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FOREIGN RELATIONS OF THE UNITED STATES 1964-1968, Volume XXV South Asia
Department of State |
453. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/ Washington, August 10, 1967, noon. /1/Source: Johnson Library, National Security File, Country File, India, India's Food Problem, Vol. IV. Confidential. A handwritten note on the memorandum reads, "Rec'd 2:15 pm." SUBJECT At Tab A, Messrs. Katzenbach and Gaud restate for you the options on India food./2/ In addition to the three choices presented at last Saturday's meeting (no food now; 1 million tons; and 1.5 million tons), this memorandum adds two more variants: /2/Reference is to an August 9 memorandum from Katzenbach and Gaud to the President. (Ibid.) --Do a million tons, but announce it as a cut in the 3 million ton target established in the Congressional Resolution. That is, the emphasis in our announcement would be that budgetary problems had forced us to cut back from the 3 million tons set out in the Resolution to 2.5 million tons. Since we have already supplied 1.5 million tons, this leaves 1 million. --Authorize no new agreement now, but allow the Indians to buy wheat in the United States on the understanding that the bill will be paid either through a new PL 480 agreement later, or from Indian foreign exchange. The first variant reflects the only way we have been able to devise whereby this decision could be presented as consistent with your cuts in domestic spending. A 500,000 ton cut in the wheat target we announced in the Message and the Resolution might compare favorably with the cuts you must make in domestic food programs. On the debit side, it would make it impossible for you to come up with more wheat later in the year if the Indian situation gets desperate, and it would probably subject you to international criticism that we had committed ourselves to go to 3 million tons if matched and then gone back on our word. The second new option is a stopgap designed to get the food into India while we decide the terms. But you should know that if you approve this it will be very difficult to avoid picking up the tab for whatever the Indians have contracted for between now and whenever we decide what more we are willing to do through PL 480. In any event, the 600,000 tons your advisers suggest would buy us only about a month before the question would come up again. At Tab B is a short discussion of debt relief/3/--what it is and how it relates to other forms of aid. /3/Reference is to an undated memorandum drafted by Eugene Rostow entitled "Debt Relief as Matching." (Ibid., NSC Histories, Indian Famine, August 1966-February 1967, Vol. IV) At Tab C is a paper you asked Ed Hamilton to do outlining how we might go at the others for more matching funds,/4/ assuming we are unwilling to accept debt relief. Hamilton emphatically does not recommend this. He has supplied it at your request. /4/Reference is to an August 10 memorandum from Hamilton to the President. (Ibid., Memos to the President, Walt Rostow, Vol. 37, August 1-10, 1967) The Katzenbach/Gaud memo ends with a recommendation of a flat 1.5 million tons now. That is, and has always been, the State/AID preference. Fowler and Freeman support 1 million tons now, and are strongly opposed to going any further. Katzenbach and Gaud would not strongly object to this solution. In my bones, I think we should do the 1.5 million tons now if we are going to have to do that much by the end of the year. If the domestic politics of the budget problem simply won't permit that amount, I think you should approve 1 million tons now, covering it in a public announcement by slamming the door on the last 500,000 tons mentioned in the Congressional Resolution. Walt 1. Go ahead with 1.5 million tons now. /5/Johnson checked this option and added the following handwritten note: "We must get State and Gaud nearer to our problem. They are in the sky."
454. Memorandum From George W. Ball to President Johnson/1/ Washington, August 15, 1967. /1/Source: Johnson Library, National Security File, Country File, India, India's Food Problem, Vol. IV. Secret. Ball left his position as Under Secretary of State on September 30, 1966, and was counsel with the law firm of Cleary, Gottlieb, Stein and Hamilton, and chairman of Lehman Brothers International, Ltd., in New York. Rostow sent Ball's memorandum to the President on August 16 under a covering memorandum. (Ibid.) I have reviewed the supplemental memorandum with regard to the India Food Aid Program, submitted by Bill Gaud and Eugene Rostow,/2/ and have the following comments. /2/Reference is to an August 8 memorandum from Gaud and Rostow to the President, entitled "India Food Aid Program." (Ibid.) Johnson sent a note to Rostow on August 10 instructing him to send the memorandum to Ball for comment. (Ibid.) The basic question emerged clearly from our Saturday/3/ morning discussion: should you stretch the concept of matching beyond what the average man (including the average Congressman) would ordinarily understand by the term in order to send an additional 1.5 million tons of grain to India? /3/August 12. In answering the question one must take into account a number of considerations: a. Would Congress believe an assertion that other nations have met the matching test? If not, what effect would this have on your other programs? b. Has the Indian political performance been such as to justify our stretching a point to provide them additional grain? c. Have other donor nations been led to offer additional help on the assumption that, on the basis of their offers, we would now put up the remaining 1.5 million tons? d. How seriously would India's development be prejudiced by the need to pay for all or part of the 1.5 million tons from its own resources? You might wish to ask State and AID to submit answers to these questions. In appraising their answers I would suggest that the following considerations be kept in mind: 1. The question of providing grain should not be determined as though it were a humanitarian matter. It is not a question of whether Indians starve but of how the Indian Government uses its finite store of resources. We know that it is now using some of those resources injudiciously--for an inflated defense budget and some unrealistic development schemes. If they had the will to do so, the Indians should be able to fund the additional 1.5 million tons by simply cutting out some of the floss. 2. The Indians have been characteristically bloody-minded about the Middle East (their active support of Nasser) and about Vietnam (Ho Chi Minh's birthday telegram). They have certainly not earned the right to special consideration on the basis of performance. 3. I would not worry much about the reaction of other donor countries. We have carried this burden for a long time and they have done damn little. 