expenditures for fiscal year 1953, compared to $236 million in fiscal. year 1950. Without repeating Mr. Wood's most able statement, I would again like to point to the chart on central government finances which shows also the increase in Government revenue from something like $500 million in fiscal year 1950, to $800 million in fiscal year 1954, which reflects in part the increase in total gross national output in Turkey, and has permitted the Turkish Government to maintain an expanding defense establishment.

To pay all the costs of that defense establishment, except for a substantial volume of military end item equipment which General Stewart indicated it was proposed to be furnished. As Mr. Vorys indicated earlier, in Turkey and Greece is where we probably get the most for our money in the way of well-equipped soldiers with high morale, of anywhere in Western Europe.

The proposed program for fiscal year 1954 is $50 million. This represents a decline from fiscal year 1953, though not as large as in most other European countries. Again, the reason is that the Turkish economy is thin. Its ability to support in the future the military establishment which is now being developed and being supplied largely with our end items demands a substantial increase in the gross national product of that country, or else, on the other hand, a continued furnishing of military equipment from the United States over an indefinite period.

It is our belief, sir, that it is much more desirable to encourage and assist the Turkish Government so that it in due course can take over the cost of financing and maintaining its military establishment, than for us to continue to anticipate furnishing end items to that country indefinitely.

In the case of Turkey, I think it should be noted, however, that with the large military program, the large military establishment there, that the end item equipment will need to come from the United States for some little time, at best.

Mrs. BOLTON. Is the money that has gone into the building of the new hotel in Istanbul, American or Turkish money?

Mr. FITZGERALD. That is Turkish money.

That hotel is being built by the Turks and leased to the American operator.

In all instances, Mr. Chairman, we have not included in the list of items everything that will be shipped, but only the major items, so quite frequently the sum of the major items does not add up to the total.

We could give you the rest of the detail, which is all small, if you would like it, sir.

Chairman CHIPERFIELD. Mrs. Bolton, did you want to take up Iran? Mrs. BOLTON. Well, it is part of the area and if the General is not coming back, I think it is too bad to proceed without it.

Mr. WOOD. We believe it would be useful to have Mr. Jernegan, Acting Assistant Secretary in the State Department, give you the political background of the middle eastern situation, and then we can go on with General Stewart immediately thereafter with the details of these military programs.

If the committee will permit, I would like to call on Mr. Jernegan to describe the political situation in this area as it relates to this program.

Chairman CHIPERFIELD. Mrs. Bolton, is that satisfactory to you? Mrs. BOLTON. Whatever is the wish of the committee, Mr. Chair

man.

Mr. JERNEGAN. I have a prepared statement which I think has been distributed to the committee.

(Program for military assistance for Near East and Africa, fiscal year 1954.)

Mr. JERNEGAN. The military aid requested for the Near East and Africa amounts to a total of $425 million, this amount to be made available for Greece, Turkey, and Iran and for "other military assistance in the area of the Near East and Africa."

If the sum requested is made available, it is the intention of the executive branch to utilize a specific sum for Greece, Turkey, and Iran and the remaining for other countries. We propose that any country of the area which joins a regional defense organization of which the United States has become a member will by virtue of that act become eligible for grant military assistance.

In addition, we propose that countries may be found eligible for military assistance by the President on the same basis as provided in section 202 of the present act.

With respect to the amounts intended for Greece, Turkey, and Iran, it is proposed to continue the established programs in these countries which have been fully discussed with the committee in the past. Questions as to the details of these programs involve military considerations which can best be discussed by representatives of the Department of Defense.

(Discussion off the record.)

Mr. JERNEGAN. United States training and equipment programed is essential to help them accomplish the improvements which they would otherwise be unable to afford. The morale and effectiveness of Greek and Turkish armed forces are high, as has been reflected by their expeditionary forces in Korea, and they represent an integral part of the NATO defenses as the buttress of the strategically important southeast flank. In addition, due to the development of close friendly relations and their mutual interest in the defense of the Balkans, the Greeks and Turks have initiated defense discussions with the Yugoslavs.

