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FOREIGN RELATIONS OF THE UNITED STATES 1964-1968, Volume XXV South Asia
Department of State |
321. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/ Washington, April 20, 1966, 11:15 a.m. /1/Source: Johnson Library, National Security File, Country File, Pakistan, Vol. VI, Memos, 1/66-9/66. Secret. The next step in shoring up the Pakistan side of our affairs in the subcontinent is to decide what kind of aid deal we offer. You established common political ground with Mrs. Gandhi and told her we would help Indian development within our means if her planners would come to terms with the World Bank on economic policy. Ayub's political performance since he was here, while not all bad, leaves us uncertain as to whether we are on common ground. So it is harder to decide where to go on aid. But Finance Minister Shoaib is here talking with the Bank this week, and we must make at least a tentative decision. The choice is between two courses, which the attached paper from State/2/ spells out in more detail: /2/Reference is to an April 19 memorandum from George Ball to the President entitled "An Aid Deal for Pakistan." (Ibid., Memos to the President, Walt W. Rostow, Vol. I, 4/2-5/26/66) 1. Taking a hard line, we could promise Shoaib nothing. We could tell him that Pakistani political performance still does not justify the full-scale development aid that its economic performance could warrant. The Pakistanis have received Liu Shao-chi and, worse, substantial quantities of Chicom tanks and jet fighters. Although they agreed to troop withdrawal at Tashkent, they blocked further progress at the Indo-Pak ministerial meeting. The press still uses us as a whipping boy. The government still has not reopened our closed facilities. Until we see more compatible behavior, we can not move on any aid but a limited holding-operation. 2. Meeting Ayub half-way, we would accept a Pak-Chicom relationship on about the present plane, even including modest Chicom military aid. We would tell Shoaib (as State recommends in the attached memo) that we are ready to resume development aid through the World Bank consortium at about the FY 1965 level of $140 million in non-project loans provided that Pakistan: limits defense expenditures (we will ask the same of India), moves ahead with India, respects our Asian interests and cooperates with us to a reasonable extent and accepts World Bank terms. The central issue is how you want to treat Ayub. Do you feel in the light of your talk with him that you must continue to stonewall to bring him around? Or do you feel that you have a satisfactory understanding with him on limiting his relationship with Communist China and promoting peace with India that permits you now to meet him halfway? State's "Recommendation 1" provides an offer to meet Ayub halfway on grounds that, if we do nothing, Ayub will have no choice but to move closer to China. However, it spells out strong enough political conditions that Ayub would still have to accept that it does not get us back into full-scale aid until we hear from him. Alternative would be saying nothing now. State's "Recommendation 2" offers a six-month PL 480 deal now. The Alternative would be more measured pace, promising to discuss a new deal when we have a clearer idea of requirements. State's "Recommendation 3" is to say that, if all goes well, we would be ready to talk about project loans (and more PL 480) in December. The alternative is to leave this carrot for later. My own feeling is that "Recommendation 1" gives us enough control to justify going that far now. It still keeps our aid in six-month slices. But I would prefer the alternatives to the other recommendations. I do not believe we ought to sacrifice the fruits of your painful but successful tough posture of the past year by rushing into new promises until we hear again from Ayub./3/ /3/There is no indication of a response from Johnson on the recommendations, but see Document 323. Walt/4/ /4/Harold Saunders signed for Rostow.
322. Minutes of Meeting of the 303 Committee Washington, April 22, 1966. [Source: Johnson Library, National Security File, Intelligence File, India's Unconventional Warfare Force. Secret; Eyes Only. Extract--2 pages of source text not declassified.]
323. Memorandum From the President's Special Assistant (Rostow) to Secretary of State Rusk/1/ Washington, April 23, 1966. /1/Source: Johnson Library, National Security File, Files of Walt Rostow, Non-Vietnam, April-July 1966. Top Secret. In the course of a review of various foreign policy problems before him, the President made the following decisions: 1. Project loans for India./2/ The President would prefer to see our resources at this time going to agriculture rather than to projects of this type. He would wish to know to what extent the electric power projects would actually contribute to agriculture. If, however, it is impossible to transfer these resources more substantially towards use in support of agriculture, the President approves the opening of negotiations on these projects with the Indians at an early appropriate moment. /2/In an April 13 memorandum to the President, Secretary Rusk recommended resuming negotiations on four AID project loans, which were suspended when a hold was placed on new economic commitments to India and Pakistan. The loans in question were to support minerals exploration and thermal power plant extensions at Dhuvaran and Durgapur, and to help finance the construction of the Beas Dam, designed to provide irrigation for 6.5 million acres in western Rajasthan. The total dollar amount was $85.3 million. (Ibid., Memos to the President, Walt W. Rostow, Vol. I, 4/2-5/26/66) 2. Pakistan aid strategy. The President first wishes to know if the proposed two-tranche project loan assumes that we will get from the Congress the full amount we have asked. What do we do if Congress cuts our request? Within the limits set by the answer to that question and by Pak compliance with conditions set forth in the memorandum to the President of April 19, recommendations 1 and 2 are approved./3/ The President reviewed the history of the steel mill/4/ negotiations with Pakistan over recent years. He observed that we appear to have something like a moral obligation in this matter. If AID and the Export-Import Bank agree, they may proceed with this project loan. /3/Concerning the recommendations in Under Secretary Ball's April 19 memorandum to the President, see Document 321. Recommendation 1 of Ball's memorandum proposed the resumption of AID commodity lending in 6-month segments beginning in July at the level needed to support Pakistan's development program and self-help policies. Ball proposed the resumption provided that the other members of the Pakistan consortium contributed a proportional share and that Pakistan limited its defense expenditures to agreed levels, made a conscientious effort to maintain the "spirit of Tashkent," demonstrated a satisfactory level of cooperation with the United States and appreciation of U.S. interests in Asia, and accepted the conditions advocated by the Pakistan consortium relating to import liberalization and Pakistan's development program. Recommendation 2 proposed negotiation a new P.L. 480 agreement, subject to the understanding that Pakistan would make a greater effort to promote agricultural output. (Ibid.) /4/Reference is to the proposed steel mill to be built at Karachi. [Here follow summaries of Presidential decisions unrelated to South Asia.] W.W. Rostow/5/ /5/Printed from a copy that bears this typed signature.
324. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/ Washington, April 25, 1966, 4:20 p.m. /1/Source: Johnson Library, National Security File, Country File, India, Vol. VII, Memos & Miscellaneous, 1-8/66. Secret. SUBJECT I should like you to know that I have told State and AID that they should not read your relatively benign attitude on the India/Pakistan aid papers the other day as a signal that you were not deeply concerned about Indian and Pakistan performance with respect to the normalization of their relations and the limitation of military expenditures. I am a little concerned that unless we keep the heat on, they might begin to resume assistance without sufficiently concrete performance in these two respects. The problem is to find specific actions which represent progress. With respect to Tashkent and normalization, there are two things that might be done: --a new round of ministerial meetings between India and Pakistan; --the beginnings of some work on multi-national India/Pakistan projects which would commit them to interdependence. Pakistan gas to India and Indian coal shipments to Pakistan are one possibility; the Ganges-Brahmaputra-Teesta River complex is another. With respect to military expenditures, we apparently reached an agreement with the Indians some time ago about their overall military budget. The Paks are trying to get agreement that they should position themselves at a level somewhere between 25% and 33% of the Indian expenditures; say, 2/7. On the whole, this is probably too high for both of them. But, given the agreement, it may be difficult to get India down right away, which George Woods would like to do; but at the minimum, we should make sure that the present Indian (and Pak) military budget levels do not continue to rise, but level off. Walt Is this the right line to take?/2/ /2/Johnson checked this option.
325. Telegram From the Department of State to the Embassy in India/1/ Washington, April 25, 1966, 9:06 p.m. /1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 7 INDIA. Confidential. Drafted by Coon, cleared by Handley, and approved by Laise. Repeated to Karachi, London, and USUN. 2041. 1. Indian Planning Minister Asoka Mehta met Secretary April 25. Following report based on uncleared memcon. It is FYI, Noforn and subject to amendment upon review. 2. Mehta said talks with IBRD have been going well so far. He would like to reach specific agreement regarding current Indian fiscal year and broad understanding regarding Indian needs for Fourth Five-Year Plan as a whole. Current economic situation very bad but program to liberalize imports could have very good effect and India needs to do it. GOI also anxious to finalize Fourth Plan. Secretary observed we were also in turbulent period in that annual Congressional review of aid program taking place. 3. Mehta described India's current economic difficulties. He noted that although production this year abnormally low, Indian economy has achieved diversification and degree of sophistication giving potential for very rapid growth. He observed India's current tribulations having salutary effects: (a) Psychology of Indian farmer completely changed. He now wants fertilizer, electricity, improved seeds, etc. This has become political issue. Healthy development but can recoil on GOI if nothing done. (b) Broad-based demand for family planning. Program going very well, proportionately even better in some states like Punjab than in Taiwan. (c) Since foreign exchange pinch currently felt throughout country, general awareness has developed of need for intensified and sustained export drive. State Chief Ministers now display clear understanding this requirement and what it means to them directly. (d) State Chief Ministers have recently unanimously decided raise taxes in this pre-election year rather than cut back development. As they are close to people, this is good sign of new commitment of ordinary Indians to concept of development and a most important psychological change. 4. Mehta recounted recent GOI measures to attract foreign private investment in fertilizers and observed that if his talks with Bank and Fund succeeded, GOI could "push this all the way." He also noted US companies being invited join Indians to set up distribution companies for improved seed. 5. Secretary referred to importance of peace in subcontinent and asked about prospects for Indo-Pakistani cooperation in development field. Mehta, noting that Prime Minister Gandhi expressed support for this concept to President, stated that GOI welcomed Indo-Pak economic development cooperation in principle and said he had so informed Woods of IBRD. In response Secretary's question, Mehta said he had not seen Pak MinFin Shoaib on present visit but would be happy to meet him. 6. Secretary asked whether GOI considering further ministerial talks pursuant Tashkent agreement. Mehta said first ministerial discussions not fruitful. Subsequent Chicom visit to Pakistan and Pakistan display Chinese arms not taken very well in India; Mehta implied it best to allow cooling off period prior starting new round of ministerial talks. Secretary noted importance of continuing to work on these problems. Mehta said it might be easier move first on economic side. Referring again to Indo-Pak political problems, Secretary drew analogy of US-Soviet problem over Berlin, noted he had spent two years discussing Berlin with Russians, and stressed that important thing was to keep communications going. 7. Secretary said basic question in US now regarding aid to subcontinent was peace./2/ Two questions important: chances for future hostilities and levels of defense expenditures by each government. Mehta said Indian public had completely accepted Tashkent and India's mood was opposite of belligerency. He noted that if one examined closely circumstances of last year's two hostilities, it clear Paks started each. Taking longer view, he noted that before Chicom attack only two per cent of India's national income devoted to defense. Need for new equipment for mountain fighting, road construction, etc. thereafter forced this percentage up but it has since remained fairly steady. As long as need to defend against China remains, India will not be able to reduce level of its defense expenditures very much. Mehta said, however, that if there should be some reduction in Pak defense outlay, India would be willing to match it. Such Indian reduction could not however be "mixed up" with need for defense against Chinese. /2/Rostow also stressed the importance of a rapprochement between