4. A credible case has not been made that other donor nations have met the matching test by any qualitative standard. This becomes clear if one asks the following questions: a. Could we expect Congress to agree that the World Bank's willingness to grant a one-year postponement of $50 million of debt repayment is the equivalent, for purposes of "matching," to an American offer of $50 million of wheat on PL 480 terms? The same question can be asked with regard to the "debt relief offers" of $33.6 million made by the United Kingdom and $14.5 million made by West Germany; in fact, 80 percent of what is represented as "matching" comes in the form of debt relief./4/ /4/Ball sent another memorandum to President Johnson on August 18, expressing second thoughts about what constituted matching contributions. He suggested that before making a decision, Johnson get a good appreciation of what had been agreed upon with the other donors concerning the standards governing matching contributions. (Johnson Library, National Security File, Country File, India, Vol X, Memos and Miscellaneous, 8/67-2/68) The critical point, it seems to me, is that, in view of India's hopeless repayment schedule, most of this debt will have to be rolled over any- way, and this raises the point that has haunted us so long: since we have furnished help on a long-term basis while other countries have provided assistance on a shorter term basis, the Europeans constantly get credit for additional aid by extending old debts while we have to put up new money. b. Should the Administration take the position that there has been matching when some items are clearly not additional and we cannot know whether others are additional until after the October Consortium meeting? I would be inclined to answer the foregoing questions in the negative, without meaning in any way to diminish the achievement of Gene Rostow and others in the Government who have certainly obtained concessions that donor countries would not otherwise have made. Clearly there has been matching with respect to the first step of 96.7 million dollars, but most if not all of the rest is arguable and ambiguous and I heartily disagree with the implication in the Gaud-Rostow memorandum that we can rest any part of our case for matching on the ground that the Indian Government and the IBRD consider that contributions by others have "more than matched" our 190 million dollar offer. They are scarcely disinterested parties. On the other hand, I would agree with Messrs. Gaud and Rostow that you are not legally bound by the fifty-fifty matching principle. The decision must be made in terms of what is the wisest course after all the issues have been balanced. I think Congress would accept your decision to go ahead with some additional food aid to India (I would stop short of the full 1.5 million tons). But if you decide to do this, I would recommend that you do not overstate what has been done by other donor countries although the Administration should certainly take credit for inducing other nations to grant aid and make concessions that would not otherwise have been forthcoming. The realistic option, it seems to me, is either to provide no additional wheat or to offer perhaps one-half or two-thirds of the 1.5 million tons requested. This would make clear to Congress that you are not accepting the matching performance of other donor nations at face value but are discounting it on qualitative grounds. Nonetheless, it would be a generous offer and should go far toward enabling India to meet her food requirements while still protecting her development program. GWB
455. Memorandum From Edward Hamilton of the National Security Council Staff to President Johnson/1/ Washington, August 21, 1967. /1/Source: Johnson Library, National Security File, Country File, India, India's Food Problem, Vol. IV. Confidential. A handwritten note on the memorandum reads, "Rec'd 2:05 pm." SUBJECT 1. Ball's memorandum (Tab A)/2/ recommends that you: /2/Document 454. --authorize 750,000-1 million tons now; --tell the Congress that we do not accept at face value the debt relief offered by other donors. Therefore, we have discounted it in calculating how much more grain we can supply under the matching principle. 2. The advantage of Ball's plan is that we could move now and still have some protection from the charge that we had accepted debt relief as matching before we knew (i) on what terms debt would be rescheduled, and (ii) whether the debt relief would be additional in regular consortium contributions. 3. The problems with the Ball proposal are that: --our discount would have to be arbitrary. There is no rationale for counting debt relief as 50% eligible for matching, as distinguished from 70% or 30% or 0%. --it would discredit debt relief as a form of aid. Up to now we have joined the World Bank in pushing the Europeans to re-schedule India's enormous debt burden. As a practical matter, it is easier to get this kind of aid than to push large appropriation bills through parliaments. We are going to need it badly in the years ahead. --it would be seen abroad as welshing on our commitments. It was made clear at every stage of the matching exercise that we would accept debt relief as matching--in Gene Rostow's testimony, in the US position at the March consortium meeting, and in the consortium press release following the April meeting. --it would make it impossible for us to supply any more wheat this year if the Indian situation becomes desperate. (The consensus among your advisers is that we probably will have to do more.) 4. After reading the Ball proposal, you asked that we put together a package of about 750,000 tons, supported by an air tight matching argument along the Ball line. 5. The plain fact is that we cannot justify more than about 400,000 tons on a one-to-one matching basis without using debt relief. Nor is there any prospect for further matching contributions this calendar year. 6. Therefore, if we must decide now whether and how much we have been matched, I am afraid I can offer you no choices other than the ones you have already heard. 7. There is, however, one further alternative I would suggest as superior to Ball's, though still less attractive, in my judgment, than the earlier proposals. Essentially, you might: --authorize a million tons now. --tell the Congress that we do not know at this point precisely how much we have been matched, and we will not know until after the October consortium meeting. --we don't want the Indians to starve and the subcontinent to dissolve into political chaos while we are determining precisely how much we have been matched. --therefore, we are going ahead with this tranche of grain on the explicit understanding that we will deduct from our consortium pledge any shortfall between the cost of this grain and the amount of "matching" funds we discover are real and additional. 8. Advantage of this approach is that it puts off the decision on the precise amount and additionality of matching until the time when we are better equipped to make such a finding. It also protects us from any charge that we are spending one penny more than we believe has been matched. At the same time it would let us move the wheat now. It would put maximum heat on the Indians and the other donors to make sure that the European consortium contributions are as generous as possible. It might even bail us out of a difficult situation at the consortium meeting, since the slashes in the Foreign Aid Bill will put us in a poor position to come up with a large consortium pledge in any event. 9. The disadvantage of this approach is that it might add the last straw to an already over-burdened camel. The consortium is in serious danger of falling apart. Everybody is tired; everybody is unhappy with the Indians; and everybody has budget problems. It is possible that the European reaction to our loading on this additional threat would be to wash their hands of the whole business. We could expect George Woods and company to be pretty upset as well. In both cases, however, the reaction would be much less violent than what we could expect if we refused to accept debt relief as matching. 10. On balance, Mr. President, I am still in favor of the proposals you reviewed last week. But I understand and share your displeasure with the Indians. And I know that there are problems to which those of us who aren't elected are too apt to be insensitive. Thus, if we cannot go ahead with the earlier recommendation I would vote for the "we'll deduct it from our consortium pledge" approach instead of George Ball's plan. EKH 1. Tell State I want to go ahead with the Ball plan at 750,000
tons _____; at 1 million tons _____. /3/None of the options is checked on the memorandum.
456. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/ Washington, August 31, 1967, 11 a.m. /1/Source: Johnson Library, National Security File, NSC Histories, Indian Famine, August 1966-February 1967, Vol. IV. Confidential. SUBJECT After careful consideration, it seems to me that there are four criteria your India food decision should meet: 1. It should combine: --enough more wheat to avoid in India the most serious political unrest and human misery associated with food shortages--or at least to counter the argument that disaster followed directly from U.S. parsimony, and --enough conditions and limitation to keep the pressure on the Indians to produce and the other donors to come across at the October consortium meeting in such a way that their matching debt roll-overs prove to be additional. 2. It should be consistent with our commitments to other donors throughout the matching exercise. (Specifically, I am afraid this means that we cannot now refuse to accept--or decide to discount by some percentage--debt relief as eligible for food matching.) 3. It should provide a matching argument which the average Congressman with other things on his mind can understand and accept (see Tabs A and B)./2/ /2/At Tabs A and B were undated draft matching arguments. 4. It should give you maximum protection from both the domestic political dangers: --the danger of maintaining wheat shipments to India while cutting expenditures for domestic food distribution programs; and --the partially conflicting danger of the political heat from falling U.S. farm prices and the charge that you are cutting P.L. 480 to take the costs of fighting inflation out of the hide of the American farmer. I don't pretend to have a perfect solution. But I believe the following formula comes as close as we can: 1. Authorize one million tons of wheat now. 2. Announce that we will be constantly reviewing the need for more, particularly in the light of our very difficult budget problem. (We could try here to establish the fact that when wheat prices are falling it does not help the budget to cut P.L. 480--indeed, it hurts.) 3. On matching, take the line that we do not yet know with precision the extent to which we have been matched with additional resources. We shall only know after the October consortium meeting--but even then, with a margin of uncertainty. But there is substantial evidence that we have been matched--at least up to the cost of one million tons--and we don't want the Indians to starve while we make absolutely sure. 4. To assure that the principle of matching is preserved, the amount of our 1967 consortium contribution will not be final until we are certain how much of the aid and debt relief which has been generated since last May is real and additional to ordinary consortium contributions. (We would leave the strong implication that any shortfall between the cost of this wheat and the total of real additional aid will be deducted from our consortium contribution.) 5. Before the announcement, have Freeman, Katzenbach, and Gaud brief the Congressional leadership, the Chairmen, and ranking minority members of the foreign affairs committees, the agriculture committees and the appropriations committees. If there is a howl of protest, they should report back to you before making the announcement. This solution would: --leave it open for you later either to ship more wheat or to cut back for domestic political reasons; --keep the heat on the Indians and the other consortium members; and --give you maximum protection--though none too much--with the Congress. I think all your advisers would support this plan, though you may wish to check it with Secretary Rusk. A final word, Mr. President. With all its imperfections, this has been a remarkable exercise you have mounted. These are the results. 1. Australia entered and Canada confirmed the legitimacy of being in the food-aid business--ending the notion once and for all that food aid was a question of U.S. surpluses. 2. France, Japan, Germany, Scandinavia, Belgium, the U.K., the Netherlands, and Italy accepted the legitimacy, in principle, of their contributing to food aid with either food production resources or money. 3. At the time of great difficulty in generating aid funds, we all managed somehow to keep enough foreign exchange flowing to permit India to continue the relaxation of bureaucratic controls. 4. We have embedded in Indian policy firmly a top priority for agriculture. 5. We have engaged the World Bank for the first time in the food aid business on the consortium principle and have a basis for keeping it there on that principle--which guarantees reasonable burden-sharing in the future. 6. If you wished to proceed with the full 1.5 million tons for, say, domestic price reasons--I believe a viable case could be made./3/ /3/Jim Jones added a handwritten note on the memorandum that reads: "Appeals to me. Do not mention w prices." The quote apparently reflects President Johnson's response to Rostow's recommendation to authorize the shipment of 1 million tons of wheat. On September 1 the White House released a statement to the press that confirmed the President's decision to authorize the shipment of an additional 1 million tons of wheat to India. For text, see American Foreign Policy: Current Documents, 1967, pp. 765-766. When he was informed of the decision, Ambassador Nehru's response was "thank God." (Memorandum from Walt Rostow to the President, September 1; Johnson Library, National Security File, Memos to the President, Walt Rostow, Vol. 40, September 1-10, 1967) On September 9 Indian Minister for Food and Agriculture Jagjivan Ram wrote to Secretary Freeman to express the gratitude of his government for the shipment of grain. (Ibid., Vol. 41, September 11-14, 1967) Walt
457. Telegram From the Department of State to the Embassy in India/1/ Washington, September 7, 1967, 1819Z. /1/Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL INDIA-PAK. Secret; Limdis. Drafted by Coon on August 30. Cleared by Heck, Spain, Handley (draft), Vice Chairman of Policy Planning Council Joseph A. Yager, Linebaugh (S/P), Wolf (G/PM), Brown (IO/UNP), Roy (EUR/SOV), Rees (AID/NESA), and Deputy Assistant Secretary of Defense for Near East and South Asia Harry H. Schwartz. Approved by Rusk. Also sent to Rawalpindi and repeated to London, Moscow, USUN, and CINCSTRIKE. 33331. Subj: U.S. Policy Toward Indo-Pak Relations and Our Bilateral Security Relations with Each Country. 1. As addressee posts are aware, recent months have seen gradual evolution in U.S. policy toward military supply relations with India and Pakistan, flowing from policy changes announced last April. Some of these changes have at least implicitly intersected with broader questions; e.g., recent discussion (State 14083)/2/ of how far we should go in telling each Government what we are doing with the other involves to some degree question of comparative priority we attach as between efforts to resolve or reduce Indo-Pak disputes and our efforts to strengthen our bilateral security relations with each. /2/The reference is in error and has not been further identified. 