277. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/
Washington, October 19, 1967, 7:05 p.m.
/1/Source: Johnson Library, National Security File, Memos to the President, Walt Rostow, Vol. 46. Secret; Sensitive
SUBJECT
Contingency Support For Sterling
At Tab A is Joe Fowler's memo/2/ recommending an increase of $100 million in the funds he has available for market operations to support sterling.
/2/Not printed.
What it comes down to is this.
Today's increase in the discount rate is part of the last ditch British effort to hold the sterling rate. As you know, they moved strongly last year to support the pound: they deflated their economy, cut down foreign commitments and borrowed heavily abroad.
The program worked well through the first quarter of this year. They were able to pay off more than $1 billion in debt. Then they ran into bad luck:
--disappointing exports, largely because of the recession on the continent;
--the Middle East crisis and the closure of the Canal;
--rising interest rates elsewhere while theirs were going down.
They began to lose reserves and had to draw heavily on their line of short term credits.
The increase in the bank rate is designed to draw funds back to London. The market's initial reaction was slightly disappointing because some expected a higher increase in the rate. But sterling is holding steady because of support operations.
Through selective and carefully timed actions, we have operated successfully in the market in the past to keep the rate from worsening on bad news or to strengthen it on good news. We do so at our own discretion but in cooperation with the British.
We now have $160 million available for this purpose. Fowler recommends that you authorize him to make $100 million more available out of the Exchange Stabilization Fund. This would give the necessary leeway to have a maximum impact on the market-either to continue defensive operations or to take advantage of favorable opportunities.
These funds are guaranteed against loss from devaluation. There is no balance of payments effect. If the funds are used, it would in effect amount to an increase in our lending to the U.K.
This is a contingency investment that could be used very effectively to support sterling. I believe Fowler's proposal makes sense. Deming, Okun, Daane and Fried who have gone into it carefully concur in the recommendation.
Your decision is needed as soon as possible so that our people in the exchange market will know how much ammunition they have and plan their operations accordingly from tomorrow on./3/
/3/There is no indication on the memorandum of a Presidential decision.
Walt
278. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/
Washington, November 13, 1967.
/1/Source: Johnson Library, National Security File, Country File, UK, Vol. 12. Secret. Drafted by Edward Fried of the NSC Staff.
SUBJECT
Sterling Crisis
I note you are seeing Joe Fowler at noon today./2/ He may have to give you some background on the sterling crisis on which we may need a decision from you later in the day. We do not yet have all the information to put the issues properly before you.
/2/No record of the meeting was found.
The British came in Saturday to tell Fowler they were near the end of the line. Without assurance of long-term credit they may have to devalue--perhaps within a week. Their line of short-term credit is down to $600 to $800 million. The announcement of poor trade figures on Tuesday could keep the pound under pressure.
I won't go into the pros and cons of letting the pound go. The main point is the risks for us are just too great to be worth the gamble--if it can be avoided through a good multilateral support operation. The European Central Bankers seem to be of the same mind.
It may be possible therefore to work out a support package through a large IMF stand-by credit, through a package of bilateral credits and swaps, or through a combination of both. There would be no budgetary or direct balance-of-payments costs for us in any action we might consider, and it would have to be multilateral or not at all.
It is our feeling, and it seems to be that of the Europeans, that this would be the last try at supporting sterling. But it would be well worth it, if it can be pulled off.
W. W. Rostow/3/
/3/Printed from a copy that bears this typed signature.
279. Circular Telegram From the Department of State to All Posts/1/
Washington, November 18, 1967, 2126Z.
/1/Source: National Archives and Records Administration, RG 59, Central Files 1967-69, DEF 1 UK. Secret; Immediate. Drafted in the Treasury Department; cleared in the Departments of State and Treasury, the Council of Economic Advisers, the Federal Reserve Board, and the White House; and approved by Anthony Solomon.
71785. Circular Cable for Guidance of U.S. Missions overseas.
1. British Government has notified IMF of intention to set a new par value for sterling of $2.40. This represents devaluation of 14.3 percent. The IMF approved this action this morning to be announced 2130 GMT./2/
/2/For text of Chancellor of the Exchequer Callaghan's statement, issued November 18, see American Foreign Policy: Current Documents, 1967, pp. 194-195.
2. U.S. view is that under existing circumstances what British have done is both necessary and desirable. We wish make sure action is effective and that similar action is limited to handful of countries with very special problems and virtual dependence on U.K. and only then through normal IMF procedures. FYI. This means Ireland almost surely and possibly although we hope not New Zealand and Denmark. FYI.
3. U.S. reaffirms commitment to buy and sell gold to foreign official holders of dollars at $35 an ounce. Similar exchange rate actions by any significant number of important trading countries would put pressure on U.S. dollar. Furthermore, until intentions of major countries are made public uncertainty may lead to speculative pressure.
4. We are hopeful governments will announce promptly intentions to maintain their present par values. To this end U.S. is initiating series moves to reduce uncertainty and calm foreign exchange markets. We are undertaking series of direct high-level telephone contacts between U.S. officials and Finance Ministers and Central Bank Governors of major countries, approaches by Diplomatic Missions in other areas, announcement of our own intentions.
5. U.S. will issue public statement which will be transmitted by immediate cable as soon as issued./3/
/3/The White House released a statement by President Johnson on November 18; for text, see ibid., pp. 195-196.
6. As soon as U.K. action becomes public knowledge Missions are urged to deliver text of U.S. statement to Finance Minister and are free to use foregoing as guidance in discussions with government officials, central bank officials and public. In meantime if Missions approached by monetary authorities who have been informed of U.K. action may feel free to use foregoing information except for FYI.
7. Supplementary cable/4/ will be dispatched to advise Missions of direct telephone contacts and to provide supplementary instructions where it is desired that Missions take initiative in early approach to monetary authorities.
/4/Not further identified.
Rusk
280. Telegram From the Embassy in the United Kingdom to the Department of Defense/1/
London, November 18, 1967, 2315Z.
/1/Source: Johnson Library, National Security File, Country File, UK, Vol. 12. Confidential; Immediate. Repeated to the Department of State. The telegram bears the notation: "Seen by Mr. Bator."
3989. Subj: Defense impacts of new economic measures.
Following letter from MOD Healey to Sec Def McNamara given to EmbOff at 10:00 P.M. 18 Nov. for urgent transmission.
"Dear Bob
You will just have heard of the new economic measures announced by the Prime Minister including cuts in public expenditure for the financial year 1968/69. Inevitably these cuts include a reduction in defence expenditure. In the summer we said we expected that defence expenditure in 1968/69 would be below a target of 2000 million pounds (at 1964 prices). We now plan that it will be below 1,900 million pounds. Some of this reduction will arise not from new programme cuts, but from processes of financial refinement and rephasing of production expenditure. For presentational reasons it may be necessary for us to lay particular stress on the programme cuts.
2. In searching for economies I have been most anxious not to make changes in the pattern of defence policy as we formulated it in July, particularly as regards our political commitments, the deployment of forces and the major elements in our military capabilities. While I have not yet decided finally on the make-up of the reduction, I am now hopeful that I can maintain these conditions.