In the view of the Department of State, the continuation of the Iranian program is important. This program has been and continues to be directed primarily toward the development of forces for internal security purposes. In the present troubled situation in Iran, we feel, that measures designed to contribute to stability are necessary. If we consider the area of the Middle East as a whole--the area stretching from Turkey eastward to the Indian subcontinent and southward through Saudi Arabia and Egypt-we can say that the Mutual Security Program to date has achieved an important, if partial, success.

The success is important because Turkey has become a strong point capable of offering powerful resistance to any direct Soviet attack, and posing a potential threat on the flank of any Soviet thrust on the east directed at the oil of the Persian Gulf.

It is only a partial success because although none of the area has been lost to the Soviets, it cannot be considered safe for the free world.

We feel that there is a serious threat to this area, with its highly important strategic and economic assets. The position of Iran, which is on the front line of defense, so to speak, gives us such concern that we feel we would be remiss if we did not do everything possible to strengthen countries in the second line. This is one of the principal considerations underlying our request for the additional amounts intended for Greece, Turkey, and Iran.

Our request is for authority to provide military aid to the states in the area of the Near East and Africa, and is meant to apply to the Arab States, and Israel, alike, as well as other states in the general region.

In administering such aid, we would propose to deal impartially with all states of the area, furnishing military aid on the basis of the same criteria in each case. While it would not be possible initially to include Israel in the same defense organization with the Arab States, we would undertake to make parallel arrangements with Israel and the country's requirements and potential contribution to Middle East defense would receive full consideration.

The proposal to provide military equipment to the Arab States and Israel, of course, raises the question of the intentions of these states with respect to the keeping of the peace. You will note that we propose to include with the authorizing legislation-in the same paragraph, in fact-the requirement that any country receiving aid under the proposed authority must agree to use the equipment, materials, or services provided only for maintaining internal security and for self-defense, and, furthermore, that it will not undertake any act of aggression against any other nation. We attach the greatest importance to the avoidance of any renewal of hostilities in the Near East, and will be prepared to exercise the utmost care to make certain that the military aid proposed does not endanger this objective.

The question of Arab-Israel peace is, of course, only one of the serious problems which beset this area and which any program to strengthen its defenses must surmount. This committee is familiar with these problems, and I can assure the committee that they are very much in the minds of those of us in the Department of State and the Department of Defense, who will have responsibilities in implementing any program that the Congress may see fit to authorize. I will be happy to discuss any of these problems with the committee in executive session.

In spite of the real difficulties, which I do not minimize, there are certain factors in the situation on which it may prove possible for us to build. In all countries of the area there are important leaders who recognize the Soviet danger and the fact that no Near East state alone, or any combination of Near East states, could successfully cope with this danger. In most of the Arab States of the Near East the role of the armed forces has proved to be decisive in determining the character of the regime; in Syria and Egypt the Governments are frankly based on the army and headed by military leaders.

Military leaders in most of these states are relatively progressive and friendly toward the west, and are acutely conscious of the deficiencies of their own forces and their need for additional military equipment. There are indications that most of the leaders now

in power in the Near East states would be willing to cooperate with the west, at least on a limited basis, provided this cooperation brought them significant benefit in the form of military equipment and did not involve any encroachment on national sovereignty.

We believe that the authority to provide military assistance to these countries will enable us to capitalize on these favorable elements, and to take certain constructive steps in the region which would further United States security interests.

As a general device for stabilizing and strengthening the region, the United States seeks to establish a regional defense arrangement which could not be expected to produce an immediate significant increase in the military strength of the region but we feel it would be an instrument of great potential usefulness. It would provide a framework in which the western powers and the Middle East states could work cooperatively toward a common end; it would assist us in bringing home to the leaders of the Middle East states the seriousness and magnitude of the Russian danger; and it would permit a beginning on the task of creating effective strength in the region supplementary to that already created in Turkey. The availability of United States military assistance could well prove decisive in enlisting the participation of Middle East states in such an organization.