2. Posts have made valuable contributions to the policy discussion which has preceded and accompanied these changes. New Delhi's 16350,/3/ for example, flagged desirability of our all agreeing amongst ourselves on assumptions underlying our actions and posture in subcontinent. This in turn led to recent SNIE/4/ on military threat and force level questions. Although results necessarily somewhat limited, SNIE has established certain conclusions which we can accept and build on. /3/Not found. /4/Document 451. 3. The policy conclusions set forth below are designed serve as guideposts for further operational decisions in coming months. (We are deliberately omitting for present any consideration of nuclear question; NPT draft has just been tabled in Geneva, and it unusually difficult right now to predict how questions of nuclear weapons and security will interrelate with other subcontinent security questions.) A. Indo-Pak reconciliation remains an important U.S. goal; its achievement would greatly facilitate achievement of important U.S. bilateral and regional objectives. Experience has shown, however, that our resources and influence operate at maximum disadvantage when directed toward goal of reconciliation; in fact good historical case can be made that under present circumstances we cannot bring about reconciliation no matter how hard we try. It follows that our efforts should usually be directed more toward strengthening our bilateral relations with each country than toward bringing them together. There are however certain regional issues we must continue to address, viz.: 1) Renewed conflict: We have clearly indicated that if the two countries insist on fighting each other again they will be dealing us out of picture as significant supplier of resources. This is a solid and uncomplicated position which we should all continue to recognize and enunciate as a fundamental element of our policy. 2) Arms race: We have no intention of fueling an Indo-Pak arms race either directly or indirectly and we intend to continue to apply diplomatic and perhaps other pressures toward persuading each Government to hold line and in due course reduce its defense expenditures. 3) Regional initiatives: Our desire not to be caught in middle should not inhibit initiatives, particularly in economic areas which might bring the countries together or head off issues that might evolve in the political or security fields. As example of former we are examining possibility of encouraging an initiative by a third country to seek to restore normal links between the two countries in telecommunications, air, road and rail services, and trade and transit rights. An example of latter might be effort solve Eastern waters problem and thereby avert casus belli through IBRD or other third party initiative. B. This means that while we will continue to counsel each Government to follow moderation and restraint in its dealings with the other we should, except under currently unforeseeable circumstances, avoid taking substantive positions or otherwise become substantively involved on Kashmir or other Indo-Pak issues not cited above. C. Each Government can be expected to continue to press with imagination and vigor its ongoing efforts to embarrass our relations with the other. We should discourage such efforts as actively as we can without causing significant damage to our bilateral relationships. D. The reasons why it is in our interest to strengthen our bilateral relations in security matters differ as between India and Pakistan. With India we have a more immediate threat of military pressure from China; the Chinese threat in Pakistan from our view is more of a political nature at this time. In each case we have additional important interest of strengthening our ability to help keep down defense spending. Strategically our Indian interest is stronger but we cannot afford to pursue it so single-mindedly as to destroy or severely restrict our Pakistani interest. It would be most desirable if GOI could be brought at least implicitly to recognize that it was in their interest too that we maintain a constructive relation with Paks. Indians should understand this relationship based on our conviction that we should seek avoid isolating Pakistan, and thereby driving her closer to Chicoms. We also believe Pakistan's political stability and economic progress sufficiently significant for long range security of sub-continent to justify our continued support and encouragement. E. Since we are not going to revert to major military supply role in either country in foreseeable future our assets for strengthening our security relationships will remain restricted. But they will not be negligible, and skillful orchestration of a variety of different activities can, as suggested in New Delhi's A-14,/5/ increase our total effectiveness. Our role as economic and food aid supplier will provide underlying strength to our efforts in security field though economic aid leverage can usually be applied with precision only in cases where the objective we seek is directly related to the purposes for which aid is being provided. /5/Dated July 6. (National Archives and Records Administration, RG 59, Central Files 1967-69, POL 1 INDIA-PAK) F. Task that lies ahead in each country is difficult per se and further complicated by inevitable impact of what we do in either country on the other. Very few of decisions that will face us will be clear-cut; this makes it all the more important that we continue operate on same wavelength. Rusk
