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FOREIGN RELATIONS OF THE UNITED STATES 1964-1968, Volume XXV South Asia
Department of State |
343. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/ Washington, June 2, 1966, 4:30 p.m. /1/Source: Johnson Library, National Security File, Country File, Pakistan, Vol. VI, Memos, 1/66-9/66. Secret. A handwritten note on the memorandum reads, "Rec'd 6 pm." Secretary Rusk recommends we take another step in our relations with Pakistan. In your conversations with Ayub in December and with Shoaib in April, you reached a general understanding that we would resume economic assistance if they would meet certain political conditions. The Secretary now thinks we should move forward with our side of the understanding./2/ He proposes that we: /2/Rusk outlined his proposal in a May 30 memorandum to the President. (Ibid.) a. Release $70 million for commodity aid about 1 July. b. Indicate a readiness to release a second slice of $70 million six months later, if our relationship is proceeding satisfactorily. c. Meet our obligation on the Karachi steel mill ($85 million Ex-Im and $35 million from AID if the Paks decide to go ahead and are ready to meet any additional costs resulting from revised estimates. He recognizes that going ahead now on this six months' basis is to take a calculated risk, because the Paks have not yet fully met the political conditions we set. --They are not bringing military spending down as far as we recommended, though they have come down some. --They may be planning limited new agitation in Kashmir. --They have paraded--not just accepted--Chicom military equipment. --They are negotiating hard on reopening the small atomic energy detection stations, [1 line of source text not declassified]. We can have no illusion that, by resuming aid, we will now get all we want. The Secretary thinks the risk is worth taking. George Woods urges that we go ahead: it fits his strategy with the Paks./3/ He will be working on them steadily to get military expenditures down further. Bell concurs. /3/David Bell sounded out Woods on June 1 on the question of proceeding with program loans on Pakistan. (Memorandum from David E. Bell to Walt W. Rostow, June 1; ibid.) Before making my recommendation to you, I sought independent answers to the following questions: 1. How serious is Pakistani involvement in disturbances along the Indo/Pakistani border? The CIA prepared a detailed memorandum/4/ which concludes: /4/Not found. --With respect to the Mizo and Naga tribal rebels (whom the Paks aided before Tashkent) there is no conclusive evidence that this aid continued after Tashkent. The possibility of some limited assistance cannot be precluded. If so, it has been very limited. --With respect to infiltration into Kashmir, some intelligence and clandestine operatives may have been sent across into Kashmir in early May. They were not armed for combat, and their number is probably fairly small. This is not good business; and we shall have to watch it carefully; but I do not think it sufficient to keep us from going forward along our track with Ayub. 2. In the matter of the small stations, is Ayub violating his pledge to you that he will not do things contrary to U.S. vital interests? I have looked carefully into the terms of the negotiation. It appears that what they are negotiating hard about concerns legitimate Pak interests in the installations; [1 line of source text not declassified]. This is a trend in installations in many parts of the world. I conclude it is not a violation of Ayub's pledge to you. 3. I have talked with George Woods. He is getting deeply into the business of military expenditures in both India and Pakistan. The Pak military budget for this year should be less than it was for last year. Bringing down the military budgets of the two countries will be a process rather than an immediate decision, interwoven with any constructive diplomacy we can generate between India and Pakistan. I conclude in this matter that we are doing at the moment as well as we could expect; we are lucky to have George Woods in the middle of the affair. 4. Can we hold up this package or any part of it for Gene Locke to give as an initial gift to the Pakistani? Shoaib must present his budget on June 9. With knowledge of our aid package, he can underline the utility of the U.S. relationship and implicitly demonstrate the virtues of restraint towards India. Without knowledge, he cannot put forward a bold development budget. Moreover, Ayub, without a public announcement of our assistance, will have difficulty holding back his radicals, who are progressively undermining Tashkent and creating an atmosphere in which a meeting with India will be politically unviable for him. An affirmative aid decision will strongly, if indirectly, support the voices of reason and moderation within the government of Pakistan. And it is urgent that this element be added to the Pak military equation. I then probed as to whether we could leave the Karachi steel mill for Gene Locke to give them. Macomber considers this of uncertain value. It is a substantial project, but it is quite uncertain at the moment. National Steel is reviewing the cost figures, and these will not be clear until six weeks to two months from now. After these figures are known (which may boost the cost to some $70 million foreign exchange over what we are planning to contribute), there will have to be negotiations between the government of Pakistan, the U. S. Government, ExIm, etc. The Paks may even have to do some negotiating with West Germany for some part of the overrun. It is, therefore, far from neat or clean. Indeed, there may be some backfires because costs will have risen and we will not be increasing our contribution to cover them fully. Ambassador Locke perhaps would be better out of this one. My feeling is that Gene Locke will not need any presents. In his person and his connection with you, he is the greatest present you could give Ayub. On balance, therefore, I recommend you approve the Secretary's proposal. I believe it is right that we release our aid on a 6-month basis. This will give us an opportunity to see how the politics of the situation evolves and retain continuing leverage. I also believe we should consider, shortly after the release of this package, a letter to Ayub like the one you have just dispatched to Mrs. Gandhi. Walt Should we prepare an Ayub letter? /5/Johnson checked this option.
