846E.2395/5–2351: Telegram

The Ambassador in Ceylon (Satterthwaite) to the Secretary of State


572. Upon my arrival at Kandy Sunday for visit with Governor Gen Lord Soulbury I found Home Min Goonetilleke also there. Ostensible purpose latter’s visit was discuss King and Queen’s visit Ceylon next Feb. Actually he seems have talked almost exclusively about rubber situation with emphasis on danger from Commie entailed by falling price and blow this time wld have on govts fortunes in next year’s elections. In course discussion I pointed out to him and Governor Gen reasonable position US had taken at Borne talks. I also mentioned extremely unfortunate effect conclusion rice rubber deal with Commie China wld have on US (Embtel 522, May 9 and 545 May 15).

After Sir Oliver’s departure Soulbury said he had been very much disturbed by picture painted by former of danger to Ceylon’s economy from world rubber situation. He asked me whether it might not be possible in view failure Rome talks for US and Ceylon reach agreement on bulk purchase Ceylon’s total output for several years at agreed price. He thought that in view serious econ sit if rubber continues fall GOC wld not be unreasonable about price. I replied that to best my knowledge US wld not be interested in reaching agreement with one country only and also expressed serious doubt about possibility reaching agreement on price on long term basis. Governor Gen nevertheless urged me to inquire.

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Local press continues give such prominence to rubber situation with both conservative and left-wing papers urging free sale to Commie China that some official inspiration seems indicated. Important producers group adopted res to request GOC not to impose ban on rubber exports to China. Rubber circles report however that Commie China has so far shown no interest. Local Commie papers continue urge rice rubber deal with Commie China.

Important Tamil paper Virakesari stated editorially May 18: “at this hour when price rubber is falling America shows no sympathy. Though she has every right bargain she shld not try slash price rubber and thus expose us to Commie danger. Such policy is not only shortsighted but will also counteract America’s efforts to win Asia’s goodwill”.

One purpose this editorial and similar articles may be of course to scare US and UK into maintaining reasonable price for rubber in order check spread Communism in Asia. Situation is not however without danger and merits most careful watching in view its influence on political thinking in whole SOA and SEA area which is inclined believe our motives are largely materialistic and selfish.

I assume from report on Rome talks in April 30 issue current econ develops and especially from Deptel 1267 May 18 to Djakarta1 which I have just read that Dept wld not be disposed to agreement of type suggested by Governor Gen. As however a fixed price for rubber for fairly long term would tend assure pol’s ability here and wld also have obvious advantages for us in case we request important concessions from GOC I urge that Governor Gen query be given serious consideration at high level and that Dept tel me its views.

Repeated info London 82.

  1. Not printed.