Washington, September 10, 1965.

/1/Source: Johnson Library, National Security File, Memos to the President, McGeorge Bundy, Vol. 14. No classification marking.

Last night at about 11 p.m. London time, the Bank of England and the Chancellor of the Exchequer wrapped up a multilateral package to support the pound sterling. The package should total between $900 million and $1 billion with the exact amounts and form of participation of some countries not yet finally settled. The countries participating are Austria, Belgium, Canada, Germany, Holland, Italy, Japan, Sweden, Switzerland, and the United States, plus the Bank for International Settlements. The Bank of France was originally in the package but pulled out of the deal yesterday morning.

United States participation in the package will total roughly $400 million in line with our agreement. This amount will be divided between the Federal Reserve and the Exchange Stabilization Fund of the Treasury.

The Federal Reserve Bank in New York began operations this morning in the spot sterling market and very limited operations have brought good results thus far in terms of a higher rate for sterling. The rate has moved from 2.7918 to a recent bid of 2.7940. We are hoping that this improvement in the rate will give the speculators [no?] reason for concern and by accelerating a return of the confidence in sterling will trigger a re--flow of funds to the United Kingdom.

This negotiation has been much more difficult than that of last November but we are hopeful that the package will carry the pound through the uncertainties of the next few months.

While this operation has started well, the first real test may come as early as Monday or Tuesday, when the British trade figures will be announced. We have no information as yet of these figures.

A release issued by the Bank of England is attached plus our own response to press inquiries./2/ We will not add any comments to these statements and feel that the details of this operation must be held very close-especially the figures.

/2/Not attached.

Joseph W. Barr

250. Memorandum From the President's Special Assistant for National Security Affairs (Bundy) to President Johnson/1/

Washington, September 10, 1965, 5 p.m.

/1/Source: Johnson Library, National Security File, Memos to President, Bundy, Vol. 14. Secret.

SUBJECT
Report from George Ball

1. The attached reporting cable from London shows how George Ball really put it to the British on Singapore and our support of the pound. You will not need to read the account of George's argumentation, but you will want to look at the sidelined account of the British responses on both subjects./2/ You will notice that it took two talks for Wilson to agree to the association between our defense of the pound and their overseas commitments. The one thing which he was apparently trying to avoid was a liability in Vietnam, and you will recall that it was your own wisdom that prevented us from making any such connection earlier in the summer, although I did once informally say to one of the Prime Minister's people that a battalion would be worth a billion-a position which I explicitly changed later.

/2/The 3d through 11th paragraphs were sidelined.

2. The essence of the Singapore part of the conversation is being sent to Ambassador Clark for report to Menzies at the time he delivers your letter./3/

/3/Apparently an August 18 message from Johnson to Menzies. (Johnson Library, National Security File, Head of State Correspondence, Australia, Menzies)

McG. B.

Attachment

(Copy of London Secun Five, Sept. 9, 1965)

Exdis. During the last two days Under Secretary Ball and Ambassador Bruce have had extensive discussion regarding Singapore and Malaysia and the quadripartite meeting convened by Her Majesty's Government. This telegram will report the essence of these conversations with Foreign Secretary Stewart on September 8, with the Prime Minister later in the day on September 8 and with the Prime Minister again on September 9, including the relation of this problem to UK current financial difficulties.

In the course of these conversations, the Under Secretary strongly challenged the British assumption that the secession of Singapore called for urgent contingency planning regarding the maintenance of the British position and the continuance of British defense commitments in the area. He stated that the quadripartite meeting was regarded by Washington as both premature and hazardous. If it became known in any of the relevant capitals that the British were seriously considering alternatives to Singapore, the Western position would be greatly weakened. The Under Secretary made clear that the U. S. did not share the British sense that their position was in imminent danger because of recent political events. He emphasized the increasing American commitment in Southeast Asia and made clear that the American people would not understand that at the same time the British were considering a diminution of their commitment in the same area. He pointed out in detail the disastrous consequences if the word should be spread that Western power might be withdrawn or diminished. He made clear that any efforts to explore with Sukarno a possible end to the confrontation would be regarded as evidence of weakness by Indonesia and thus lead Sukarno (and the Communists) to feel that their bloody-mindedness was justified by events. He indicated strongly that the use of Japan in an intermediary role might well contribute to Japanese neutrals.

The response of the British--both the Foreign Secretary and later the Prime Minister--was directed at the contingency nature of British planning. The underlying British concern was that the future behavior of Lee could not be precisely predicted. They did not know whether or not he might seek to align himself with the Afro-Asian powers. They felt therefore that some kind of contingency planning was necessary.

At the same time both the Foreign Secretary and the Prime Minister categorically rejected the idea that they were seeking an easy way out of British commitments.

They therefore felt that Four-Power talks might be useful, not for the purpose of preparing a British withdrawal, but rather with the intention of developing alternative courses of action in the event that the Singapore base proved untenable.

The end result of the Under Secretary's conversations with both the Foreign Secretary and the Prime Minister was a categorical assurance that the United Kingdom had no present intention of reducing its commitments in Southeast Asia, but that it was merely seeking to develop alternative arrangements in the event that the use of the Singapore base was progressively circumscribed. Both the Foreign Secretary and the Prime Minister also indicated clearly that they had dropped the idea of any negotiations to end the confrontation.

The Under Secretary felt that as a result of his conversations the British had clearly gotten the word that the quadripartite talks had been misconceived and that neither the U.S. nor Australia had any intention of letting the British off the hook in Southeast Asia.

In the Under Secretary's discussion with the Prime Minister on Wednesday, September 8, the Under Secretary vigorously pressed the argument that the U.S. regarded the maintenance of British commitments around the world as an essential element in the total Anglo-American relationship. In response, the Prime Minister insisted that no clear link could be made between the U.S. efforts to assist Sterling and a common approach to foreign policy.

