751.5 MSP/4–2653: Telegram
No. 597
The Ambassador in France (Dillon) to the
Department of State
priority
5673. Pass DMS, MSA, Treasury, Defense. Limit distribution. Following is text of memorandum on aid, dated April 26, referred to in immediately preceding telegrams.
Begin text. 1. The US Delegation has given further study to the question of aid to French from the MSP, and related matters. It is understood that the French Government will present its financial plans to the French Parliament in May of this year. It is understood from the French Government that these financial plans as prepared by the French Government will include certain reductions in the current 1953 budget, which may entail certain unavoidable reductions in defense expenditures; certain tax reforms designed to bring in some additional revenue; and arrangements for internal financing adequate for the remainder of 1953. It is understood that there is also a need for additional dollar resources to be made available at an early date.
2. In light of the extension of the war in Indochina by the new aggression in Laos, the US is now prepared to make this one immediate unconditioned commitment: To make available to French the sum of $60 million as a grant from the MSP as an advance payment in relation to US FY 1954 aid to French. This $60 million, or such portion as may be required, may be used as a special resource to pay any balances needed in the EPU settlements.
3. Subject to substantial achievement of the financial program contemplated by the French Government and described in paragraph 1 above, the US will give favorable consideration to a proposal for an EXIM Bank loan in the amount of one-half ($100 million) of the existing $200 million of offshore procurement contracts, to be repaid by means of one-half of the receipts as they are earned under the contracts, and will give favorable consideration to a request for the use of the franc counterpart of the $60 million after June 30, 1953, at any time during US FY 1954 and as a part of the US FY 1954 aid program for France.
[Page 1355]4. The further FY 1954 MSP is dependent upon:
- (a)
- Congressional action;
- (b)
- A French defense contribution from their own resources in CY 1954 in line with NATO discussions as to France’s political-economic capabilities;
- (c)
- A French military program for CYs 1953 and 1954 and its NATO forces in line with NATO recommendations, it being understood that the 1954 goals at this time are provisional only and that, as the French Minister of Defense reported to NATO, the air goals would need to be adjusted especially.
5. Subject to the conditions set forth in paragraphs 3 and 4 above, the US will recommend to Congress a FY 1954 MSP for France as follows:
- (a)
- The US to provide the funds for a special French artillery, automatic weapons, and munitions payments program for French metropolitan forces assigned to SACEUR, in the amount of $100 million.
- (b)
- The US to provide funds up to maximum of $460 million, which is estimated to be approximately 40 percent of the current rate of expenditure on the Indochina war, of which $60 million will be advanced under paragraph 2 hereof.
- (c)
- Subject further to the adoption by the French Government of a satisfactory military program which in all its aspects holds the promise of success in Indochina, the US is prepared to provide a portion of a mutually agreed additional French effort in IC, involving especially additional trained forces of the associate states. This portion would be of a moderate amount of dollars and subject to specific subsequent agreement before it is to be considered a commitment.
6. The US makes these substantial proposals with confidence in the fundamental strength of the French economy, and with the belief that if the French Government takes the necessary and desirable decisions, and [then?] France will have both economic and military success in these matters.
7. These proposals are apart from the anticipated delivery of certain military end-items and the probable award on a competitive basis of certain offshore procurement contracts, both of which will proceed under normal procedures and conditions. End text.