344. Telegram From the Department of State to the Embassy Office in Pakistan/1/ Washington, June 6, 1966, 3:57 p.m. /1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, AID (US) PAK. Secret; Priority; Limdis. Drafted by Laingen on June 4; cleared by Schneider, Rees (AID), Wriggins, Handley, in draft by Hoopes, and in substance by Horbaly (Department of Agriculture); and approved by Handley. Also sent to Karachi and repeated to New Delhi, USUN, and London and pouched to CINCMEAFSA, Ankara, Tehran, and Bangkok. 610. Subject: Aid Bargain with Pakistan. For Charge. This message contains instructions for use by Ambassador Locke/2/ with Ayub in conveying steps President has now authorized on US side of economic aid bargain presented to Shoaib during April visit here. Ambassador Locke will convey this information to Ayub immediately following presentation credentials. Charge should inform Shoaib in advance that Ambassador will be under instructions seek substantive conversation with Ayub at time he presents credentials, in order convey next steps USG prepared take in economic aid. /2/Ambassador McConaughy left Pakistan on May 15. Cargo served as Charge until Ambassador Locke arrived. Eugene M. Locke was appointed Ambassador May 27 and presented his credentials June 9. A. Background 1. GOP response to conditions of Pak performance in bargain is less than we had hoped for. GOP has accepted concept defense budget ceiling and indicated an intention reduce over-all spending next year. But its continuing efforts to expand armed forces, including Chicom procurement, add to arms race potential in subcontinent and we have no certain assurance of downward trend defense spending in either Pakistan or India. Pakistan is clearly keeping up the pressure on Kashmir and its frustration on this score could lead it to new efforts of agitation with real risk for peace on subcontinet. The result could be that events might negate or undermine what we otherwise believe to be determined GOP efforts to resume economic development program and restore import liberalization. 2. We recognize that renewed US economic aid in these circumstances involves a calculated risk. Nevertheless we have concluded that on balance the situation justifies decision resume aid on short-leash basis. In doing so we would be affirming to Ayub and other friendly elements in Pakistan that we are prepared do our part to rebuild our relationship on new and firmer ground. But we would condition our follow-through in aid bargain on same elements of per- formance that we originally posed to Shoaib and thus serve new notice that we intend keep these elements under careful, continuing review as our relationship evolves. B. Action Instructions 1. We want Ayub to be directly aware of importance we attach to economic aid steps we now ready to take. We want him and GOP to understand that these steps are intricate part of process begun with Ayub's visit here and our subsequent talks with Shoaib at highest level. 2. You should preface your remarks to Ayub on this subject by recalling President's satisfaction over growing sense of confidence in our relationship begun in his talks with Ayub in December and strengthened as result meeting he had with Shoaib here in April. As evidence of our desire strengthen this trend, and our confidence in similar intentions Ayub and GOP, President asked that you go out immediately to Pakistan and to convey directly on his behalf information as to several steps USG now prepared take in economic aid field with Pakistan, despite some uncertainties that remain as to trends in subcontinent. FYI: What you should get across here (in fairly low key with Ayub but more strongly to Shoaib in subsequent conversation) is point that our decision move ahead was not easy one in view response we have had from Paks on conditions we posed, and that as consequence we intend keep these conditions under continuing review as our relationship evolves. End FYI. 3. You should state President has authorized us begin negotiations immediately on $70 million commodity loan, on assumption GOP prepared follow through this month on economic aspects of aid bargain; i.e. announcement of budget with restored priority to development and return to import liberalization. In addition President has authorized us tell GOP we prepared consider further $70 million commodity loan in fall after Congress has acted on aid bill, if review at that time indicates continued progress in our relations and economic performance. USG also prepared meet its commitments on Karachi Steel Mill ($85 million EXIM and $35 million AID) provided GOP decides go ahead with project after reviewing revised cost estimates when these available and provided Pakistan meets any added costs. We will also be prepared begin negotiations on Pakistan's food needs under PL 480 for balance CY 66 after returns spring wheat harvest assessed. 4. You should indicate to Ayub that these actions on our part and our follow through on them depend on several factors. Above all there is need for peace on subcontinent and conditions in which development efforts can proceed with maximum effect, including downward trend in defense spending. You should note the highest importance the President continues attach to efforts by both India and Pakistan find ways to deal peacefully with problems between them, including Kashmir. You should indicate great weight President personally attaches to reaffirmation conveyed to him by Shoaib of understanding reached between Ayub and the President on our respective interests in Asia. And you should say that we believe it incumbent on both of us to seek ways to improve atmosphere in which we conduct our bilateral relations, an objective that is of highest importance to you as you begin your mission. 