367. Telegram From the Embassy in Lebanon to the Department of State ¹1. Source: Department of State, Central Files, 783A.5–MSP/12–258. Confidential; Priority.

Beirut, December 2, 1958—6 p.m.

2535. I discussed Deptel 1990²2. See footnote 6, supra. in great detail last night with President Chehab and this morning with Karami. I likewise outlined main points US offer to Foreign Minister Oueini today. During interview with Karami which lasted hour and a half he was accompanied (at my private suggestion) by Raymond Edde, while I had with me acting USOM Director Lippincott. To make certain Karami understood everything that was said, conversation was translated from English into Arabic by Embassy employee Haddad.

Chehab evinced utmost gratification at readiness of US to offer $10, 000,000 as one-time grant operation and concurred that with other elements of US aid program there should be no requirement for any repetition of such a cash grant. He agreed that Lebanon must find sufficient civic and administrative discipline to live within its own resources and to go its own way. I found a similar but more attenuated concurrence in Karami and Edde who said that, although they agreed in principle that Lebanon should meet its own fiscal requirements, they could not say with certainty that GOL would not in future years require some form of external assistance. However, their eyes were clearly on finding means to finance larger budgets and to this I rejoined that until Lebanese imposed same sacrifice on their citizens as did US in respect of income tax I, for one, could not go along with notion that ever increasing budgets would somehow be underwritten by a complacent Uncle Sam.

We found great confusion in mind of Karami as to nature of $12, 000,000 DLF financing authorized Deptel 4057.³3. Dated April 21. (Department of State, Central Files, 783A.5–MSP/4–1158) In fact, no one in present Government ever heard of oral presentation made to Malik last April (Embtel 3574).⁴4. In telegram 3574 from Beirut, April 26, McClintock reported that he had discussed with Malik the DLF financing authorized in telegram 4057. (Ibid., 783A.5–MSP/4–2658) When I queried Karami as to his press statement November 19 (Embtel 2406),⁵5. Dated November 19. (Ibid., 683A.86B/11–1958) he explained that during Parliamentary debate on grant of emergency powers to Government, he had been pressed to give assurances that these powers would not include authorization to cabinet to contract debts on behalf of Lebanon. It was to this parliamentary restriction that his press conference statement had been addressed. However, he would welcome in principle utilization of DLF financing in private sector provided applications for loans could be processed expeditiously and if rate of interest was not too high. (We have feeling, however, that in a hard currency country like Lebanon there will be less enthusiasm than in soft currency countries for loans to private sector at interest rates of between four and one half to five and one half percent.) It was clear that Prime Minister was apprehensive lest announcement of availability of $12, 000,000 of DLF funds might unleash a clamor from undisciplined applicants which might have unfavorable repercussions for his Government in event many claimants for easy loans would of necessity be turned down. Karami asked if in screening out applications for loans we would object to an informal working group made up of representatives of Lebanese interested Ministries and of USOM. I replied I had no objection as, in fact, I had told Chehab last night I did not wish US to be in a position of being deluged with requests for soft loans which it was not purpose of DLF to finance and would in consequence welcome an indigenous shock absorber between USOM and voracious applicants for easy loan financing.

Karami and Edde fully understood need for cleaning up arrears of pipeline and will appoint experts to consult with USOM on details.

Re final paragraph Deptel 1990, Karami was in full agreement with suggested treatment. He volunteered that he would like to make a statement at his weekly press conference tomorrow. I had anticipated this and had drafted as a talking paper a suggested communiqué which he might wish to issue. Karami thought it would prove a good vehicle for his press conference statement. Text is submitted to Department in Embtel 2534.⁶6. The text of the announcement transmitted in telegram 2534, December 2, indicated that the United States had expressed its readiness to provide substantial aid to Lebanon in the form of a cash grant. (Ibid., 783A.5–MSP/12–258) If Department wishes to make changes, please instruct Niact in order that I may pass on our views to Karami before his press conference at 1100 hours tomorrow. Following Karami’s statement to press, we suggest in next few days I hand him check for $10, 000,000 with suitable publicity and that Department or USIA confirm payment, taking into account whatever ad lib statements Karami might make at press conference. I do not anticipate, however, he will stray far from text of suggested communiqué, although he may prefer to delete reference to DLF loans.

McClintock