India and Pakistan in a conversation with Mehta on April 27. (Memorandum for the record, April 28; Johnson Library, National Security File, Country File, India, Mehta Visit, 4/19-28/66) 8. In response to Secretary's question on Binational Foundation,/3/ Mehta said if we could agree on permanent Indian Chairman and majority of Indian members, Indian public would find it easier to accept idea as genuinely Indian institution. /3/Reference is to the binational educational and cultural foundation Bowles proposed in March 1964. As envisioned by Bowles, the foundation was to be funded by rupee bank deposits held by the United States in India as a result of funds generated from the repayment of development loans and P.L. 480 proceeds. (Letter from Bowles to Moyers, March 12, 1964; Johnson Library, National Security File, Country File, India, Exchanges with Bowles) 9. On internal stability, Mehta discounted severity of problems in Punjab and Naga-Mizo Hills. Punjab problems sorted out. Discussions with Nagas going well, and in any case troubles there should be seen in perspective (India successfully assimilating 25 million other tribals). 10. In conclusion, Mehta held forth prospect of very rapid progress in India, given sufficient external aid to permit the necessary structural changes. 11. At the Secretary's suggestion, Mehta agreed another meeting would be desirable shortly before his return to India, i.e., May 4. Rusk
326. Memorandum From the President's Special Assistant (Komer) to President Johnson/1/ Washington, April 26, 1966, 6 p.m. /1/Source: Johnson Library, National Security File, Memos to the President, Walt W. Rostow, Aides File, Vol. I, April 1-30, 1966. Secret. A copy was sent to Rostow. Who Welshed on Whom? I know you'll forgive an old Pakistani (who likes Ayub too) for saying that we need not feel we failed to honor any commitment to the Paks. The shoe is on the other foot. As Dean Rusk said, we've insisted from the outset that CENTO and SEATO were anti-communist alliances. But the Paks have always regarded them as reinsurance against India, and tried to get them skewed around this way. True, our arming India against China helped push the Paks toward China, but our policy here was quite consistent with the anti-communist purpose of our alliances. Thus, while one can't blame the Paks for being unhappy with us, it isn't because we betrayed them; it is because their own policy of using us against India has failed. They know full well we didn't give them $800 million in arms to use against India (but they did). Even so, we have built up Pakistan's own independent position and sinews--to the tune of almost $5 billion in support. We've protected Pakistan against India; we had more to do with stopping the war Ayub started than anyone else (just in time to save the Paks). In return, all we've gotten is a bit of quite valuable real estate (yet four of our installations are still closed). So if there's any history of broken moral commitments, it's on the Pak side--not ours. There is even a good case that the Paks lied to us about China; for example, did Ayub tell you about getting MIGs and tanks? But this is history. Our need now is to keep the Paks from going off the deep end. But if we just return to business as usual (and let Bhutto convince Ayub again that he can have his cake and eat it too), we'll fall into the same trap all over again. We can't afford to let Ayub return to thinking that he can both get arms from China (and use China against India), while still getting massive economic aid from the US. The answer is to keep dangling the carrot (as you did last December), but to give only enough to whet Pak appetites that they can get back into our good graces if they start playing ball./2/ /2/According to a memorandum for the record prepared by Rostow on April 26, President Johnson decided at a meeting with his principal advisers on April 25 to make U.S. assistance to Pakistan conditional on additional requirements. Johnson decided that some movement by Ayub on issues of importance to the United States, such as the closed installations, would be necessary before he would proceed with the loans cited in the April 23 memorandum from Rostow to Rusk (Document 323). The President also decided that an agreement to sell spare parts to Pakistan would be dependent upon an understanding on Pakistani limitations on military expenditures. (Johnson Library, National Security File, Country File, Vietnam, Vol. 50, Memos (A), 4/1-8/66) Granted that this is risky, and that we might lose Ayub (our best hope). But it is less risky than past policy, because if Pakistan keeps sliding down the slippery slope we'll lose Ayub anyway and Pakistan to boot. This has been the trend, and it was only your tough policy since April 1965 that slowed it down. So I'm for impressing on Shoiab (our best friend and pipeline to Ayub) that sizeable US aid, including military, depends on Pakistan avoiding Chicom arms or ties. In fact, it might be most effective for you to call Shoiab in privately and tell him just this./3/ /3/At the end of the memorandum Komer wrote: "I'll work with Walt Rostow on this matter." Johnson responded with a handwritten notation that reads: "Walt--bring this to McNamara's attention." Rostow sent a copy of Komer's memorandum to McNamara on April 27 with a covering note indicating that the President wanted him to read it. (Washington National Records Center, RG 330, OSD Files: FRC 70 A 4443, Pakistan 1966) In a May 2 memorandum from Townsend Hoopes to McNamara commenting on Komer's memorandum, Hoopes noted that he and John McNaughton proposed to make economic assistance to Pakistan dependent upon a Pakistani promise to stop the flow of military assistance from China, and to make military assistance dependent upon a promise to terminate Chinese assistance. (Ibid.) Hoopes stated in a May 2 memorandum to McNaughton that he had discussed their recommendations with McNamara, and McNamara had commented that he did not see how the United States could avoid providing essential spare parts to Pakistan unless it was prepared to see Pakistan ally itself completely with China. (Ibid., OASD/ISA Files: FRC 70 A 6648, 000.1-400) R.W. Komer
