741.5/8–850: Telegram

The Secretary of State to the Embassy in the United Kingdom

top secret

790. For Douglas. Leslie Rowan, in conversation Matthews Aug 9 made interpretation contained Embtel 7861 clear. Rowan stated that provision “free dollars” as so interpreted and in approx amt indicated by UK was a basic assumption of whole UK proposal. In response to question as to whether US accepted this basic assumption, Matthews replied that we were not yet prepared to accept this assumption either with respect to provision of free dollars as such or as to amt stated; that we were considering this assumption; and that further [Page 1679] discussions thereof would undoubtedly be necessary. In response to further question whether US cld, under present legis, legally provide free dollars, it was indicated that this legally cld be done, but only thru mechanism of off-shore procurement, and no decision has been made as to extent to which, if any, controls might be imposed on use of dollars provided thru such off-shore procurement. It was also made plain that dollars cld not be provided under existing law on a straight grant basis and that we did not at this time contemplate seeking, and could not in any event expect obtain during present Cong session, an amendment which wld permit aid in such form. Ways in which off-shore procurement might accomplish somewhat same objectives were however spelled out. It was further pointed out that techniques which we proposed employ in months immediately ahead to assist in increase of Eur production, namely off-shore procurement and expanded AMP, might well prove inadequate and inapprop for solution over any extended period of the problems involved and that we were considering, and wld continue to consider, both within our own govt and in connection with activities of DFEC, all alternative methods by which US assis might best be utilized in this effort. This consideration, coupled with experience over the next few months, wld indicate what methods would be best and whether further legislative authority wld be required in order fully to implement them. Exec Br had already indicated that if addit legislation appeared desirable, it wld be sought at first opportunity. For time being it was felt, particularly in view urgency obtaining $4 billion before Cong adjournment, that methods of assistance available were adequate, provided other nations wld make necessary effort, to get accelerated defense measures required under way.

Rowan stated that since entire UK proposal based on assumption that US wld transfer to UK dollars qua dollars without any strings and in approximate amt suggested, and not thru off-shore procurement or in form of assistance in the procurement of production equip, materials or components required for increased milit production, his govt might have reconsider its entire proposal.2

  1. Not printed, but see footnote 2, p. 1677.
  2. In a subsequent telegram, Douglas was informed that Rowan had “urgently requested” an official reply to the two British notes on additional defense measures, reitreating “that both size and composition of UK program dependent upon US aid of type requested and upon amount of aid.” (741.5/8–850) The question of additional military efforts by the British then became part of the more general question of additional military production by the NATO countries and was discussed by the NATO Council deputies. For documentation on their discussion, see pp. 1 ff.