846E.2317/9–2353: Telegram
The Ambassador in Ceylon (Crowe) to the Department of State1
priority
89. Re Deptel 66, September 15.2 Embassy concurs with Department that it would be unwise for US give GOC any concrete proposals in present situation.
Embassy has not yet been able obtain definite information regarding rice purchase negotiations Rangoon or accomplishments Peking talks. Press this morning announced signing Peking agreement for second year’s rice-rubber exchange but gave no information re terms. Ceylon delegates due return by next week and Embassy will endeavor obtain and transmit information re agreement.
Sir Oliver Goonetilleke informed Embassy privately that his Rangoon talks had been so successful that he would be able reduce retail price rice by rupee cents 15 or 20 per measure. He did not quote and has not announced specific figures amounts or prices rice Burma will furnish. It appears likely concessions were obtained Rangoon that were used strengthen position Ceylon negotiators Peking.
Embassy believes it likely that Corea approach made not so much in hope that satisfactory concrete offer from US would be received as with idea of “keeping open the telegraph wire to Washington” with eye to some possibly favorable future developments and in order that Ceylon might continue reiterate statements that it turned to Communist world only after failure appeals to US to produce assistance to extent needed.
Domestic political situation Ceylon uncertain at moment. Prime Minister Dudley Senanayake, overtired and apparently half ill from worry and possibly feeling inadequacy, is almost daily threatening resign and then permitting himself be persuaded continue. His irresolution has now become matter general public concern and discussion to extent that is seriously damaging his personal prestige. Even people who have always supported Dudley in past and who have been critical of Sir John Kotelawala’s attitude when he was passed over for Prime Ministership are now saying that wrong man was chosen. Uncertainty, as to whether succession can be passed amicably as result rivalry between Sir John Kotelawala, who is as leader House obvious successor, and Finance Minister Jayewardene, who is also reportedly making bid for successorship and whom Dudley said to favor, appears be principal motive behind continuing but increasingly less hopeful efforts persuade Dudley remain. His vacillation seems have tried patience most associates to extent that would influence them wish him Godspeed were successorship clear.
[Page 1581]Embassy believes difficulties present domestic situation arise primarily from irresolution Prime Minister and resulting weakness GOC as presently constituted and pose problem that Ceylonese must solve themselves. Situation is not at the moment of nature to lend itself to solution by foreign aid financial or otherwise. Embassy does not believe Ceylon at this time requires foreign financial support preserve internal stability. Primary need is government with resolution to govern. Without this foreign aid is useless and with this foreign aid would be of secondary importance.
As indication magnitude problem involved in terminating Ceylon-Red Chinese rubber-rice trade Embassy study indicates benefits existing deal approximately as follows:
By September 1 Ceylon has shipped 35,000 metric tons rubber to Red China under the five year trade agreement at estimated gross profit over and above Singapore market prices of over $10 million. In absence material rise Singapore rubber prices Ceylon should receive additional gross profit on balance 15,000 tons rubber to be shipped on this year’s contract of approximately $5 million. Savings to Ceylon on low price China rice compared with Burmese rice amount to an estimated $4.5 million. Benefits to Ceylon China rice-rubber deal in 1953 therefore likely total approximately $19 to $20 million.