The State Department considered moving the embassy in 1951 – but worried about upsetting Arabs

From a US Department of State Policy Statement marked “secret,” February 6, 1951:

A special policy problem has developed as a result of the United Nations concern with Jerusalem. The Israel Government has proclaimed Jerusalem to be the capital of Israel, an act which, while not specifically prohibited by the United Nations, is in clear violation of the spirit of the special status recommended for the city by the General Assembly. The Department advised the Israel Government against moving its capital to Jerusalem, but without effect.  

There is thus created the problem of whether the establishment of the capital in this city should be recognized by moving the United States Embassy, which has remained in Tel Aviv, to Jerusalem. Since the UN General Assembly has reach no definite decision on Jerusalem, consideration should be given to moving the Embassy to Jerusalem after consultation with other appropriate nations. 

A difficult factor in the Palestine dispute is that the Arab states regard anything favorable to Israel as being unfavorable to themselves. The Department is endeavoring to convince the Arabs of US impartiality as between them and Israel, and care should be taken in dealing with Israel to avoid giving an impression of favoritism which would be resented by the Arabs. 

The United Nations Relief and Works Agency, set up by the General Assembly in 1949 to administer relief and to undertake development projects for the employment of the refugees, has concluded that the only hope of reintegration for any substantial number of these people lies in resettlement in the Arab countries.

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