327. Memorandum From the President's Special Assistant (Rostow) to President Johnson and Secretary of State Rusk/1/ Washington, April 27, 1966, 7 p.m. /1/Source: Johnson Library, National Security File, Country File, Pakistan, Vol. VI, Memos, 1/66-9/66. Secret. SUBJECT The following points arose in my discussion with Shoaib this afternoon. 1. U.S. Installations. After Secretary Rusk raised this question/2/ he sent an immediate urgent message to President Ayub, expressing his personal shock at the fact these installations were not yet open. He hopes for a reply before he leaves on Friday. /2/Shoaib met with Rusk on April 26. A report of that conversation was transmitted to Karachi in telegram 1536, April 26. (National Archives and Records Administration, RG 59, Central Files 1964-66, POL 7 PAK) 2. Ganges-Brahmaputra-Teesta Project. He has talked with Mehta as well as the IBRD about this. The World Bank is prepared to take the initiative. Woods may now be looking in England for a third man to work with the Paks and Indians. It could form an item on the agenda of the next Ministerial meeting between the Paks and Indians. 3. Military Expenditures. These will take time to reduce. What is needed now is an agreed level for Pak military expenditures in relation to the Indian program (which is fixed by agreement between the U.S. and U.K.). We talked of the possibilities of introducing a political and psychological environment in both countries which would permit their leaders to get away with reduced military budgets. One method would be agreement between the Pak and Indian military to thin out the forces on the Pakistan-Indian frontier and substitute for them paramilitary and border guard units. Shoaib says Pakistan has such forces. He does not believe the Indians now have them. In any case a discussion on this question might form an item for the next Ministerial meeting. 4. Next Ministerial Meeting. The Indians would have to agree, without in any way changing their public position on Kashmir, to let the Pakistani talk about Kashmir as an item on the agenda. It would be understood that at some agreed moment--perhaps after one morning on the subject--they would proceed to the other two items. They might be: military arrangements; the Ganges-Brahmaputra-Teesta joint project. 5. China. I raised with Shoaib the political difficulties we face with the Chinese equipment and the visits. I said that the problem was real and political even though the President had known in advance from President Ayub about them. He asked what, at the present stage, Pakistan should do about China. I said: "Nothing. Keep your relations with China as quiet and inactive as possible." I went on then to explain the depth of the problem of what appeared to be close China-Pakistan ties at a time when the Chinese Communists were actively encouraging Hanoi to continue a war in which our men were being killed every day. It was not impossible for us to understand Pak policy and the reasons for it. But the Pak Government must be conscious that every pro-China move they make throws a heavy political burden on our relations. 6. A Story. In great confidence Shoaib said he would tell me of a recent incident in the Pak Cabinet. Ayub said: "I want it understood that never again will we risk 100 million Pakistani for 5 million Kashmiri--never again." I said that in equal confidence I would tell him that one of the reasons we were so anxious to end the war between India and Pakistan was we feared a military set-back for the Paks which might destroy the morale of the nation and Ayub. He said: "It was close--very close." Walt
328. Memorandum From Secretary of State Rusk to President Johnson/1/ Washington, April 27, 1966. /1/Source: Johnson Library, National Security File, Memos to the President, Walt W. Rostow, Aides File, Vol. 1, April 1-30, 1966. Secret. SUBJECT We have told Mrs. Gandhi that we are prepared to do our part in support of an economic reform program, which is now being worked out between Indian Planning Minister Mehta and the IBRD. We must urgently decide how to proceed with Pakistan. Our economic decisions for Pakistan are complicated, however, by political problems. Pakistan's Finance Minister Shoaib leaves Washington April 29. I will be seeing him shortly before his departure and would like your permission to present to him the aid deal indicated below. Shoaib must present his budget in early June and therefore his economic policies must be set within the next six weeks. The IBRD has taken the lead in formally promoting the economic aspects of the aid package recommended below, and to support our effort to achieve an understanding on defense expenditures. On the political side of the problem there are two basic policy questions: (1) Has President Ayub violated his understanding with you in acquiring Chinese Communist military equipment? (2) Has Ayub's political performance since his talks with you justified return to economically justifiable development lending? Our recommendations assume that the steps so far taken do not represent a breach of your understanding and that we need to reach a combined economic-political bargain in order to help Ayub balance the pressures pushing him toward Communist China. Recommendation 1: That you authorize us to describe to Pakistan's Finance Minister Shoaib the following bargain: We are ready to resume AID commodity lending in six-month slices beginning in July at a level needed to support Pakistan's development program and self-help policies (about the FY 1965 annual rate of $140 million) provided other members of the IBRD Consortium do their fair share and that Pakistan: (1) limits its defense expenditures to a level to be agreed upon (we will seek a comparable understanding with the Indians); (2) demonstrates a conscientious effort to maintain the "spirit of Tashkent" and to contain the intensity of India-Pakistan disputes; (3) demonstrates a satisfactory appreciation of basic U.S. interests in Asia; (4) maintains a satisfactory level of cooperation with the United States; and (5) accepts the economic conditions advocated by the IBRD Consortium to restore the funding level of its development program and restore and extend import liberalization. These conditions are defined more fully under U.S. requirements below. Recommendation 2: That you authorize us to tell Shoaib that after we know the results of this spring's wheat harvest, we will agree to negotiate a PL-480 agreement and provide shipments for six months, subject to the understanding that the GOP would take further steps to promote greater agricultural output. Recommendation 3: Within the context of these two decisions to resume aid, we recommend that you authorize us to tell Shoaib at the same time, as a further carrot to performance, that we will proceed to cost out the Karachi Steel Mill and, assuming that the political climate continues to be satisfactory and that