Foreign Relations of the United States, 1955–1957, South Asia, Volume VIII

152. Department of State Memorandum¹

Washington, September 20, 1955.

SUBJECT

• Renewal of Beryl Arrangement With India

Problem:

The existing beryl supply arrangement between this Government and the Indian Government provides for automatic renewal for five years unless notice of termination is given by September 30, 1955, which is one year before the expiration of the arrangement’s current term. Beryl is classified as a strategic material.

Discussion:

The original deadline for a decision as to renewal was September 30, 1954. In effect, a year’s grace period was obtained, by agreement with the Government of India. This grace period was suggested by the U.S. because of uncertainties as to continuing U.S. needs and sources of funds and in recognition of the favorable provisions of the existing arrangement.

The present positions of the various interested agencies are understood to be as follows:

The Atomic Energy Commission, the Department of Defense, and the Office of Defense Mobilization consider that renewal or extension of the arrangement is not warranted on the basis of present and foreseeable demand for beryl to meet defense and related U.S. Government requirements. Accordingly, they are not prepared to underwrite the continuance of the U.S. beryl arrangement with India. It is understood that the prime potential requirement, if any, would be operational, which therefore leaves the major determination of further requirements to the Department of Defense.

The administrator of the Battle Act considers it desirable that beryl supplies be denied to the Soviet Bloc (the present arrangement tends to encourage the retention of the GOI’s official restrictions on general exports of beryl), and is prepared to support a request to fund a continuance of the arrangement from special funds of the President.

In the course of previous OCB meetings, it has been suggested that beryl might be downgraded on the strategic list; it is understood at this time that such downgrading is highly unlikely. The OCB has also considered in the past the possibility of negotiating an agreement providing for automatic annual renewal. The Department of State believes that it would be extremely difficult to obtain such an agreement on similarly favorable terms.

The Department of State considers that renewal of this arrangement for a full five-year term is in the interest of the United States, and that failure to do so would tend to be prejudicial to U.S. foreign policy objectives in Asia. The arrangement involves a secret Indian commitment to the U.S. Government. Such cooperation in itself is of some political importance, given India’s posture in world affairs. The commitment is to supply an atomic energy material at world prices; this and other features of the arrangement have contributed to U.S. Indian cooperation in the atomic energy field and to the maintenance of U.S. influence in Indian atomic energy developments. Furthermore, Embassy New Delhi has urged that there be taken into account the political impact of a U.S. withdrawal from the arrangement at a time when the USSR is increasing its economic influence in India and other countries of the area.² Finally, the renewal or non-renewal of the arrangement has Battle Act implications, and non-renewal would appear to be inconsistent with U.S. policy guiding the extremely difficult negotiations, now at long last virtually completed, covering U.S. purchase of India’s exportable supplies of thorium compounds. The possibility of strategic exports by India to Communist countries, as in the case of thorium, could be substantially increased if the present arrangement is allowed to expire; such a development could gravely jeopardize U.S. relations with India.

Although the Department of State does not presume to appraise the technical requirements of beryl, it must point out that if the U.S. future requirements dictate the desirability of a new arrangement for beryl, it will be extremely difficult if not impossible to obtain a new arrangement with India on similarly favorable terms.

The cost of renewing the contract should be manageable and is likely to continue to be modest in terms of the interest at stake. Deliveries have averaged about $150,000 a year. (They constituted about one-third of all beryl procurement by the Government in Fiscal Year 1955 and are estimated to be one-half of such procurement in Fiscal Year 1956.) The annual cost under the Agreement, can theoretically, run to about $1.3 million, but present information indicates that this contingency which involves substitution of beryllium hydroxide for beryl ore will continue to be hypothetical for several years.

Potentially, renewal of the contract might be funded by one of several means. The Office of Defense Mobilization could authorize the General Services Administration to procure beryl under the Defense Production Act³ for commercial distribution. Secondly, it might be possible under Section 401 of the Mutual Security Act of 1955⁴ to obtain authorization of funds at the President’s discretion. Finally, confidential funds of the Department of State or other agencies might be utilized.

Conclusions:

1. Because of the very important foreign relations considerations, the U.S. Government should not act to terminate its existing beryl arrangement with India even though there appear to be continuing uncertainties in Washington that there is a technical need for the material, and difficulties in working out funding arrangements within this Government.

2. The OCB should agree that a funding arrangement will be made, and authorize the Department of State to permit now a renewal of the present arrangement for a period of five years beginning September 30, 1956.

3. The OCB should agree to arrange within the next twelve months the funding of the five-year renewal by an appropriate agency or agencies through the Defense Production Act, Section 401 of the Mutual Security Act of 1955, or by the use of the confidential funds noted above.

Recommendation:

That the Board approve the foregoing conclusions, and take necessary action.⁵

1. Source: Department of State, Central Files, 891.2546/9–2055. Secret. No drafting information is given on the source text. Attached to a memorandum of September 20 from Allen to Hoover requesting the latter to seek OCB approval on September 21 of the conclusions which follow. Staats transmitted the memorandum to the OCB under cover of a memorandum of September 20. (Ibid., OCB Files: Lot 61 D 385, India)
2. In telegram 558 from New Delhi, September 20, the Embassy urged that the beryl agreement be extended by one year. (Ibid., Central Files, 891.2546/9–2055)
3. For text of the Defense Production Act of 1950, see 64 Stat. 798, and for amendments to the Act in 1955, see 69 Stat. 580.
4. See P.L. 138, approved July 8, 1955 (69 Stat. 283). Section 401 created a Special Fund which the President could use to further the purposes of the Act without regard to the requirements of the Act so long as he determined it was important to U.S. security. Some of the sums were changed in 1955. For text of the Mutual Security Act of 1954, see 68 Stat. 833.
5. At its meeting of September 21, the OCB decided not to renew the agreement. (Memorandum for the files by J. Bruce Hamilton, October 3; Department of State, Atomic Energy Files: Lot 57 D 688, India, Beryl 1955–57) Thus on September 28 the Embassy delivered Note No. 134 to the Indian Ministry of External Affairs conveying the U.S. decision to terminate the agreement on September 30, 1956. (Despatch 409 from New Delhi, October 4; ibid., Central Files, 891.2546/10–455)