Foreign Relations of the United States, 1952–1954, East Asia and the Pacific, Volume XII, Part 2

Eisenhower Library, Eisenhower papers, Whitman file

No. 254
Memorandum of Discussion at the 171st Meeting of the National Security Council, Washington, November 19, 1953¹

top secret
eyes only

Washington, November 19, 1953

[Extracts]

Present at the 171st meeting of the Council were the President of the United States, presiding; the Secretary of State; the Secretary of Defense; the Director, Foreign Operations Administration; the Director, Office of Defense Mobilization. The Vice President did not attend because of his absence from the country. Also present at the meeting were the Secretary of the Treasury; the Acting Director, Bureau of the Budget; the Chairman, Joint Chiefs of Staff; the Director of Central Intelligence; Huntington Sheldon, Central Intelligence Agency (for Item 1); The Assistant to the President; the Deputy Assistant to the President; Robert Cutler, Special Assistant to the President; the Acting White House Staff Secretary; the Executive Secretary, NSC; and the Deputy Executive Secretary, NSC.

There follows a summary of the discussion at the meeting and the chief points taken.

1. Significant World Developments Affecting U.S. Security

Because the Council was considering a new draft statement of policy on Indonesia,² the Director of Central Intelligence devoted his briefing of the Council exclusively to the situation in Indonesia. With the assistance of a chart, Mr. Dulles indicated the political complexion of the Indonesian Parliament, which was largely an appointed rather than an elected body. President Sukarno’s selections, moreover, had not been very happy or fair, since the largest Indonesian party, the Masjumi, had been given insufficient representation.

Mr. Dulles ascribed to inexperience the increasing trend toward a breakdown of governmental authority in Indonesia. He pointed out that the Indonesians, unlike the Filipinos, had had no training in self-government prior to independence. Initially the Indonesians had attempted to create a federal system of government, which was what was required in view of the geographical and other circumstances. They had, however, given up this objective in favor of the present centralized system of government, which simply does not work. All these circumstances make it difficult to estimate how serious is the danger of Indonesia’s going Communist.

There will be no elections until 1955. The electoral commission which has been set up has excluded the Masjumi and the Socialist parties from membership, which indicates that the elections, if they occur, will be rigged. While, said Mr. Dulles, it was not accurate to describe the present Indonesian Government as Communist, at least eight of the twenty cabinet ministers were pro-Communist. Accordingly, the present government could best be described as a Popular Front. The opposition had put out feelers looking to a revolt, but the opposition at present did not command sufficient resources for a successful armed revolt. Meanwhile President Sukarno, who still has very great influence, is apparently convinced that he can control and exploit the Communists for his own purposes. Disaffection in the armed forces, however, remained very great.

The major problem in foreign policy remained the question of New Guinea. In the economic realm the Chinese Communists were playing with the rubber issue chiefly in order to stir up trouble. So far the Indonesians had remained faithful to their commitment not to sell this strategic material to Communist China, but there was no certainty that they would continue to observe the prohibition. Worst of all, the United States gets the blame for the falling prices of tin and rubber. The Indonesians tend to class the United States with the Colonial powers. In summary, while the situation was not one of immediate crisis, everything was moving in the wrong direction from the U.S. point of view. The situation, in short, was one of steady deterioration.

The President’s first comments on the intelligence briefing consisted of inquiries as to the likelihood of a coup d’état by the army. He then moved on to question, with some warmth, why it was a matter of such moment to the United States if the Indonesians did undertake to sell all their rubber to Communist China. The President said he got very weary of all these rigid U.S. controls on the trade of free world nations with the Soviet bloc. Why should we not tell the Indonesians to sell their rubber and tin to China instead of having to assume the blame ourselves for the inability of the Indonesians to market the products on which their economy depended? So far as he could see, said the President, Russia has all the rubber she needs, or in any case could manufacture it synthetically. Meanwhile, the United States cannot stand forever in the way of other nations making a living. Obviously the chief obstacle to a more intelligent approach to this problem was the vehemence of popular and Congressional opinion on trade between the free world and the Soviet bloc. Accordingly, what we needed most was a program to educate our own citizens on the facts of economic life.

When the President had concluded his observations, Governor Stassen pointed out that the Joint Chiefs of Staff had listed rubber among the most important strategic materials, which accounted for their policy of preventing its sale to Communist China. If rubber were taken off the strategic list, it would make a very great difference in the volume and character of international trade.

In reply the President said that he was not impressed with this argument, and felt that we conducted our policy of trade controls in much too rigid and generalized a fashion. It would be much more desirable to substitute for the present criteria, the criterion of net advantage to the free world and to the U.S. of trade with the Communist nations.

Mr. Cutler then suggested that this subject be dropped and taken up again in connection with the policy report on Indonesia, which addressed itself to precisely this problem.

The National Security Council:

Noted an oral briefing by the Director of Central Intelligence on the subject, with specific reference to Indonesia.