To clear up the American position on the point, the Under Secretary arranged for Ambassador Bruce and himself to have a private talk with the Prime Minister following the Prime Minister's meeting with Secretary Fowler later on the evening of Thursday, September 9. During this private conversation which lasted for almost an hour, the Under Secretary and the Ambassador made emphatically clear that the U.S. Government considered that the Anglo-American relationship must be regarded as a totality, in which each element of the relationship should be given weight and each related to the other.

Thus it would be a great mistake if the United Kingdom failed to understand that the American effort to relieve Sterling was inextricably related to the commitment of the United Kingdom to maintain its commitments around the world. All of the U.S. Government activities in relation to Sterling or the economic problems of the United Kingdom were necessarily related to the commitment of the two Governments to engage together in a 5-year review of the United Kingdom's defense program.

The Prime Minister agreed to all of this, noting that he had expressed his earlier qualifications merely to make the record clear that the United Kingdom would not accept an additional demand for a United Kingdom contribution to Vietnam as a quid pro quo for U.S. Government short-term assistance for Sterling. He readily admitted that all aspects of the relationship of the two Governments must be considered as a totality in any long-range review of the United Kingdom defense effort.

The other subjects discussed by the Under Secretary with the Foreign Secretary were Kashmir, Vietnam, and NATO. These subjects will be reported by the Under Secretary upon his return to Washington.

Ball

251. Editorial Note

British Foreign Secretary Michael Stewart's visit to Washington October 9-12, 1965, included a day of talks with U.S. officials. The Foreign Secretary met with Secretary Rusk on October 11 for wide-ranging discussions. Memoranda of their conversation are in the National Archives and Records Administration, RG 59, Conference Files: Lot 66 D 347, CF 2550.

252. Memorandum Prepared by the Executive Secretary of the Department of State (Read)/1/

Washington, undated.

/1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 7 UK. Secret. Bruce's record of Prime Minister Wilson's visit is in Department of State, Bruce Diaries: Lot 64 D 327. Bator's notes on part of President Johnson's December 16 meeting with Wilson are in the Johnson Library, Bator Papers, Europe. A portion of the Johnson-Wilson private meetings dealing with nuclear sharing is in Foreign Relations, 1964-1968, vol. XIII, Document 117.

VISIT OF PRIME MINISTER WILSON
December 15-19, 1965

The following is a list of the meetings in which Prime Minister Wilson participated during his visit to Washington:

December 16--5:15-7:00 p.m. President and Prime Minister alone for approximately an hour and thereafter with officials.

December 17--Under Secretary Ball, Secretary McNamara and McGeorge Bundy met with the Prime Minister at the British Embassy.

December 17--1:00-3:30 p.m. Lunch at White House with conversation continuing thereafter. President and Prime Minister spoke privately before lunch.

The notes are based on the comments of Ambassador Bruce and Assistant Secretary Leddy who attended some but not all of the meetings listed. Ambassador Bruce was present at the White House on December 16 and also attended the lunch on December 17. He was not present at the meeting at the British Embassy the morning of December 16 which was largely concerned with the British defense review. Assistant Secretary Leddy attended only the lunch on December 17 and the discussion which followed.

Rhodesia

This subject was discussed on both days with the Prime Minister expressing his appreciation for US backing, particularly on the oil sanctions and the airlift for Zambia./2/ (In his press briefing on December 17, the Prime Minister said in response to a question that United States planes would be used in the airlift.) The Prime Minister took an optimistic view of the prospects of bringing down the Smith regime in a short time through economic action. While the Prime Minister did not give a specific time estimate, Oliver Wright subsequently told Ambassador Bruce that the British Government hoped to achieve this result in a matter of weeks.

/2/For text of the statement issued by the Department of State on December 17, see American Foreign Policy: Current Documents, 1965, pp. 693-694.

British Defense Review

At the White House meetings attended by officials the Prime Minister did not go into details on the defense review but said he understood the importance we attach to a continuation of British defense commitments and gave assurances that the British world-wide role would be maintained. He said that there would be readjustments in the British defense posture East of Suez but that they would maintain their presence. In the long run, Singapore might become very tricky and the UK had no real assurance that it could be used in case of need. As a consequence the British Government had been considering the possibility of an alternative base in Northern Australia. The Australians, he said, had shown interest in this possibility. He expressed interest in the possibility of defense talks with Australia and New Zealand and, by implication, with the US on the defense problems of the area. The Prime Minister indicated that he was thinking, in connection with a base in Australia, of the post 1970 period. With respect to Aden, the Prime Minister said that this could not be regarded as a long-term base. In the Persian Gulf there continues to be a need to afford some protection to Iran and Kuwait. The Prime Minister thought Bahrein would have some use in this connection but that generally it should be possible to lighten the British presence in the Gulf.

Ambassador Bruce noted that the Prime Minister was careful in phrasing his remarks on the defense review to indicate a desire to have our comments while avoiding any commitment that British decisions would conform to our views. In the meeting at the British Embassy on the morning of December 17, it was agreed that Foreign Secretary Stewart and Defense Minister Healey would visit Washington in January for more detailed talks with Secretary Rusk and Secretary McNamara.

Nuclear Sharing

This subject was apparently discussed privately by the President and the Prime Minister. In the subsequent discussion with officials on December 16, the Prime Minister said that the UK preferred a consultative arrangement to a "hardware" solution but that if necessary it was prepared to support its 1964 proposal for an ANF. The Prime Minister indicated that he and the President would have further contact on the nuclear problem in the Alliance as the situation developed and after the President had discussed the matter with Chancellor Erhard.