458. Telegram From the Department of State to the Embassy in India/1/ Washington, September 15, 1967, 2327Z. /1/Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 7 INDIA. Secret. Also sent as telegram Toros 59. Drafted by Heck, cleared by Special Assistant to the Under Secretary for Political Affairs Thomas O. Enders, and approved by Handley. Repeated to Bombay, Calcutta, Madras, Hong Kong, Kathmandu, London, Moscow, Ottawa, Tokyo, Rawalpindi, and CINCSTRIKE. 38363. Subject: Morarji Desai's visit to Washington. 1. Indian Deputy Prime Minister Morarji Desai left Washington for New York September 14 after three crowded days of discussions here. Visit went well and frank and useful discussions were held in cordial atmosphere. Only jarring note was Desai's tactlessness at press conference which antagonized most of journalists present. On other hand, Washington Post commented favorably editorially on visit. 2. During course of September 11-13 visit Desai saw President, Vice President, Secretaries Rusk, McNamara,/2/ Fowler and Freeman, as well as Gaud, Linder, Governor Harriman and George Woods. He met with members of Senate Foreign Relations Committee, addressed National Press Club and had several sessions with press. /2/Desai met with Rusk and Humphrey on September 11, with Johnson on September 12, and with McNamara on September 13. Records of these meetings are, respectively, ibid.; ibid., NEA/INC Files: Lot 71 D 174, Economic Affairs (Gen.), Morarji Desai Visit; Johnson Library, National Security File, Name File, Vice President, July 1, 1966, Vol. II; ibid., Country File, India, Vol. X, Memos and Miscellaneous, 8/67-2/68; and Washington National Records Center, RG 330, OSD Files: FRC 73 A 1250, India 121.6. 3. The discussions were wide ranging and covered India's agricultural problems and policies, political developments in India, outlook for aid and debt relief, family planning, India's relations with Southeast and East Asia, China, Vietnam, Middle East, nuclear policy, NPT and security assurances. 4. No proposals were advanced by either side and none were expected. Each of foregoing topics was discussed in some detail at least once and several, such as China and Vietnam, were covered several times. For the most part Desai followed the GOI position on these issues. He was inflexible on the Middle East and voiced well-known Indian objections to NPT. He discounted efficacy of security assurances. He strongly reaffirmed policy of present Congress Government of foregoing nuclear weapons. 5. Desai recognized the need for further Indian initiatives to improve relations with countries of Southeast Asia and with Japan and Australia. He expressed concern over China's continued threat to India. The subject of relations with Pakistan came up inferentially and Kashmir was not raised by either side. 6. Desai was given a full briefing on Congressional and public attitudes to aid and on U.S. resources that may be available for India next year. He was told not to expect more than 250 million additional DL funds. 7. Desai departed from his script most notably when discussing Vietnam. He displayed considerable interest in our views and in developments in North and South Vietnam. Much of his questioning reflected concern that South Vietnamese might become restive and withdraw their support of U.S., thereby putting us in awkward position. He readily agreed to proposition that we could not expect to discontinue bombing in North while North Vietnamese continued their infiltration and aggression in South Vietnam. He repeated this view on TV show September 13, stating with regard to our bombing policy "we do want that these operations of destruction stop, and not stop only on one side, they have to stop on both sides." 8. We believe that Desai left with clear picture of our views on topics covered and on aid prospects. Two proposals emerged during discussions with Secretary and with McNamara: (a) to undertake strictly private, informal periodic meetings for full exchange of views on mutual problems and policies in order identify areas of agreement and disagreement and understand why we disagree when we agree to do so. Desai suggested these talks include parliamentarians and private leaders who have confidence of their government; (b) to consider a cost-effectiveness study of Indian defense spending with the aim of buying same amount of security with less money. This arose during discussion with Secretary McNamara who said we would help whenever asked. Desai expressed interest in concept. 9. We will be following up on both suggestions and in meantime welcome Embassy's comments on how best to get them going. 10. Septels report details on discussions on aid and economic matters/3/ and on military and security subjects./4/ Memcons follow. /3/Telegram 37916 to New Delhi, September 15. (National Archives and Records Administration, RG 59, Central Files 1967-69, POL 7 INDIA) /4/Telegram 38829 to New Delhi, September 16. (Ibid.) Rusk
459. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/ Washington, October 5, 1967, 2 p.m. /1/Source: Johnson Library, National Security File, Country File, Pakistan, Vol. VIII, Memos, 8/67-4/68. Secret. A handwritten note on the memorandum reads, "Rec'd 10/5/67, 4:15 p." A handwritten "L" indicates that the President saw it. SUBJECT As you look ahead to decisions on the full range of food aid, I thought you would want to know the specific considerations we have to take into account in a case like Pakistan's. The Paks calculated their food import requirements for FY 1968 at 2.25 million tons of wheat. We have already provided 1.25 million. They purchased another 200,000 tons. They're getting 66,000 tons from Canada and Australia. That leaves 734,000 tons for them to get. Of this 734,000 tons, we have told them we will provide 500,000 tons under PL 480. As you instructed, we have offered to provide half of the final 234,000 tons if the Paks would match it with cash purchases. This means we sell them 117,000 tons for about $9 million. When the instruction to sell the 117,000 tons went to Ben Oehlert, he cabled back his deep concern. (His cable is at Tab A.)/2/ The AID economists share his feelings. The argument goes like this: /2/Reference is to telegram 1074 from Rawalpindi, September 29. (National Archives and Records Administration, RG 59, Central Files 1967-69, AID (US) 15-8 PAK) --The Paks have already bought 200,000 tons, and they have squeezed their foreign exchange budget to the bone. (Pakistan's foreign exchange now stands at $166 million--enough to finance five weeks of imports. Most countries are very uncomfortable with anything less than enough foreign exchange for four months' imports.) In the last two years they have tripled their cash food buying in world markets. --Their wheat reserves are dangerously low. Their target is a reasonable 950,000 tons. They are now at 300,000 tons. With scheduled imports--including our 734,000 tons, if they get it all--they will only raise reserves to 500,000 tons by June 1968. --If we play our cards well, we have a good chance of a big package of wheat for Pakistan--purchases and PL 480--for the whole of calendar 1968. The total might run over 3 million tons ($195 million). With that kind of bait, we might get them to agree to a much higher level of purchases, starting within the next three months. If we use the time between now and the abundant new Pak harvest (December) wrangling about this small portion, we may lose the opportunity for the large deal which would really help our domestic wheat price and our balance of payments. --The Paks will need every penny of foreign exchange to back up the import reform planned for January 1968. AID and the IMF have encouraged this reform. The Paks badly need to devalue. They need to simplify import controls to let market forces work freely and