2. United States Objectives and Course of Action With Respect to Indonesia (NSC 171;³ Memos for NSC from Executive Secretary, same subject, dated November 13 and 18, 1953)⁴

Mr. Cutler presented the draft statement of policy as one in the series of Far Eastern policy recommendations which had been prepared in recent months by the NSC Planning Board. He pointed out that the two most difficult issues faced by the Planning Board with regard to Indonesia had been, one, … the present … Indonesian Government … secondly, the character of U.S. assistance to some more satisfactory Indonesian Government if such a government succeeded to power.

Secretary Humphrey⁵ said he wished to comment at once on the second of these two issues. He pointed out that we already have on hand a stockpile of tin sufficient to last for five years. Meanwhile, the domestic demand for tin was steadily falling, thanks to new equipment and to the use of substitutes. Accordingly, Secretary Humphrey judged that even if the U.S. were to get no tin at all for a number of years, the situation would not be troublesome. To make matters worse, we seemed to be obligated to purchase another 60,000 tons of tin in addition to the five-year supply already amassed. Thus there was a glut of tin, and anything we did about our supply was bound to get us in wrong with the governments from which we purchased it. If we insisted on buying tin at a reduced price these governments would be sore. If we don’t buy any tin, they will be equally mad. If we sell some of the tin which we have accumulated, the tin market goes to hell. In the circumstances, concluded Secretary Humphrey, it was his recommendation that the United States get itself completely out of the tin business and out of the cartel business. We will buy tin when and where we need it, and let the tin-producing countries sell their tin to anyone who offers to buy it.

Governor Stassen, while agreeing with the dark picture Secretary Humphrey had painted, said that the difficulty had resulted from our own frantic purchases of tin in recent years. It was these purchases that had driven up the price and now caused such severe dislocation in the economies of countries like Indonesia and Bolivia.

The President also took issue with the arguments of Secretary Humphrey. Unless, he said, we can foresee the complete elimination of tin from our economy, we could not altogether abandon the program for stockpiling this metal. Furthermore, said the President, a country could never be called poor if it owns commodities and things, as opposed merely to money and currency.

Secretary Humphrey said he couldn’t agree with the President’s point. He said that he was not a conservationist. He was convinced that we would always be able to obtain all the material resources we needed if we were willing to pay the price, or else we could find substitutes for such materials. Contrary to the President’s point of view, Secretary Humphrey said that people who have too much of a given commodity often go broke. He, in any case, was not frightened of not having sufficient materials to use when we needed them. There would be plenty.

The President inquired whether Secretary Humphrey had not overlooked manganese. A few years ago we could have created a much larger stockpile of this material, and such a program would have been very desirable. Now manganese was in short supply and we are searching for it all over the world, with a resultant sharp rise in price.

Secretary Humphrey did not answer the President’s argument, but suggested going back to the point made earlier by Governor Stassen. He confessed that Governor Stassen was right in blaming the United States for the glut of rubber and tin which was now causing such difficulty. Our policies had raised the price of these commodities and occasioned the large production which could not now be disposed of. Nevertheless, we cannot now dissipate our assets in vain attempts to support the economy of Indonesia. If we continue to try to buy up all the significant strategic materials in the world for our own use, or to prevent the Russians from obtaining such materials, the burden would fall with heavy weight on our own taxpayers.

Governor Stassen expressed agreement with Secretary Dulles on the interdependence of the United States and the other countries of the free world, and then went back to the President’s suggestion of allowing the Indonesians to sell their rubber and tin to any buyer who appeared. This appealed to the Secretary of State as the most constructive proposal to come out of the discussion thus far. He illustrated the problem by pointing out that when Ambassador Cumming first went to Indonesia he was faced with the disagreeable task of informing the Indonesians that we could neither buy their rubber and tin nor accede to their sale to Communist China.

Secretary Dulles stated that while Secretary Humphrey’s analysis might be accurate from a purely tax point of view, it ignored very important political factors. While our policy of buying strategic materials in foreign countries could indeed cause unemployment here and there in the United States, failure to buy such materials might completely destroy the economic stability of certain friendly countries. If this occurred, the price to us would in the long run be much greater. In short, we could not look upon economic assistance to such countries as Indonesia solely from the point of view of the banker.

The President then restated his proposal, but suggested that before it was adopted he would like the Joint Chiefs of Staff to make a fresh study, from the military point of view, of the whole matter of trade controls on the sale of strategic materials.

Both Secretary Humphrey and Mr. Flemming expressed the need for a sense of urgency in the paragraph of the report which called for exploration of ways and means of providing assistance to the Indonesians in the marketing of their rubber and tin. We were right up against the wall not only on tin and rubber but on a number of other items for which the stockpile was complete. Accordingly, we could no longer justify the purchase of such materials as necessary contributions to the stockpile. Further purchases in fact would simply amount to preemptive buying.

The President observed that if we took tin and rubber off the strategic list, the Chinese Communists would either have to buy these items from the Indonesians or else their bluff would be called. In any case, the Chinese Communists would have to take the rap if they broke the market in these commodities. But, said the President, he wished the Joint Chiefs to make the study he had suggested.