Vietnam

In replying to press queries the Prime Minister took a strong line in support of US efforts to pursue peace in Vietnam and said that his Government was quite satisfied with the willingness repeatedly expressed by the United States to go to the conference table. He cited the efforts made by his Government to bring about negotiations and said these efforts would continue with the full support of the President. These press responses were along the lines earlier indicated by the Prime Minister in talks with the President and US officials. The discussions reflected continued understanding and support for the US position in Southeast Asia and appreciation on our part that notwithstanding domestic political pressures the Wilson Government has been constant in maintaining this attitude. The Prime Minister did, however, indicate that any bombing of Hanoi or Haiphong would create the most serious problems for him and his Government in determining what line they would be obliged to adopt.

As a result of the discussions with US officials the British agreed to give further consideration to increasing their contribution to the Asian Development Bank from $10 million to $30 million.

The foregoing appear to be the principal subjects covered in the discussions although other matters such as the India-Pakistan dispute were also touched on briefly.

253. Memorandum From the Counselor of the Department of State and Chairman of the Policy Planning Council (Rostow) to President Johnson/1/

Washington, January 20, 1966.

/1/Source: Johnson Library, National Security File, Country File, UK, Vol. 8. Secret; Noforn.

SUBJECT
UK East of Suez Proposals

Attached is a memorandum for the record/2/ on the purported British position for the talks which will be held next week.

/2/Not found.

1. The British apparently have in mind three new elements in their relation to the Far East: (a) increased de facto interdependence East of Suez, through intensified staff talks and other consultations; (b) a formal linkage of the UK to the Far East via ANZUS; and (c) assignment to Asia of the British Polaris submarines.

2. I find no objection to their first proposal; but I feel strong reservations on the other two proposals for the reasons stated below.

3. Underlying UK Objectives. The British propose to have us pay a high price for what they intend, in any case, to do; that is, to shift from Singapore in a few years and then cut down their Far East presence to an Australian air-naval base. The price they seek from us consists in: as firm an institutionalized grip as they can manage on U.S. policy in the Far East; U.S. financial assistance; and the right to continue to maintain their national nuclear deterrent.

4. U.S. Interests. It is our interest to maintain the UK presence in the Far East during the Viet Nam war--both in Singapore and in Malaysia. Over the longer term it is our interest to work out a viable basis for containing Communist China based on the systemic mobilization of Asian and European as well as U.S. resources. Our agreement to the British second and third proposals is not required to effect our primary short-run interest; that is, to keep the UK in the Far East in the short run. They are locked into the Far East by their confrontation in Malaysia. After that confrontation ends, they will cut down their forces irrespective of what we do. There is no political basis in the UK for keeping 45,000 ground troops East of Suez except in defense of Malaysia.

5. The British proposals run counter to our long-run interests in the Far East.

a. If we become too formally involved with the UK via a treaty structure or assignment to the UK Polaris submarines of important Chinese Communist targets, we will be moving towards something close to a British veto over our China policy. It is highly unlikely that domestic politics will allow any government in London to go to war against mainland China; and we could count on the UK influence consistently to make difficult any firm stand vis-á-vismainland China.

b. The British joining ANZUS would create a white man's club in Asia. It would antagonize not merely the Indonesian military but other Asians as well and make more difficult our long-run task of building an effective security grouping in Asia for the containment of China.

c. Acceptance of the British proposal would turn the British away from Europe and turn the continental Europeans away from the UK. An Anglo-Saxon Asian defense club, built on what appeared to be a special London-Washington relation, would discourage rather than encourage other Europeans to move towards responsibility in Asia. It would also complicate eventual UK entry into Europe and deny the British and ourselves the correct strategy of having British entry into Europe serve as a way of leading Europe as a whole to assume increased responsibilities East of Suez and on the world scene.

6. In these three ways acceptance of the British proposals would make our tasks of containing Communist China more rather than less difficult.

7. Conclusion. I conclude, therefore, that, in dealing with the British proposals, we must distinguish sharply between the short-run and long-run problems we face in Asia. We should be forthcoming on short-term steps to help the UK stay East of Suez by financial assistance, staff talks, etc. On the other hand, we should not allow the British to exploit our short-term concerns in ways which would mortgage our long-term prospects for effective U.S., Asian, and European action East of Suez.

Walt

254. Memorandum of Conversation/1/

Washington, January 22, 1966, 11 a.m.

/1/Source: National Archives and Records Administration, RG 59, Conference Files: Lot 67 D 305, CF 8. Secret. Drafted by Judd and cleared by U on February 3 and by S on February 4. The memorandum is Part 1 of 3. The meeting was held in the Secretary's office.

SUBJECT
British Defense Review

PARTICIPANTS

The Secretary
The Under Secretary
Assistant Secretary Leddy
Thomas M. Judd, EUR/BNA

Sir Patrick Dean, British Ambassador
Michael N. F. Stewart, British Minister

The British Ambassador said he was returning to London for a brief consultation on the defense review. He hoped to give us a piece of paper setting forth the British position on January 25. The Secretary then handed him the attached paper giving U.S. reactions to what we understood to be the British position.

There was some discussion of the contents of the U.S. paper, particularly our view on the four-power arrangements in the Far East being proposed by the British. The Secretary asked if the UK had in mind a formal arrangement requiring ratification or more informal arrangements. He stated that a formal alliance would cause problems for us. We would not like to get into the business of amending any of our existing treaties.

Mr. Stewart said he thought the Prime Minister had in mind some kind of agreement. Whether it would need formal ratification he didn't know.

The Secretary said that we were anxious that the UK keep its commitment to Malaysia and Singapore. If the British presence in the Far East was connected only with the defense of Australia, it didn't have much point to it.