3. Though of course, my colleagues in the Cabinet will have their say before final decisions are taken, I hope to prevent the economies affecting any of our major US purchasing programmes--the F.111, Phantom or C.130--though it may be necessary for us not to proceed with the Chinook deal. As you will appreciate, such an economy would have a presentational value greater than its military or financial significance.
4. You will be particularly interested in whether there is any major consequence for the Far East and the Gulf. Again, I hope to avoid this, though inevitably there may be one or two minor adjustments in the phasing of re-equipment. But, given the broader context and our desire to preserve other parts of our programme it is clear that we shall be unable to go ahead with the Aldabra project. This was, as you and I agreed in Ankara, a marginal option. In the pressure of priorities I can no longer see a space for it, particularly as its elimination will have a bigger public impact than its military cost or value might justify. It may therefore be necessary for us to announce the decision on Aldabra very early next week. I am sorry about this especially after all the hard preparatory work put in by both our staffs.
5. I hope to be able to discuss all this in greater detail with you at Brussels, when my detailed plans will be clearer, but I wanted you to know how my mind is working as soon as possible.
Denis Healey"
Bruce
281. Telegram From the Embassy in the United Kingdom to the Department of State/1/
London, November 24, 1967, 1144Z.
/1/Source: National Archives and Records Administration, RG 59, Central Files 1967-69, FN 17 UK. Secret; Immediate; Exdis.
4172. Pass Treasury for Deming from Griffin. Following is memcon your meeting with Sir William Armstrong November 17:
1. Frederick Deming and James Griffin accompanied Sir Denis Rickett from London Airport to U.K. Treasury at 9:30 PM, Nov 17. On meeting there with Sir William Armstrong, Joint Permanent Secretary to the Treasury, Mr. Deming was informed that U.K. had decided to devalue to $2.40 or 14.3 percent. Deming then listed countries which his understanding would hold their exchange rates in event of U.K. devaluation as follows: U.S., Common Market countries (although France had indicated might also move if hurt too much), Sweden, Norway, Japan, Canada, and Switzerland. Deming indicated Denmark would follow U.K. and probably Spain and Austria. He did not know about Australia but Armstrong felt they would hold, although he could not be sure. Deming said Kashiwagi had said Japan's rate would be tied to that of the dollar.
2. Armstrong said Maude of U.K. Emb Washington had informed Secy Fowler of move Friday afternoon, London time, and Amb Deane had called on Pres Johnson to inform him./2/ Armstrong said had informed Schweitzer at IMF that U.K. would request $1.4 billion stand-by from IMF. Armstrong said Schweitzer said he would at 9 AM inform Executive Directors of special meeting and give them paper on proposed devaluation at same time and convene meeting to discuss it at 11 AM. Schweitzer estimated would take Board three hours to discuss, thus not have decision before 2 PM, Washington time, 7 PM London time. Schweitzer was sending Fund mission led by Goode. Armstrong said Callaghan had telephone conversation with Fowler at about 3:30 PM London time on Friday but was not clear whether Fowler had been informed at that time. Since telephone line not secure, discussion had been on very guarded terms and Callaghan not clear on Fowler's understanding of some points made in the conversation. Schweitzer informed British it could be end of following week before stand-by credit could be granted, thus Armstrong said U.K. would need a large reflow of short-term funds which had gone out Thursday and Friday or short-term help from major countries.
/2/No record of these conversations was found.
3. Deming stated major countries had come to him in Paris on Thursday and Friday volunteering short-term credits to U.K. which along with U.S. contribution totalled some 13.75 billion dollars. Deming said these offers had been extended on assumption of no devaluation, thus he could not be sure how many would still be available, but he thought most if not all would be.
4. Armstrong said U.K. tentatively estimated devaluation would improve B/P by pounds 500 million, although this somewhat hasty estimate which would have to be refined. This improvement would not become fully effective until end 1968 or beginning 1969 since effect on exports could not be immediate. U.K. had forecast large B/P deficit for 1968 without devaluation and B/P in next few months would still be in deficit. He said for near term they now relying on large reflux of capital.
5. Armstrong gave accompanying govt program as follows: reduction in govt expenditures of pounds 400 million of which pounds 100 million defense, 100 million abolition export rebate (which Armstrong was sure would please U.S.), 100 million abolition set premium payments, 100 million reduction other govt expenditures mostly investment expenditures by nationalized industries; raise bank rate to 8 percent; credit squeeze with virtual ban on personal loans for consumption and reduction in bank lending ceiling from 105 percent to 100 percent with exemption for export credits; increase in corporate tax of 2-1/2 percent, increase in heavy fuel oil duty of one penny per gallon. Armstrong said this would take out from home resources pounds 500 million by end 1968 or beginning 1969. This would offset inflationary impact of anticipated 500 million B/P gain which was net of gross gain of 800-850 on exports partially offset by 300-350 deflationary effect from imports.
6. Governor O'Brien of BOE,/3/ who had been called earlier by Armstrong, joined the meeting. Deming repeated for O'Brien his assessment of countries which would hold rate and gave O'Brien list of countries who had offered credits totalling some $1375 million. O'Brien said "we" had felt U.K.'s short-term indebtedness already quite enough and felt they should not take on any more (this was in regard to defending old parity, not in new circumstances). O'Brien computed total short-term help now available at $3275 million, including 1375 bilateral credits as reported by Mr. Deming, 1400 from IMF stand-by, and 500 from U.K. dollar portfolio. O'Brien said he felt these countries should now come to him rather than he going to them, and he hoped to be taking telephone calls from them on Sunday. He said U.K. would declare bank holiday on Monday.
/3/Bank of England.
7. Discussion then reverted to timing of announcements. U.K. tentatively planning to make announcement at 9:30 PM Saturday but would much prefer to make it earlier if possible. However, must wait for IMF Executive Directors' decision which Schweitzer said could not come before 7 PM London time and possibly not before 8 PM London time. Deming questioned need for such long period deliberation in IMF and thought timing could be pushed up. Armstrong said earlier announcement would be much better for press and TV coverage in UK. It was also tentatively agreed with U.S. Treasury that Secy Fowler would make announcement at 6 PM Washington time./4/ In any event, however, U.K. would have to sustain selling pressure from Middle East markets which open on Saturday. U.K. would inform European countries of decision just before IMF meeting and Armstrong felt sure could not avoid some leak getting to Middle East countries. However, they were resigned to these losses and since Middle East banks had limitations on amount of dollar holdings, losses would be limited.
/4/For text, released November 19, see Department of State Bulletin, December 11, 1967, p. 793.
8. Armstrong and O'Brien expressed gratitude to Deming for his efforts and for what he had reported to them. They also expressed their gratitude for U.S. Govt's cooperation through entire crisis period and Fowler's attitude, who as reported by U.K. Embassy Washington, received news "without animosity."
Bruce
282. Telegram From the Embassy in the United Kingdom to the Embassy in Australia/1/
London, December 21, 1967, 1130Z.