5. You should frame your remarks on small facilities (AEDS stations Lahore and Malir) problem in context our desire improve bilateral relationship; noting our satisfaction that negotiations underway, that you believe basis for agreement exists and that you assume this problem will be resolved. You should also say that you believe it in interest both of us that reopening and refurbishing of stations not be delayed pending final signature agreement. FYI: We hope GOP will agree interim reopening stations but do not wish make actual reopening condition for first steps on aid./3/ End FYI. /3/On June 7 Cargo reported that Additional Foreign Secretary Agha Shahi had called him in and told him that the Ayub government was certain that it would encounter serious political and military repercussions if it agreed to reopen the stations. (Telegram 737 from Rawalpindi; National Archives and Records Administration, RG 59, Central Files 1964-66, DEF 18-8 PAK) Howard Wriggins sent a copy of the cable to Rostow on June 7, noting that it was not certain whether the position taken by Pakistan represented the situation as actually perceived by the Ayub government or was a bargaining ploy. (Johnson Library, National Security File, Country File, Pakistan, Vol. VI, 1/66-9/66) 6. Following your talk with Ayub, you should go over same ground with Shoaib but in greater detail as to our requirements, emphasizing the difficulty of our decision and making perfectly clear that we intend keep situation under continuing review as we take each step in economic aid; i.e. we will expect tangible, continuing evidence that Pakistan: a) will stick to a course of moderation and negotiation with India; b) will assure a downward tend in its defense spending (reasserting points Embassy will have made pursuant Deptel 604);/4/ /4/Telegram 604 to Rawalpindi, June 3, repeated to New Delhi as telegram 2383, expressed the Department's continuing concern over the high levels of military spending by Pakistan. The Department instructed the Embassy in Pakistan to pursue the issue of restraint in military expenditure with members of the Ayub government. The Department noted that restraint on the part of Pakistan was conditioned upon similar restraint on the part of India. (National Archives and Records Administration, RG 59, Central Files 1964-66, AID (US) PAK) c) will continue demonstrate appreciation US interests Asia; d) will follow through quickly in negotiations begun on small facilities (making strong pitch on reopening); e) will indicate, in its budget presentation June 11, top priority to development, agricultural self-help and restored import liberalization and will follow through in subsequent actions. f) and will move promptly to release seized AID and MAP cargos impounded last September and reimburse USG for unlocated cargos. 7. FYI: We are also considering follow up Presidential letter, content of which would depend in part on report of conversations with Ayub and Shoaib. End FYI. Ball
345. Telegram From the Department of State to the Embassy in India/1/ Washington, June 7, 1966, 3:25 p.m. /1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, DEF 1 INDIA. Secret. Drafted by Herbert G. Hagerty in SOA, cleared by Hare and Schneider, and approved by Handley. Repeated to Rawalpindi, Karachi, London, Bonn, and CINCMEAFSA for POLAD. 2404. Ref: Deptel 2383 to New Delhi (Notal)./2/ Subject: Indian Defense Expenditures. /2/See footnote 4, Document 344. 1. Assistant Secretary Hare called in Indian Ambassador Nehru June 6 to discuss with him question of defense expenditures and to bring our discussion this subject with GOI to level of specifics we have already reached with GOP. 2. In brief remarks on Indian devaluation, Amb. Nehru described Mrs. Gandhi's decision as "very courageous," expressed some surprise that GOI would have made this move so far in advance of any foreseeable consortium pledging session, and suggested that devaluation will be good move only if India can "get a lot of money" to make it work prior to elections. 3. Ambassador Hare then briefly informed Amb. Nehru of Amb. Locke's departure for Pakistan evening of 6th. Amb Hare expressed view that Amb Locke's appointment at this time will turn out to be useful not just for US-Pak relations but useful from a subcontinent point of view. Amb Nehru agreed and expressed hope he and Amb Locke would be able to meet when Amb Locke returns in a week or two. 4. Ambassador Hare then reviewed results of Mehta mission here, specifically focussing on need to reduce defense spending. He stressed our view that peace and development in the subcontinent require that there be reasonable limitation on defense expenditures and indicated as well our unwillingness, through economic aid, to finance indirectly an arms spiral in South Asia. He then referred to Soviet military assistance which, he noted, Amb Nehru had described as not very substantial during Minister Mehta's talk with the Secretary. Amb Hare said information gleaned from only public sources such as press and GOI statements in Lok Sabha indicates that program has an overall value of more than $250 million and that it has included large number of transport aircraft, three squadrons of MIG-21's (in addition to production facilities acknowledged by Amb. Nehru earlier), surface-to-air missile complexes, and large number of helicopters and tanks. Amb Hare also mentioned submarines and noted that this information could well be partial since certain info of this character is often kept confidential. 5. Amb Hare said our point in raising this matter and clarifying our position is that this substantial Soviet assistance feeds fears in Pakistan and contributes to arms spiral on basis of its arrival in South Asia rather than on basis of stretched out payments. For that reason we believe that costs of Soviet military assistance should be thus reckoned on basis of deliveries. 6. Amb. Hare indicated that we had also pressed Paks hard on question of reducing defense expenditures, and he suggested that if India, as the larger power, could initiate first steps toward reduction defense spending, then it would be helpful in getting Pakistan, as smaller, to come along as well. 7. Finally, Amb Hare made point that in our annual aid reviews, we would be assigning considerable weight to subject of defense spending and to need for downward trend. He said he hoped GOI and GOP might get together on this, but if that not possible, then cooperation by independent example might have same effect. 