Attachment

INFORMAL NOTE ON UK DEFENSE REVIEW

1. On the basis of such indications as the U.S. has received concerning the direction of British thinking, and in the absence of more specific indications of British views, U.S. reactions are likely to be along the following lines on certain important points:

a. General. As a general principle, the U.S. would be unable to assume political or defense responsibilities in any area to make up for the reduction in, or withdrawal of, the UK presence. This would of course apply to Libya.

b. Aden. We are likely to accept, with regret, the probable necessity for their phasing out within the next few years; we attach great importance to their maintaining an adequate military capability in the general area of the Arabian Sea-Persian Gulf.

c. Singapore. This will need to be discussed at length; the British presence there is regarded as of very great importance.

d. Four-Power Arrangements in the Far East. Formal alliance arrangements in this area would raise many problems; a range of other possibilities for collaboration might be explored.

2. The U.S. attaches importance to the maintenance by the UK of a balanced capability depending on a suitable mix of forces to carry out UK responsibilities in the area East of Suez.

3. The whole range of British overseas commitments and capabilities should be discussed before the UK makes a final decision.

255. Memorandum of Conversation/1/

Washington, January 27, 1966, 10 a.m.

/1/Source: National Archives and Records Administration, RG 59, Conference Files: Lot 67 D 305, CF 8. Secret; Noforn; Limited Distribution. Drafted by Lindjord and approved in U on March 1 and S on March 7. The memorandum is Part 1 of 5; memoranda of conversation covering other portions of this meeting are ibid. The meeting was held in the Secretary's Conference Room. The British delegation arrived in Washington on January 26 and returned to London on the morning of January 28.

SUBJECT
UK Defense Review--Principal UK Presentations and U.S. Responses

PARTICIPANTS

U.S.

State
Secretary Rusk
Under Secretary Ball
Deputy Under Secretary Johnson
Assistant Secretary Leddy
Deputy Assistant Secretary Kitchen
Colonel Lindjord

Defense
Secretary McNamara
General Wheeler

Assistant Secretary McNaughton

White House
Mr. Bator

American Embassy, London
Ambassador Bruce
Mr. George Newman

UK
Foreign Secretary Stewart
Defense Secretary Healey
Sir Patrick Dean
Field Marshall Sir Richard Hull
Sir Henry Hardman
Sir Bernard Burrows
Sir Solly Zuckerman
Admiral Henderson
Mr. C. M. MacLehose, FO
Mr. P. D. Nairne, MOD
Mr. G. G. Arthur, FO
Mr. E. J. W. Barnes, FO
Mr. F. W. Armstrong, MOD
A/Cdre. Maynard, MOD
Mr. M. N. F. Stewart
Mr. D. V. Bendall
Mr. K. T. Nash

Secretary Rusk expressed on behalf of the US delegation his appreciation for the opportunity to hold discussions on this series of interesting and important subjects. He expressed regret for the bad weather at the time of the arrival of the British delegation./2/ He continued that we very much appreciate the readiness of Her Majesty's Government to discuss in depth and detail with us the problems relating to the UK Defense Review. These discussions are especially important now because it appears that today only the United States and the United Kingdom among the Free World countries are carrying the burden of world-wide security demands. Accordingly, we particularly value this chance to discuss the issues raised by the British and also to expose our thinking on our strategy, commitments, and plans. Mr. Rusk welcomed the British delegation and suggested that they lead off the substantive discussion in any way they wished.

/2/Washington was hit by a major snow storm and subfreezing temperatures.

Mr. Stewart thanked Secretary Rusk and said he and his colleagues were very pleased to be in Washington. They were happy the US participants feel able to discuss in detail and in great frankness these problems of mutual concern. He suggested that before moving on to the substantive problems, they might discuss how to deal with the press. In general, the British don't want to say much to the press at this stage; Mr. Healey is going on to Australia, and it would be unfortunate if too much is said publicly before he reaches Canberra. Mr. Stewart indicated that he and Mr. Healey would be meeting with British press representatives, on a non-attributable basis, after the talks today. They intended to confine their remarks to the press mainly to platitudes and generalities. He suggested that US and British press officers might come in for instruction later in the morning. Mr. Rusk thought these arrangements were appropriate and that we might meet with our respective press officers toward the end of the morning meeting. Mr. Stewart commented that essentially the British want to be as polite and uninformative as possible in dealing with the press. The subject matter of these discussions is extremely confidential and false inferences could readily be drawn from premature disclosures. Mr. Rusk agreed that we should say as little as possible to the press at this stage.

Mr. Rusk indicated that the President had expressed the hope he could see Foreign Minister Stewart and Defense Minister Healey during the course of the day, and we would have information soon as to when this would be./3/

/3/The only record of this meeting found was a January 27 entry in the Bruce Diaries: "At three o'clock Rusk, Stewart, Healey, McNamara, Dean and myself went to see the President. Most of the conversation pertained to Vietnam. It seemed evident he expected to resume bombing, but he wanted no reference made by those present to his mentioning the subject." (Department of State, Bruce Diaries: Lot 64 D 327)

Mr. Stewart began the British presentation by pointing out that the Ministers closely concerned, but not the Cabinet as a whole, have now reached provisional conclusions on the British Defense Review. After talks with the UK's allies concerned, the Cabinet will make its decisions. He proposed to set out now the foreign policy assumptions on which the British believe their Defense policy should be based. The objective of UK policy is to provide for the defense of the homeland, to contribute to the defense of neighboring nations, and to assist other nations of the world who feel threatened either by direct military aggression or by subversion. At the same time, the British do not want to be in the position of defending every existing regime in the Free World; change is simply inevitable, and the requirement is to try to promote change in an orderly fashion and to avoid getting more nations drawn into the cold war struggle. UK policy envisages not only defending its homeland and closely allied nations such as those in NATO, but also concerning itself with the defense of other allied nations such as those in CENTO and SEATO and of non-aligned countries who wish to maintain their integrity.

Mr. Stewart continued that the UK has both strengths and weaknesses in playing its part. First of all, there is the economic and financial problem. The UK has been overstretched in trying to maintain a range of commitments, and has been facing a serious foreign exchange drain. The British Government is extremely anxious that the UK should not run away from its proper responsibilities. However, if British defense commitments create an unbearable strain, especially in balance of payments terms, the result will be a weakening of the UK position everywhere.