/1/Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL UK-US. Secret; Immediate; Exdis. Repeated to the Department of State. The President and Prime Minister were attending funeral services for Australian Prime Minister Holt.
185. For the President from Bruce. Subject: President Johnson and Prime Minister Wilson meeting at Melbourne.
1. In connection with Embtel 184 to Canberra/2/ I should like to make following comment.
/2/Dated December 20, this telegram analyzed Wilson's political position and problems. (Department of State, Bruce Diaries: Lot 64 D 327)
2. PriMin Wilson's domestic political position has been so eroded that it is impossible to forecast now whether remedial financial and economic measures essential to real confidence in Britain and elsewhere in his policies will be accepted, in necessary measure.
3. Under the circumstances, I urgently suggest that the President offer him at this time nothing more than a sympathetic hearing, and say he will be glad to discuss the program when it has been definitely settled upon, and looks forward to doing so at Washington in February./3/
/3/No memoranda of conversation were found. According to Wilson, The Labour Government, 1964-1970, p. 478, the two men discussed Vietnam.
4. After a wild Christmas binge of buying in considerable degree increased by a desire to convert disturbed currency into goods, a winter of even heavier discontent is almost certain to distress the British. Meanwhile, I believe we should buy no pig in a poke.
Bruce
283. Telegram From the Embassy in the United Kingdom to the Department of State/1/
London, December 21, 1967, 1726Z.
/1/Source: National Archives and Records Administration, RG 59, Central Files 1967-69, DEF 1 UK. Secret; Priority; Exdis. Also sent to the Department of Defense.
4964. Subj: New UK defense cuts.
1. Healey invited PolMil Counselor to call at his office this afternoon to discuss subject of new defense cuts, particularly in light of massive press speculation on fate of F-111 contract. When PolMil Counselor arrived Healey apologized that he had to rush off to special Cabinet session. He asked Broadbent (his office Chief of Staff) who he said was privy to his thinking to review situation on his behalf.
2. Broadbent said that Healey was fighting hard in Cabinet sessions on budget reductions, generally taking line that he had already "done his stuff" in past budget cuts, while civil depts had not. Now it was time for them to show "color of their money." There was no reason why it was always Defense's "sacred cows" that had to be gored. This line, on which Healey had allies, was having some effect, as was Healey's other basic pro position, i.e. that Cabinet, and especially Political Dept, had to make decisions on what commitments UK would relinquish before MOD can get down to decisions on specific changes in structure, equipment and deployments. Broadbent said that how long Healey could sustain this line was "matter of speculation." Timing was such in this crash exercise that decisions were perforce focussed on broad political intentions.
3. It seemed generally accepted that there was little that could be done to save money on defense budget in 1968-69. There was not much to be saved even in 1969-70. Nevertheless F-111 project is one that seems to attract attention as most beguiling area for cut, whether it makes sense in terms of UK capabilities for fulfilling its commitments or not.
4. Healey has taken same line in Cabinet as he has with press, i.e. that F-111 is a form of military capability that it is right and valid for UK to offer within framework its alliances. He has stressed its utility in Europe and its importance for rapid reinforcement capability abroad. He has also stressed value of offset and industrial advantage it brings UK.
5. Healey felt, according to Broadbent, that US could be helpful to him in this fight, if we desired, by "very discreetly" taking hard line on consequences cancellation in our discussions this subject with UK officials and reporters. We could stress the highly favorable price to UK of aircraft and concessions we have made on offset arrangement, playing up our "unfathomable generosity." This would help undo some of the Douglas-Home line (London 4960)./2/ We could also stress our conviction that F-111 represents a capability that it makes sense for UK to retain both in NATO context and worldwide.
/2/Telegram 4960 from London, December 21, reported on press coverage of the F-111 cancellation. (Ibid., DEF 12 UK)
6. PolMil Counselor pointed out that this would be fine if Healey won the day, but could make a turn around difficult if British were to come to us within a week or so and ask for soft terms on cancellation. Broadbent admitted this would be the case but stressed Healey's determination to stand pat on entire package of 50 aircraft. He said he did not rule out, "at the breaking point," Healey's being willing to be forced down to 40-45 aircraft but thought it would make no sense to go below this.
7. In summary, Broadbent hoped we would be willing to stress how far we have gone to help UK in view value of F-111 to NATO and in other theatres. (Broadbent said we might make point, as Healey is doing, that if UK does not have F-111, France will be only other country on continent with long-range strike-recce capability.) To extent this could be done without cancelling out possibility reduction in size of aircraft buy so much the better.
8. Broadbent said that so far Healey had had surprisingly sympathetic response from Labor backbench. Finally Broadbent said Healey wished him to make once more the point that early response to his request to Nitze to increase offset by $150 million would materially help him in holding the line./3/
/3/The response was transmitted in telegram 4860 from London, December 15. It provided a list of British weapons systems that might constitute an offset to costs of F-111 procurement. (Johnson Library, National Security File, Country File, UK, Vol. 12)
9. Comment: Embassy has had numerous inquiries from press re how US would view cancellation of F-111 and whether we would make it "easy" for HMG. So far we have refrained from comment on ground question is academic. Healey is now asking us to give him some discreet help in his internal battle. If in fact US attaches importance to preservation of F-111 program and considers retention of this capability by UK is important to us, as Embassy believes it should be, it would be fully feasible for Embassy and Washington in their press contacts to make some of these points. Request guidance on this as well as indication when we may expect response on proposal to up offset by $150 million./4/
/4/In telegram 89054 to London, the Department of State instructed the Embassy that in view of further British defense cuts, the United States should avoid the appearance of intervening in support of Healey. (National Archives and Records Administration, RG 59, Central Files 1967-69, DEF 1 UK)
Bruce
284. Letter From President Johnson to Prime Minister Wilson/1/
Washington, undated.
/1/Source: Department of State, Bruce Diaries: Lot 64 D 327. Secret. The text of the message was transmitted in telegram 91707 to London, December 31. (Johnson Library, National Security File, Head of State Correspondence, United Kingdom)
Dear Harold:
We are at the end of a difficult year, and both our countries have much unfinished business to carry forward. It is encouraging to recall, nonetheless, that it has been a year in which our close consultation and collaboration have helped produce a number of memorable achievements--the maintenance of security arrangements in Europe, the agreement of the new reserve unit in the IMF, the completion of the Kennedy Round, to recall a few. We are not yet out of the woods in the Middle East, but we have certainly made progress, with the passage of your Resolution in the Security Council./2/
/2/Security Council Resolution 242 (1967), adopted November 22.
We can take heart also from the success we have had through our joint efforts and through the cooperation of the other financial powers in meeting the critical problems of November and December and in restoring a sense of confidence and order to the world's financial system.
The speculative fever of these weeks has severely tested our methods of cooperating on economic problems; but, we have continued to work together effectively in a financial world suddenly beset by fear and disorder. We have, thus far, met and repelled a serious threat to the foundations of the international monetary system, which, in turn, could also have undone the accomplishments of the Kennedy Round and the unity of the system of international commerce.