take up slack in the economy. They also need to provide more incentives for exports. The hard fact is that our forcing even a small additional outlay (the $9 million we're asking them to spend on our wheat) might strengthen the factions in the GOP who oppose reform so that the January package would be canceled. --Finally, we must look at the wheat bargain in terms of our overall negotiating position with the Paks. Our large, important intelligence installation at Peshawar comes up for renegotiation in mid-1968. The current betting is no better than even money that Ayub can hold off his neutralists well enough to sign a renewal. Whether he can will be largely determined by the tone of our relations over the next few months. The wheat business certainly won't kill the Peshawar renewal, but it will be one more irritant and one less generosity which we could cite next year as evidence of our reliable good will. (This is particularly true in light of the fact that we have been urging the Paks to conserve foreign exchange to maintain their economic health.) Despite these concerns, Oehlert is carrying out the instruction we have given him to try to work out a sale and will see Ayub Friday morning. We have given him firm instructions along the lines you directed (Tab B)./3/ Judging from Ben's effectiveness so far, we just might do it--however adamant the Paks (below Ayub) seem, and however reluctant Ben and people here in town are about this particular deal. Ayub might well conclude that even a big sacrifice now--and helping you when you need it--will pay dividends in the long run. /3/Reference is to telegram 49058 to Rawalpindi, October 5, in which Oehlert was instructed to "stick to 500,000 ton offer." (Ibid.) Meanwhile, we have been playing the same tune with the Pakistan Finance Minister who is now in Washington. I told him Wednesday/4/ about the staggering load you carry with the budget, and how important even small wheat sales are to your ability to go on financing programs in the poor countries. /4/A summary of Rostow's conversation on October 4 with Finance Minister N.M. Uqaili was sent to Rawalpindi in telegram 49050, October 5. (Ibid., POL 15-1 PAK) We certainly have to look carefully at this whole range of questions before we come to you for food decisions. I am not convinced, for example, that Pakistan should devalue right now. I have commissioned a study to examine this problem in a new light. Maybe the Paks will just put us off until 1968, taking only 617,000 tons now with a promise to buy the 117,000 in next year's deal. They just might take that risk with their food stocks. I take your time with all this because it is reasonably typical. I've got the "sell wheat" message loud and clear, and I think the bureaucracy is getting it too. But I thought you would want to know what kinds of judgments are involved. I will have papers to you within the next few days looking toward an NSC meeting on the whole food outlook. The meeting is now scheduled for next Wednesday (October 11). Walt
460. Memorandum From Edward Hamilton of the National Security Council Staff to the President's Special Assistant (Rostow)/1/ Washington, October 6, 1967, noon. /1/Source: Johnson Library, National Security File, Country File, India, Vol. X, Memos and Miscellaneous, 8/67-2/68. Secret. SUBJECT We have disturbing new evidence this morning that the Indians are dealing from the bottom of the deck on arms purchases. The story goes as follows: 1. Last June, after considerable soul searching, we granted permission to the British to sell 24 Hawker-Hunter fighters to India on explicit GOI assurances that: --these would be replacement aircraft which would not increase total Indian combat capacity; and --that the Indians would not buy any aircraft from the Soviet Union. (There had been rumors for months that the Indians were trying to swing a deal for a large number--perhaps 200--of SU-7 fighter bombers.) 2. British-Indian negotiations have been underway ever since, and the Indians have become more and more concerned that the British are not a dependable source of supply--e.g., it now appears that the Brits have only 17 planes to sell rather than the 24 the Indians wanted. 3. We had a cocktail party rumor last week that the Indians and the Soviets were about to sign a contract providing for 200 SU-7's at $1 million each. (Hawker-Hunters cost $200,000 per copy.) 4. Yesterday our DCM in Delhi spoke to the Defense Ministry official who had given the original assurance against SU-7's (copy of the message at Tab A)./2/ The conversation was imprecise, but the gist of it seemed to be that: (i) the Indians are going to buy SU-7's from the Soviets; (ii) they believe this is necessary because of the short supply of British fighters, the need for a fighter bomber for use in the north, and the fact that the Paks have Mirage fighter bombers; and (iii) they will argue that their June assurance was limited to "fresh procurement" and that this does not represent bad faith. (It is not at all clear what "fresh procurement" means. It may mean that any aircraft purchased for replacement purposes is not covered by the assurance. In any event, it is clearly a transparent attempt to circumvent a promise which couldn't have been more categorical.) I don't need to lecture you on the idiocy of this action. It would represent bad faith with us, escalation of the arms race on the subcontinent, serious complication of our relations with the Paks, and a further blow to slim hopes we now have for generating some enthusiasm in the Indian Aid Consortium. (Aside from the distaste every donor feels for the worsening of Indo-Pak military problems, this contract--if it is anything like the size it is rumored to be--would certainly result in considerable diversion from development to defense.) In addition, we could expect real trouble on the Hill. Senator Symington knows and has followed the Hawker-Hunter deal very closely and could certainly be expected to reflect his displeasure with this development in an amendment to the Foreign Aid Appropriation Bill. /2/Telegram 4150 from New Delhi, October 5. (National Archives and Records Administration, RG 59, Central Files 1967-69, Central Files, DEF 12-5 INDIA) State has the following steps in train to head this off: 1. A strong cable to Bowles to read the riot act to Mrs. Gandhi./3/ (She leaves Monday for Eastern Europe, so this will have to be over the weekend.) I transmitted to the drafters my own view that no language is too strong for use in this cable. /3/Reference is to telegram 50373 to New Delhi, October 6. (Ibid., DEF 19-6 USSR) Bowles cabled on October 9 that he was unable to take up the issue of the SU-7s with Prime Minister Gandhi because she was leaving for a trip to Eastern Europe. He took up the issue instead with Morarji Desai. Desai's initial