A satisfactory Suez settlement is probably a precondition to the establishment of a cooperative regional defense arrangement. Although the outlook for such a settlement does not at this moment appear highly promising, we believe it is possible and that the availability of the authority and funds we are now seeking may be an important element in achieving it.

The achievement of these two objectives-a Suez settlement and a regional defense arrangement for the Middle East-would change the whole situation in the area and greatly improve the prospects of achieving other important objectives of United States and free world policy. We must recognize, of course, that in the period immediately ahead we may not be successful on either count. In the absence of these developments, progress in effecting United States policy objectives in the Middle East will inevitably be slower, but there will be no less need for the military aid authority requested.

With or without a Suez settlement or a Middle East Defense Organization, we would expect to utilize military aid to strengthen friendly governments within the area and to promote stability and internal security. There are political leaders in the area who desire to cooperate with the nations of the free world but have limited freedom of action because of the precarious nature of their hold on power and the strength of the antiwestern elements within the state. If these leaders controlled effective military forces their susceptibility to pressures from extremist elements would be reduced.

The United States has military installations in certain of these states and it may be desirable to seek additional facilities elsewhere in the region. Where we have such installations, it is clearly in our interest to provide military assistance which would strengthen local forces available to assist in their defense.

To emphasize what is in my paper, I would like to mention the delicacy of the situation in the area covered here. By that I do not mean Greece and Turkey, which relatively speaking are in very good

shape, politically, economically, and militarily, but the countries to the south of them. The Arab States, Israel, and certain adjacent countries which are covered by the language in this bill, such as Ethiopia.

In particular, our problem in the Arab States is very difficult, indeed. We face attitudes of distrust, uncertainty, hostility, which have got to be reversed, in the opinion of the executive branch, if we are going to hold that part of the world outside of the Soviet-Communist orbit, and have these nations function as useful members of the free world in the defense of the free world.

I need not tell you that the Secretary of State is presently touring that area and judging by the reports we have had from him, very brief reports necessarily, he has been even more impressed than before with the difficulties of the situation and the importance of finding remedies.

I look forward next week and the week following to a very busy time in our section of the State Department, after the Secretary comes back with his ideas.

Mrs. BOLTON. May I say, Mr. Chairman, that the one thing that we hope will come out of the Secretary's trip which some of us felt was not altogether wise at this time, is that he may understand a little bit more than has been understood by the Executive we have had for 20 years, the responsibility of the executive department for the whole situation in the Near East. We sincerely trust that he will recognize the seriousness of it all and that he will come back with a very clear and much more developed character of understanding than has been evidenced by the Department up to this time.

I am not asking you to comment on that. I am simply expressing what some of the rest of us have been working on for 25 years. We know what some of our people have gone through and we feel very disturbed over the various situations that have developed along the path.

We hope very much that the Secretary will take up into his confidence when he comes back, in the whole matter of the Department's thinking in the matter of a balance between Britain's present state in the world and the possible swingback of the Arab States to the side of the Western World. There is only one way to do it.

Mr. JERNEGAN. I am sure the Secretary will want to confer with this committee.

Without commenting on your statement, I would like to say that the report we have had from him and from our missions along the way indicate that the good effect of the trip has been not all on one side, that it has had a good effect on the least certain of the leaders in the area. The impression generally has been good-better than you might judge by some of the newspaper headlines.

Mrs. BOLTON. We certainly hope so.

Mr. JERNEGAN. His contact with the political leaders of the countries has been much more cordial and much more productive than reports of demonstrations in the streets might indicate.

Mrs. BOLTON. Might I ask you a question about Iran. What is the situation in Iran in the matter of the loyalties of the army? Do you have any information that is reasonably accurate?

Mr. JERNEGAN. May I answer that off the record?
Mrs. BOLTON. Surely.