Meanwhile, the agreements at London and Rio on a plan to supplement existing reserve assets are a further reason for solid satisfaction, as we look to the longer future.
In both of these achievements--the long-range improvement of our international monetary system and the recent defense of the existing system--James Callaghan at the Treasury and Leslie O'Brien at the Bank of England have played important and indeed vital roles. I know that they have contributed much to the recent efforts to preserve order in the gold and foreign exchange markets. I am reassured by our mutual determination to exert a constructive force in the world financial system. This I know reflects a clear common understanding of the importance of international monetary cooperation in creating that environment of safety and opportunity which is required for the continued growth and stability of our nation's economies.
As you know, we, as well as our trading partners, have been concerned about the balance of payments position of the United States. This concern has been increased by the events of recent weeks. As a result, I am announcing on January 1, 1968, a new and vastly strengthened program to reduce our deficit and guarantee the continued viability of the international monetary system./3/
/3/For text, see Public Papers of the Presidents of the United States: Lyndon B. Johnson, 1968-69, Book I, pp. 8-13.
In the program, I will press for tax increase to restrain excessive demand in the United States and to reduce our budget deficit to manageable proportions. I hope that this bill will soon become law. This, in itself, should be a helpful factor in our balance of payments and should demonstrate to the world that we will keep our own economic house in order. And the Federal Reserve has already made clear its determination to use monetary policy to this end.
But much more needs to be done; and we propose to do much more. Our balance of payments actions are designed to improve both our current and our capital accounts.
These actions will be painful to the United States and, to some degree, to our international partners. They are designed to avoid as far as possible adverse effects on the developing areas of the world. We hope they will result more in the reduction of surpluses than in the shift or increase of deficits. And we have kept very much in mind the views of other countries and the international economic institutions.
In this effort we wish to proceed within the spirit and the letter of the recent resolution of the OECD Ministerial Council that the adjustment of the American deficit and the European surplus is a matter of common concern to be handled cooperatively. Surpluses in international payments are the mirror image of deficits. Thus, both surplus and deficit countries must strive to reach balance and act cooperatively to this end. This is no less true in the 1960's than it was in the late 1940's and '50's, when we carried the responsibilities of a surplus nation. This concept was definitively developed by our best economic and financial experts in a carefully prepared OECD report on "The Adjustment Process" in August 1966.
Our deficits have been the net result of a current account surplus, including a trade surplus, inadequate to support foreign exchange costs of our external capital flows, foreign aid programs, and military expenditures for the common defense. During the period of the "Dollar Gap", these deficits helped redistribute the world's monetary reserves--the time has come, we all agree, to bring them to an end.
As we see the problem, we need to act to improve our current account, reduce capital outflows, and neutralize more fully our net foreign exchange expenditures in the common defense. Our new program is designed to move us strongly towards equilibrium. But full success will require the understanding and cooperation of our partners. It seems axiomatic to us, and basic to our view of the OECD Resolution, that those in strong reserve positions, or in surplus, should avoid actions that increase surpluses, should not take off-setting action to preserve their surpluses--indeed, that it will be necessary for them to take positive action to move toward balance. Otherwise, the only result will be to shift the adjustment burden to those who can least bear it or to make it more difficult for us to achieve balance. In our judgment--and, I believe, in your judgment--it is important for the United States to move decisively toward balance with the last possible dislocation to the world's system of trade and finance. Our mutual security and collective well-being, which rest upon the continuing strength and unity of the international economic system, are at stake.
It is against these fundamental objectives, which I am sure are common objectives, that I hope you and your Government will judge our new and strengthened balance of payments program. I have asked Ambassador Bruce to call on you to explain our new program more fully. I have also asked Under Secretary Katzenbach to visit with you in London to review further both this program and the entire scope of our mutual cooperation. I trust you and your key ministers will support this program and, thereby, help preserve confidence in the system we have built so diligently together over the past twenty years. I am looking forward to seeing you in February.
Sincerely,
Lyndon B. Johnson/4/
/4/Printed from a copy that bears this typed signature.
285. Telegram From the Department of State to the Embassy in the United Kingdom/1/
Washington, January 5, 1968, 2212Z.
/1/Source: National Archives and Records Administration, RG 59, Central Files 1967-69, DEF 6 UK. Secret; Immediate; Limdis. Drafted by Brewer; cleared by Battle, BMI, and G; and approved by Rusk. Repeated to Dhahran, Jidda, Kuwait, Tehran, and Paris.
94043. Subject: UK and Persian Gulf. Ref: State 93645; London 5236./2/ From Secretary for Ambassador.
/2/In telegram 93645, January 5, the Department of State reviewed efforts to discourage the British from announcing a definite timetable for withdrawals East of Suez. (Ibid., DEF 1 UK) Telegram 5236 from London, January 5, reported that the British had not yet set a firm date for these withdrawals. (Ibid.)
1. View info reftel re imminence British decision accelerate withdrawal from Persian Gulf, request you convey following personal message from me to FonSec Brown soonest:
"I am deeply disturbed by information which has just reached me to the effect that HMG may be considering accelerating its withdrawal from the Persian Gulf. As you know, we attach very high importance to the maintenance of the British position in the Persian Gulf for the indefinite future. We welcomed the repositioning of some of your forces there from Aden last year as an earnest of your determination to continue to play the essential stabilizing role in the Gulf which has been so helpful to us all for so long. While economies can no doubt be made, I would earnestly hope that when we meet next week HMG will not have taken any irrevocable decisions. In our view, fixing of specific timetable at this early stage would be likely feed instability in the region and increase your own problems in arranging eventual orderly departure."
2. In event Brown already departed for Tokyo, I leave to your discretion how best communicate our concern to top level of HMG. Nick Katzenbach's visit January 6 may afford additional opportunity stress our viewpoint./3/
/3/In telegram 5273 from London, January 6, Bruce reported that he delivered the message to Brown who would reply directly to the Secretary. Bruce added: "My impression is that he is sympathetic to our views, but has encountered strong opposition in the Cabinet." (Ibid., DEF 6 UK)
Rusk
286. Telegram From the Embassy in the United Kingdom to the Department of State/1/
London, January 7, 1968, 0003Z.
/1/Source: Johnson Library, National Security File, Country File, UK, Vol. 13. Secret; Immediate; Exdis.
5279. Secun 31. For Secretary and Secretary Fowler from Katzenbach./2/
/2/The Under Secretary visited the six European Community capitals and Switzerland January 2-6 to explain President Johnson's balance-of-payments program.
1. Tonight we met at Chequers with Prime Minister Wilson, Fred Mulley, Peter Shore, Paul Gore-Booth and William Armstrong. I first gave the Prime Minister a run-down on our visits around the continent. They were particularly interested in French reaction and whether any of the other countries had begun to make estimates of the effects of our measures. Prime Minister reiterated the position taken by Roy Jenkins at our meeting last Tuesday of complete understanding and support for the President's program./3/ I emphasized that these measures were taken in a political context and that the President was very anxious to be able to subtract the balance of payments argument from those who would, for other reasons, wish to advocate either troop withdrawals or protectionist measures.