8. Amb Nehru responded saying he had no instructions this regard and his remarks should be interpreted as his and not necessarily GOI's. He spoke briefly of 1964 Memorandum of Understanding,/3/ indicating that while he agreed US would not want to fuel arms spiral, that memorandum appeared to him to have been broken by our suspension of military assistance. /3/See footnote 2, Document 53. 9. More important, he said, is fact that GOI wants to spend no more than is absolutely necessary to meet the two-fold threat to its security. Prior to 1962, GOI spent too little on defense; now GOI needs forces deployed against the threat from China regardless of cost to other important needs. Second threat comes from Pakistan which "suffering from some kind of lunacy" that its security is threatened by India. He said GOI needs no more than parity on Pak side to protect Indian security on that front. If GOP is willing reduce forces, then GOI would be willing to reduce anti-Pak component its forces on man-for-man basis, but anti-Chicom component of Indian forces would still be very large. He went on to say there is no question of a ratio between the two armed forces since the threats they face differ; neither ratio nor costing basis is relevant. Main point, Amb Nehru said, is the threat. 10. Amb Nehru asked Amb Hare what response US had from Paks. Amb Hare pointed out Pak interest in reducing arms load and in keeping heavy emphasis on economic development. Amb Nehru said GOI has same view. GOI, he said, has already put lid on defense spending; current defense budget essentially same as last year's, with no increase in real terms due to war. GOP's has doubled. GOI is most interested, he emphasized, in reducing arms spending and focussing not on "military glory" but on economic progress, but GOI finds it necessary to defend itself against "psychotic Pakistan" which has allied itself with China. 11. Ambassador Hare noted that we agree GOI defense budget has not gone up appreciably, but it was precisely for that reason that we had made point about costing basis for Soviet bloc assistance, since deliveries which heighten Pakistan anxieties are not accurately reflected in current GOI defense budget. 12. Ambassador Hare recapped points he wished leave with Amb Nehru, summing up by noting that while we recognize difficulties, we consider it simple proposition. An arms spiral in South Asia causes such difficult problems for us that we believe it is essential to get the arrows pointed down rather than up. Ambassador Nehru agreed on the importance of a downward trend, saying he would report this conversation to his government and assuring Ambassador Hare that the GOI will do all it can to limit defense spending, but not below the level of the threat the GOI feels it faces. 13. For New Delhi: Embassy should, at appropriate time and level, reinforce message on defense spending Ambassador Hare conveyed to Amb Nehru. Ball
346. Summary Notes of the 558th Meeting of the National Security Council/1/ Washington, June 9, 1966. /1/Source: Johnson Library, National Security File, NSC Meetings File, NSC Meetings, Vol. 3, 6/9/66, The Problem of Indian Nuclear Weapons. Secret/Sensitive; For the President Only. Those attending the meeting, in addition to the President, included the Vice President, Ball, McNamara, Rostow, Raborn, Bell, Goldberg, Treasury Secretary Henry Fowler, ACDA Director William Foster, AEC Director John Palfrey, USIA Director Leonard Marks, and JCS Chairman General Earle Wheeler. (List of attendees for the 558th NSC meeting; ibid.) The Problem of Indian Nuclear Weapons The President: indicated that this was the first of a series of NSC meetings to be devoted to the discussion of complex problems requiring careful exploration before they were to come to him for discussion. He expressed his concern about the growing pressures in India favoring the nuclear route. Its own economic progress and the stability of the whole area depended on India not going nuclear. The Paper/2/ admirably summarized the problems. He invited Mr. Ball to lay out the issues. /2/Reference is to an interdepartmental policy paper entitled "The Indian Nuclear Weapons Problem: Current Issues," which was circulated to NSC members June 7 under a covering memorandum from NSC Executive Secretary Bromley Smith. (Washington National Records Center, RG 330, OSD Files: FRC 70 A 4443, India 471.61) Mr. Ball: briefly summarized the Interdepartmental paper of June 7, 1966, on this subject, giving the pros and cons of the suggested alternatives/3/ (Plowshare/4/ was not mentioned). Although his presentation was even-handed, he appeared to favor some form of multilateral approach which attempted to deal with India's real security problems. /3/The alternatives suggested in the policy paper as having the potential to restrain the development of an Indian nuclear device included economic pressure the United States could bring to bear, the dampening effect that an arms control agreement between the United States and the Soviet Union would have on an Indian nuclear program, and a bilateral or multilateral security arrangement to guarantee India against a nuclear attack. /4/Plowshare was the program being developed to demonstrate the peaceful potential of controlled nuclear explosions. He recommended further--and urgent--staff studies. Mr. McNamara: agreed and thought recommendations could come forward for Presidential consideration within two to three weeks. Mr. Foster: Stressed the urgency, since disarmament meetings resume in Geneva in June, and the U.S. must have an improved position within a month or six weeks at the outside. He thought the two or three principal alternatives now under study (in the Committee of Principals) could easily be staffed out and recommended within a month. Mr. Marks: Urged (a) a conference of world intellectuals to stress the economic costs and security liabilities