Mr. Stewart said another special fact that bears on the British role is their past as an imperial power. There are both advantages and disadvantages inherent in this heritage. In some areas of the world the British are particularly vulnerable to attack because of their past associations; in other areas their past history gives them continued and substantial influence. The British have been trying now to make a series of judgments as to which bits of their former imperial holdings ought to be kept and which ought to be given up. In making these judgments, they have tried to steer clear of pre-conceived notions. There is simply no use in clinging to places where there is strong local hostility to their presence and where this would be a propaganda advantage to enemies. In other areas (the Persian Gulf is an example), the British are the only people who can provide the framework for orderly development. It is difficult to know how long the British can continue to provide such a framework. We also must keep in mind that some countries want British support but can't say so publicly; an example is Singapore.

Mr. Stewart said he would next like to reduce these general considerations to more practical terms.

In Europe it is quite clear that, in view of obligations to allies and of UK policy in Europe, there should not be any reduction in British ground forces. There would be, however, some reductions in the Air Force. He noted that a special problem in Europe is the relationship between the UK and the FRG. While there is a need for a closer relationship between the two, there are problems. There is no need to elaborate the obvious personal aspects involved in this relationship; it is simply a fact that many Britons do not approach with positive enthusiasm the idea of closer ties with Germany. However, this attitude is lessening with time, and with the present government in Germany this relationship would improve.

Mr. Stewart noted there is a growing feeling in the UK that the FRG is not paying its proper share of the cost of the common defense. The British accept the fact that there is not likely to be any German military contribution outside NATO at present, but there is a need for wider arrangements than offset for sharing of costs. The UK would like to discuss in detail how we can get other allies to carry a fair share of the defense and security burden. Mr. Stewart expressed the hope that diplomatically the US could help the British with the FRG on this problem.

Mr. Stewart noted that most countries in the Middle East and North Africa area reject formal alliance ties with the UK. Exceptions to this rule are Libya and Iran. On Libya, the British view is that arrangements for defense of that country could be more efficient and economical if the US could undertake a bigger share of its defense. The British believe this could be done without the need for more US military resources in the area. This adjustment would permit considerable economies for the British in Cyprus, without reducing the defense capability the UK is providing in Libya.

As regards the Arabian Sea-Persian Gulf area, the British believe the base at Aden is one of the areas from which they must withdraw. This would be compensated for by an increase in the forces in the Persian Gulf area. The UK plans to modify its commitment to Kuwait. With the new ruler in Kuwait, it is not certain how long UK protection will be wanted. With the changes proposed in the Persian Gulf the British feel they can reassure the Shah that they are not letting him down. It is proposed that Aden should become independent by 1968, and the UK would then withdraw from the base there. The UK very much desires that Nasser not represent this as a triumph for himself, and would hope that Nasser would withdraw from the Yemen, thus promoting peace and order in Southwest Arabia. Mr. Stewart suggested that the US use its influence with Nasser to encourage him to refrain from making difficulties for the British in connection with their withdrawal from Aden.

Turning finally to the large Indian Ocean-Pacific area, Mr. Stewart referred to the British paper on this subject. The UK believes it important to continue a large and indeed expensive military program in that region. The UK recognizes that the US feels it should not have to operate alone over this area. At present, only the UK, Australia, and New Zealand are available to join the US in this task. The British wish to make very clear that they are anxious to play a full and effective part in interdependent security arrangements in this area. Much depends on what happens on confrontation between Indonesia and Malaysia. The British assume it will be over by 1970 or sooner and do not consider this assessment overly optimistic. Here again, US diplomatic help in easing relations between Indonesia and her neighbors would be important.

Mr. Stewart said the above is essentially how the UK sees the problem. He said the Secretary of State for Defense would next discuss the proposed British force structure. Thereafter he suggested that we discuss the financial problem, the Libya and Middle East problems and the Far East-Indian Ocean area.

Mr. Healey said he regretted that he had not been able to provide more details earlier on the provisional conclusions of the British Defense Review; he pointed out that the British Defense and Overseas Policy Committee had not finished their consideration of the problem until the preceding Sunday. (Mr. Rusk said we are entirely familiar with problems of this kind.) Mr. Healey said he was grateful to Mr. McNamara for all the assistance Mr. McNamara had rendered to him in doing his job as Minister of Defense.

Mr. Healey pointed out that the British Government is concerned over the budget and fiscal strain created by their defense expenditures. The target given to him for the year 1969-1970 was 2 billion pounds. This meant a savings of 400 million pounds or a cut of 16% below previously projected levels. He was also given a target of 100 million pounds annual savings in foreign exchange costs or a cut of 1/3 in foreign exchange expenditures. These targets complicated the problem he already had, which was a force structure badly overstretched by covering too many commitments. He described the British forces as a "stage army" trying to cover 100 commitments with forces enough for 10, and said this stage army had become so threadbare that now there were not enough men to "walk behind the stage" fast enough to keep up the facade of strength.

Mr. Healey noted that the British give the US military services their monthly deployment maps. Referring to the map, he commented that British forces were deployed in "penny packets" all over the world, doing jobs vital to peace and security. He pointed out that British action in East Africa in 1964 may have prevented another Congo type situation there; similarly, operations in Zambia now are of vital importance, and British reinforcements in Cyprus two years ago Christmas nipped serious trouble in the bud. The two British battalions in British Guiana have made a real contribution to stability in that part of the Western Hemisphere. These jobs were costly for the British but they would be much more costly for others. The problem the British face is whether they can continue to carry out all these obligations in addition to maintaining large forces in the Malaysia area. He pointed out that until quite recently the British had a relatively higher percentage of their forces deployed in the Far East than the US did. He indicated that the British see many other potential commitments-Nigeria, for example.