/3/The meeting took place on January 2. According to a January 2 entry in the Bruce Diaries: "Katzenbach, at times assisted by Deming, explained at length what we hoped to achieve by the proposed measures. Roy Jenkins replied, saying he thoroughly understood the reasons for what we were doing, and, although our actions would have a harmful effect on the British economy, he did not propose to make any complaint about them." (Department of State, Bruce Diaries: Lot 64 D 327)
2. While recognizing that these political forces were at work, the Prime Minister did express concern about any measures in the trade field and commented that the introduction of the border tax by the United States could lead to consequences on world trading patterns. He said he did not wish to over-dramatize this situation but clearly implied that it would be extremely difficult for the British to go forward with their elimination of export rebates at a time when the United States was introducing such a measure. He inquired whether it might not be possible, as it was in the British system, to leave discretionary measures in the hands of the President while discussions were proceeding in the GATT about the TVA. The Prime Minister also pointed out that although we might be successful in obtaining the agreement of the major world trading powers to stand still for our border tax measures at this time, we might very well find that the next country to get into trouble would use this method and perhaps even more protectionist devices in its "package."
3. In discussing our talks in Bonn and the reactions to our pleas for neutralization of balance of payments effects of troop stationing, Prime Minister said that it was absolutely essential for Britain to obtain one hundred million pounds offset agreement by April 1st when the current agreement runs out. He said that the Germans had not yet been able to talk to them because they had not reached agreement on their purchase plans because of internal budget difficulties. It looked now as though these talks could not begin yet for some time. The Prime Minister made the flat statement that without such an offset, given all the other drastic measures he has had to take and the situation in the Parliamentary Labor Party, he could not defend the maintenance of troops in Germany. He said that they would have to make this clear to the Germans. He recognized that any breakdown in British arrangements with the Germans necessitating such a withdrawal could very well fuel the very forces the President was opposing in the United States and therefore he would make every effort to reach an agreement with the Germans. He was not insisting that payments under an offset agreement be received immediately, but would be content with assurance that payments would in time be received sufficient to completely offset UK military expenditures after April 1.
4. In discussing this problem Prime Minister said that recent Cabinet discussions had been leading in the direction of decisions to put the greatest stress on British military presence in Europe. He knew that this gave us problems and mentioned the fact that the Secretary had sent a letter to George Brown today on the Persian Gulf. I said that this did give us concern but felt in the context of this discussion I should not go any further. (In any case George Brown will be discussing this with you next week.)
5. As we were leaving Prime Minister said he was very much looking forward to seeing the President next month in Washington and assumed he could continue this conversation there. We would then have a better idea of what we were going to do.
Bruce
287. Telegram From the Embassy in the United Kingdom to the Department of State/1/
London, January 9, 1968, 1819Z.
/1/Source: National Archives and Records Administration, RG 59, Central Files 1967-69, DEF 1 UK. Secret; Immediate; Exdis. In telegram 5337 from London, Ambassador Bruce told Secretary Rusk: "I think it important you read in full, before your conversation with George Brown, London's 5336, reporting rather extraordinary conversation between Healey and Spiers. In spite of Healey's optimism about maintaining his position in Cabinet, I think it impossible at present to predict what compromise may finally be reached." (Ibid.)
5336. Subj: Healey views on UK defense policy.
1. Denis Healey this morning asked Embassy PolMil Counselor to come to his office for private chat on current status British defense cut decisions. Discussion, which lasted an hour, was extremely frank and far ranging. Healey's comments made it quite clear that he was bitter about role PriMin had played but that he, Brown, Thomson--at times assisted by Callaghan--had nevertheless prevailed in assuring relatively rational approach to defense cuts.
2. Prime reason for Healey's invitation to discussion became immediately apparent however. He said it was important for Secretary and Wash officials with whom George Brown would be talking this week to know that there was "absolutely no question of a choice between chopping the F-111 and our staying East of Suez." It will do no good for Sec to suggest that UK pull out of F-111 deal and change decision on Singapore/Malaysia withdrawal.
3. While he did not say so explicitly, way he put matter indicated that he has some indication that this is possible proposal from Sec and that this will jeopardize his so far successful fight to save F-111, without changing East of Suez decision. EmbOff assumed from tenor Healey's remarks also that he had discussed with Brown his making this pitch to Embassy.
4. Healey then went on to say that he felt much more encouraged about present situation than he could have thought possible a month ago. In early Dec things looked "pretty grim" and he was sure that he would have to resign before long since he would be forced to accept "lunatic" Cabinet judgments on series of irrational defense cuts which would leave Britain with no real capability even in Europe. By making common cause with Brown and Thomson and Callaghan, however, he had succeeded in getting firm Cabinet agreement that if more cuts were to be made they had to be preceded by and related to cuts in commitments, and that this was matter for decision by entire Cabinet including particularly "political departments." At some risk he had given Sunday Times interview (A-2146)/2/ which nailed down this point for record.
/2/Dated January 9. (Ibid.)
5. In response to EmbOff questioning Healey gave series of frank comments on status of various issues. Following are highlights:
A. Defense
Cut decision emerging from last Thursday's Cabinet discussion, where "big majority" was in favor of almost immediate Singapore/Malaysia and Gulf pull-out, had been to leave Singapore/Malaysia finally on 31 March 1971 and to be out of Gulf "before" that date. (From another source, Embassy learned this could be any time during FY70-71.) He and George Brown had argued strongly for an additional year in Singapore/Malaysia and it was agreed that "the two Georges" would have a right to raise the issue this coming Friday or Saturday in the light of their consultations in Far East and Wash. It is certain, Healey said, that they would do so. Lee Kuan Yew had performed brilliantly yesterday and had strengthened Thomson's hand in seeking another look. He hoped Australians would do as well, but was less hopeful. He thought Lee had slightly overdone, however, in his threats about "Japanese takeover." What Healey was indirectly urging was that Sec also concentrate on timing issue (since the only thing open was timing) in his talks with Brown. He thought that decision to extend by another year withdrawal date was still a possibility.
Healey said he was somewhat surprised by Secretary's message to Brown on Gulf since he would have assumed that as between two places US interests were much more involved in prolongation UK presence in Far East. Healey said UK would warn SEATO that its force declarations would be reduced to "derisory level" in terms of numbers and forces but that UK would not pull out of SEATO or raise membership as issue in view of SEATO's importance to US as cover for justifying US presence in Vietnam.
