Foreign Aid Is Withdrawn from Egypt's Aswan High Dam Project

Date July 19-20, 1956

As part of attempts to establish good relations with Egypt’s Nasser-led regime, the United States and the United Kingdom proposed to share finances in building the Aswan High Dam. Deterioration of political relations, however, led to the cancellation of the aid offer and to the subsequent nationalization of the Suez Canal.

Also known as High Dam

Locale Washington, D.C.; London, England; Aswan, Egypt

Key Figures

• Gamal Abdel Nasser (1918-1970), president of Egypt, 1956-1958, known for opposition to Western influence in the Middle East

Summary of Event

The series of mixed political priorities that led to the collapse of the U.S. and British plan to sponsor construction of the Aswan High Dam began at least as early as 1953. In the first years after the 1952 coup that ousted King Farouk I, attempts had been made to draw Egypt away from participating in the struggle against Israel and to move Cairo into a strategic alliance with the Western camp. Following failure of the British-initiated Middle East Defense Organization scheme (1950-1951), a different policy was introduced to elicit cooperation from Cairo’s new leader, Colonel Gamal Abdel Nasser.

At least until the fateful emergence of the openly pro-Western Baghdad Pact in 1955, more emphasis was placed on the need for some form of economic development aid that could complement Nasser’s desire to upgrade Egypt’s military. Technical experts had observed as early as the mid-1940’s that Egypt’s economic productivity would be greatly enhanced if a huge dam were constructed on the Nile River above what came to be called the Aswan Low Dam built earlier (1899-1902) by the British. The possibility of adding reserves of hydroelectric power to Egypt’s grid meant that, in addition to obvious agricultural irrigation advantages, new industrial projects depending on electricity could be established.

The cost of building such a dam, however, was more than Egypt could even begin to consider, even if a joint aid package involving the United Kingdom and the United States could be negotiated. For this reason, and also to foster the image of political neutrality in the charged climate of the Cold War , both Washington, D.C., and London suggested that the World Bank be contracted to shoulder the lion’s share of estimated costs. The World Bank accepted these terms on the condition that both the United States and the United Kingdom contribute toward the total costs. In January, 1956, the Dwight D. Eisenhower administration presented a bid before the U.S. Senate Committee on Appropriations for funding, which was approved and added to the United Kingdom’s concomitant pledge.

In the meantime, however, the political climate surrounding Nasser’s role as a potential leader of an Arab “opposition camp” became murky. Egypt’s denunciation of the Baghdad Pact kept Jordan from joining, and Nasser insisted on harboring the Provisional Government of the Algerian Republic (in revolt against France) in Cairo. He stalled in negotiations that indirectly aimed at tying High Dam aid to some form of assurance of adherence to Western defense arrangements for the so-called northern tier of the Middle East. Continued delays led the British and Americans to cancel their offers of support on July 19 and 20, followed by cancellation of the World Bank package.

Once international aid for the High Dam was withdrawn, a drastically new political scenario unfolded in Cairo. Nasser quickly moved to use the situation to bolster his image as a charismatic nationalist leader. On July 26 he delivered a blistering speech in Alexandria announcing that, in order to obtain funds for the project, Egypt had nationalized the Suez Canal . The move would, he said, be completely legal and would follow international law by compensating the private (and British governmental) owners of canal shares.

It is impossible to know if the impasse created by Nasser’s Suez Canal policy was the main cause of the covert plan by Israel, France, and Britain to launch an attack on the Canal Zone on October 29, 1956. The attack brought an immediate reaction, if not in defense of Egypt’s regime then certainly in opposition to the surprise use of military force with the aim of toppling Nasser. In an unprecedented move, the Soviet Union and the United States joined in presenting an ultimatum to the invading forces.

From the point of view of Egypt, the secret collusion with Israel meant that there would be no further point in dealing with either Britain or France. Despite its externally visible attempts to stop the aggression in the heat of battle, the United States was nonetheless judged to be indirectly tied to rising pressures against Cairo. This view seemed to be strengthened by President Eisenhower’s request to the U.S. Congress for authorization to use diverse means, including economic and military aid, to support Middle East regimes that declared themselves menaced by communism.

