411.919/9–853: Telegram
The Acting Secretary of State to the Embassy in India1
287. US Govt prepared make following arrangements as basis for purchase thorium nitrate. Embtel 456.2
1. Price
$2.75 per pound. Embassy telegram 2023 indicates Bhatnagar willing accept this. AEC will pay $2.20 per pound for mantle grade thorium nitrate containing at least 46% thorium oxide, and contract will have to be on that basis. Premium of $.55 will have to be made available to GOI on some other basis as described below.
2. Quantity
GOI commit total amount available for export up to 135 tons. This based on Bhatnagar’s figure of plant output at full production 210 tons of which 135 tons exportable. Do not anticipate Trombay plant in full production for one to two years. Imports from France should be modest and therefore their inclusion not important problem. GOI should undertake not to increase its export availability in any unusual manner; i.e. in way not now contemplated.
3. Length contract
Two years from date contract or delivery 135 tons whichever comes soonest.
[Page 1721]4. Renewal
Contract may provide for renewal on such terms and conditions as are mutually agreed upon.
5. Method of payment
Payment would be in two parts. Important that AEC price structure for thorium nitrate be protected so that contracts with other suppliers are not upset. This means that AEC would contract at $2.20 per pound delivered NY. All other payment arrangements will be separate and apart from AEC contract. Following alternatives provide for payment of additional amount estimated at $167,000 on basis of 135 tons and Emb given discretion as to which to use:
- (a)
- Rupee grant under FOA–GOI agreement for purpose scientific and industrial research; rupees might be derived from sale of surplus commodities in India under Section 550. Although this grant would be subject usual procedures FOA operations it is assumed that its provisions would meet Bhatnagar’s desires and be in accord his wishes.
- (b)
- Dollar grant as in (a) instead of rupee grant. Under this arrangement Bhatnagar through GOI channels might specify US equipment he desires. Under both (a) and (b) grant for first year would be made at beginning of contract on basis realistic estimate thorium nitrate deliveries. Balance of grant would be made at end of contract to adjust to final total.
- (c)
- Option agreement to purchase rare earth compounds produced in India for which we would pay $167 thousand. Sole purpose of option would be to give Bhatnagar equivalent of $2.75 for thorium nitrate and this should be made clear.
6. Approach to Bhatnagar
Believe that you should await Pillai’s informal indication he prepared to give oral assurances re shipment Battle Act commodities (paragraph 2 Deptel 253)4 before discussing above with Bhatnagar. If in your opinion however some indication to Bhatnagar that US ready to proceed when way open will help expedite Pillai action, you may do so. When discussions are opened you should attempt arrive at basis of understanding which would be set forth in memorandum and transmitted Washington. If, to reach agreement, it becomes necessary, you have discretion to increase the premium up to $.80 per pound thus making the over-all price $3.00 per pound. (This would make additional sum of $242,000 over $2.20 price.) On basis this memo understanding we would send you AEC contract for signing at $2.20 per pound and instruct FOA/FID to undertake necessary additional agreement. Emb should not raise question Bhatnagar’s coming Washington for negotiations but if he makes issue of coming, you may indicate concurrence.
[Page 1722]FYI. Agreement re purchase thorium nitrate not to be reached until Battle Act assurances in hand and in this regard Pillai proposal Embtel 4625 does not appear to meet position set forth in Deptel 253. End FYI.