a practical part in the transit of shipping through the Canal, by employing a body of pilots and through them cooperating with the shore services of the Egyptian Canal Authority. On that assumption, [Page 739] the Association would have spent on its own activities an appreciable part of the dues received, and would have offered payment to Egypt for her contribution to the handling of Canal traffic.
For various reasons this conception of SCUA has had to be abandoned. It is not now conceived as an organization for operating, or playing a large part in operating, the Canal. In these circumstances I think we must seek guidance from the Declaration adopted in London on September 21.3 In the course of its definition of the purposes of SCUA, this document states (Article II 4):
“To receive, hold and disburse the revenues accruing from dues and other sums which any user of the Canal may pay to SCUA, without prejudice to existing rights, pending a final settlement”.
There is here no definition of the proportions in which revenue should be “held” or “disbursed”. But there are two considerations which seem to me relevant to a decision on this point. In the first place we for our part do not admit Egypt’s right to the Canal dues from July 26 onwards. We have not admitted the validity of the act of nationalisation, and in our view a decision as to the title to dues between July 26, 1956, and the date of the final settlement is a matter for future determination. We have already told the Suez Canal Company that in our opinion their request to be paid a proportion of these dues by SCUA cannot be accepted because it would prejudice the final settlement. And we must, it seems to me, take the same attitude towards any proposal that the bulk of the money should not be handed over to Egypt.
But the more important consideration, to which I return, is that SCUA was intended to strengthen our hand, not to weaken it. If we now decide to pay our dues to SCUA, only to see them passed on to Egypt, Nasser will be getting very much more money from the Canal than he is getting now, and our negotiating position will be much weakened. If I understood you correctly at our private talk early on Sunday morning,4 it is your feeling that approximately 90% of the dues collected by SCUA should be offered to the Egyptian Canal Authority as payment for the services it renders. If we all agreed on this basis to pay our dues to SCUA, the effect would be that Nasser, while losing one-tenth of the 3% of Canal dues paid by American flag shipping, would at the same time gain nine-tenths of the 60% of Canal dues now denied to him by the ships of Britain, France and others who have followed our lead. This would be an altogether unacceptable result, and I cannot believe that it is what you really intend.
[Page 740]We are both very conscious of the fact that this is a testing time for Anglo-American relations. I have done my utmost to prevent exaggeration of our differences of approach to the Suez Canal problem in recent weeks, and have emphasised the debt that we owe to your leadership. But we must face the fact that revelation of so grave a divergence between us on the purposes of SCUA would have serious repercussions in Britain.
I do rely on your statesmanship to resolve this difficulty before it becomes a serious factor in our relations. I am afraid that, if we cannot reach agreement, SCUA will prove to have been stillborn, and the prospects of a peaceful settlement with Egypt will be gravely diminished.
Yours ever,
- Source: Eisenhower Library, Dulles Papers, Misc. Papers—U.K. (Suez Crisis). a notation on the source text by Bernau reads: “Sec saw”. Transmitted to London in telegram 2785, October 17, which indicates that this letter crossed Dulles’ letter to Lloyd, supra. (Department of State, Central Files, 974.7301/10–1756)↩
- For text of Dulles’ closing statement to the Security Council on October 13, see Department of State Bulletin, October 22, 1956, pp. 615–617.↩
- For text, see Document 251.↩
- See footnote 2, supra.↩