Foreign Relations of the United States, 1961–1963, Volume III, Vietnam, January–August 1963

95. Telegram From the Department of State to the Embassy in Vietnam ¹

Washington, April 18, 1963, 6 p.m.

970. Joint State/AID/Defense. Embtel 920.² Gratified atmosphere continues improve. You have done excellent job making Diem face funding issue without upsetting joint effort. Concur your view expressed to Thuan (Embtel 893)³ that heart of matter may revolve around whether or not peasants should be given boots so they can have straps to pull on. Certainly this has been one of your longstanding problems. Given success of US-GVN cooperation during past 15 months we would hope avoid crisis our relations with GVN, but continue dialogue thru frequent letters and meetings. Following offered for your consideration in attempting maintain reasonable degree flexibility in negotiating subjects which GVN has put on table.

A. U.S. Military and Civilian Advisers

1. Completely concur with your suggestion to Diem that specific cases raised by GVN could be discussed as suggested reftel. We prepared fully support you in seeking recall and personnel whose presence, in your judgment, may jeopardize US-GVN cooperation.

2. Suggest you and TF/Saigon consider whether we should offer substantially reduce number U.S. military advisers in any province within say 90 days after it declared “white”?

3. DOD actively studying Comprehensive Plan which will be discussed at Honolulu. Meanwhile it should not be discussed with GVN.

B. C.I. Joint Piaster Fund

We would have no objection to minor modification role provincial representatives, e.g. re veto power these reps over GVN funds. However use streamlined budget procedures appears essential.

Because attribution of source of piasters has become such an issue, we wish to make sure Saigon understands distinction between US-owned PL 480 piasters and GVN-owned counterpart, both of which involved in U.S. support of GVN military budget. Use of US-owned Section 104(c) PL 480 piasters may offer a practical psychological advantage over use counterpart which continues to be mentioned in Saigon messages when referring to diversions from military budget. There is a legal problem of definition here, and the tentative interpretation is that 104(c) currencies can be used for C.I. activities which are basically defensive in nature, but not those of primarily an economic and social development nature.

View this limitation, if US-owned PL 480 funds appear helpful in present situation, you may wish consider proposing amendment Sales Agreement to provide for piaster use under Section 104(e)⁴ rather than 104(c) as at present, and seeking Presidential waiver grant the 104(e) funds for C.I.

We also observe that it would not appear essential to extend C.I. joint piaster fund procedures to cover USAID support and economic development costs, and perhaps not to war infrastructure costs. If a substantial negotiating advantage could be achieved, it would seem to be possible to reduce size of joint fund to costs of direct counterinsurgency purposes only.

Rusk

1. Source: Department of State, Central Files, AID (US) S VIET. Secret. Drafted by Wood and cleared by Rice and Hilsman, in AID by Stoneman and R. Poats, and in DOD by Colonel Kent. Repeated to CINCPAC for POLAD.
2. Document 91.
3. Document 85.
4. Section 104 (e) of P.L. 480 stipulates that the President may enter into agreements with friendly nations to use the foreign currency which accrues under P.L. 480 for the following purposes: “For promoting balanced economic development and trade among nations.” (68 Stat. 4541)