costing problems prove to be manageable, we will look forward to a favorable decision within perhaps three to four months on a U.S. contribution of not over the $120 million level ($85 million EXIM Bank; $35 million AID) earlier contemplated. We have concluded that there will be adequate funds to finance this package. The first slice of commodity aid can be financed from money already appropriated. The second slice is only about half of the new money for Pakistan included in your appropriation request for this year. The $35 million for the steel mill would leave a margin of $40 million. Administrator Bell concurs; Secretary Freeman concurs in those recommendations concerning food aid./2/ /2/President Johnson approved each of the three recommendations. The decisions were conveyed to Shoaib before he left Washington, and a summary of the talks with Shoaib in which the understanding concerning economic assistance was outlined was transmitted to Karachi in telegram 1564, April 30. (National Archives and Records Administration, RG 59, Central Files 1964-66, POL 7 PAK) Background: Pakistan-Communist Chinese Relationship: Fear plus India's attitude on Kashmir operate to pressure Pakistan to seek unqualified political support from a major power. The continuing Indian military build-up pressures Pakistan to seek suppliers of military hardware. The current power alignments and our withholding of MAP cast Communist China in both roles. Pakistan has recently received a number of MIG-19's (the best estimate cites 22 out of a reported planned total of 100) plus medium tanks from the Chicoms, who are offering substantial additional materiel. During the visit of China's President to Pakistan last week, the public theme of Chicom-Pak solidarity against India was intensified. But President Ayub appears to have resisted Chinese lures which would place impossible strains on Pak-U.S. ties. Ayub instructed Shoaib to tell us there has been no change whatsoever in the discussion and understandings which Ayub reached with you last December. Ayub's Domestic Problems: In the present atmosphere, it is as impossible politically for Ayub to abandon his efforts to resolve the Kashmir dispute with India as it is for Indira Gandhi to make meaningful concessions to Ayub before the elections in 1967. If he is to retain his power base, which has been weakened by recent events, Ayub has few options. He must continue a hard line against India, maintain his ties with the Chicoms, and seek to replenish his military stockpile. U.S. Requirements: 1. Our requirements are peace and stability in the subcontinent and Pakistan respect for basic U.S. interests in Asia; we assume that the Chinese objectives are the precise opposite. Therefore, we need to have continuing evidence from Pakistan that in managing its relationship with China it is meeting our requirements; e.g., --Maintenance Spirit of Tashkent: Pakistan must make an evident effort to restrain the intensity of India-Pakistan disputes. It must be willing to continue the dialogue with India at whatever levels necessary to achieve progress in resolving "matters of direct concern to both countries." Pakistan must be willing to seek agreement on other outstanding issues, particularly those left over from last September's conflict, without conditioning settlement on progress on Kashmir, although we recognize that for its part, India must be willing to discuss Kashmir with Pakistan. Willingness to agree to cooperative joint India-Pakistan economic projects would be evidence of a desire by Pakistan, as India, to maintain the spirit of Tashkent. --Satisfactory Appreciation of Basic U.S. Interests in Asia: This should be reflected in the Pakistani attitude on the U.S. effort in Vietnam, and in Pakistan's continued adherence to the SEATO and CENTO alliances. --Satisfactory Level of Cooperation with the U.S.: This should be reflected in the continued operation of the U.S. special facilities at Peshawar, Pakistan (which represent [less than 1 line of source text not declassified] of our intelligence needs in Pakistan and which have continued in operation without interruption); in continuing a satisfactory pace of negotiations for the reopening of our two Atomic Energy Detection Stations [1 line of source text not declassified]; and in building a climate (e.g., through restraint and accuracy in public statements and the controlled press) which is conducive to friendly relations with the United States. 2. Limit on Defense Expenditures: We will require an understanding with Pakistan, as we also will with India, on limiting military expenditures. We have examined various approaches to this problem and have concluded that the most realistic way to proceed is to do what we can this year to reduce the level of defense expenditures in both countries, starting from bargaining positions outlined below. We recognize, however, that, given the current state of India-Pakistan relations and political pressures in both countries, immediate results will be limited. Therefore, we will put the weight of our effort on achieving a downward trend in defense spending over the years by conducting with India and Pakistan an annual review of defense expenditures in connection with consideration of our economic aid program. We would ask both countries to disclose to us, at least in general terms, what equipment they are receiving from Communist China and the Soviet Union. We would also say that if they are unable to sit down together to work out an agreed limitation on defense expenditures, we would hope at least that each would ensure that the other learns of the steps it is taking to cut back on defense spending so as to encourage reciprocal cuts. For discussions with Pakistan and India this year, we would start from negotiating positions as follows: Pakistan: For the fiscal year about to begin, Pakistan should limit its over-all defense expenditures to 3 1/2 % of estimated GNP for a total of about $400 million (expenditures during the past year total $525 million and constitute approximately 5.3% of GNP), and limit its foreign exchange expenditures to $84 million, this figure to include the value of aid from all sources (expenditures in foreign exchange during the past year have been about $147 million). India: For the fiscal year just begun, India should reduce its actual defense expenditures from its budgeted level of $2081 million to no more than last year's actual expenditures ($1972 million or about 3 1/2 % of estimated GNP) and should reduce its foreign exchange expenditures to no more than $286 million, counting Soviet equipment on the basis of deliveries rather than payments. (The $286 million figure comes from a Memorandum of Understanding we negotiated with the Indians in 1964, but the Indians have been counting Soviet equipment, which they get on long-term rupee credit, on a payments basis. On this basis they are probably within the ceiling, but on a deliveries basis they will be $50-100 million over it. We propose a change since it is the deliveries of large quantities of Soviet equipment which is an important stimulus to the extensive Pakistani military procurement program.) 3. Economic Requirements: We will also seek a restoration by Pakistan of its previous priority and funding to economic development in FY 1967, agreement to a resumed and extended import liberalization program by July and steps to increase further agricultural production, including active pursuit of potential foreign investors in fertilizer production. Dean Rusk