Although Egypt never espoused a communist ideology, there was no doubt that, after 1956, Nasser believed the shortest path to radical restructuring of his country would involve socialist principles. As this became evident, it provided an ideal opportunity for the Soviet Union to support what eventually gained the title of Arab Socialism. Financial support for the High Dam project seemed to provide an ideal path to Arab Socialism, particularly if it could demonstrate to the West that the Soviets would not tie their aid in the economic development sphere to any particular scheme for political (and, indirectly, Middle East regional security) issues. This, then, became the basis for Soviet involvement in what became the biggest construction project in the Middle East during the Cold War era.

In return for Soviet technical and financial aid for a purely economic development project, Egypt would, in the long run, end up tying itself to the Soviet Union both economically and politically. In terms of economic dependency, the High Dam project carried a stipulation that the majority of Egypt’s primary export product—long staple cotton—would, in lieu of direct monetary payments, be reserved for the Soviet Union—at arbitrarily fixed prices.

This stipulation, however, was just the beginning. Within a few years, and as the High Dam project advanced, other major trade and financial aid agreements, including the provision of military hardware, would bind Egypt and the Soviet Union for years to come. The bond would further aggravate relations between Nasser and the West, particularly in the last half of the 1960’s.

Whereas political consequences stemming from Soviet replacement of the U.S., British, and World Bank sponsorship for the High Dam project were significant, much longer-term ecological consequences of the grandiose scheme began to appear as early as the late 1970’s, less than a decade after completion of the High Dam. In the agricultural sphere, for example, near total control of yearly Nile flooding raised the possibility of predictable distribution of irrigation waters. Because the “trapped” waters reached Egyptian fields without the high natural silt content characteristic of floodwaters, there would be a rising need to fertilize by means of artificial chemicals. This meant added costs for farmers who had never before relied on commercial fertilizers. It also promised to produce a decline in soil quality, owing to over-application and leaching of chemicals.

Meanwhile, for certain Nile Delta cities and especially in Cairo, “revenge” from the dammed Nile stemmed from variable changes in the level of the water table. In some areas, large structures and even villages showed signs of “sinking.” At the same time, since the water table was the source of drinking water for a large portion of Egypt’s inhabitants, the danger of contamination of well water—from leaching tied to artificial fertilizers, the introduction of sewage, the rising water table, or all three—promised to bring high social and economic costs to what had initially appeared as one of the most important developmental and technological breakthroughs of the twentieth century.

Significance

The shift in Egypt’s economic-development dependence toward the Soviet Union during the 1960’s arrived, in large measure, because of moves by Britain and the United States to use the Aswan High Dam project for political leverage. When these two governments withdrew from what should have been a package involving the World Bank, there was no other real source of international financing for such a massive project. One can say that the Soviet Union’s move was equally motivated by political considerations. By the time the High Dam was near completion in 1967, Moscow was firmly implanted in Egypt as the primary supplier of not only economic development aid but also military hardware. This was the case until Anwar Sadat succeeded Nasser in 1970, the year the dam was completed.

Bibliography

Aswan Dams. University of Colorado, Denver. 2000. http://carbon.cudenver.edu/stc-link/aswan1/. Web site created by engineering students at the University of Colorado, Denver. Includes information on the culture, organization, geography, and technology of the dam projects.

Building the World: An Encyclopedia of the Great Engineering Projects in History. Compiled by Frank P. Davidson and Kathleen Lusk Brooke. Westport, Conn.: Greenwood Press, 2006. A two-volume collection detailing the greatest engineering projects, including the Aswan High Dam. Also includes an article on Hoover Dam and the Colorado River.

McCully, Patrick. The Ecology and Politics of Large Dams. New York: Zed Books, 2001. A study of the effects of technology and of ecological and political concerns on a number of major dam projects, including the Aswan High Dam.

Takeyh, Ray. The Origins of the Eisenhower Doctrine: The U.S., Britain, and Nasser’s Egypt, 1953-1957. New York: St. Martin’s Press, 2000. An updated study of the political climate surrounding the negotiations for and failure of the High Dam project for the United States and the United Kingdom.

U.S. Congress. Senate. Committee on Appropriations. Financing of Aswan High Dam in Egypt. Washington, D.C.: Government Printing Office, 1956. Report of the hearing before the Senate Committee on Appropriations of January 26, 1956. Discusses the rationale and costs associated with U.S. sponsorship for a joint World Bank project for the Aswan High Dam.