1. Progress Report by the Operations Coordinating Board2


(Policy Approved by the President March 6, 1954)

(Period Covered: August 24, 1955 through March 28, 1956)

A. Listing of Major Developments During the Period


1. Soviet Political Campaign: The Soviet Union greatly stepped up its campaign to woo India and Afghanistan into closer relations with the Communist Bloc and to weaken their ties with the West, while Pakistan, Ceylon and Nepal were also subjected to increased Communist Bloc pressure.


2. Goa Issue. During the latter part of the period, U.S.-Indian relations became seriously strained on the Goa issue.

3. Reorganization of Indian States. Agitation within India on the issue of the reorganization of the Indian states on linguistic lines became so strong as to weaken at least temporarily the authority of the Government of India and Nehru’s prestige.

4. Internal Politics. India’s major non-communist opposition party, the PSP, was seriously weakened by a split-off of the doctrinaire left.

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5. Constitution. The Pakistan Constituent Assembly on March 2 adopted the Constitution; Pakistan is to remain within the Commonwealth as a Republic.

6. Baghdad Pact. Pakistan’s adherence to the Baghdad Pact marked a major step toward stronger defenses for Pakistan through realization of the Northern Tier concept.

7. Afghan Dispute. Renewed border tension and mutually hostile propaganda occurred as a result of Afghan resentment of political unification of West Pakistan.

8. Soviet Support of Pakistan’s Neighbors. The deep concern of the Pakistanis over the Soviet support to the Indians and Afghans in their disputes with Pakistan caused the Pakistanis to seek similar open support from the West; when support considered satisfactory by the Pakistanis was not immediately forthcoming, evidences appeared of a trend toward neutralism in the country.


9. Soviet Loan. Afghanistan accepted a Soviet offer of a $100 million loan which may result in substantially mortgaging the country’s economy to the USSR for years to come.


10. U.S. Economic Aid . In accordance with NSC Action No. 1458,3 the U.S. Ambassador4 has been authorized to negotiate an economic assistance agreement with the Ceylonese Government. An ICA country director has been appointed and is developing the details of an economic and technical assistance program with Ceylonese officials.

11. The U.S. expressed its willingness to assist a voluntary agency in providing Ceylon with powdered milk in the amount of 7,000 tons per year for three years for a school lunch program.


12. Communist China Economic Aid . Communist China has offered to help Nepal in its development program.

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B. Summary Statement of Operating Progress in Relation to Major NSC Objectives

13. NSC Objectives. Paragraph 59 of NSC 5409 provides that United States policy towards Afghanistan should be immediately reviewed in the event of increased Soviet efforts to subvert or take over Afghanistan. It has become increasingly evident during the weeks which have elapsed since the visit of Bulganin and Khrushchev to Afghanistan in December—which culminated in the extension by the USSR to Afghanistan of a $100 million credit—that the Soviets have initiated a full scale campaign to become the dominant influence in Afghanistan.5 It is therefore believed that a review of NSC 5409 in those sections pertaining to Afghanistan should be undertaken.

14. Operating Progress

The U.S. took the following actions relative to the U.S. objectives of strengthening regional economic cooperation and the economies of the individual countries of South Asia:
The U.S. decided to aid in establishing an Asian Nuclear Research and Training Center and to locate it in the Philippines rather than in Ceylon, Pakistan or other interested countries.
Eligibility criteria were established for projects to be considered for aid under the President’s Fund for Asian Economic Development.
The President asked Congress for authority to give continuity to some aid programs to underdeveloped countries.
Following the meeting of the SEATO Council in Karachi,6 the Secretary visited India and Ceylon; he took advantage of the opportunity afforded by his talks with India and Ceylon leaders to explain U.S. foreign policy objectives in order to increase their understanding of our purposes.


15. During the first part of the period under review, some progress was made in improving the atmosphere of U.S.-Indian relations, owing primarily to the general easing of cold war tensions. Nehru’s criticisms of U.S. collective security policies were less emotional. Ambassador Cooper established close personal relations with Nehru and made a favorable impression with the Indian press. On the other hand, little if any progress was made in resolving the basic differences between India and the U.S. Meanwhile, India’s relations [Page 4] with Communist China remained unchanged and with the Soviet Union became closer. On balance, probably no progress was made towards improving the Western position relative to that of the Communist Bloc and deterioration may have taken place:

