S/S Files: Lot 63D351: NSC 98 Series

Memorandum by the Deputy Under Secretary of State (Matthews) to the Executive Secretary of the National Security Council (Lay)

top secret

Subject: Second Progress Report on NSC 98/1, “The Position of the United States with Respect to South Asia.”1

NSC 98/1 was approved as Governmental policy on January 25, 1951. It is requested that this progress report as of November 2, 1951 be circulated to the members of the Council for their information.

On June 15 the President signed the Emergency Food Aid Act2 providing a loan to India of $190,000,000 for the purchase of food grains in the US. By November 2 approximately 97 vessels, carrying some 845,500 tons of grain purchased under the loan had left US ports for India. In mid-July a representative of ECA joined the Embassy staff in New Delhi to observe grain distribution and to implement provisions of the Act. While it is too early to evaluate accurately the full effect of the grain loan, it is evident that it has averted famine in India; and there is good reason to believe it is contributing to economic stability, and indirectly to political stability. When the Emergency Food Aid Act was passed the Government of India announced restoration of a substantial cut in grain rations. There is reason to believe the grain loan has increased good will toward the US in India.

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With reference to the strategic materials clause of the Food Aid Act, it should be noted that in June and early July a special mission headed by Ambassador Pawley3 visited India to discuss with high Indian officials the question of increased shipments of strategic minerals—particularly beryl, manganese, mica, and kyanite—and initial shipments, heretofore prohibited, of monazite. In September a Government of India representative visited Washington to continue negotiations. A contract has now been drawn up to cover shipment from India of 500 tons of monazite concentrate. During the period under review, India has informed the US that it does not intend to ship strategic or military items to China.

Dr. Frank Graham, UN Representative appointed under the Security Council’s Resolution of March 30, 1951, presented his report4 to the Security Council on October 18 after two and a half months in the Indo-Pakistan subcontinent where he endeavored to effect demilitarization of Kashmir on the basis of agreements reached between India and Pakistan incorporated in the United Nations Commission on India and Pakistan Resolution of August 13, 19485 and January 5, 1949.6 While Dr. Graham has not succeeded in effecting demilitarization, the US Representative on the Security Council has been instructed to support a Resolution continuing Dr. Graham’s mediatory efforts. If an equitable solution is not found during the next few months, incidents leading to general hostilities between India and Pakistan, and widespread communal warfare, may well occur. Resulting chaos could in effect deny South Asia and its resources to the free world and, by opening the way to possible Communist control of the subcontinent, threaten a crisis of greater proportions in relation to US national security than the current crises in Egypt and Iran.

Greatly increased tension in India and Pakistan—growing out of delay in the settlement of the Kashmir dispute and the plan of the Kashmir National Conference to hold elections to a so-called constituent assembly to decide the future affiliation of the state, and culminating in the forward movement of Indian and Pakistan troops to their common borders—impelled the Department of State on July 25 to instruct our Ambassadors in New Delhi and Karachi to express grave concern to both governments. Informal approaches were made in Karachi and New Delhi on July 26. Following a lull in September, there are signs that tension may again increase—principally over the Kashmir dispute. The assassination of the Prime [Page 1697] Minister of Pakistan, Liaquat Ali Khan, on October 16 represented a blow to stability in the subcontinent. While Liaquat Ali’s successor, Khwaja Nazimuddin, is expected to follow Liaquat Ali’s policies of moderation, it remains to be seen whether he will be able to control indefinitely popular feeling in Pakistan against India’s actions in Kashmir.

On July 17 the National Security Council formally excepted India from the provisions of the Kem Amendment.7 This permitted continuation of the operation of the loan agreement with India as well as Point IV agreements. Nepal executed the required certification under the amendment. Pakistan was formally excepted from the provisions of the Kem Amendment on September 19. No formal action was taken regarding an exception for Ceylon under the Kem Amendment. The fact that Ceylon shipped rubber to Communist China October 2 raises a question as to whether Ceylon may be granted an exception under the Battle Act.8

During the period since April 25 the number of US Information and Educational Program (USIE) personnel in South Asia or en-route to this area has increased from 63 US and 462 local employees to 87 US and 520 local employees. The total USIE program for South Asia is now under review. Owing to Congressional cuts in funds requested, expansion of the program will not reach the level contemplated by the Department.

South Asia is included under Title III of the Mutual Security Program enacted into law on October 8. Funds which may be made available for this program will be devoted to economic development and technical assistance projects. On November 1 it was announced that programs in India and Pakistan would be directed by Technical Cooperation Administration in the Department of State. No military financial aid is provided for or contemplated at this time, but procurement assistance on a reimbursable basis is available to India and Pakistan under Section 408(e) of the Mutual Defense Assistance Act of 1949, as amended.

Late in October the Governments of Afghanistan and Pakistan were informed that the US was discontinuing its efforts to bring about acceptance by these two governments of its informal proposal of November 6, 1950 for the resumption of more cooperative relations [Page 1698] between the two countries. The Department will continue informally to encourage bilateral negotiations but, for the present, does not contemplate making further proposals. Until such time as the Afghan Government decides to discontinue its anti-Pakistan agitation over the status of the Pakistan tribal areas, it is not likely that substantial progress will be made.

During the period under review the Point IV program for South Asia, which is administered on a country rather than a regional basis, has been accelerated. Thirteen US technicians are now in India; 7 are about to leave for that country; and 44 awards have been granted to Indians for training in the US. There are 6 US experts in Pakistan and 4 scheduled to leave soon, while 90 awards have been granted to Pakistanis to train in the US. Three US experts have arrived in Afghanistan and 5 Afghan trainees have been selected to come to the US. Five Ceylonese were awarded training grants in FY 1951, but further US technical assistance to Ceylon has been suspended pending a decision as to Ceylon’s status vis-à-vis the Battle Act.

There were no developments to November 2, 1951 which required a revision of the policies approved in NSC 98/1.

H. Freeman Matthews
  1. The National Security Council, in NSC Action No. 584, noted this progress report at its 107th meeting on November 28 (S/S Files, Lot 62 D1, NSC Actions).
  2. Public Law 48, 82d Congress, 65 Stat. 71.
  3. William D. Pawley, Consultant to the Secretary of State; formerly Ambassador to Peru (June 1945–April 1946) and Ambassador to Brazil (April 1946–March 1948).
  4. U.N. document S/2375.
  5. U.N. document S/995.
  6. U.N. document S/1196.
  7. The Kem Amendment, Section 1302 of P.L. 45, Third Supplemental Appropriation Act of 1951, approved June 2, 1951 (65 Stat. 52), so-named after Senator James P. Kem of Missouri, provided for a ban on economic assistance to countries exporting strategic materials to Communist-bloc countries.
  8. The Kem Amendment was superseded by the Battle Act (The Mutual Defense Assistance Control Act of 1951, P.L. 213, 82d Cong., approved October 26, 1951, 65 Stat 644), so-named after Representative Laurie C. Battle of Alabama, which likewise provided for the suspension of economic aid to nations supplying specified strategic commodities to the Soviet bloc. Rubber was one commodity included in Title II of that Act.