B. Persian Gulf. Healey said he had himself been against last year's Brit decision to build up at Sharjah and Bahrein on grounds it made neither military nor political sense. Now all money which had been poured in would be wasted. While he continued to believe that UK forces in area were a contribution to stability (in terms of possible Iraq-Kuwait conflict or trouble between Shah and Faisal over Bahrein, or among Trucial States) he thought these conflicts could be contained diplomatically. It was clear that Britain would have had to get out of Gulf by 1975 at any rate. In light of this it was better to go sooner rather than later, by which time [garble] situations as in Aden might have been created. Brown and he both thought that situation in Gulf certain to be eroded in due course, that UK interests served by maintaining status quo as long as possible but that UK presence could be an irritant as well as inhibitor of trouble and it was a nice judgment in which direction they would operate most strongly. He thought that leaving in less than two years would be risky but his comments seemed to indicate he would prefer to use whatever influence he had in prolonging UK presence in Singapore/Malaysia rather than in Gulf and that ordinarily he would have assumed US would see it same way. If UK was going to leave, and this decision was irreversible, it was likely to be harmful rather than helpful to prolong Brit Gulf presence beyond 1970-1971. He said at least one UK rep on spot he had recently talked with seemed to feel same way he did about this.
C. F-111. He said he "nearly won" this battle last week, but that PM had surprisingly "led the pack" against it; PM seemed to consider it a good sacrificial goat. Nevertheless Healey now felt relatively optimistic about his ability to keep whole order of 50 aircraft but said that he would be willing to sacrifice 10 if this was necessary to get an overall rational package of defense cuts. EmbOff raised question of UK CENTO commitment and Canberras on Cyprus. Healey said that as Canberras phase out F-111's would be helpful in maintaining this commitment, which there was no present intention to cut. On balance he felt reduction of order to 40 (if any reduction necessary) would be "least damaging," that he expected this matter would be resolved within another 36 hours and that he was not at all unconfident about keeping all 50, at the moment at least. He said Wash talks which indicated UK could keep Jetstream order, present offset arrangements, (including the extra $100 million if cut was no more than 15), were helpful. EmbOff noted he had understood that extra $100 million could not be kept if order were cut to this extent. Healey said he was gratified at US emphasis that offset was related to total UK aircraft buy and not just to F-111 program.
D. BAOR. Healey said both he and the Foreign Office were determined to avoid any further drawdown of the BAOR either this year or next. However, the offset talks, when they came about, would have a heavy influence on whether they could prevail. He said Jenkins would be more help than Callaghan had been in this area. Also, what the US and the Germans themselves did would also bear on British ability to hold the line, and he feared that the US would be pressed to announce sometime next fall a further "redevelopment" of its own forces. (He said he felt 1970 would be too soon for another reduction.) Also the Dutch Defense Minister told him he could not hold the line on Dutch forces. Therefore this was still likely to be a troublesome area.
E. Miscellaneous. Healey said that Navy Phantoms were too far along to cancel and were "so bloody expensive" that no one else would buy them. They would probably have to be repainted and turned over to the RAF. He thought there would be some reduction in total Phantom buy but evaluations had not yet been completed. He said present situation made any UK only or UK/FRG project to replace AFVG "out of the question." Some kind of cooperative program with us, however, could not be ruled out. He would probably procrastinate by keeping present VG design team going for another year. He also said he was meeting with Messmer this afternoon and would try to have it out re French intentions on building their own VG. He did not think French would do more than build a prototype in view defense budget problems arising from de Gaulle's trying to do a little bit of everything in the nuclear field.
6. Comment: EmbOff said he had no indications from Wash about any proposal for a tradeoff such as Healey feared between F-111 and East of Suez. EmbOff however promised to bring his comments as reported above to Wash's immediate attention. Healey obviously has strong personal stake in continuation of F-111, feels he has matter under relatively good control and was worried that some proposal along these lines from Sec to Brown would upset the applecart. He was also clearly urging us to weigh in with Brown in favor of lengthening by one year present withdrawal deadline from Singapore/Malaysia. His judgment appears to be that with US pressure along side of that which is already coming from Singapore and Kuala Lumpur there is better than even chance of Healey, Brown and company prevailing on this in renewed Cabinet discussion Friday or Saturday.
Bruce
288. Memorandum of Conversation/1/
Washington, January 11, 1968, 9:30 a.m.
/1/Source: Johnson Library, National Security File, Country File, UK, Vol. 13. Secret; Exdis. Drafted by Cheslaw and approved in S on January 23. The memorandum is marked Part III of V. The meeting was held in the Secretary's office.
SUBJECT
British Budget and Defense Cuts
PARTICIPANTS
UK
Foreign Secretary George Brown
Sir Paul Gore-Booth, Permanent Under Secretary, Foreign Office
Sir Patrick Dean, British Ambassador
US
The Secretary
John M. Leddy, Assistant Secretary, EUR
Irving Cheslaw, EUR/BMI
Foreign Secretary Brown said that Britain had lost the battle to avoid devaluation--a matter on which USG was so understanding--because they had been trying to do too much at home and abroad with too slender resources. Since devaluation the Government had been obliged to consider what could be done to free a considerable part of its resources for greater exports as well as to consider what cuts in spending must be made to assure confidence and to avoid further devaluation. The conclusion of HMG was that this required a switch of 1 billion pounds, including substantial cuts in spending at home. This was all particularly unpalatable because it involved an attack on some cherished social programs, such as health and educational services. It would also involve a mammoth rise in taxation as well as a reduction in overseas spending. HMG did not want to attack the aid program; this would be counter productive. Therefore, Brown said, they were forced again to look at defense expenditures overseas. The Ministry of Defence had taken the view that they had made all the possible hardware and manpower cuts as long as the present commitments remained./2/ Therefore they have had to look again at the commitments implied in the July 1967 decisions.
/2/During a subsequent part of the discussion, Brown, in reply to a question from Assistant Secretary Leddy, stated: "They had not decided in the same firm was as they had made other decisions what to do about the F-111's." A memorandum of this portion of the conversation is in the National Archives and Records Administration, RG 59, Central Files 1967-69, DEF 12-5 UK.
Brown said that they had come to the following conclusions: first, they must accelerate the rundown in the Far East. This meant there would be no bases on mainland Asia by March 31, 1971, instead of by the mid-1970's. They must drop the idea of maintaining (after withdrawal) special capabilities in that area such as an amphibious force. They would however have a general capability in Europe from which troops would be available for use anywhere. Second, they must also leave the Persian Gulf by the same time. This was dictated by (a) savings, although admittedly they would not be very great, and (b) the decision about the Far East which meant there would be no carriers or bases available to support or relieve the Persian Gulf after that date.
Brown went on to say that it was their intention to "renegotiate" the Anglo-Malaysian Agreement, but not to renounce it. They would remain in CENTO and SEATO, but obviously when the troops ran down the force declarations under SEATO would have no content. Hong Kong would be the only exception to this general policy: they propose to maintain and retain their position there. Mr. Brown concluded these were the firm views of his colleagues subject to the reports presented to the Cabinet this coming weekend by George Thomson, Goronwy Roberts and Brown following their visits to the Far East, Middle East and the U.S. respectively.