In Strengthening the non-Communist Government. India continued to have one of the most stable non-communist governments in Asia but the government and Nehru at least temporarily lost initiative to some extent in the potentially dangerous problem of reorganizing the Indian states along linguistic lines, and India’s major non-communist opposition party was seriously weakened relative to both the Congress and the communists.
In Fostering India’s Alignment with the West and the Rest of Free Asia:
No progress was made in achieving this long-run objective and the West’s position relative to the Communist Bloc perhaps deteriorated as a result of the Soviet campaign to increase its influence in India as exemplified by Bulganin’s and Khrushchev’s visit to India7 and prospects for increased Indo-Soviet trade. The Soviet leaders were given a tremendous welcome by the Government of India. The attendant publicity lent respectability to the communists in India and elsewhere, and tended to identify Indian and Soviet foreign policies. India was proffered increased Indo-Soviet trade on easy loan terms, specifically for one million tons of Soviet steel. India also welcomed the Soviet leader’s open support for India’s full claims to Kashmir and Goa. In a number of the questions discussed at the recent Bangalore meeting of ECAFE, India and the U.S. took opposing positions and in some cases the Indian and Soviet positions were similar. Other developments unfavorable to the U.S. and the West were: the heated reaction in India to the Dulles–Cunha Communiqué of December 2, 1955,8 and the Government of India rejection of our official explanations of it; the probable discouragement of foreign private investment in India by such moves as the nationalization of Indian life insurance companies; and a deterioration of Indo-Pakistan relations, particularly exemplified by the large number of border incidents which have occurred in recent weeks, despite the settlement of some outstanding issues of a less important nature.
Developments of the period probably favorable to the U.S.-Indian relations were: the September 10 Agreed Announcement between Ambassadors Johnson and Wang giving India a role in facilitating the travel of Chinese nationals in the U.S. to Communist China;9 the cordial exchange of correspondence between the President and Nehru about mutual visits; the visits of General Maxwell Taylor to India and the Chief of Indian Army Staff to the U.S.; Nehru’s apparent decision to allow the [Page 5] USIS sub-posts in India to continue operation on a restricted basis; Indian officials’ expressions of unusually warm appreciation for American economic aid to India at the Colombo Plan meeting at Singapore; and India’s activity in fostering regional economic cooperation, as evidenced by a sterling loan to Burma, and proposals for cooperation with Japan under the Fund for Asian Economic Development.
The State Department decided to favor in principle the invitation of an Indian parliamentary delegation to visit the United States. The Department of State invited, and India accepted, an invitation to join the group of nations preparing a draft charter for the proposed International Atomic Energy Agency. The Indian Atomic Research Commission was presented a research library on January 3.
In Strengthening India’s Defense Position. The delivery of 17 C–119G aircraft under a reimbursable military assistance program during the period resulted in the near completion (over 90%) of a combined Army and Air Force program to supply Indian purchases of military equipment amounting to approximately $33 million. The U.S. approved a UK request to release “Green Satin” confidential radar equipment to India for installation on UK bombers for possible sale to India; it is hoped to forestall India’s purchase of 60 Soviet light bombers. The long pending procurement contract for thorium nitrate from India was also completed.
In Improving India’s Basic Economy. India continued to enjoy economic stability and expansion. The U.S. took the following actions to strengthen the economy of India: approved a grant of $50 million for developmental assistance; granted India 20,000 tons of wheat and rice as a special flood relief measure; made a gift of 500,000 cc of gamma globulin to help meet an unprecedently large epidemic of infectious hepatitis in the Delhi area; negotiated a civil air agreement which was signed February 3, 1956; and is considering the development of a possible three-year $400 million PL 480 program.


16. While gains in some directions tended to be offset by losses in others, on balance there was net progress toward achievement of our objectives:

In Strengthening Pakistan’s Defense Position
Since early 1953 the U.S. has encouraged Pakistan toward greater defensive cooperation with its neighbors in the Middle East. These efforts, including implementation of a military assistance program for Pakistan and consistent expressions of approval for Pakistan’s participation in area defense agreements, were rewarded by Pakistan’s adherence to the Baghdad Pact in September 1955. Subsequently Pakistan played a constructive part in the initial meetings of the pact members at Baghdad.
An increased flow of equipment deliveries under the U.S. military assistance program during the period, together with [Page 6] Ambassador Hildreth’s assurances of continued U.S. intent to meet its commitments, served to allay somewhat the previously expressed Pakistan dissatisfaction with the U.S. aid program.
In Improving Pakistan’s Economic Situation. A substantial flow of commodities financed by FY 1955 Defense Support funds served to ease critical supply shortages. FY 1956 programs of $6 million for Technical Cooperation and $56,430,000 for Defense Support have been approved to date. Obligations presently exceed $35 million.
In Fostering Pakistan’s Alignment with the West. Increased efforts were made in the information program to publicize U.S. military and economic aid, and to cooperate with the Pakistan Government in the production of anti-communist material. These efforts achieved success, but were offset to some extent by such major developments as the visit of Bulganin and Khrushchev and their outspoken support of India and Afghanistan in disputes with Pakistan.
In Improving Pak-Afghan Relations. The U.S. attempted through utterance of warnings and such action as the President’s suggestion for a high-level meeting to bring about some perceptible improvement in Pak-Afghan relations. However, little progress was registered as each country continued in projection of its national policies to assume sharply hostile attitudes on the part of the other.


