Aswan Dam in International Perspective
In 1955 Nasser was trying to portray himself as leader of Arab nationalism, in opposition to Hashemite Iraq, especially following the Baghdad pact of 1955. At this time the US was much more concerned with the possibility of communism spreading to the Middle East than protecting Israel, and saw Nasser as a natural leader of an anti-communist Arab league. And the USA and Britain offered to help finance construction with a loan of USD $270 million in return for Nasser's leadership on resolving the Arab-Israeli Conflict. Nasser presented himself as a tactical neutralist, and sought to play off US and Soviet concerns to Egyptian and Arab benefit.
Angered by the Baghdad Pact and following Ben-Gurionist theory, Israel attacked Egyptian forces in Gaza and defeated them soundly. Nasser realized that he could not legitimately portray himself as the leader of pan-Arab nationalism if Israel could push him around militarily. He looked to quickly modernize his military, and he turned to the USA first.
John Foster Dulles and Dwight Eisenhower tell Nasser that the US will supply him with weapons only if they can send military personnel to supervise the training and use of the weapons. Nasser doesnít like these preconditions and looks to the USSR. Dulles believes that Nasser is only bluffing, and that the Soviet Union wonít aid Nasser. But the USSR promises Nasser a quantity of arms in exchange for a deferred payment of Egyptian grain and cotton. Instead of retaliating against Nasser for turning to the Soviets, Dulles sought to improve relations with Nasser. This explains the US/British offer of December í55.
Though the Czech arms deal actually increased US willingness to invest in Aswan, the British cited the deal as a reason for withdrawing their funding. What angered Dulles much more was Nasserís recognition of communist China, which was in direct conflict with Dullesís policy of containment. There are several other reasons the US decided to withdraw the offer of funding. Dulles believed that the Soviet Union wouldnít actually make good on its promise to help the Egyptians out. He was also irritated by Nasserís neutrality and attempts to play both sides of the Cold War. Actual NATO allies in the Middle East, like Turkey and Iraq, were irritated that a persistently neutral country like Egypt was being offered so much aid.