The Secretary said he had several observations to make. At the outset he wanted to remind the Foreign Secretary that, as he had a reputation for being soft spoken, he wished Brown would add several decibels when he conveyed these views to the Cabinet. The Secretary was profoundly dismayed by the proposed withdrawal from Southeast Asia and the Persian Gulf, and he was particularly disturbed by the intention to announce these decisions. Both areas were in a high state of turmoil and free world interests were in jeopardy. The Secretary said his advice, more succinctly, was "be Britain." This step would have profound and detrimental implications for the US and the UK. The Secretary said he would dismiss as of "no consequence" the idea that forces at home could support CENTO and SEATO. The pressures behind these moves would make it impossible for British soldiers to leave British shores.
The Secretary said that if, pending its entry in Europe, the UK dropped back to a Little England he could not help but feel that this would generate a descending spiral across the board. It would have a profound effect on the economic and financial relations with these countries in the Middle East and Southeast Asia. By consulting their fears rather than their confidence, the British would bring about the very thing they were struggling against. This was an alarming development. The Secretary thought that HMG needed to be concerned with developments elsewhere, such as what would the Malaysians think the UK would do if their remote islands came under attack. When HMG announced last July that they would leave the Far East by the mid-1970's, the U.S. Government had understood this would be subject to peace in the area, that the situation would be under review and that there would be no pull-out until there was stability in the area. There is no stability in the area yet although there has been some progress, for example, in HMG's role vis-?-vis Indonesia. He said that many Americans were essentially isolationists, but since 1945 the US has had 300,000 casualties in the effort to maintain peace around the world. The British had set the example and had helped us make decisions of will in World War II and in the post-war period. The Secretary said he was disturbed when the teacher abandoned the field. Americans would ask if no one else was interested, why should they be. Authentic isolation was growing in the US because of the growing feeling that Americans were carrying the problem alone. General de Gaulle had contributed to this, but if the UK went down the trail of deliberate withdrawal the effects would be profound.
The Secretary said that as he looked at the foreign exchange costs of British presence in the Persian Gulf, i.e. approximately 12 million pounds per year, he thought these costs would be multiplied if the governments there decided there was no point in staying with the UK. In the Far East, Malaysia and Singapore, Australia and New Zealand would look elsewhere, and the direct economic impact would be greater than the cuts.
Foreign Secretary Brown said that he had hoped to make clear that the Persian Gulf decision was not based on the minor saving that might result, but that it was a logical outcome of the major decision to withdraw from the Far East. He said it was not true to say the Persian Gulf was in a state of unrest. At the moment, it was more stable than it had been for a long time and relations between major parties were as good as ever. The likelihood of unrest seemed minimal at this moment. As regards the Far East, Brown said that the July 1967 decision had never been intended to mean that they would review the basic decision to leave. They had always considered, even if it had remained unstated, that the reference to stability in the area was itself confined to a 1973-77 time frame.
The Foreign Secretary said that he wished to note also that this did not represent a choice between defense cuts or cuts in social services, but rather that there would also be very substantial cuts in their home programs. In fact, they would derive very little short-term benefit from the cuts in their external programs. HMG could not keep forces overseas in face of a sick economy at home which was unable to sustain these forces. The inescapable facts were that their economy must be strong if they were to play any part in world affairs. This did not reflect a desire to withdraw to a Little England.
The Secretary said he did not feel as comfortable about the Middle East as did Foreign Secretary Brown. Iran and Saudi Arabia were worried; and both Israel and the Arabs were concerned about Soviet penetration of the Middle East. At NATO it had been agreed that there would be further talks about Soviet penetration in the Middle East. The Secretary thought that some discussion in NATO on these British intentions would have been appropriate if not obligatory. The Secretary asked if they had considered whether the prospects of improved trade figures were relevant to these decisions.
Mr. Brown said the economic ministers thought the adverse consequences of devaluation would be felt first, such as in the increased cost of imports; the improvement in exports would not show until around 1969-70. This would depend on the availability of resources at home, the development of substitutes for imports, on establishing confidence in the pound and in the UK's internal policies, as well as British determination to carry these out. Brown said it was hard to fault these assumptions and recommendations. In reply to the Secretary's question as to whether there had been an authentic national debate on these questions, Brown said he thought the majority view was that they were trying to do too much, that they were carrying more than their share of the peacekeeping burden, and in favor of cutting their overseas commitments. There would be a debate in Parliament next week but there was no doubt that support for ending their Far East commitments ran through the left, center, and right wings of the Labor Party. He added that it was generally felt that HMG was struggling with a burden which their economic competitors did not share.
The Secretary asked Mr. Brown if the pullout from the Persian Gulf was wiser than an equivalent reduction in foreign aid. Mr. Brown said he opposed a reduction in foreign aid. In fact, one of the results of these decisions was that the aid program would go up. For example, there would be the need to provide compensatory assistance to Singapore and Malaysia. As for the Persian Gulf, Brown said HMG's continuing presence was more divisive than unitary; withdrawal was important for its own sake and this was the right moment for it. The Foreign Secretary reiterated that they could not stay in the Persian Gulf once they were rid of the Far East bases. They believed they could only get hardware savings out of such decisions as cutting the carrier force. For example, they will not refit a third carrier; this will save 30 million pounds. If there is no carrier force beyond '72 which is capable of returning people and equipment everyone could conclude that they must come out of the area. He thought they would provide support via aircraft and, if necessary, they could make arrangements to obtain the necessary transport planes. Brown said they did not want to maintain ships against theoretical possibilities.
Assistant Secretary Leddy asked if it was necessary to be so explicit about the withdrawals. Brown said that his colleagues believed that it was necessary to be clear cut as there would be leaks. Furthermore, if they followed this timetable, they must stop the buildup in Bahrain and Sharjah. The moment that buildup stopped the basic decision would become self-evident. They would also be accused of vacillation if they did not make a clear cut decision, and this reduced the risk of an Aden type situation. A reduction not accompanied by an announcement would help the extremist forces. Brown said there had been varied reactions out of the Middle East, but the most serious governments have known what was coming. They would settle down to consider other arrangements. This was also an argument for being precise. The time would come when HMG would not be the policeman; it should help these governments concentrate on what they must do for themselves in the security field.
Secretary Rusk said that HMG's departure would eliminate any contribution it could make to deterrents such as in Malaysia vis-?-vis Indonesia. The U.S. could not pick up these responsibilities; the resulting gap would be contrary to free world interests. Brown said there was no good reason why Malaysia, Singapore, Australia, New Zealand and even the U.S. should not get together to discuss how to fill that gap; there was no reason why it should be filled by HMG. The Secretary said USG was not in a position to advise as it could not take on any more in Southeast Asia; our current costs were too high. He asked what would be said at the CENTO meeting in April. Mr. Brown replied that HMG's main contribution to CENTO was the equipment on Cyprus and no changes were contemplated there. As for SEATO, he reiterated that the declaration covers the forces in the area but that when there were no forces nothing could be declared. HMG would remain a member of SEATO; any forces would come out of their general capability. This obligation was not the same as that under NATO.
Secretary Rusk asked if they contemplated a demobilization of forces. Brown replied affirmatively, saying they intended a rundown in their army, navy and airforce. While the troops stationed in Europe would be available to go anywhere, they would need to make a choice of flareups occurred in a number of places simultaneously. He assumed USG intended some demobilization of its own after Viet-Nam. The Secretary said the latter assumption was correct, but the U.S. would be able to move back quickly from various bases.
