Repeat London K-217; CPDUN K-80; Paris K-123; NATO K-125; New Delhi K-118.

DISCUSSIONS WITH SIR ANTHONY EDEN AND MR. SELWYN LLOYD

The principal discussions with Mr. Eden and Mr. Lloyd took place on Tuesday, February 7. These were supplemented by talks between officials, by a discussion held in the Department with Mr. Lloyd and a press conference held by Sir Anthony Eden.

2. Except where otherwise specifically indicated this telegram is based upon the talks with Mr. St-Laurent and Mr. Pearson where the most important discussions naturally took place. We have already reported to you on the official discussions [on] IndoChina (telegrams Nos. Y-206 of February 7 and Y-[111] of February 8 to London);⁵⁹ the Middle East (telegram No. K-222 of February 7 to Washington); and Atomic Energy (telegram No. E-213 of February 6 to Washington).

3. Sir Anthony Eden referred to fact that Canada and the Commonwealth seemed to get too little credit for their contribution to the Colombo Plan. He suggested that a Commonwealth report might be prepared along the lines of one put out by the International Bank. Mr. Pearson suggested that we might, as the Russians do, emphasize the contribution of certain projects rather than talk less concretely in terms of money value. He suggested that consideration might be given to a proposal whereby all countries involved in aid and assistance projects should clear their activities with the United Nations. This would be purely a clearing process and would not involve interference. The United Nations would issue a report each year and this might show up the small extent of the Soviet contribution. Sir Anthony Eden thought this might be a good idea but seemed more interested in a Commonwealth approach.

4. Mr. Pearson also wondered whether we might not alter the nature of our assistance to take the form of credits as the U.S.S.R. does. This might appeal to a sensitive underdeveloped country more than straight charity. There were, of course, difficulties involved in giving credits at rates different from those offered to other countries. Sir Leslie Rowan said it would be hard for the United Kingdom to adopt such a policy as these countries came to the London markets for loans. However, he knew the Americans were thinking along these lines and he thought it a very good idea if they and the Canadians could do it. Sir Anthony Eden agreed.

5. Mr. Lloyd made a somewhat unenthusiastic remark about SUNFED but the Minister said he thought we should take a fresh look at this project. We shall be communicating with you in greater detail when we have examined the implications of these proposals.

Middle East

6. Sir Anthony Eden began by saying that the situation did not look good. Mr. Lloyd was going to a Baghdad Pact meeting in about a month's time and en route would have a frank talk with Nasser. It was essential to find out what Nasser's intentions were. On the subject of "policing" the area, he had found considerable confusion among the newspapermen. All that the United Kingdom had in mind was a possible increase of the observer force taken from various members of the United Nations, including, of course, Canada. There was no question of Canada being asked to send forces comparable to those in Korea or Indo- China. At his press conference Sir Anthony had reiterated a number of times that it was a matter for the United Nations and General Burns to advise upon.⁶⁰

7. Quite separate from this question was that of guaranteeing the countries against aggression. This was the Tripartite responsibility of the countries which signed the Declaration in 1950 and this responsibility had been reaffirmed in Washington. Mr. Lloyd said that while it was impossible to have anything in the nature of a police force which would prevent aggression, he was interested in the possibilities of increasing the observer force up to one thousand if necessary. He would like, for example, to put two hundred into a certain place where Nasser had indicated the Egyptians might retire and if this proved a success, similar experiments could be tried elsewhere.

8. The situation along the Jordan frontier was better. Real trouble was to be expected shortly on the Syrian frontier if and when the Israelis start to build their canal. Both Sir Anthony and Mr. Lloyd expressed grave concern over the consequences of the steps likely to be taken in this area by the Israelis shortly and considered it important to have their positions cleared in advance. He implied that an ultimatum should be given to the Israelis about the consequences to them if they started any shooting. Mr. Pearson suggested that the Syrians should also be cautioned.

9. On the question of arms shipments, Sir Anthony and Mr. Lloyd clearly indicated their hope that the Americans would stand firm on exports to Israel. They had no intention of changing United Kingdom policies on the subject. Their problem was that if they sent anything at all substantial to the Israelis the Arabs would go straight to the Russians. Nasser had told them that the orders he had already placed with the Communists were on a once-and-for-all basis. Nasser said he was well aware of Communist intentions and did not wish to get tied up with them. There was reason to believe that he had been under pressure from the army to get better equipment and had done so to protect his domestic position. However, it was difficult to be certain how far Nasser could be trusted.

