187. Telegram From the Department of State to the Embassy in Pakistan1

1038. State–FOA–Defense telegram. Appreciate general comments your 9212 and look forward at end month your detailed [Page 417] response questions Deptel 804.3 Following Washington comments regarding your numbered paragraphs:

While Washington not in best position determine Pakistan military requirements, it with Embassy advice must be in position determine amount US funds to be available for given programs. Embassy aware that law and appropriate agency interpretation requires specific aid agreement references to military. High level Washington determination based on all present complex considerations set amounts mentioned in agreements. Amounts specifically noted in agreements do not mean that actual military requirements can not be less than amount mentioned, nor that FY 1956 allocations can not deviate from above-mentioned specific FY 1955 figures.
Commend your alertness to possible squeeze play. Note that it possible for squeeze play come from either direction, i.e., on economic development side or on military requirements. Heartily support tenor your “preferable statement” of position to Pakistanis, but wonder whether it not more desirable in view US belief that GOP can not stand additional military expense amend first sentence of statement to note that additional expenditure must be within capabilities US appropriations and allocations, i.e., that additional expense connection effectuation MDAP must be kept to absolute minimum consistent with objectives of program and that GOP must cooperate this endeavor. Washington heartily supports remaining sentences verbatim.
Believe rupees 41 million support estimate shows determined effort MAAG keep support figures within effective reasonable levels. We interpret your last sentence to mean that rupees 41 million is full 12 months estimate expenditure of which will possibly overlap with additional expenditures which may be required in connection with FY 1956 MDAP.
(Also paragraph 1 Embtel 9754) Commend agreement GOP authorize military expenditure immediately. This should be helpful in moving all programs forward. We concur your approach regarding no prejudgment use PL 665 counterpart.

Last sentence paragraph 6. Of $20 million acceleration fund, about $5 million already allocated Air Force program. Balance of fund is possible source of increased foreign exchange requirements [Page 418] resulting from MDA program, including counter-inflationary imports if needed. However, Defense desires program maximum portion this fund for military hardware as soon as practicable. Therefore, keeping in mind increased foreign requirements and possible inflationary impact MDA program, request your views and reasoning on desirable breakdown $15 million remaining funds. In this connection, MAAG has been advised consider possibility offsetting portion increased foreign exchange requirements by inclusion in MDA program eligible items that would otherwise be purchased outside Pakistan.

  1. Source: Department of State, Central Files, 790D.5–MSP/1–855. Secret. Drafted by Fluker and Colonel D.M. Gordon of the Office of Foreign Military Assistance, ISA; cleared with FOA, NEA, and ED; and approved by Jernegan.
  2. In telegram 921, January 8, Ambassador Hildreth offered some general comments regarding the question of using Pakistani counterpart funds generated under Public Laws 480 and 665 for military purposes. He complained that Washington, although it had no greater information than the country team and was at some remove from the problem, “should consider itself in position to settle issues of Pakistan military counterpart requirements once and for all by making allocation of funds part of aid agreements now ready for signature.” The Ambassador emphasized that there was obviously no disagreement between the country team and Washington on the central point that the heart of the U.S. problem in Pakistan was how to coordinate the military program with economic development so that “we end up with military establishment useful United States objectives this area and substantially within ability of Pakistanis to support.” He also pointed out that a “squeeze play” might be shaping up, whereby the Pakistanis would endeavor to secure the maximum possible commitment of counterpart funds for economic development and then produce a large additional bill for military requirements as a commitment which the United States was bound to honor. Accordingly, Hildreth recommended that the Pakistanis be reminded that the funds generated by the U.S. economic aid programs represented the total U.S. contribution to Pakistan for the fiscal year and that there was no possibility of finding any additional funds to cover military requirements. (Ibid.)
  3. In telegram 804, December 18, 1954, the Department requested Hildreth’s recommendations regarding implementation of the Military Defense Assistance Program in Pakistan. (Ibid., 790D.5–MSP/11–1254)
  4. In telegram 975, January 19, Ambassador Hildreth reported a recent conversation with Chaudhri Mohammed Ali regarding problems connected with the use of counterpart funds for military purposes. Paragraph 1 of the telegram reported that the Pakistani Finance Minister had agreed to make approximately $14.4 million worth of P.L. 480 funds available immediately for defense purposes. (Ibid., 790D.5–MSP/1–1955)