From his viewpoint as Minister of Defense, Mr. Healey considered that this scattering of forces in penny packets all over the world (the stage army) had had two disagreeable consequences: (1) People in the military forces are badly overworked, and recruitment is becoming a problem; and (2) all British troops are continuously committed to operational tasks, limiting the UK's military and political flexibility.

Mr. Healey said by August last year the UK had identified savings of 220 million pounds out of the 400 million pound target. However, these budgetary savings, which involved getting better value for money, were made at costs in foreign exchange, specifically by buying US aircraft. Also these savings had no effect on the over-stretched condition of the British forces. Since August he has had to look at the possibility of reducing military tasks and the commitments from which these tasks flow.

Mr. Healey then described the review process he had followed. The British, using the McNamara techniques, had developed functional costings of various commitments. There were many difficulties involved since the cost of commitments change and it is a problem to forecast future military tasks. The British Chiefs of Staff in 1962 making its forecasts did not foresee the requirement to send troops to Cyprus nor did the current Defense Review take into account African needs which may eventuate. He noted for example that after the illegal Smith regime has collapsed, there may be a requirement for two brigades in Rhodesia for a long period of time. Mr. Healey observed that he had had to make savings of an additional 180 million pounds to meet his target ceiling of 2000 million pounds. This could be accomplished partly by cutting out marginal military capabilities and partly by cutting out military tasks. These cuts were costed at about 130 million pounds which still leaves him 50 million pounds over his target.

Mr. Healey commented he had been looking at a global force structure appropriate for tasks the British should be ready to carry out. This force structure should not be overstretched and should have some margin for unforeseen contingencies. This new proposed structure had been costed out at 2,100 million pounds. Subsequently, he had been able to narrow the gap down to 50 million pounds since it was clear the Chancellor would not accept a 2,100 million pound defense program. A range of alternatives had been identified for effecting the remaining savings, that could be offered to the Cabinet for consideration. A mix of these would close the 50 million pound gap, but he is anxious not to get tied down yet to a particular and rigid way of closing the gap. He is hopeful that the Chancellor will permit him some leeway on this remaining 50 million pounds.

Mr. Healey emphasized that the Cabinet as a whole had not yet been informed about the provisional conclusions of the Defense Review. There will be a need to persuade the Cabinet on the new force structure and deployments, and particularly on the balance of payments aspects. He described the new proposed force structure as representing minor cuts in capabilities and as providing much better value for expenditures. There would be a 16% cut against the original Tory 2,400 million pounds defense program. This would consist of 12% savings due to cost effectiveness measures, with only a 4% cut reflecting actual reductions in military capabilities.

Mr. Healey said the biggest single cut falls on the Royal Navy. The Navy will have a more cost effective mix of frigates and other ships, but there will be no new aircraft carriers. The Royal Navy would concentrate on East of Suez tasks, and would get some sophisticated new ships (including missile ships) plus atomic powered hunter killer submarines and more helicopters.

In describing the rationale for the carrier decision, Mr. Healey reported the British conclusion that--as with ICBM's--only big countries can afford aircraft carriers. He said the British Navy cannot man more than four carriers and the UK probably cannot afford more than 3; this means only 1 carrier actually on station. One of the carriers now in commission is the Hermes, which has a complement of only 12 strike aircraft plus 7 reconnaissance aircraft. It appeared to the British it was not worth the heavy 10-year cost of an additional carrier to maintain a force that would be represented a considerable part of the time by only this small carrier (the Hermes). Accordingly, the proposal for a new British carrier will be cancelled. However, the British would like to keep their existing carrier fleet going as long as possible, and this means until 1975. He said there is grave doubt as to whether the Fleet Air Arm (even with Royal Air Force help) would be able to continue manning a wasting force for as long as to 1975. Mr. Healey noted that the British are thinking of buying Phantoms for two of their carriers; these aircraft could later be ground based when the carriers are phased out. He said although the strike carriers will be out by 1975 at the latest, it is planned to keep some commando carriers, plus the Hermes (for early warning.)

The new force structure, according to Mr. Healey, would produce no cut in the number of aircraft or men in the Royal Air Force. He said one-third of the Air Force would be devoted to transport aircraft. He commented that there would be fewer combat aircraft in the British Air Force in the 1970's than in the French or German Air Forces. He added that the resultant Air Force would be more effective and would cost less. The most important feature would be 50 F-111A's, organized in four squadrons, half of which would act in the reconnaissance role. The decision to try to make do with only 50 F-111A's was based on three considerations: first, he frankly did not think he could get approval from the Cabinet for a larger number; second, the major aircraft project for the British in the 1970's is an Anglo-French variable geometry aircraft (he said sometimes called the poor man's TFX), which it was planned would be the follow-on aircraft; third, the British want the

F-111A's mainly for the Indo-Pacific area, where they hope to operate in stride with the Australians, who are also buying F-111A's. Mr. Healey reiterated that the key problem is the dollar cost of the billion dollars worth of airplanes being bought from the US.

Mr. Healey then indicated that this force structure would provide an overall capability to do nearly everything the British are doing now. It would have a wide range of peacekeeping capabilities, including logistic support for UN operations; a capability for intervention against unsophisticated enemies; greatly improved airlift capability, especially by incorporating C-130's; a strong reserve in the UK; and an amphibious capability East of Suez. It would also incorporate a powerful conventional deterrent against sophisticated nations, relying on F-111's for reconnaissance and strike roles, plus submarines and missiles. He stressed that the F-111A's are critical to the whole force structure. Finally the force structure would include a land and sea based nuclear capability ranging from air delivered bombs to 4 Polaris submarines. This in general terms described the overall capability of the proposed force structure.