17. Following settlement in September of the Afghan–Pakistan “flag dispute” the U.S. continued to urge upon both parties the desirability of further efforts to improve their relations. The U.S. informed the Government of Afghanistan that it might be willing to consider assistance in projects designed to draw Afghanistan and Pakistan closer together, but did not elicit a favorable initial response from the Afghans. In an exchange of letters initiated by King Zahir, President Eisenhower expressed his desire to assist in achieving an Afghan–Pakistan settlement, and endorsed a proposal for a meeting between the heads of state of the two countries.10 The U.S. Government was successful in efforts to induce the Government of Afghanistan to allow supplies for U.S. projects in Afghanistan to continue transiting Pakistan. Steps taken in U.S.-assisted projects including increase of funds available for education-training projects were calculated to demonstrate to the Afghans our interest in maintaining our ties with Afghanistan. The Embassy and USOM in Kabul have been authorized to offer the Afghan Government assistance for an airline-airport project. The Royal Government of Afghanistan has recently announced formulation of a Five-year Plan of economic development. No details as to magnitudes or organization to execute the plan are yet available.

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18. The Prime Minister’s anti-communist, pro-Western orientation continued during this period. Increasing pressure was placed on him, however, by those with neutralist or leftist sentiments, or special economic interests, to adopt a more friendly attitude toward the communist world, particularly Communist China. Ceylon was informed that the United States is prepared to negotiate an atomic research reactor agreement under the President’s Atoms for Peace Program. The United States also expressed its willingness to assist a voluntary agency in providing Ceylon with powdered milk in the amount of 7,000 tons per year for three years for a school lunch program. Economic assistance in the amount of $5 million has been tentatively earmarked for Ceylon and is broken down as $4.6 million for development assistance and $.4 million for technical assistance. Ceylon was admitted to the UN during the period.


19. Though the King appointed a Cabinet in January, the Government of Nepal continued throughout the period to have a relatively weak government. Satisfactory progress was made in the U.S. technical, economic and information programs in Nepal. A Five-year Plan for economic development has been published by the government. It is hoped that the plan will be put into effect by July 1, 1956.

C. Major Problems or Areas of Difficulty


20. a. Political Alignment. The Soviet Union has presented a challenge of unprecedented proportions for India’s political sympathies and diplomatic support. While India will continue to maintain that its policy is one of “non-alignment”, it may identify itself even more with the Communist Bloc positions on current problems. For the first time India is giving serious consideration to the purchase of arms from the Soviet Union.

b. Opposition to Regional Defense Pacts. India may be expected to maintain its opposition to SEATO and other regional defense pacts, and to exercise its influence in South and Southeast Asia against SEATO and in favor of neutralism.

c. Five-year Plan. India made known that it would have a gap of about $1.7 billion in its Second Five-year Plan. The extent to which India will turn to the Soviet Bloc to fill this gap is likely to depend upon the continuity and magnitude of external assistance from the West.

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d. Goa Issue. The U.S.-Portuguese joint communiqué referring to Goa caused damage to the U.S. position by creating the impression in Indian eyes that the U.S. supports colonialism.

e. Tara Steel Mill Loan. Tata has signed an engineering contract with an American firm for its proposed steel mill expansion. He has requested a loan from the IBRD for $70 million for the financing of foreign exchange costs of construction. It is estimated that about half of the purchases will be made in the U.S.

f. Oil Bunkering. India challenged the right of an American-owned oil company incorporated in India to refuse to bunker a ship bound for Communist China. Another such incident might not be resolved without harm to our oil companies or U.S.-Indian relations.

g. Adequate Subsistence Costs of Indian Visitors. Difficulties have been encountered in finding means to pay more than $12 per diem to proposed official visitors to the U.S. from India, specifically the Indian Minister of Education and a proposed Indian parliamentary delegation. The numerous Indian visitors of this rank invited to the Soviet Union and Communist China have all their expenses paid in the host country, but the U.S. Government is limited by law to pay only $12 per diem in most cases.

h. Antarctica. India has notified the UN that it will offer a resolution on the subject of Antarctica relating to international control of its usage.

i. Atomic Tests in Trusteeship Area. Krishna Menon has raised a question in the UN Trusteeship Council as to the propriety of the U.S.’s announced plan to hold further nuclear weapons tests in certain Pacific trust territories.


21. a. Possible Communist Economic Ties. The Communist Bloc has increased its pressure on Pakistan to establish closer economic and other ties, as evidenced by the Soviet offer to purchase substantial quantities of Pakistan’s salable surpluses and by Bulganin’s hint that Pakistan could receive Soviet technical aid and increased trade on terms considered favorable by Pakistan if it cut its ties with regional defense alliances.