of nuclear weapons; (b) using the 20th anniversary of the Baruch proposals/5/ as the occasion for a bold new U.S. initiative. /5/Reference is to U.S. proposals for the international control of atomic energy put forward in a statement on June 14, 1946, by Bernard M. Baruch, the U.S. representative on the UN Atomic Energy Commission. For text of the statement, see A Decade of American Foreign Policy, 1941-1949: Basic Documents, pp. 865-871. The Vice President: Stressed how little additional expenditure would be necessary beyond that already invested for India to go nuclear. He preferred a UN umbrella with private U.S. reassurances to India. This leaves the door open to the Soviets without forcing either the Indians or Russia to take a public stand. Ambassador Goldberg: Stressed the urgency of deciding on any such arrangement, since it would require soundings with the Russians well in advance of the opening of the UNGA in September. Also necessary would be precise commitments to the Indians. Mr. Foster: Cited Minister Banerjee, the Indian Minister who had officially indicated that "for a period, a General Assembly resolution would be adequate." Mr. Rostow: Urged: a. the urgency of our own explorations but reminded the Council of the complexity of decisions countries must face before they chose to go nuclear. Our problem was to buy time until the Indians came to accept the necessity for Western assistance; b. the nuclear issue was so complex that it could not be dealt with solely by the specialists concentrating on arms control or by the country or area specialists. We must find ways of combining these two types of specialists in the study of this problem. The President: Instructed the Department/6/ to speed the study of the Indian nuclear problem and said he would issue a NSAM shortly. /6/An apparent reference to the Department of State. See Document 359. Howard Wriggins/7/ /7/Printed from a copy that bears this typed signature.
347. National Security Action Memorandum No. 351/1/ Washington, June 10, 1966. /1/Source: Johnson Library, National Security File, NSAMs, NSAM 351, Indian Nuclear Weapons Problem. Secret; Exdis. Copies were sent to McNamara, William Foster, Wriggins, U. Alexis Johnson, and Helms. TO SUBJECT At the meeting of the National Security Council on June 9, 1966,/2/ the President noted the increased urgency of dealing with the Indian nuclear weapons problem following the third Chinese Communist nuclear test. He has directed the Secretary of State, in collaboration with the Secretary of Defense, the Director of the Arms Control and Disarmament Agency and heads of other departments and agencies, as appropriate, to study in greater depth the following interrelated issues emerging from the National Security Council review of the Indian nuclear weapons question: /2/See Document 346. a. The extent to which it might be in the U.S. interest to use our economic leverage more explicitly to discourage an Indian national nuclear program. b. The effect which various arms control agreements might have on Indian nuclear intentions, and what price the U.S. should be prepared to pay for such agreements. c. How far it is in the U.S. interest to go in meeting Indian security concerns, what form such action might take, and what the optimum timing might be. d. Whether there are other approaches to the problem which need to be pursued. The study should balance the price of each of these suggested courses of action against the damage resulting from India's choosing the independent nuclear path. For the purpose of this study, no change in our present position on a non-proliferation treaty should be assumed. The study should result in specific recommendations to the President as to measures which the U.S., in its own interest, should take to delay or prevent India's choosing that path. The President requests that the first report of recommendations for his attention be presented to him no later than July 15, 1966. WW Rostow
348. Telegram From the Embassy Office in Pakistan to the Department of State/1/ Rawalpindi, June 9, 1966, 1329Z. /1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 15-1 PAK. Secret; Priority; Limdis. Repeated to New Delhi and Karachi. 753. Ref: Deptel 610 to Rawalpindi./2/ /2/Document 344. 1. My presentation of credentials followed by private meeting between President Ayub and myself took place in satisfying atmosphere. 2. DCM Cargo, General Rafi, and Chief of Protocol were present during credentials presentation phase. President Ayub spoke in warmest terms of his relationship with President Johnson and expressed his strong desire to maintain best possible relationship with United States. He stated his conviction that the long range interests of United States and Pakistan coincided. He stressed difficulties of Pakistan's strategic and geographic position--with three great powers "breathing down our necks". It was necessary for Pakistan to strive for friendly relations with these powers, although India was not yet prepared for this. Indian hostile intentions, Ayub added, were not imaginary; they had been demonstrated in fact last September. Nevertheless, he hoped that friendship would be attained with India and asserted his desire for peace on the subcontinent. He said that Pakistan and India both needed 15 years of peace and that, for Pakistan, this would mean an opportunity to carry forward economic development that had already made great strides. Reverting to his comments on Pakistan's relations with great powers, Ayub said that the United States was the only great power that had no designs on Pakistan and friendship with the United States was highly valued. Ayub expressed hope for our understanding of the difficult problems faced by Pakistan in its relations with its neighbors. He said he understood the compulsions of US global policies and that Pakistan was a small element in this large picture. But he hoped the United States did not consider Pakistan expendable. (I interjected that we indeed did not consider Pakistan expendable but, on the contrary, an important friend.) President Ayub concluded his remarks by very graciously welcoming me to Pakistan in my capacity as President Johnson's representative here. 3. Credentials presentation was followed by 45 minutes private meeting between President Ayub and me in which I covered ground of reftel. 