reaction was one of "sharp but unfocused irritation." India, he said, was confronted with a serious security threat in China and could not allow foreigners to judge the strength India needed to meet that threat. He also noted that Pakistan was building up its air force with purchases from Iran, Germany, and France. Bowles pressed the importance of reducing defense expenditures, and Desai agreed to raise the question of the purchase of the SU-7s with Defense Secretary Shankar. (Telegram 4310 from New Delhi; ibid.) Bowles met with Shankar on October 10, and Shankar defended the purchase of SU-7s as an agreement negotiated with the Soviet Union in February or March 1966, well in advance of the assurances offered the United States in June 1967 concerning additional purchases of Soviet aircraft. In response to Bowles' question concerning the size of the purchase, Shankar said that the number of SU-7s involved was much smaller than the rumored 200. (Telegram 4432 from New Delhi, October 11; ibid.) 2. An immediate meeting between Secretary Rusk and B.K. Nehru. 3. Talks with the British, both here and in London. (We don't yet know precisely where the Hawker-Hunter negotiations stand and whether they could be reversed.) 4. A Monday meeting between McNamara and Swaran Singh,/4/ the Indian Defense Minister. Singh is in town for other reasons, but we can certainly take advantage of his presence for this. /4/McNamara met with Singh on Monday October 9 and discussed the importance of holding down India's defense expenditures. He did not bring up the issue of the SU-7 fighter bombers, however. (Memorandum of conversation, October 9; Washington National Records Center, RG 330, OSD Files: FRC 77-0075, Memoranda of conversation between Secretary McNamara and Heads of State (other than NATO)) I think these steps are fine as far as they go. But they may not be nearly enough. The Indians have been debating this problem and probably negotiating quietly with the Soviets for months. I doubt that it will be possible to turn them around at this point with anything less than our biggest guns. If we don't seem to be making progress over the next few days, I would suggest a Presidential letter--or perhaps even a quiet visit by a special emissary of the President. In the present mood of the Congress, a great deal hangs on whether we are able to turn this off. I think it is fair to say that public knowledge of a deal of this size at this time would almost certainly cost us a very sizeable chunk of our foreign aid appropriation--perhaps enough to eliminate aid to India. I will keep you informed. EH
461. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/ Washington, October 10, 1967, 6 p.m. /1/Source: Johnson Library, National Security File, Memos to the President, Walt W. Rostow, Vol. 45, Oct. 10-15, 1967. Confidential. Drafted by Hamilton. SUBJECT I think this meeting can serve two useful purposes: --to give you a clear picture of the outlook for food aid; and --to give you a chance to instruct us on what kind of food aid programs we should try to put together in the major customer countries, particularly India and Pakistan. Papers Attached are two Freeman-Gaud papers which have been prepared for this meeting. At Tab A/2/ is a response to your request to the Secretary of State to examine each of our present food aid programs to find ways to move more wheat. At Tab B/3/ is a special memorandum on India which recommends a large wheat program in 1968 and spells out your major options on amounts, conditions, and matching arrangements. /2/Reference is to an October 10 memorandum from Gaud to the President entitled "P. L. 480 Program Possibilities." (Ibid.) /3/Reference is to an October 10 memorandum from Freeman and Gaud to the President entitled "Food Aid for India in 1968." (Ibid., Vol. 46, Oct. 16-20, 1967) The Wheat Picture Orville Freeman's PL 480 wheat target for FY 1968 is about 11 million tons. We have a little less than 6 million tons now contracted or under negotiation. An additional 2 million tons will be provided through our donation programs. The immediate problem is to find ways to move another 3 million tons in the next 8 months. It is clear that we can't hope to do it without big programs in India and Pakistan--the potential elsewhere won't add up to more than 500,000 tons. We also have a longer term problem. The PL 480 target for FY 1969 is also 11 million tons, and we must try to meet that in a year of bumper crops in India and Pakistan. Thus, it is to our advantage to do our bargaining for all of CY 1968 now, when our clients need the wheat, rather than wait until next summer when they are rolling in their own. (Obviously, our own concern about domestic wheat prices is not going to decline between now and next November.) You should know, however, that Freeman and Schultze think that meeting our PL 480 targets will probably not lead to any dramatic rise in domestic wheat prices. The grain traders know what our targets are. They have taken them into account in deciding what price to offer. The only prediction we can make with confidence is that if we do not meet our targets, the wheat price will fall further. India How we handle India will largely determine how much wheat we move. The monsoon is holding up well; chances look better and better for a bumper crop of 95 million tons of food grains. We don't know precisely how much the Indians will need to import, but nobody is guessing higher than 7-8 million tons. Estimates of how much they really must import range as low as 3-4 million tons. We have settled on a PL 480 target for India of a little more than 6 million tons during calendar 1968. It seems to me that we have three objectives to serve in designing this year's approach to food aid to India: --to move as much wheat as possible; --to get the Indians to take the policy steps necessary to make use of the economic lift provided by a good harvest; and --to preserve the matching principle. These objectives are at least partially conflicting. For example, if we insist on full matching of every bag of wheat by other donors, it is the unanimous consensus of your advisers that we will not move more than 1 million tons. There is an additional complication this year in that 1-1 1/2 million tons of the total we can move will be for government-owned buffer stocks that allow the GOI to run a CCC-type price support program, and provide for internal food emergencies. This grain would go directly into the hands of the Food Corporation of India for storage and use from time to time as required. (We would hope to get the GOI to match it with their own domestic buying which in itself would serve to support producer prices and help to avoid a sharp price drop which could undo much of the economic benefit of the bumper harvest.) The paper at Tab B sets out three policy