Suez Canal - 27 July 1956

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Suez Canal - 27 July 1956


On receipt of news, summoned Fr. Amb. & U.S. Chargé d'Affaires.  Expld gravity of situation.  They undertook to report at once. 
 Fr. Govt. have now issued statement similar to ours - but adding  sentence tht. they will take all steps necessary to protect Fr. lives & interests in E.
 Statement in H/C.


First need = common posn. with U.S. & France.  Pineau will be here on Mon. (arriving Sunday).  Ask Eis. to send someone over at once.  i.e. Suggest immediate talks, at high level - where convenient, but Ldn. mght be best. 
 Our line : we are ready to act - mil., pol. & economic. 
  Military :  good chance to w'draw one divn. fr. Germany.  3 Divns needed to police canal.
  Political : note to E. Govt : consider refce. to Sec. Council :  consider mtg. of maritime Powers : get U.S. to make plan for oil.
  Oil  U.K. wd. be O.K. for 3 wks.  Shd. need 10 m. tons of from America.  Urgent need : to get U.S. planning machinery into opern.
  Trade : little effect on our imports : but some on our exports, esp. to India.
  Economic : No more U.S. aid is due.  £100 M. sterling balances - of wh. £4 M. only is due to go to them this year. cut-off wdn't hurt them much. 
    Cotton crop : 0rd. to Sov. bloc : v. little to U.K. - tho' Eur., India/Pak. cd. cut some off. 
    Stop further supplies of arms.   (Agreed.)
  Canal Employers (Br.) :  we shd. consider this aspect.  Law includes penalty for w'holdg. labour.  Impt. of B. subjects on this ground wd. give us occasion for action.


Tabulate things we want U.S. to consider - for my message to Eis. Account of our oil posn.
 What circle of Powers do we bring in?


Ship-owning countries (e.g. Norway) : Oil producers (Iraq., Iran).


Note from U.K., U.S. & Fr. - callg. on E. to allow Co. to resume opns.


Dom. H. Commrs. were keen to bring in users of Canal.


Basing ourselves on stock-holding wd. be weak ground because Co. is Egyptian.  Base ourselves on Convn. - free navign. implies i) managemt. must give confidence ii) reasonable dues.  We don't believe E. can be trusted under either head : as recent facts show.  W'out Co. organn., no confidence E. can run Canal.
 U.K. not in strong posn. to protest v. natn. with compensn.


Avoid reference to stopping traffic to Israel because that 
  wd. bring other Arab States on to E.'s side.


On ii) Canal is not to be run for own purpose but to finance Dam.


Much capital needed to deepen & widen Canal.  E. has taken over capital liability. 
 Immedte. ques £102 M. blocked sterling.  No new release before Jan. Also they have £14 M. on current a/c.  Have told B/E. not to allow any of this to be w'drawn to-day.
 Offl. sterling is v. weak to-day.


will sell all their free sterling on transferable market if they can.
 Shall have to decide wtr we mean to block this £14 M.  B/E. wd. not regard E. as reliable holders of sterling - cd. be addl. argument. But mght. provoke them into unilateral action v. us - e.g. closing Canal to Br. shipping.
 Canal Co. have sterling & other assets in Ldn.  Shall see them & advise them to hold on to it.
 Support K.'s view.  Argue i) they can't pay (in what currency?)  ii) can't run Canal  iii) can't develop it.  May be a chance to improve what wd. be posn. in 1968.


Discover what balances E. holds in U.S. or France.


Action of E. is not unlawful - but in breach of Convention.

Taken from C.M. 54(56) - Meeting held on 27 July 1956.