891.2546/9–2954
Memorandum by the Deputy Assistant Secretary of
State for Near Eastern, South Asian, and African Affairs
(Jernegan) to the Acting Secretary of State1
secret
[Washington,] September 29,
1954.
Subject:
- Beryl Arrangement with India
The US may be faced with the need to decide before September 30, 1954
on the renewal of its arrangement with India for procurement of
Indian beryl, an atomic energy material. Beryl is in Category I–B
under the Battle Act—which means that it is of “primary strategic
significance”. It is on the National Stockpile list because of its
industrial uses. The difficulty of this decision stems from the fact
that our AEC, after consultation
with other US materials procurement agencies, informs us that there
is no present requirement which would support renewal for five years
as provided for in the Arrangement.2 Even though the
AEC is prepared now to finance
one year of the five-year renewal policy, funds are not readily
forthcoming for the full commitment which would be involved in the
renewal.
The Arrangement provides for supply of Indian beryl at world market
prices. The value of shipments has averaged about $150,000 a year.
The Arrangement provides for automatic renewal for five years from
September 30, 1955 if notice of termination is not given by
September 30, 1954.
This Arrangement for Indian supply of beryl to the US Government is
secret. It is, we believe, as politically advantageous now as it was
when signed in 1950. It is important to the US national interest to
renew the Arrangement for the five-year period because: it would
help prevent problems similar to those which confronted us in our
relations with India before our recent difficult negotiations on
thorium compounds; it bears on the principle of “trade not aid”, and
permits US influence on atomic energy development in India. Embassy
New Delhi urges consideration of the adverse effect of termination
at this time when Soviet economic penetration is being reinforced.
The Arrangement
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should
be renewed and funds found to cover the commitment.
While the Department of State does not presume to anticipate future
requirements for beryl, it must note that it would undoubtedly be
difficult to negotiate a new contract with India in the event of a
need such as existed in 1950.
If by September 30 India does not accept a proposal we have made
through our Embassy at New Delhi—for a one year extension of the
initial period of the Arrangement—we must be prepared to put up the
money or give notice of termination.
Since receipt recently of the AEC
response to our formal presentation of the matter to it on June 24,
discussions with other interested agencies have indicated that,
while funds might be available, no commitment is forthcoming. We are
informed that Governor Stassen
believes FOA could underwrite the
renewal if necessary, but believes that a Presidential directive
should order AEC to renew the
Arrangement.
Recommendation:
That you take advantage of the OCB
meeting this afternoon to:
- 1.
- secure agreement that, in the light of U.S. policy
interest, the renewal of the Arrangements should be allowed
to come into effect; and
- 2.
- assuming more than one agency has authority and fiscal
capability, get agreement that, within say thirty days,
there will be a determination among them (or by the
President if necessary) as to which one or more of the
Agencies is actually to finance the Arrangement.
[Attachment]
United States Arrangement For Purchase Of
Indian Beryl
Under date of October 1, 1950, there was concluded an Arrangement
with the Government of India whereby India will sell, and the
United States Government will buy, beryllium oxide either as
beryl ore, or at the option of the Government of India, as
beryllium hydroxide. The United States Government may be
required to buy in any one year as much as 15,000 long ton units
of such beryllium oxide.
The Arrangement, the working details of which were negotiated
between representatives of the Atomic Energy Commissions of both
countries, also provides that certain information and assistance
in the atomic energy field may be provided to India by the
United States Atomic Energy Commission. Article 12 of the
Arrangement provides for renewal for two consecutive five-year
periods after the initial five-year period ending on September
30, 1955, on the same terms and conditions, except as to
renewal, unless either party should give notice to the other in
writing of its desire to terminate the Arrangement at least
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one year before the
end of any five-year period during which the Arrangement is in
force, in which case the Arrangement shall come to an end on the
expiry of the period of notice. Thus, if the United States
desires to terminate this Arrangement at the end of the first
five-year period, notice must be given in writing to the
Government of India by September 30, 1954. In the absence of
such notice, the Arrangement is automatically renewed for
another five-year period.
The Atomic Energy Commission, after carefully examining its own
needs and inquiring as to possible interest on the part of the
Department of Defense, the Emergency Procurement Service, and
the Office of Defense Materials, informs us that there is no
present beryl requirement which would support a renewal of the
Arrangement.
The Department of State believes that renewal of the Arrangement
for the full five-year term is in the interest of the United
States; conversely, failure to do so will be prejudicial to the
interests of the United States foreign policy in Asia. The
Arrangement is secret, covering an Indian commitment to supply
the US Government with an atomic energy material. In this
respect, the Arrangement represents a considerable
accomplishment now as it did when signed in 1950.
This Arrangement is also consistent with the achievement of
United States objectives through “trade not aid.” It is
important to note that the price of the beryl is the market
price at the time of shipment.
Moreover, the Department of State believes that the Arrangement’s
provision for appropriate information and assistance to the
Government of India, is of importance in maintaining United
States influence in Indian atomic energy developments.
Embassy New Delhi, furthermore, urges that there be considered
the political impact of United States withdrawal of the
Arrangement at this time when the USSR is making a highly
significant attempt at economic penetration of India by offering
to finance the establishment of a fourth steel plant in India
and to provide technical assistance in connection
therewith.3
The renewal of the Arrangement also has some Battle Act
ramifications, and a bearing on the recent negotiations for
United States purchase of exportable Indian thorium compounds.
The possibility of Indian thorium exports to Communist countries
caused some concern which led to lengthy and difficult
negotiations covering United States purchase of that commodity.
Indian beryl might well cause similar concern, and jeopardize
relations with India at a critical time.
Past deliveries of beryl under this Arrangement have amounted to
about $150,000 a year. This value, however, might theoretically
be increased to a maximum of about $1,300,000 a year if the
Government of India chose, in accordance with Article 5, to
substitute beryllium hydroxide
[Page 1770]
for beryl. This latter contingency seems
unlikely at least in the first few years of a second five-year
period, since at present, there is no plant in India which
produces this material.
It has been possible to offer the Government of India an
extension of the present Arrangement for a one-year period. The
Embassy in New Delhi was instructed to this effect by a telegram
on September 20, 1954.4
This telegram suggested that in view of the shortness of time,
the GOI might wish to extend the
date for decision on this offer from September 30 to November
16, 1954.5 If the
GOI responds to the latter
part of this proposition by September 30, we shall have some
additional time to consider the problems of trends and
finances.
Against the possibility, however, that a response is not received
from the GOI by September 30,
the United States must be prepared for one of two alternatives:
give notice of termination, or have at hand the means to support
the automatic five-year renewal of the Agreement.
It is believed that one or more of the executive agencies may
have the statutory power and available funds to underwrite the
Arrangement for the next five years. However, while discussions
among officials of interested agencies have indicated some
agreement that the renewal of the Arrangement should be allowed
to come into effect in the United States national interest,
these same discussions show little likelihood that by September
30 any specific part of the Executive Branch is prepared to
underwrite the cost of the renewal beyond the first year.