4. President Ayub expanded on his statements reported in para 2. above with particular reference to his friendship for United States, his desire for peace on the subcontinent, his desire to reduce military expenditures, and his hopes for discussions with Indian leaders. On latter point, he thought that GOP representatives could be helpful in encouraging Indians to suggest meeting, but indicated that GOI should take initiative in moving toward further Indo-Pak meetings. 5. I said we hoped that Pakistan could reduce its military expenditures, that figures were not going down as much as we would like them to, although they were being reduced to some extent. Ayub replied that military expenditures were being reduced to a considerable extent, and indicated that Pakistan would be prepared for further reductions, linking this, however, to parallel action by India. I told him that we were likewise encouraging Indians to reduce their military outlays. 6. I told Ayub that we were encouraging Indian leaders to resume discussions on all problems they faced with Pakistan, including Kashmir. We spoke of other matters to be considered such as the Ganges/Bramhaputra control and development, and levels of military expenditures. 7. Ayub made no particular comment, although he did not dissent, when I expressed the desirability of a reduction of forces along both sides of the Indo-Pak border and the cease-fire line. I said I thought the ultimate objective should be a U.S.-Mexican type of border arrangement and that this could involve para-military forces which should be under strict operational control of the central government authorities. 8. During our private discussion Ayub reaffirmed promises he had made to President Johnson during his visit to Washington that he would do nothing to hurt the interests of United States. He said President Johnson had told him that we would do nothing to hurt the interests of Pakistan. Ayub followed this by commenting that he had told his Ministers on his return from Washington to stay away from Vietnam questions in their speeches and that he had passed advice to the press to stay away from anti-U.S. statements about Vietnam and other topics. Ayub said he thought this had been followed up reasonably well. (I believe that this comment by President Ayub gives me a good basis to take up press problems with him if the situation should warrant.) 9. In describing problems that he faced Ayub adverted to the question of spare parts. He indicated he did not take position that United States was wrong in cutting off military supplies. However, he observed that since all his equipment was of U.S. origin, he could not obtain parts except at exorbitant prices (noting parenthetically that we were urging him to lower his military budget) and that this put Pakistan at a disadvantage in comparison with India. India, he said, does not have such a problem, because it could and did procure its military supplies and equipment from other sources. Ayub made no specific request to me on subject of spares but he clearly wanted me to understand that he had a problem. 10. I told Ayub what we were prepared to do on the matter of economic aid. I let him know that this was not an easy matter for us and that we had taken this decision on the basis of statements by himself and Shoaib to President Johnson and of our understanding and expectation that Pakistan would follow through with efforts to maintain peace on the subcontinent, resolve its differences with India, improve its bilateral relations with the United States and continue its emphasis on economic development. I mentioned also the importance we attach to import liberalization and to release of seized cargoes and compensation for those that could not be returned. On matter of compensation, Ayub agreed in principle and said GOP would be prepared to negotiate that matter with us, presumably on amounts involved. Ayub was obviously pleased at this word and the indication it conveyed of U.S. readiness to take affirmative steps to build strong U.S.-Pak ties. 11. I am reporting separately my discussion with Ayub on the reopening of the small technical facilities./3/ /3/Locke reported on this part of his discussion with Ayub in telegram 754 from Rawalpindi, June 9. In light of the importance the United States attached to the reopening of the facilities, Ayub indicated that he was prepared to negotiate an agreement to reopen them if they could be made less conspicuous by moving them into the Peshawar complex. If that was not acceptable to the United States, Ayub said that he would consider reopening them where they were if they were manned by Pakistani personnel. (National Archives and Records Administration, RG 59, Central Files 1964-66, POL 15-1 PAK) The Department replied, in telegram 640, June 13, that it could accept the bases for negotiation put forward by Ayub. (Ibid., DEF 18-8 US) 12. I am seeing Finance Minister Shoaib at 6:30 this evening and will go over some of these points in greater detail with him. Locke
349. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/ Washington, June 11, 1966, 6:15 p.m. /1/Source: Johnson Library, National Security File, Country File, India, Vol. VII, Memos & Miscellaneous, 1-8/66. Confidential. Mrs. Gandhi has taken the first big step in the economic program Mehta worked out with George Woods. She has devalued the rupee. This has triggered strong opposition within her own party, from the Left, and from Indian business men. She needs the prompt response of aid donors to permit import liberalization and to underscore the positive part of her program. That is why George Woods is pressing the consortium hard for prompt action. The politics of our bargain are in pretty good shape. --She is angling through diplomatic channels for another meeting with the Paks. Gene Locke is working the other end of the line. While this will probably not produce anything dramatic, it should keep the Tashkent process going. --The effort to get a grip on military spending is less advanced. But George Woods is working actively on this, as you know; and State is pressing the Indians to take our concern seriously. We are pleased with Mrs. Gandhi's boldness; a bit worried about the tightrope she's on; and feel we should go ahead now with our part of the economic deal. Woods has promised to let her know by 15 June--next Wednesday--how much the consortium will contribute toward the World Bank target of $900 million in non-project aid. She has committed herself to announce further steps on import liberalization by about 20 June. She cannot do this without the Woods package. The consortium meets on Tuesday. Dave Bell accepts the World Bank's $900 million target and would like your approval: To put in a U.S. planning figure up to $335 million at the consortium negotiating session Tuesday. This is in addition to the $100 million you approved for the Vice President to take with him in February. Our planning figure would include: (a) an immediate new program loan of $150 million available from FY 66 funds and (b) up to another $185 million to be made contingent on Congressional approval. Bell would start bargaining with a low U.S. figure of $280 million (plus the earlier $100 million) to press other donors to give more and would go up to the full $335 million only if necessary to get the maximum out of the others. AID can handle the higher figure with what it has already asked of Congress. Woods is pressing the Germans to increase the $62 million they plan to put into the consortium; and to increase within that figure the present amount (about $45 million) of their program lending. We shall be on to the Indians to press home George's point. Bell recommends the package/2/ and has consulted the Congress. /2/Memorandum from David E. Bell to the President, June 10. (Ibid., NSC Histories, Indian Famine, August 1966-February 1967, Vol. II) State concurs. Bureau of the Budget concurs in an attached memorandum./3/ /3/Reference is to a June 11 memorandum from Charles L. Schultze to the President. Secretary Fowler is in dissent as his attached memorandum/4/ to you indicates. /4/Reference is to a June 11 memorandum from Henry H. Fowler to the President. He makes three points: --He believes 42 percent rather than 48 percent is the "Appropriate share" for the United States; --He regrets that the debt rescheduling for India will be delayed by the World Bank until the fall; --He generally opposes continued non-project lending to India unless we can establish a more favorable bilateral trade balance with India. I have looked carefully into these points. With respect to shares, the 42 percent is an historically accepted figure covering both project and non-project lending. It is not the relevant figure for this package, which is wholly non-project. In fiscal 1965--the last year for a full consortium package--the non-project share of the United States was as high as 35 percent. It is, thus, true that in the sensitive area of non-project lending we are making progress in getting others to do more. Moreover, our share looks bigger than it is. We are being allowed by the World Bank to count the $100 million non-project loan to India which we granted via the Vice President, as part of this year's consortium package, although it represents funds which under normal circumstances we would have lent India last year. The other members of the consortium did not break off the assistance to India as we did during the war period. They are not getting credit this year for the contributions they made last year. Therefore, on this point I conclude that our share in this non-project package is "appropriate." With respect to debt rescheduling, all of us would like to see that take place as soon as possible. It requires, however, complicated prior negotiation. George Woods believes he cannot get it organized until the fall. He has, however, accepted and will try to press on the others, a principle greatly to our advantage; namely the principle that we will take the debt rescheduling "off the top." This means that those who, in the past (mainly Europeans), lent on hardest terms will bear the greater burden in the rescheduling; we will deduct this from the $900 million; and we shall divide up the balance according to the agreed percentages. It is just that this principle be accepted; but it is also to our advantage. And it is worth our while to let George Woods fight this battle for us between now and the autumn, which is his recommendation. With respect to the commercial balance, it is true that we buy more from India than they buy from us. However, this does not bear directly on the present loan package. All of it is tied. We are working hard--and should work harder--to increase our exports to India. We are making some progress. But we cannot count on having even bilateral trade balances with every country. Moreover, of the other major trading partners of India: the pound is in worse trouble than the dollar; the Germans are no longer building reserves; and we have good balance of payments arrangements with Japan. The Indians trade little with the French. I conclude, therefore, that while we wish to go further in increasing our exports to India as to other countries, there is no balance of payments pain in this loan package; and there is not even much pain in India's favorable trade balance with us. Therefore, I concur in the recommendation of AID, State, and the Bureau of the Budget. The $900 million is the minimum necessary to carry Mrs. Gandhi over import liberalization and her political crisis. Economically, our balance of payments will not be damaged. And we are getting about as much equity from the consortium as one is likely to get in an imperfect world. I recommend you approve the AID package as presented. Walt Approve AID package/5/ /5/Johnson checked this option.
