891.546/3–1254: Telegram
The Secretary of State to the Embassy in India1
priority
1163. Limit distribution. Although GOI draft Memo of Commitment (Emb despatch 1436, March 12, 1954)2 fails to provide absolute protection desired, I believe it should be accepted as basis for finalizing thorium nitrate procurement contract, subject following provisos:
GOI memorandum, as written, offers no certainty that any fixed quantity of thorium nitrate will be delivered to U.S. in any specific time. As written, proposed commitment would carry into contract a firm commitment by U.S. for purchase of specified amount but with extremely vague requirements on GOI to supply even to best of its ability such an amount. In view U.S. prepayment, in effect, of premium in form of lump sum grant under an FOA–GOI project agreement, and inasmuch U.S. is undertaking to purchase substantial quantity thorium nitrate and vast bulk of Indian production, U.S. should have firmer commitment regarding deliveries thorium nitrate to U.S. There follow, therefore desired rephrasing numbered paragraphs 4, 6 and 7.
“4. The Government of the United States of America, under the terms of this agreement, is prepared to purchase by September 30, 1955, up to a maximum of 230 long tons of thorium nitrate of mantle grade of the specifications given in paragraph one above, on the understanding that this constitutes the maximum amount which will be available for disposal outside the countries specified in clause three above. It is understood that the Indian Atomic Energy Commission will use its best efforts to make delivery of the above amount as expeditiously as possible and that all quantities of thorium nitrate produced under the authority of the Indian Atomic Energy Commission and available for purchase will be sold to the United States under the terms of this agreement except for thorium salts equivalent to approximately 15 long tons thorium nitrate per calendar quarter, which it is understood is required for domestic Indian consumption and the export commitments specified in paragraph three.”
“6. The present contract shall be for a period of 18 months from the 1st April 1954, or until the delivery of 230 long tons of thorium nitrate, whichever is earlier. The 18-month contract of the General Services Administration will provide that in the event that the Indian Atomic Energy Commission, through no fault of its own, has been unable to deliver the full amount of 230 long tons within the 18-month period of the contract, the Indian Atomic Energy Commission will deliver and the General Services Administration will purchase the balance of the said amount in the succeeding six-month period which may be extended at the option of the U.S. Government.”
“7. The contract shall provide for renewal on such terms and conditions as are mutually agreed upon on completion of the delivery of [Page 1752] the 230 long tons covered in this agreement or at the end of the 18-month period or extension thereof.”
FYI, if Embassy’s negotiation on rephrasing of point 4, suggested above indicates this may block entire arrangement, Embassy is authorized to retreat from concept of 15 long tons thorium nitrate per calendar quarter for Indian internal consumption and for shipments to other than US, to concept of 30 long tons thorium nitrate per six months. If absolutely necessary to preserve negotiation, Embassy may further retreat to original Indian position by putting period after phrase “as expeditiously as possible” in final sentence paragraph 4 and deleting rest of sentence. End FYI.
There is, in addition, several non-substantive revisions GOI draft advisable. These relate to need to maintain integrity U.S. AEC thorium nitrate price by removing overt reference to price of $3.50 a pound. Following rephrasing desired:
- A.
- Numbered paragraph 5—“The contract resulting from this Memorandum of Commitment will be drawn up between the Indian Atomic Energy Commission on the part of the Government of India and the General Services Administration on the part of the United States of America and will contain the standard terms of a contract for such material. Such a contract will be transmitted to the GOI and executed as soon as possible on the completion of this Memorandum of Commitment.”
- B.
- Numbered paragraph 8—“Price of Thorium Nitrate: The price of the thorium nitrate delivered under the contract with the General Services Administration, quality as specified, shall be $2.20 per pound delivered ex dock New York or other U.S. east coast port.”
- C.
- Numbered paragraph 9—“Operational Agreement: The procurement contract will be simultaneously supplemented by an operational agreement under the Indo-American Technical Cooperation program, in the amount of $669,760; this project agreement will cover such equipment and supplies as the appropriate Indian authorities shall designate to the extent of the above amount. It is understood that the funds applied to this purchase under the proposed operation agreement will not be derived from the total funds otherwise allocated to India under the Indo-American Technical Cooperation Agreement, but will be an addition thereto.”
In view fact US has experienced some difficulty in past on oral commitments by persons who later departed their positions in GOI, it is deemed important there be something more than simple oral commitment by Bhatnagar to follow procedures for checking bona fides of end-user each shipment outside India. Therefore, Embassy should obtain from Bhatnagar, through exchange of letters, confirmation U.S. understanding that Indian undertaking to sell thorium nitrate for consumption only in countries named in paragraph three of Memorandum of Commitment means GOI will check bona fides of end-user each shipment to such countries by obtaining government endorsed import [Page 1753] certificate or formal assurance which guarantees against transshipment or reexport and would insure that thorium nitrate is, in fact, consumed there and is not shipped elsewhere; Embassy might well emphasize that this procedure is and has been standard practice widely used for commodities of this importance.