Mr. Healey then identified the limitations of this force posture. Principally, if the deterrent failed, the UK could not in the 1970's fight a limited war against a sophisticated enemy, such as Indonesia. He expressed the hope that this would not happen, and noted that it would probably not happen if Indonesia stopped receiving Soviet equipment or underwent a more favorable development in terms of political orientation. In any event, Mr. Healey did not think it would be feasible politically for the UK in the 1970's to fight limited wars without allies. Thus, he concluded that the British were not really giving up a relevant capability for the 1970's. (Mr. Healey observed that in fact it is doubtful that the UK has the military capability today to deal effectively with an expanded conflict in Indonesia.) The ability to fight a limited war alone is the big option the British are renouncing, but Mr. Healey argued that the British do not really have this capability militarily now and could not use it politically in the 1970's.

Mr. Healey noted that the second significant limitation imposed by the new force structure would be the lack of the capability for large, long drawn out counter-insurgency operations. The British view is that unless the local population can carry out the basic counter-insurgency task themselves, it does not make political sense to do it for them. However, the British would have the capability to provide increments of support in the sophisticated area to poorer countries to assist them; he cited the sending of Javelins to Zambia as an example. He asserted that this ability to help poor countries in Africa or Asia by providing some sophisticated support may be very valuable.

Mr. Healey said a third limitation would be the inability to land troops outside the range of land-based aircraft, or to evacuate troops in such a situation. This was a key consideration in the carrier question. He concluded that, on balance, the political requirement for this type of capability is not likely to be large. Without this capability the British would now have to rely on help from their Allies.

Mr. Healey then described the deployment plans for this overall capability. Although plans have been made in great detail, it is impossible to know now what the actual deployments will be in the 1969-1970 time frame; all sorts of things may happen in the intervening years. But for planning purposes, the rough picture is as follows:

(1) The only areas with almost no forces will be the Caribbean and the South Atlantic, in each of which the British will have a frigate.

(2) In Western Europe, the British will keep the BAOR at its present strength provided they can get a bigger financial contribution to the cost of maintaining it. They will reduce the RAF elements in NATO committed to the nuclear role, but will increase the air units devoted to ground support. They will reduce the Royal Navy elements committed to SACEUR (from 46 to 30 escort vessels and from 26 to 13 submarines, mostly in the Mediterranean).

(3) In the Middle East-North Africa area, they will retain the existing planned force in Libya, giving up re-inforcement capabilities located on Cyprus, and Malta with a small exception. They will leave Aden after 1968, but plan to start a buildup in the Persian Gulf to replace some of what is lost in the area by evacuating Aden. The buildup in the Persian Gulf will be in the Bahrain and Trucial Coast areas. They will modify their Kuwait commitment somewhat by not providing land forces hereafter except in case of a coup.

(4) In the Indo-Pacific area, the attributable cost of the force structure will be 200 million pounds (which is slightly higher than the Prime Minister had envisioned). The projected cost of the Indo-Pacific deployments would be about 10% of the defense budget. They would maintain 7 major land units, partly for amphibious purposes and partly as a contribution to the Commonwealth Brigade. There would be powerful sea and air forces and a floating stockpile. The Hong Kong garrison would be retained, provided some financial support could be obtained from the Hong Kong government. There would be a much improved air movement capability in the area. In short, the British propose to retain a balanced but not wholly self-sufficient capability; this capability should be able to handle 95% of the contingencies likely to arise in the whole area East of Suez, and 99% of the contingencies likely to arise between Suez and Cocos Island.

Mr. Healey continued that the British would need allied help, specifically for fighting a limited war against sophisticated enemies. When the British carriers are gone, the British will also need help in operating outside the range of British land-based aircraft. He said they would need diplomatic help, too, in dealing with Cairo, Djakarta, Saudi Arabia, Iran and Australia.

Mr. Healey stressed that there were little new fixed capital expenditures provided except for 10 million pounds in the Persian Gulf over the next few years. This means, for example, that if there should be a need for an airfield on Aldabra or a base in Australia, the British would need financial help. But he said the main issue is foreign exchange costs, and it is in this area the British need help in the next two weeks in order to get their proposed new military program through the Cabinet.

Mr. Healey said again that the UK has an extremely serious problem with the foreign exchange costs of their military expenditures. For the British this foreign exchange cost is about 1% of their GNP, while for the US it is about 0.4%. The UK foreign exchange deficit due to military expenditures is 14% of their budget, while for the US it is approximately 5%.

Mr. Healey suggested the following areas might be explored to find ways of assisting them with their foreign exchange problem:

(1) Get the FRG to contribute more to the support of British forces in Germany.

(2) Possibly get some assistance for the cost of operations in Singapore.

(3) Above all, work out an offset to the F-111 buy--this is critical since the F-111 is the key to the proposed overall UK defense posture. (Mr. Healey also noted that because of the carrier decision, it had not been possible to reduce the numbers of F-4s needed since the RAF will now require more aircraft.)

Mr. Healey stated he must now convince the Cabinet that there is a chance to recover some of the incremental dollar costs of his proposed program. To complicate matters there are other dollar buys being considered, such as the Lance for the BAOR, and the Chinook helicopter. He commented that he had not yet told his Cabinet colleagues about these possible additional purchases from the US.

In concluding his presentation, Mr. Healey said the package just described is what the Foreign Secretary and he would like. They are prepared to make adjustments to meet the views of major allies, especially the US, but also Australia. Getting this package through the Cabinet and through the Parliament will depend on being able to assure them that the program is acceptable to Britain's allies and particularly that there will be help on the foreign exchange problem. Since the Cabinet has not yet been told any of this (only a committee of the Cabinet has been informed), Mr. Healey emphasized that it is vital to retain secrecy until publication of the White Paper. If any of this, especially anything on the weapons side and above all on the carriers, was leaked here in Washington, the whole program would be gravely prejudiced in the UK.

