Memorandum of Conversation with Foreign Minister Moshe Sharett of Israel, Ambassador Abba Eban of Israel, and
Fred E. Waller, June 18, 1952. Secretary of State File . Acheson Papers
DEPARTMENT OF STATE Memorandum of Conversation
DATE: June 18, 1952
SUBJECT: Request of Israel Foreign Minister Moshe Sharett for Assistance in
Overcoming Israel's Financial Difficulties.
PARTICIPANTS: The Secretary Mr. Moshe Sharett, Israel Foreign Minister Abba Eban,
Israel Ambassador
Mr. Waller - NE
The Israel Foreign Minister, Mr. Sharett, accompanied by the Israel Ambassador, Mr.
Eban, called at their request on the Secretary at 12:15 today. After greeting the Secretary
and a short exchange of pleasantries the Foreign Minister expressed, on behalf of his
government, appreciation for the assistance given by the Secretary and the US
Government toward a solution of Israel's compensation claim against Germany and in
connection with Israel's financial emergency of late April and early May. He continued by
stating that the purpose of his present visit was to inform the Secretary of Israel's
present financial difficulties and to request assistance in solving them.
The Foreign Minister recited at some length the efforts of his government to build Israel
into a democratic country patterned after the US and efforts to rehabilitate a population
rescued from persecution in many parts of the world. He also mentioned Israel's desire
to build up its industry, its agriculture, to develop its resources, to search for water, to
explore areas heretofore considered waste land, and similar ventures which require time
and money. It is Israel's intention, the Foreign Minister stated, to make the country
self-supporting, and it is hoped to bring this about by a substantial increase in exports of
finished products as a result of industrial expansion and to export raw materials either in
a natural or processed state.
Mr. Sharett said that Israel must find a way to bridge the gap between her imports and
exports or, in other words, between income and expenditures. He believed that a solution
to the problem could now be foreseen, although it was a question of years rather than
weeks or months. One aspect of the problem, however, appeared to be incapable of
solution by Israel alone and it was in connection with this problem that he wished the
assistance of the US Government. The problem is to find a way to refund Israel's
short-term debts, which, he stated, amount to about $124 million and which
are payable at various times and in various amounts during the next twelve months. His
advisers offered two possible solutions; namely, for the Export-Import Bank to
consolidate the short-term debts and to arrange for the total sum to be repaid over a
longer period of time; or by the stabilization of Israel's currency which, the Foreign
Minister said, was notoriously weak. This would require the use of the Stabilization Fund
of the US Treasury. Mr. Sharett said that he understood there have been precedents for
each of these possible solutions and that both were constitutionally permissible. So far
as he was personally concerned, the Foreign Minister continued, he would prefer the
stabilization fund procedure because, he understood, it was a secret operation and
hence would not give rise to any publicity.
Mr. Sharett said that he was of the opinion that it was in the long-range political interest
of the US to assist Israel in finding a solution of the financial difficulties but he
recognized that on a short-term basis public knowledge of such an operation might
result in some criticism, particularly from other Near East countries. While he felt that
this was an important consideration, it should not be considered decisive because,
although the Arab states would undoubtedly like to see Israel in difficulties, they are
losing as much economically as Israel by refusing to come to terms for peace. He also
recognized that the Arab states are in a better position than Israel to afford losses.
The Secretary replied by stating that he has known of Israel's difficult financial situation;
he has recognized the importance of finding a solution; and that he would look into the
matter. The Secretary said that Mr. Mikesell is being sent to Israel to try to find an
answer. What must be determined is whether Israel's financial policy will be effective or
whether Israel will continue policies which would recreate the present situation. The
Secretary continued by saying that he would have the matter gone into urgently, but that
he understood it would not be permissible to use Mutual Security funds. He said he had
not heard of the Stabilization Fund possibility and had assumed the only possibility was
an Export-Import Bank transaction.
The Foreign Minister said that Israel had followed very carefully the hearings on the
Mutual Security Bill and was well aware of the sentiment against using MSA funds for
page 2 / 3Harry S. Truman Library & Museum Acheson Memoranda of Conversation
other than program purposes. Israel had always recognized the wisdom of this and had
used MSA funds in the past to pay for current imports only after other possibilities had
been exhausted. Israel also realized that it was in its own interest for the program to
develop according to plan. It was therefore to find a solution outside the MSA that he had
presented the matter to the Secretary and was exploring possibilities with other officials
of the Government. He expects to see Secretary of the Treasury Snyder tomorrow to
obtain his advice about the possibilities of using the Stabilization Fund procedure.
In conclusion, Foreign Minister Sharett said that he fully realized the Secretary had not
committed himself in any way but that he nevertheless felt encouraged by the
Secretary's remarks.