options for next year: 1. insist on full matching; 2. a one-year agreement to provide a base amount of wheat (say the 3 1/2 million tons we supplied last year), plus an amount for building buffer stocks (1-1 1/2 million tons)--all this without matching. In addition, we would offer to match any contributions from other donors. (The estimate is that these would be about 1 million tons in such contributions. This would result in our moving upwards of 6 million tons.) 3. A six-month agreement providing for a base amount (again 3 1/2 million tons) plus 1 million for buffer stocks, with no matching requirement and no commitment on what we would do in the last half of 1968. (We would justify the fact of no matching requirement on the ground that the International Grains Agreement is scheduled to take effect on July 1, 1968, and provides that other donors must provide 2.3 million tons of wheat per year to poor countries. Our pitch would be that this guarantees the matching principle.) Even with our best efforts, option 1--full matching--would move only about 1 million tons of wheat during 1968 and make it impossible for us to meet our target either in this fiscal year or in next fiscal year. It would eliminate any leverage we might have to get the Indians to reform their economic policies. Option 2 would probably result in our moving about 6 million tons, of which 1 million tons would be matched by other donors. It would give us a reasonable shot at getting the Indians to make the reforms. Option 3 would result in moving about 4 1/2 million tons of grain in the first half of 1968 and leave room for more. It would give us some basis for negotiating the reform package. This is the option recommended by Freeman and Gaud. You should be aware that both options 2 and 3 would probably lead to charges that the Administration, having built the matching principle into a major political asset, has abandoned it as soon as it became clear that other donors wouldn't play. We would have a reasonable defense. But there might well be some heat. (Of course, it is not at all certain that it will be in anyone's interest to make this a cause celebre in an election year.) The timing of our approach to the Indians is critical. The argument in the attached is that if we go at them with a six- or twelve-month package now before their big harvest hits the market, we have a reasonable chance of moving a lot of wheat and getting a reasonable quid pro quo in terms of economic reforms and commercial sales. If we string it out piece by piece, our bargaining position will suffer as the immediate need for food declines. Thus, the recommendation is for a relatively long-term agreement to be negotiated within the next six weeks. In light of the above and the discussion tomorrow, we need your general guidance on the following questions: --How large an India food package should we put together? One month, six months, or a full year? --How should we treat matching? Should we insist on dollar for dollar matching; should we confine matching to grain above and beyond a base amount and a contribution for buffer stocks, or should we finesse the problem by maintaining that matching is taken care of by the International Grains Agreement? Pakistan You will recall commissioning Ben Oehlert to see whether he could sell some wheat to Ayub on the basis that we would match new sales with PL 480. Oehlert had a good meeting with Ayub last week. There was no specific pledge to buy wheat--Ayub said he had to talk to his Finance Minister--but he was friendly and did promise that if he bought wheat from anybody, he would buy it from us. Oehlert sees him again tomorrow morning; we may get an answer then. (This conversation involves only about 120,000 tons--value: $9 million.) Pakistan's crop outlook is at least as good as India's, probably better because they have more than 2 million acres sown with the new high yield wheat seeds. Our estimate is that the best we can do under PL 480 in CY 1968 is about 1 1/2 million tons, of which 500,000 tons would be for buffer stocks. (There is not as much groundwork in Pakistan as in India on the buffer stock proposition. All we have is an educated guess that they will agree to establish such stocks.) Our bargaining problem in Pakistan is the same as in India--if we can get a large agreement negotiated before the new crop comes to market, we have a fair chance of moving a lot of wheat and of using the deal to get the Paks to agree to an import reform package which we think is very important. If we can't move quickly, we will be selling a less and less attractive product. The question on Pakistan is the same as for India: how large a package shall we prepare for immediate negotiation? The recommendation is that you authorize a CY 1968, full-year package calling for 1.5 million tons. Other Customers The memorandum at Tab A reflects a careful canvass of all our PL 480 clients looking for ways to substitute food for AID dollars or otherwise to move more wheat usefully. This review has come up largely empty. The proposals made at Tab A, taken together, will not increase wheat shipments by more than 500,000 tons at the outside--most of what would be accomplished by expanding our donation programs. The non-donation increases result from conservative re-estimates of the "usual commercial marketings" of the wheat exporters--including the U.S.--in these countries. (We have to be very careful about this; in cases like Korea, every cut we make in usual marketings cuts directly into our commercial markets. It does us no good to substitute PL 480 shipments for dollar sales.) The truth is that ways have not yet been found to make substantial substitution of wheat we have in abundance for dollars we don't. My own recommendation would be that you tell the group you consider this an interim report, and send them back to work on a final report to be submitted to you by the end of next week. Summary Recommendation/4/ /4/There is no indication on the memorandum of the President's response to these recommendations. I would vote that you give us the following instructions tomorrow: 1. Begin talking to the Indians in terms of a six-month, 4 1/2 million ton wheat package, to be negotiated immediately. This package would not mention matching on the ground that it is taken care of by the coming into effect of the International Grains Agreement. 2. After the current wheat-sale proposition is settled, begin talking to the Paks about a CY 1968 package of 1.5 million tons. 3. Accept the memorandum at Tab A as just an interim report on the question of substitution of wheat for dollars. Ask for a final report to reach you by the end of next week. W.W. Rostow/5/ /5/Printed from a copy that bears this typed signature. [Continue with the next documents]
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