329. Memorandum for the Record/1/ Washington, April 27, 1966. /1/Source: Johnson Library, National Security File, NSC Histories, Indian Famine, August 1966-February 1967, Vol. II. Secret. Prepared by Saunders. The President in a talk with Rusk and Rostow yesterday expressed these feelings about aid to India and Pakistan: 1. He recognizes it will be hard to get concrete progress on our two conditions--progress on Tashkent and defense ceilings--immediately. So he is willing to move ahead cautiously. We can maintain control by meting out our aid in two tranches and making it clear the second tranche--but not the first--will depend on concrete progress by late in the year on these two fronts. In Pakistan, he feels reopening our facilities is something the Paks could move on quickly. 2. He feels we have a moral commitment to finance the Karachi Steel Mill. However, he realizes we need a political context. So we might move ahead with recosting now but hold off final commitment. 3. He feels we are morally obligated to sell spare parts for military equipment we have already given Pakistan. H.S.
330. Memorandum From the Deputy Assistant Secretary of State for Near Eastern and South Asian Affairs (Handley) to Secretary of State Rusk/1/ Washington, April 28, 1966. /1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 7 PAK. Secret; Exdis. SUBJECT Bill Gaud and I went to the White House this afternoon for the President's meeting with Finance Minister Shoaib who was accompanied by Ambassador Ahmed. The President first saw Shoaib with only Walt Rostow in attendance. This session lasted about one-half hour. Ambassador Ahmed, Bill Gaud and I joined the President, Shoaib and Walt Rostow for a brief round-up session in which the President made the following points: 1. He continued to have the greatest respect and regard for President Ayub and had asked Minister Shoaib to convey this message to him. 2. He understood Pakistan's difficulties but even with this understanding we too have our problems. He spoke particularly about problems caused by Pakistan's relations with China and India. He emphasized the problems of Pakistan/Chinese relations at a time when American boys were dying in Viet Nam and said that it would be very hard for Americans to understand the kind of relationship that seemed to be developing between the Pakistanis and Chinese when Pakistan is supposed to be an ally of the United States. We too might someday like to give the Chinese leaders a "parade" but we were a very long way from that at the moment. On India/Pak relations, he said we simply cannot finance a war between these two countries and he hoped that men in India and Pakistan would find some way to bring about a lasting peace. There might be joint economic projects, there might be a river to be dammed and shared, for example. 3. He said that Ayub knows how he feels about Kashmir and he doubted that he would be as restrained as Ayub has been about this matter. But settlement of these problems takes time and understanding. 4. He said that Secretary Rusk would be meeting with Mr. Shoaib tomorrow and would be discussing the conditions under which we would be prepared to help Pakistan to join with the World Bank in helping Pakistan in its economic programs. He looked with sympathy on the steel mill and felt that we should help Pakistan in this project. 5. The President spoke with some emotion about the closing down of the facilities. He said he didn't understand this because it seemed to him Ayub would have reopened them after their talks in December and he did not know why this problem had not been straightened out. 6. The President emphasized the importance of limiting military expenditures. He said that he talked with India's Prime Minister Gandhi and Food Minister Subramaniam about this problem. India cannot expect to continue to build MIGs and steel plants and at the same time continue to get help from us for food and economic programs. India has got to be able to feed itself and has to see this as its major priority. 7. The President concluded his summary by emphasizing his great admiration for President Ayub. He recalled that President Kennedy had told him that Ayub was a truly great statesman and he wanted Minister Shoaib to know that he has never met a head of state for whom he has greater respect and admiration than he has for Ayub. He knew Ayub's problems and he knows Pakistan's problems. Pakistan happened to choose some "lulus" for neighbors including Russia, China and Afghanistan, but that was not Pakistan's fault. At the end of our meeting with the President Walt Rostow asked all of us to join him for a few minutes in his office where he emphasized to Minister Shoaib and Ambassador Ahmed the President's great concern about the facilities and the need to have them reopened. He said the President saw this as a possible breakdown between him and Ayub and he was troubled by it./2/ Minister Shoaib got the point but Ambassador Ahmed considerably less so. /2/The Department emphasized this concern in telegram 499 to Rawalpindi, April 30. The telegram summarized the portion of Johnson's conversation with Shoaib that dealt with the closed installations. (Ibid., DEF 15 PAK-US) Walt Rostow has told me that the President, in his initial talk with Minister Shoaib, followed the attached memorandum/3/ he had prepared for the visit. You will see from this that the President has made it very clear to Shoaib what general understandings we must have before we can resume assistance to Pakistan. The President did not, however, get into the specifics of aid figures and military levels. It would seem, therefore, in your meeting with Shoaib that this is the subject on which you might wish to concentrate. /3/Not attached. The April 28 briefing memorandum from Rostow to the President listed a number of suggested points the President might want to make in his meeting with Shoaib. (Johnson Library, National Security File, Memos to the President, Walt Rostow, Aides Files, Vol 1, April 1-30, 1966)