10. Mr. Pearson said that in considering these issues he always went back to the basic principle that we could not expect the Israelis to behave peacefully while they were surrounded by neighbours dedicated to their destruction. While Nasser and others had privately indicated that they did not intend to destroy Israel they had not said so publicly. It would be a great thing if they could be induced to do so. Sir Anthony said that Nasser had gone a long way to give such an assurance in private after his Guildhall speech. He commented also that the longer the Israelis waited to accept compromise proposals the more they would have to concede.

11. In conclusion Mr. Lloyd mentioned that the United States and the United Kingdom representatives in New York were examining a 1950 resolution (this is presumably the Uniting for Peace Resolution) which would let it be known in advance what exactly would be considered aggression. This had been Mr. Dulles' idea.

12. In his talk to departmental officials Mr. Lloyd was at pains to deny (a) that there were divergencies between the United Kingdom and the United States (b) that the Baghdad Pact had prompted Soviet intervention in the Middle East. The United Kingdom had been surprised at the effectiveness with which Egyptian propaganda and Saudi Arabian money had kept Jordan out of the Pact. He thought a salutary lesson had been learned. The Americans and British, including senior officials of the large oil companies, if not their subordinates, were now agreed on the importance of preventing a clash between their interests in the Middle East. He fully agreed with the Alsop brothers' statement that Russia was "feeling for the jugular vein" of the United Kingdom in the area. Loss of Middle East oil would be crippling to the United Kingdom and Western Europe and, by implication, the North Atlantic Alliance.

13. (In our telegram No. K-222 of February 7 we commented on the views expressed by Caccia and Shuckburgh, which were, of course, substantially those of Mr. Lloyd. We shall be communicating to you later certain observations with regard to what appears to be the United Kingdom policy of constraint towards Israel.)

India and the Security Council

14. The agreement reached the previous day was confirmed to the effect that to counter a possible Soviet move to make India a permanent member of the Security Council, we should have a counter- proposal for two non-permanent members pending a review of the Charter. We might agree to support India for one of these seats. Mr. Pearson agreed to ask our High Commissioner in New Delhi to raise the question frankly with the Indians and suggest that they should not allow themselves to be led into any proposal at this time for increasing the number of vetoes in the Council. (Action has already been initiated on this point).

15. In his subsequent discussions with officials, Mr. Lloyd said he was aware of the problem which might arise over the Commonwealth seat. He also thought there would be general agreement among the non-permanent members against an increase in the number of veto holders. He concurred in the statement made to him by a South African official that the enlargement of the United Nations might reduce anti-colonial sentiment in the Assembly.

Commonwealth Conference

16. In answer to a question from Mr. Pearson, Sir Anthony Eden indicated that the Gold Coast was not expected to be ready for membership in the June conference of Prime Ministers. He thought it would be useful if the "Old Commonwealth" Prime Ministers had some talks in private about this question during the conference. The United Kingdom believed that the South African Government was now reconciled to the membership of the Gold Coast.

17. Sir Anthony spoke briefly about Singapore where he said they were going to have trouble. Marshall was a very good man but would not last. Marshall himself had indicated that he did not expect to survive long and he thought he would be succeeded by a crypto- communist. In that case, he had said that the British would have to take back the governing of Singapore.

18. Sir Anthony said that the High Commissioner for Pakistan had told him just before he left London that they were very worried about the situation in Kashmir because of the indications of Communist infiltration. He had given Sir Anthony the names of certain ministers who were Communists and had said that the Indians were doing nothing about this. It would probably be necessary to talk about Kashmir in June but "out of school". Mr. St-Laurent said that little progress had been made when the subject was discussed privately at the last meeting.

19. In his speech in the House on February 6 Sir Anthony had mentioned the possibility that the Commonwealth conference might "revolve".⁶¹ In his press conference he returned to this theme saying that he thought there was a good deal to be said for a Commonwealth Prime Ministers' meeting taking place in other capitals than London. Such a step might bring "a new sense of the world wide nature of this organization to which we all belong". Ottawa had very high claims but there were others to which in due course we might give consideration.

