135. Telegram From the Embassy in Ceylon to the Department of State1

376. Reference Department telegram 385.2 Prime Minister told me today he is willing restrict rubber shipments Red China to 50,000 tons per year. Present shipment running about 2,000 tons per year above this. He is also willing embargo other strategic commodities. He added that he has always been personally opposed to China deal but that politically it would be worth his scalp to try jettison it now. It should not be forgotten that the China Pact has been worth an average of ten million dollars per year to Ceylon.

It is my opinion that there would be a good chance of Ceylon refusing to renew the Pact when it comes up in 1957 if we bring a worthwhile aid program and the government is reasonably sure we intend continue it for immediate future. There is even a chance of terminating the Pact before 1957 if the world price rubber stays up, the Prime Minister wins his forthcoming election in April and we give Ceylon economic aid now.

As I have repeatedly pointed out during my recent consultations in Department now is the time help the Prime Minister and the government in power. The opposition are putting him under continual pressure on account of his pro-Western bias and continually ask him to show tangible proofs resulting from his friendship with America. In April he faces his first and certainly most crucial election and I strongly believe that our help today would be deeply appreciated. Failure to help now would have just as strong reverse effects.

The milk gift, while appreciated, is not considered aid. Ceylon, unlike India, Pakistan and Egypt, will have to pay for the shipping. Furthermore, everyone is well aware that we are endeavoring to get rid excess commodities.

  1. Source: Department of State, Central Files, 746E.5–MSP/1–2656. Secret; Priority.
  2. In telegram 385, January 11, the Department informed the Embassy that the determination had been made to grant Ceylon U.S. economic assistance in fiscal year 1956. The Embassy was instructed that no information regarding this decision was to be given to the Ceylonese until authorized by the Department. (Ibid., 746E.5–MSP/ 1–1156) In telegram 413, January 19, the Department asked Crowe to explore with Prime Minister Kotelawala the modalities whereby Ceylon could regulate its trade with China so as to qualify for aid under the Battle Act. (Ibid., 746E.5–MSP/1–1956)