331. Letter From President Ayub to President Johnson/1/ Saidu Sharif (Swat), May 1, 1966. /1/Source: Johnson Library, National Security File, Head of State Correspondence File, Pakistan, Vol. 2, Pres. Ayub Correspondence, 1/1/66-12/25/67. No classification marking. The letter was sent from President Ayub's camp in Saidu Sharif (Swat), Pakistan. Dear Mr. President, I thank you for your letter of April 17, 1966./2/ /2/Document 317. I am grateful to you for informing me of your discussions with Prime Minister Mrs. Indira Gandhi and, in particular, for urging her to keep up the effort to resolve the underlying issues which divide India and Pakistan, including the dispute over the State of Jammu & Kashmir. We in Pakistan earnestly desire to implement the Tashkent Declaration with a view to restoring peace in the sub-continent. However, unfortunately, we have not as yet seen any tangible signs, barring verbal professions of peace, of a like desire on the part of the Indian Government and its leaders. On the other hand, plans for a major expansion of the Indian armed forces continue to be implemented as a matter of great urgency. In the meantime, the Soviet Union has decided to resume supplies of heavy military equipment to India. All this is bound to increase tension in the sub-continent. We are not oblivious of the domestic political and economic problems which the Indian Prime Minister faces in her country in preparation for the forthcoming general elections in India. However, I do not see why progress towards removing the underlying cause of the India-Pakistan conflict should adversely affect her election prospects. In my judgment it should strengthen her position. You have expressed concern about the possible effect of the recent visit of the Chinese leaders to Pakistan on relations between Pakistan and India. As you know, Chairman Liu Shao-chi came to Pakistan in response to a long-standing invitation extended to him during my visit to China last year. I see no reason why this visit should come in the way of implementing the Tashkent Agreement by either country. With warm personal regards, Yours sincerely, Mohammad Ayub Khan
332. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/ Washington, May 2, 1966, 9 a.m. /1/Source: Johnson Library, National Security File, Country File, India, Vol. VII, Memos & Miscellaneous, 1-8/66. Secret. Ambassador Bowles has asked that two long cables of his be called to your personal attention. They are attached./2/ But let me try to summarize them. /2/Reference is to telegrams 2914 and 2931 from New Delhi, both April 28, which were retyped for the President and attached to this memorandum. Copies are also in National Archives and Records Administration, RG 59, Central Files 1964-66, DEF 19-8 US-INDIA and POL 1 INDIA-USSR, respectively. First, he sees us entering a period of acute competition with the USSR for leverage in India. Straws in the wind indicate that the Soviets are trying hard to undercut the new Indo-US cooperation generated by Mrs. Gandhi's visit here and subsequent progress on economic programs. The attack focuses on the wide range of economic reforms we and the World Bank are pressing, which the Soviets and their Indian backers see as a threat to socialism. While we have a lot of momentum, Soviet prestige is high, and many Indians are uncertain of our intentions, so the battle will not be one-sided. Second, Bowles sees military aid as an important key to this struggle. This is where the USSR can put the heat on most effectively, and where the Indians are most sensitive. We think Soviet deliveries of military equipment have already slowed. Bowles fears resumption of US military aid to Pakistan would play right into Soviet hands. Third, Bowles has long felt that our military aid to Pakistan has been a mistake. India is the big power in the subcontinent, and it opposes China. He feels we muffed our opportunity in 1963-64 after the Chicom invasion by not moving into India with large-scale military aid to pre-empt the Russians, and he feels our unwarranted concern for the Paks led us down that false path. He would like to see us resume limited military aid to India now, but says that resuming lethal aid to Pakistan--even spare parts--would undo all the progress we have made with India in the last few months. He would not resume any military aid to the Paks unless they renounce Chicom aid and cooperate in the defense of the subcontinent against China. Our view is: 1, India is, indeed, more important than Pakistan. But 2. It is the Indian interest as well as ours to keep a Western option open to Ayub. In this spirit Secretary Rusk is considering an instruction to Bowles (which he will check with us) suggesting he discuss frankly with the Indians how we keep that door open for Ayub without endangering India. The Indians have to recognize that our dilemma is theirs because they have a bigger stake than we do in where Ayub and Pakistan go. Most of the town feels we will have to get back into at least selective sales to both sides when we have established a better political and economic framework, and agreed force levels. We are not, therefore, asking you for a decision now. We will wish to make some concrete progress towards limiting military spending on both sides before we put some operational choices to you. Walt