Mr. Rusk thanked Mr. Healey for his presentation and said the US delegation fully realizes that these views have not been approved by the British Cabinet as a whole. He said he expected his colleagues to keep these matters very secret until the British make them public. He proposed that we continue to be in touch with the British as the Review progresses.

Mr. Rusk commented that he found himself in general agreement with most of what Mr. Stewart and Mr. Healey had said. The US is not opposed to change as such; he pointed out that we are working very hard in this Hemisphere to introduce change at a revolutionary pace. The problem is whether the political fabric in these countries will permit change to be accomplished by peaceful and democratic means. Mr. Rusk continued that the US would be reluctant to expand its undertakings to support other nations. We have formal commitments with 42 countries, and there would be great reluctance to extend our commitments. The commitments to these 42 countries are major undertakings aimed at threats to world peace, largely the problem of Communist aggression. Mr. Rusk said the US understands the British problem of being overstretched. We have a comparable problem; our Great Society programs are being set back this year by the costs of Vietnam. Over the next 18 months, we will probably have to add $25 billion to the budget to pay for Vietnam. We also have a foreign exchange problem, which because of its cumulative nature is very serious for us. The notion of cutting the coat to fit the cloth is one we appreciate, but if everyone does this the US would have a residual responsibility involving manpower, arms and finances and we simply cannot do this on a world-wide basis.

Mr. Rusk stated that the US attaches the greatest importance to Britain's retaining a world power role. It would be disastrous if the American people were to get the impression that the US is entirely alone; they simply will not accept it. There are great strains now on this point and insistent questions are being asked by the American people as to what our allies are doing while we are in Vietnam. There will be more questions here concerning our NATO allies. The American people want to know not only what they are doing for their own defense, but what they are doing in other parts of the world. The US has met its NATO commitment but is also involved in a major conflict in the Pacific.

Mr. Rusk noted that Britain as a partner is very important to the United States in sustaining the kind of role we think is essential to achieve peace and security. The British world role has, in a sense, a multiplier effect because of its influence on other nations. He commented that he had spent most of the week before Congressional committees, and there had been intensive questions on these matters. Mr. Rusk continued that in many parts of the world, the British have ties as a result of which they can act; they are acceptable, but the US would not be. This is partly because of British historical ties in these areas and partly because the US is looked on in many places as the point of the spear of the Cold War.

Mr. Rusk said he had the general impression that we could narrow our differences rather quickly. In NATO, we can agree to the British treating the BAOR as a source of reinforcement for other areas, and certainly can agree with the decision to make no change now in the BAOR itself. We can see the point in making some reductions in the Royal Air Force on the Continent, but note that this will require careful handling in NATO to avoid undesirable political repercussions.

Turning to the Middle East, Mr. Rusk noted we would want to talk about Libya in more detail. On Aden and the Persian Gulf, he thought we could reach a common understanding, and said we would see what we could do in influencing Nasser. He observed that Nasser had not been the chief offender recently; the Yemenis themselves had been difficult. Although Nasser has not yet been tested, we will follow this closely and be prepared to discuss it further.

The thing that impressed Mr. Rusk the most was the British statement on keeping a big and expensive force in the Far East and playing a major role there. He pointed out that timing of deployments is of the utmost importance in that area. We have said ourselves that there is no requirement for US bases on mainland Southeast Asia once peace is achieved; but if either Hanoi or Peiping got the impression that the British were on the way out in the Far East, it would make the British problem and our own much more difficult. (He remarked that we have done about everything in our peace effort except to parachute the Secretary of State into Hanoi, but we have had no response.) One could understand that Hanoi might get the impression that demonstrations in the US regarding Vietnam mean that the US is becoming tired and will weary of the struggle. He concluded that acoustics are very important in regard to the Southeast Asia situation. He considered it essential to underline the fact that the American people simply will not become the gendarmes of the universe. Mr. Healey said the same was true in the UK. Mr. Rusk continued that he would not want the word to get out that the British are trying to get the US to take over some commitments the British are dropping. This is the worst possible moment in post World War II history for such a transaction. It was simply not on for us to consider seriously any additional commitments. He concluded that, in looking over the British paper, if we could reach agreement on the detailed points then we would find we are agreed in principle.

Mr. McNamara said he was very sympathetic with the British need for assistance on budget and foreign exchange costs, and said the US would do everything possible to be of assistance. He was impressed with the imagination displayed in developing the extraordinarily ingenious solution to the British defense problem. He could not over-emphasize Mr. Rusk's point concerning the political difficulties the US would have in policing the world alone. There was, in fact, a serious question in his mind as to whether the US was militarily capable of doing the world-wide job. He was certain it was politically impossible for the US to do it. It was not that it was a financial problem for the US, for even after adding $25 billion for Vietnam our defense expenditures will be a smaller percentage of our GNP than in five of the past six years. Thus, it was not a financial problem, but a political problem. Mr. McNamara observed there are twice as many Americans in uniform proportionately as in NATO countries, including the UK and FRG. He said with 270,000 men in combat, the US won't tolerate indefinitely carrying this burden and will need the association of other nations. He doubted whether the US could carry on for very long in the Indo-Pacific area without the participation of Japan. While we must have UK participation, that will not be enough. He voiced the doubt that there would be continued public support for US participation in NATO unless other NATO nations support us elsewhere in the world, over a reasonable period of time. He suggested we should talk about this problem today. Mr. McNamara continued that the F-111 and attendant foreign exchange implications were very complex. He emphasized that the US Congress is not at all willing to extend commitments anywhere while we have 270,000 men in Vietnam. He concluded that we have problems of our own, but he again expressed admiration for the British analysis and proposed solution./4/

/4/Further discussion took place during lunch. A memorandum of conversation is in the National Archives and Records Administration, RG 59, Central Files 1964-66, DEF 6 UK.