Foreign Relations of the United States, 1952–1954, Africa and South Asia, Volume XI, Part 2

446E.9331/10–2252: Telegram

The Ambassador in Ceylon (Satterthwaite) to the Department of State¹

secret

Colombo, October 22, 1952—5 p.m.

191. There has been considerable speculation locally both as to why Chi shld have made such seemingly over generous proposals to Ceylon (Embtel 187 Oct 21)² and as to full implications of proposals.

In Emb’s opinion GOC wld have been content accept any substantial quantity rice Chi might have offered at reasonable price and in return guarantee continued free rubber market in Ceylon. Chi in Sept took over 94 per cent Ceylon’s sheet rubber exports at premium price of 5D to 6D³ per pound. Competition among shippers has been reducing premium and there is reason suppose that shippers wld be willing sell all sheet to Chi for considerably less than present premium. Trade sees no factors (excluding war which wld obviously nullify agreement) which during next twelve months wld result in marked improvement in natural rubber prices.

In circumstances, it is reasonable assumption that Chi rice-rubber proposals, which apparently so favorable to Ceylon, were motivated by political factors and not by necessity ensuring rubber supplies. These political motivations may include any or all of fol:

1. To achieve propaganda victory over democratic countries which will be exploited specifically by strengthening position local Commie Party in Ceylon and generally by creating pressure in other Asian and European countries for greater trade and closer relations with Chi in view generous terms granted by latter. Agreement also may be exploited by Chi for domestic propaganda purposes.

2. As soon as pattern is established and Ceylon’s dependence on Chi as source rice and market for rubber confirmed, Chi expect apply pressure on GOC to permit trade or diplomatic mission in Ceylon (this mission wld actively assist local Commie Party, and what is more important, be in position extend influence to South India where Commie Party already important.

3. Because GOC willingness ship rubber contrary GA resolution and send high level mission to Chi, Commie Chi may have considered there is strong latent pro-Commie sympathy among high GOC officials which can be successfully strengthened and exploited.

4. Commies may have feared that US wld conclude rubber agreement with GOC which wld result in latter embargoing Chi shipments, therefore willing pay price high enough assure GOC wld “stay bought”. It is difficult define future trend with any accuracy. At this time, however, Emb considers fol:

(a) GOC will ratify agreements.

(b) GOC will take line in justification that prolonged negotiations had been carried on with US but latter always quibbled over minor points. Despite this, before turning to Chi, GOC sent Goonetilleke mission to US to ask for aid which was refused; therefore, GOC forced to turn to Chi.

(c) Chi will meticulously fulfill obligation supply rice at least until able appraise fully propaganda and other results of gesture.

(d) GOC is arrogant and confident of ability to handle Commies and feast on bait without getting caught. However, GOC might well balk and even repudiate agreements in event Commies, Chinese or local, move toward their probable objectives in too open or abrupt a manner. Although GOC not unwilling flirt with Commie Chi, key personalities in govt still believe be definitely anti-Commie and some at least recognize basic realities.

Emb suggests Dept request other posts such as Moscow, Taipei, and Hong Kong for their appraisal Chi motives.

Satterthwaite

1. This telegram was repeated to London for information as telegram 37.
2. Ante, p. 1546.
3. These figures are undoubtedly erroneous since the rubber price in 1952 did not decline below 23 cents per pound in any market (see Rubber Statistical Bulletins, 1952–1953). The sender may mean that the Chinese took over 94 percent of Ceylon’s rubber at 5D or 6D (6 or 7 cents) per pound over the market price.