333. Memorandum for the Record/1/ Washington, May 4, 1966. /1/Source: Johnson Library, National Security File, Country File, India, Planning Minister Mehta Visit, 4/19-28/66. Secret. Drafted by Handley. SUBJECT The President met with Indian Planning Minister Asoka Mehta and Ambassador B.K. Nehru this morning at 10:45 am. Messrs. Bell, Rostow and Handley were present. The President began the meeting by saying how delighted he was to meet with Minister Mehta. He said that he had had good reports about the Minister's discussions in Washington and invited him to tell him about what was going on in India. The President added that there was no area or people in which we were more interested or more concerned about. He said that the recent visit of Prime Minister Gandhi has been applauded in the United States and that we were inspired by what India was doing. Minister Mehta made the following points: (1) He had just returned from Canada. (2) While the United States was building a "Great Society", India was embarked on a "Great Change." He spoke of the transformation of the structure of production and of the changes taking place in the minds of so many Indians. These changes kept people like him going. He spoke at length about progress in agriculture, family planning, and about the way younger people were coming to the fore. Farmers want to break away from traditions, putting pressure on him for electricity, fertilizer and irrigation. They are "clamoring for changes." He mentioned a recent meeting to discuss how best to celebrate the 100th anniversary of Gandhi's birth and he said that it was virtually unanimous that the best monument to Gandhi would be a program for rural electrification. (The President recalled that a substantial part of the talk he had with Prime Minister Nehru when he visited India concerned rural electrification.) (3) He said that the supply of fertilizers is the chief subject the Chief Ministers of the various Indian states discuss with him these days. They say they cannot go back to their states without some commitment on this subject. (4) In discussing family planning, he said that in 1965 there were more vasectomies than in the preceding 10 years. In five states annual targets for "the loop" had been reached within five months. Twenty-nine million IUD's would be fitted within the next five years. (5) There were subtle changes taking place in the Indian society which gave him great confidence. India is no longer an under-developed country, although still not fully developed. Within a few years India would be largely self-reliant in transportation and power. India's power program for the next five years was of the same order as that of Great Britain. At the end of the British rule in India, there were 35,000 miles of railroad but only 2.5 million kilowatts of power. In 1966-67 alone India was adding 2.5 to 3 million KVA's. (6) When he told the Ministers of the various states that they had a choice between cutting development planning or raising taxes, they decided to raise taxes. India is collecting 8-900 million dollars additional taxes this year, the worst year in terms of economic and food problems in recent history. The President then made the following points: (1) We were in a heavy budget year. He had moved the budget from $99 billion to $113 billion this year and with add-ons by Congress, Viet Nam and other things it may well go over $120 billion. (2) We had made no request of the Prime Minister or Subramaniam nor had we demanded conditions. He thought that relations between India and the United States had moved forward. (3) Subramaniam had made quite an impression on Secretary Freeman, our technicians and on himself. He felt that India was genuinely trying to face up to its problems. (4) He had seen in the newspapers that we had demanded concessions from the Prime Minister but this was not true. He had demanded no concessions but had listened to her and was inspired by what India was doing. (5) Americans were pleased with Tashkent. He realized that this was an election year in India--we had ours too--and therefore, he could understand certain problems. But we longed for both India and Pakistan to "bend a little" so that their resources would not be used for war. He pointed out there will be difficulties but that Tashkent was an important achievement and should be carried forward. (6) He hoped that Minister Mehta would go over economic criteria with George Woods, Secretary Rusk and AID Administrator Bell. While he could proceed on the general assumption that the Prime Minister and Subramaniam had demonstrated India's needs and what India was doing to cope with its problems, we had to take into account certain standards and criteria since we had commitments to others, e.g. Pakistan, the Western Hemisphere, etc. (7) He thought that the talks with Subramaniam and the Prime Minister had fully justified his decision last year to wait until the Aid Bill was out of the way. There was now a complete atmosphere of trust and confidence between India and the United States. (8) He was grateful to Prime Minister Shastri for his efforts with Kosygin to get Hanoi to the peace table. He had understood that Shastri's letter to him on this subject/2/ was probably the last he had written to a chief of state. /2/Document 275. (9) The visit of Prime Minister Gandhi was as perfect as any visit could be. (10) Despite the advice of some of his best friends and advisers, he had sent a special message to Congress on the Indian food problem and other matters. Congress had come through with a unanimous vote of confidence and was now part of the program. He attributed much of this success to the effect of the visits of Food Minister Subramaniam and Prime Minister Gandhi. (11) He had made no request of the Prime Minister or of India on Viet Nam. All we want is peace. If India can help, she will find that the United States and this administration would lean over backwards to achieve a lasting peace. (12) He invited Minister Mehta to attend the Diplomatic Reception tonight and hoped that they would be able to find a few minutes to talk together. He then said that since he was already late for his appointment in Detroit for the funeral of Senator McNamara ("funerals don't wait even for Presidents of the United States"), he would like to see Minister Mehta again before he returned to India. Following the President's departure the group adjourned to Mr. Rostow's office. A second meeting between the President and Minister Mehta was tentatively set up for 5:30 pm, May 5./3/ Minister Mehta in reviewing his schedule noted that he was having luncheon on the Hill tomorrow with Senator Morse and others. /3/According to the President's Daily Diary, there was a meeting between President Johnson and Mehta at 2:54 p.m. on May 5. (Johnson Library) No other record of this meeting has been found. In responding to a question from Mr. Bell and Mr. Rostow, Mr. Mehta said meetings at the Bank were going well, although they were only now getting to the heart of the problem. He said that the extent of India's economic liberalization depended on assistance that would be available from the Bank and other donors. He was seeing Mr. Woods this afternoon and hoped that they would come to grips with this problem at this meeting. [Continue with the next documents]
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