European Unification

20. Mr. Pearson referred to the difficulties of the problem, either one had to stand in the way of a genuine movement towards European unity or to support it and thus encourage the setting up of a high tariff union. Sir Anthony and Mr. Pearson agreed that Euratom was a good idea. Sir Anthony said he did not want anything to develop which would affect O.E.E.C..

21. Sir Anthony expressed grave concern over the statement of the German Finance Minister on the refusal to continue contributions to NATO forces. He said that the United Kingdom might have to consider withdrawing a division. The financial problem was very considerable. They could not go on paying if the Germans provided neither forces nor services. However, there would be no sudden withdrawal.

22. In discussion with officials later Mr. Lloyd spoke of United Kingdom fears of a repetition of the failure of earlier Western European plans for integration. In opposition to the French concept of high tariff protection he preferred to see common markets develop through NATO and the OEEC. With regard to the Euratom proposals the United Kingdom would consider some form of association similar to the European Steel and Coal Community.

United Kingdom-Canada Trade

23. Sir Anthony referred to this in his press conference. "We very much want to increase mutual trade". He pointed out that Canadian exports to the United Kingdom were twice those of the United Kingdom to Canada. The United Kingdom wished the trade to grow but to rectify the imbalance and he made a public plea for the sending of Canadian "private enterprise" missions to the United Kingdom. "We understand that the Canadian market is highly competitive but all the same we want to be in the competition and from time to time we want to do very well in it." Both Sir Anthony and Mr. Lloyd said that the downward economic trend in the United Kingdom last autumn had been to some extent seasonal and that January figures on gold and dollar reserves had been better. There was no cause for depression concerning the United Kingdom balance of payments position since it was due to a tremendous upsurge in confidence and investment.

Indo-China

24. Sir Anthony praised the Canadian role both in the House of Commons and at his press conference. Mr. Lloyd at his meeting with officials thought that Indo- China was not likely to be a trouble spot in 1956. Diem would be victorious in the March elections in South Vietnam. The problem was one of consolidation there as well as in Laos and Cambodia. The United Kingdom Ambassadors thought that both Vietnam and the Vietminh need time to re-group their forces. There was no indication for the present of any likely incursion from the North.

Communist China

25. Mr. Lloyd told departmental officials that he had brought back from Washington the conviction that if United Kingdom took the initiative in pressing for Communist China's admission to the United Nations "there would not be any single issue more damaging to the Anglo- American alliance." Sir Anthony reinforced this view at his press conference. Mr. Lloyd thought therefore that the United Kingdom should refrain from pressure in this election year although he did not exclude representations to Washington regarding the China list.

26. Mr. Lloyd had personal and precise misgivings on the United States stand on the off-shore islands where the danger of war was implicit. If Communist China attacked the alternative was clear: either the United States would not fight and withdrawal of the nationalist forces would leave the United States in the same position vis-à-vis Communist China, or the United States would fight and a world war might result. He thought that neither the United States administration nor the American public was entirely sure of what they would themselves do if the Communist Chinese attacked the offshore islands and there lay the danger. "This is a game of bluff which can be continued only for a time."

Bulganin-Khrushchev Visit

27. Sir Anthony stated at his press conference that this invitation still stood and Mr. Lloyd stated to officials that the Americans had been in favour of the United Kingdom attitude of letting it stand. Mr. Lloyd said that both the United States and the United Kingdom thought that talks must go on with the Russians "at whatever time and whatever place" as however intractable the discussions might appear results could suddenly and unexpectedly be achieved. He cited the Austrian Peace Treaty. Mr. Lloyd expressed the personal view that the Indians may have come to believe that the Soviet leaders had gone too far in their statements during their visit in November.

Cyprus

28. Mr. Lloyd in discussion with officials rehearsed the dilemma facing the British: how to give self- determination gradually to the Cypriots without abrogating the treaty rights invoked by Turkey. Strategic considerations were the overriding element. While the United Kingdom had the highest regard for principles the issue was not one of morality. There had recently been an encouraging indication that the ethnarchy was aware of growing dissatisfaction among the Cypriots about the continuing state of tension.

Atomic Energy

29. Discussions with United Kingdom officials have already been reported to you in our telegram No. E-213 of February 6.