The view that neutralism has “paid off” for India and Afghanistan has been growing in Pakistan and has led to widespread questioning of Pakistan’s policy of cooperation with the West and exclusive dependence on the U.S. for outside aid.

b. Kashmir and Pushtunistan Issues. Pakistan’s dissatisfaction with the West for failing to support it in the Kashmir and Pushtunistan issues was considerably abated by references to these problems in [Page 9] the final communiqué of the March SEATO meeting at Karachi.11 Afghanistan reacted mildly to the SEATO statement, merely reiterating its own position on Pushtunistan. India was sharply critical of SEATO for having mentioned the Kashmir issue at all, although the merits of the case were not discussed in the SEATO meeting.

c. Internal Security. While the group in control led by Governor General Mirza and Prime Minister Chaudhry Mohamad Ali can always retain its power by falling back ultimately on the loyalty of the Army, there are signs of growing strength in the opposition parties which may make difficult the maintenance of stability and may create heavy pressure on the group in power to alter Pakistan’s foreign policy in a direction away from the present close cooperation with the West.

d. Relations with Afghanistan. The U.S. will have to exercise such restraint as it can on Pakistani inclinations to seek settlement of their problem with the Afghans by dangerous intrigue against the Afghan ruling group.


22. a. Soviet Relations. The Bulganin and Khrushchev visit, the extension of a large Soviet credit, and increasing Afghan use of trade routes through the USSR brought Afghanistan appreciably closer to the Soviet Bloc. With Prime Minister Daud receiving a vote of confidence from a national meeting of tribal elders, there seemed little prospect of his removal or of a change in his pro-Soviet policy. The U.S. is faced with the problem of how to maintain and develop ties between Afghanistan and the West in the face of the Soviet offensive.

b. Differences with Pakistan. The tension between Pakistan and Afghanistan continues to obstruct achievement of U.S. objectives in Afghanistan. While the expected high-level talks gave hope for relaxation in Afghan–Pakistan tension there seemed little prospect for progress in the basic dispute on Pushtunistan. The U.S. desire to see improvement with U.S. assistance of Afghan trade and communications with the West through Pakistan encountered the Afghan unwillingness to become dependent again on trade routes through a neighbor considered unfriendly. The U.S. may have to decide whether to increase the level of its aid programs in Afghanistan as a means of demonstrating continued U.S. interest. In any event maintenance of U.S. prestige heavily involved in the Helmand Valley development required a coordinated plan for moving forward and for attracting Afghan confidence and support.

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23. Economic Relations with Communist China. Talks between Communist China and Nepal on economic and possible representation matters are reported to be scheduled for the near future in Peking. In addition, the new Prime Minister of Nepal12 has asserted that Nepal is prepared to accept unconditional aid from any country, including the USSR. The U.S. may wish to open a diplomatic establishment in Nepal on short notice if the Chinese Communists indicate they will do so.

  1. Source: Department of State, S/SNSC Files: Lot 63 D 351, NSC 5409–Memoranda. Secret. Forwarded by Roy Melbourne, Acting Executive Officer of the OCB, to Lay under cover of a note dated March 30. An attached financial annex is not printed. A previous Progress Report, dated August 24, 1955, covering the period December 16, 1954 to August 24, 1955, is ibid.
  2. In this action, taken by the NSC at its 262d meeting on October 20, 1955, the OCB was requested to reexamine the possibility of further aid to Ceylon within the provisions of the Battle Act. (Ibid., S/SNSC (Miscellaneous) Files: Lot 66 D 95, Records of Actions by the NSC, 1955) The Mutual Defense Assistance Control Act, or Battle Act (named after Representative Laurie C. Battle of Alabama), was approved on October 26, 1951, as P.L. 213, 82d Congress. For text, see 65 Stat. 644.
  3. Philip K. Crowe.
  4. Nikolay Aleksandrovich Bulganin, Chairman of the Soviet Council of Ministers, and Nikita Sergeyevich Khrushchev, First Secretary of the Communist Party of the Soviet Union, made a 5-day official visit to Afghanistan December 15–19. Regarding their visit, see Document 107.
  5. The SEATO Council meeting was held March 6–8.
  6. The Soviet leaders visited India in November; for documentation, see Documents 11, 12, and 154.
  7. For text of the U.S.-Portuguese Joint Communiqué concerning Goa, see Department of State Bulletin, December 12, 1955, p. 966. Paulo Cunha was the Portuguese Foreign Minister.
  8. For text of this agreement, see ibid., September 19, 1956, p. 456.
  9. This correspondence between President Eisenhower and King Zahir was exchanged in October and November 1955. See Documents 97 ff.
  10. Printed in Department of State Bulletin, March 19, 1956, pp. 447–449.
  11. Tanka Prasad Acharya became Prime Minister on January 27.