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United States Department of State / Foreign relations of the United States, 1948. The Near East, South Asia, and Africa (in two parts)

Israel,   pp. 533-1707 ff. PDF (461.4 MB)

Page 1301

account that the Arab Governments would undoubtedly charge that
economic aid to Israel by the United States would materially upset
the'rbaance of military advantage in favor of Israel and would thus
alter the basis of the existing truce which was ordered by the Security
Council on July 15, 1948.
   From theI  e onmic aspect,- the -Department is -informed by Mr.
 Epstein that the basis for repayment of the $100 million l1oan would
 largely be contributions from private sources to the Provisional Gov-
 ernment of Israel, which in turn would make available these con-
 tributions for the service of the loan. The soundness of the loan must
 be assessed in connection with the fact that the State of Israel is, in
 effect, in a state of war and that a resumption of hostilities would
 render promises to pay almost meaningless. Accordingly, from the
 strictly banking aspect, the loan presents great difficulties to the
.Export-mp├Żort Bank,
   The Export-Impor, Bank has had numerous discussions with the
 representatives of Israel, and Mr. Martin notified Mr. Epstein on
 July '26 that" . . reports reaching me do not appear to warrant at
 this time active consideration by the Export-Import Bank of the credit
 application ....
   Although the Department of State does not believe that a flat $100
 million loan should be made to the State of Israel at this time, it is
 suggested that Mr. Epstein be informed by us that the Export-Import
 Bank will be prepared to consider specific projects for which a loan
 might properly be granted and for which assurance of repayment and
 service could be provided on sound banking principles.
   I thought it advisable to seek your approval of this recommended
 position since Mr., Epstein and Dr. Weizmann have previously dis-
 cussed application with you.
                                                 ROBERT A. LOVETT
  See fooltnote 1, p. 1261.
  501.BB Palestine/8-1148: Telegram
       The Consu General at Jerusalem (Macdonald) to the
                        Secretary of State
SECRET                         JERUSALEm, August 11, 1948-1 p. m.
  1187. At meeting yesterday morning Bernadotte informed military
governor Jewish Jerusalem that Jews have been more aggressive in
violating truce by sniping and small arms fire than Arabs. This is
definitely correct re Jerusalem area alhough accusation denied vigor-
ously by military governor.
  Mediator asked military governor if he had any suggestions for
safeguarding Jerusalem from possibility ,of future figh~ting to which

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