The Secretary said that he deduced from Mr. Brown's remarks the acrid aroma of a fait-accompli; and presumably what he said would not make much difference. He hoped that HMG would look hard at the implications of these decisions, adding also that any announcements the British make would elicit strong Congressional reaction. He hoped no action would be taken that would diminish the accomplishments for peace in the post-war period. An announcement such as the British propose would throw a long shadow far greater than the magnitude of the actions themselves.
Mr. Brown reiterated that these were intentions which had been firmed up before there were meaningful consultations. He had been given the charge to explain the intentions and to report back the Secretary's reactions. In that sense this was not a fait-accompli, but he wished not to leave the Secretary with any doubt of the intention of his colleagues to make final decisions tomorrow and announce them next Tuesday. The Secretary said that what was really important was that this represented a major withdrawal of the UK from world affairs, and it was a catastrophic loss to human society. These decisions involved the highest level of judgment and of instinct about where the human family was going. We were facing a difficult period in world affairs and Britain was saying it would not be there.
The Secretary noted that, as a government, we were not making choices or indicating preferences between the Far East and the Middle East. We believed our interests were in trouble in both areas if the British took these measures. He also said he had the impression that the need for making an advance announcement was not really related to their operational requirements. Rather, he thought this was relevant to the other cuts they were making. Perhaps they were underestimating their people. Mr. Brown said all governments have this problem; each must assess its own political difficulties. However, these decisions were based on the belief that these were the right things to do, not on political reasons.
289. Message From President Johnson to Prime Minister Wilson/1/
Washington, January 11, 1968.
/1/Source: National Archives and Records Administration, RG 59, Central Files 1967-69, DEF 6 UK. Secret. An attached January 11 note from Bromley Smith of the NSC Staff to Benjamin Read, Executive Secretary of the Department of State, stated that the message was sent "via private wire" and authorized its relay to Bruce "eyes only." In a January 11 memorandum to the President reporting the substance of the Rusk-Brown conversation, Under Secretary Katzenbach recommended the dispatch of this message, adding: "While I do not think it will do any good, I believe we cannot fail to express our views at the highest level and in the strongest possible terms." (Ibid.)
Dear Harold:
I have just learned from Dean Rusk of your plans for total British withdrawal from the Far East and the Persian Gulf by 1971.
I know you are close to a final decision and that there is not much time for reconsideration. I also can guess at what soul-searching you and your colleagues have been going through in trying to find the means for restoring health of the British economy and still carrying as much as possible of the financial burdens which you have so courageously borne thus far.
This having been said, I cannot conceal from you my deep dismay upon learning this profoundly discouraging news. If these steps are taken, they will be tantamount to British withdrawal from world affairs, with all that means for the future safety and health of the free world. The structure of peace-keeping will be shaken to its foundations. Our own capability and political will could be gravely weakened if we have to man the ramparts all alone.
Although the decision must, of course, be your own, I can only wonder if you and all of your associates have taken fully into account the direct and indirect consequences.
While the hour is late, I urge you and your colleagues once more to review the alternatives before you take these irrevocable steps. Even a prolongation of your presence in the Far East and the Persian Gulf until other stable arrangements can be put in place would be of help at this very difficult time for all of us.
With warmest personal regards,
Sincerely,
Lyndon B. Johnson/2/
/2/Printed from a copy that bears this typed signature.
290. Message From President Johnson to Prime Minister Wilson/1/
Washington, January 15, 1968.
/1/Source: Department of State, Bruce Diaries: Lot 64 D 327. Secret. Bruce noted in his diaries that the message was transmitted through a "special channel."
The question of Britain's future in the world, about which I wrote you the other day, continues to be very much on my mind. I know that you and your colleagues will be making crucial decisions on this question in the coming hours.
The London press this morning carries reports that the Cabinet has in fact decided to cancel the F-111./2/ Though I know how unreliable the press can be, I have decided to communicate to you my extreme concern about this matter in particular.
/2/In telegram 5479 from London, January 13, the Embassy reported that Broadbent informed Spiers of the decision to cancel the F-111 order by referring to press reports as "not far off the mark." (National Archives and Records Administration, RG 59, Central Files 1967-69, DEF 12-5 UK)
As Dean Rusk and Bob McNamara explained to George Brown/3/ during his recent visit, and as I stated in my recent letter to you, the announcement of accelerated British withdrawal both from its Far Eastern bases and from the Persian Gulf would create most serious problems for the United States Government and for the security of the entire free world. Americans will find great difficulty in supporting the idea that we must move in to secure areas which the United Kingdom has abandoned.
/3/For the Rusk-Brown conversation, see Document 288. No record of the McNamara-Brown discussion was found.
It has been our hope that a demonstrated ability of United Kingdom military forces speedily to deploy to these areas from its own bases might alleviate somewhat the strong reaction which will inevitably take place. The F-111, because of its range and overall capability, would demonstrate this rapid deployment ability.
But if you decide to forego the acquisition of the F-111, everyone here will regard this as a total disengagement from any commitments whatsoever to the security of areas outside Europe and, indeed, to a considerable extent in Europe as well. Moreover, it will be viewed here as a strong indication of British isolation which would be fatal to the chances of cooperation between our countries in the field of defense procurement. Both Dean and Bob made it clear to George Brown that financial penalties will have to be applied if there is a decision to cancel the F-111 contract. Politically, we have no choice. Appreciable as these penalties would be in monetary terms, however, they would be far less serious than the reciprocal actions which in all likelihood would follow. Retention of the present offset arrangements would become out of the question. Pressures for domestic procurement could no longer be resisted. These would almost inescapably lead to complete cancellation of recent awards of military contracts to British firms.
But even these severe economic effects would be overshadowed by the foreign policy consequences of an F-111 cancellation. Many in this country, including influential members of Congress, would bring the strongest pressures to bear on us to sacrifice international security interests to ease our present financial problems. Our ability to maintain substantial forces in Europe, while fighting a difficult and costly war in Southeast Asia, would be greatly endangered.
As I indicated in my last letter to you, I recognize fully that a decision on this question is one that the British Government alone can make. I hope that it will do so with full consideration of all the factors involved. And I wanted you to know how important I consider it to be that the United Kingdom and the United States maintain their understanding on the F-111 in all essential respects and continue to at least try to defend freedom in this hectic and unsettled world in which we live./4/
/4/On January 16 "Healey sent for Spiers. He gave Ron a letter for Bob McNamara, telling him it has been decided to cancel entirely orders for the F-111." (Bruce Diary entry of January 16; Department of State, Bruce Diaries: Lot 64 D 327) The Embassy reported on the Healey-Spiers conversation in telegram 5544 from London, January 16. (National Archives and Records Administration, RG 59, Central Files 1967-69, DEF 1 UK)
Sincerely,
Lyndon B. Johnson/5/
/5/Printed from a copy that bears this typed signature.
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