350. Telegram From the Department of State to the Embassy in India/1/ Washington, June 14, 1966, 10:46 p.m. /1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, AID 9 INDIA. Secret; Priority; Exdis. Drafted by Schneider; cleared by Macomber (draft), Wriggins, and EUR/GER; and approved by Handley. Repeated to Rawalpindi and Karachi. 2477. 1. The President has approved the following US position regarding aid to India: (a) We accept the requirement of $900 mil non-project aid as calculated by the World Bank (U.S. $100 mil commodity loan announced by VP in Febr. is counted toward this total); (b) we are prepared to negotiate an immediate non-project loan in the amount of $150 mil; (c) we are prepared to make further non-project loans to India after Congressional action in order to meet share in financing India's non-project aid requirements for the year, and we now contemplate an additional loan in the amount of $130 mil. This latter loan would be subject to Congressional action. We now contemplate that this would complete our contribution bringing U.S. total to $380 mil or 42 percent,/2/ which U.S. share recent years total pledges. /2/Reference is to the percentage of assistance pledged by the members of the India consortium. 2. As a fall back position, the President has further authorized us to increase the contingent portion of our contribution to be provided after Congressional action, by an amount up to $55 mil which could be financed by AID, or by a combination of AID and Export-Import Bank resources. This total package assumes India sustains economic liberalization, avoids arms race and pursues peace on sub continent. 3. Subsequently, Macomber conveyed to Woods points (a), (b) and (c), further qualifying (c) as subject to appropriate burden sharing by other donors. Woods indicated he did not expect have word from British regarding their contribution until June 15. By that date Woods estimates contributions of US, UK, Canada (which he now contacting) and Bank will total somewhat over $700 mil. He plans to convey this figure to Indians June 15 noting US conditions of Congressional action and appropriate burden sharing. 4. Woods' position as we understand it is that if Indians require immediate response to their query regarding resources to support reforms, figure of $700 mil is best Bank can do at this time. Additional contributions will take more time. 5. Principal problem Bank has encountered so far in rounding up contributions has been with Germans. Woods has informed us in confidence that in response to his latest query German Minister of State Westrick (please protect both sources) has replied as follows: "We are, as I explained to your collaborators, in very hard budgetary discussions. It seems to me impossible to come to a final decision regarding the aid for India within short time. I hope that we will continue in principle to support the Indian economic development but we cannot give assurances at the present time." 6. Bank as yet has no report from Japanese who next most significant contributor. Bank meeting June 7 asked early report from all including smaller donors but no reports yet in. 7. In our view while $700 mil figure is far from what we or Indians had hoped for, there is reasonable prospect for reaching goal of $900 mil given time. For example, if, on top of $700 mil from Bank, UK, Canada and US, others only match their last year non-project pledge the total would be over $810 mil. Obviously look for increased non-project contributions from others, particularly Germany, Japan and Italy. Principal problem, of course, is the Germans and it is up to Indians, at least in the first instance, to press the Germans for early adequate contribution. We are making this point to Indians here. Japanese are also rather unknown factor since Bank has not yet made serious individual effort with them. 8. Above information is FYI for the present. White House has authorized us to convey points (a), (b) and (c) to Indians, but we believe we should defer this until after Bank has given its overall response. We will notify you by Immediate telegram when this has been done./3/ /3/On June 15 the Department informed the Embassy in New Delhi that the World Bank had informed the Indian Embassy about the projected levels of economic assistance. The Embassy was authorized to discuss the U.S. assistance package, as outlined in telegram 2477, with the Indian Government. The Embassy was instructed to point up the qualifications listed in paragraph 2, and to make clear that U.S. ability to proceed with additional non-project loans, as indicated in paragraph 1 (c), was dependent on Congressional action and proportionate burden sharing by other donors. (Telegram 2479 to New Delhi; National Archives and Records Administration, RG 59, Central Files 1964-66, AID (US) INDIA) The Department issued a press release on June 15 that stated that, in conjunction with the members of the consortia on India and Pakistan, the United States was in the process of resuming economic assistance to India and Pakistan. (Telegram 659 to Rawalpindi; ibid., AID (US) PAK) Rusk [Continue with the next documents]
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