Governor Stassen pointed out that Admiral DeLany⁶ was administering U.S. policy with respect to the control of the movement of strategic materials, not out of any fear of Congress, but strictly in accordance with the guidance given him by the Department of Defense as to strategic materials. If we changed this guidance and decided to relax controls on trade in strategic materials, Governor Stassen said that Admiral DeLany would be quite prepared to present his case and defend it before the Congress.

In support of the President’s argument that this would take the heat off the U.S. and put it on the USSR, Governor Stassen said that there had been certain indications of late of economic difficulties in the USSR and the satellites, and the President expressed the hope that if his proposal were adopted it would tend to increase such economic difficulties. By and large, said the President, his proposal was directly related to the basic objective of this Administration, which was to achieve a reasonable balance between the demands of national security and the necessity for economic health and stability in the United States.

After further discussion of certain amendments to the language in the proposed statement of policy, Mr. Cutler pointed out, as to paragraph 29, the view of the Joint Chiefs of Staff that the language of that paragraph was not sufficiently clear to provide the guidance necessary for military planning. While it was clear that such plans involved the possibility of U.S. military assistance to Indonesia in the event of a Communist seizure of power, it was not clear what the United States could do if chaos reached such a point in Indonesia that no legal government was left to issue an appeal for assistance.

. . . . . . .

The National Security Council:⁷

a. Adopted the statement of policy contained in NSC 171, as amended by the enclosures to the reference memorandum of November 13, subject to the following changes:

(1) Paragraph 9: Change “as an immediate objective” to “as prime objective”.

(2) Paragraph 20: Delete the asterisks and footnotes,⁸ and reword the first four lines to read:

“20. Explore urgently the practicable means of assisting Indonesia in regard to its important economic problems, with particular attention to the net advantage of helping Indonesia find markets for rubber and tin,”.

(3) Paragraph 21: Delete the asterisks, and substitute for the bracketed portion⁹ the following: “particularly with respect to helping Indonesia find markets for tin and rubber.”

(4) Paragraph 26: Delete “on a priority basis” in the first sentence.¹⁰

(5) Subparagraph 29–b: Insert, after “appropriate action”, the following: “, in collaboration with other friendly nations,”.

b. Requested the Department of Defense to make, before January 1, 1954, for Council consideration, a reappraisal of the military effect of a relaxation of controls on trade with the Soviet bloc in strategic raw materials where such trade might result in a net advantage to the free world through increased political and economic stability.

Note: NSC 171, as amended and approved by the President, subsequently circulated as NSC 171/1 and referred to the OCB as the coordinating agency designated by the President. The action in b above subsequently transmitted to the Secretary of Defense for implementation.

. . . . . . .

S. Everett Gleason

1. Drafted by Gleason on Nov. 20.
2. For text of the paper as adopted, see NSC 171/1, infra.
3. NSC 171, dated Nov. 10, was a report to the NSC by the NSC Planning Board on U.S. objectives and courses of action with respect to Indonesia. (S/S–NSC files, lot 63 D 351, NSC 171 Series)
4. The memorandum of Nov. 13 forwarded revisions in the text of NSC 171 made by the NSC Planning Board after further consideration of that document. The memorandum of Nov. 18 forwarded the views of the JCS on NSC 171, expressing general agreement with the objectives and courses of action set forth in that paper. (S/S–NSC files, lot 63 D 351, NSC 171 Series)
5. Secretary of the Treasury George M. Humphrey.
6. Adm. William S. DeLany, USN (ret.), Deputy Director for Mutual Defense Assistance Control, Foreign Operations Administration.
7. Subparagraphs a and b and the Note constitute NSC Action No. 962.

8. The text referred to here, NSC 171 as revised, reads:

   “*20. Explore the practicable means of assisting Indonesia in regard to its important economic problems, [with particular attention to the net advantage of negotiating or continuing in effect long-term contracts for rubber and tin purchases]** and explore the possibility of assisting the Indonesian Government in improving the quality of the rubber produced by small holders.”

   “*While raising no objection to the public purchase of rubber and tin, ODM points out that such purchases beyond stockpile objectives would require either additional funds for such purchases or a broadening of stockpiling objectives to include economic warfare.”

   “**Treasury and the Bureau of the Budget dissent from attempts now to predetermine the kinds of economic assistance which might later be planned by appropriate agencies.”

   Brackets are in the text.

9. The text referred to here, NSC 171 as revised, reads:

   “*21. In the event that communist influence is eliminated from the government of Indonesia, be prepared to take rapid appropriate action that would tend to strengthen the position of such an Indonesian government, [particularly with respect to purchase of tin and rubber.]**

   The asterisked notes are provided in footnote 8, above. Brackets are in the text.

10. The sentence referred to reads: “As requested by the Indonesian government, and as appropriate, make available U.S. military training, military equipment and supplies on a priority basis for the maintenance of internal security.”