15. Letter From the Assistant Secretary of Defense for International Security Affairs (Sprague) to the Chairman of the Council on Foreign Economic Policy (Randall)1

Dear Mr. Randall: I am writing this letter following your suggestion at our CFEP meeting on October 17, 1957, that Departments might wish to submit views on the problem of Soviet Economic Penetration.

For a long time, the Department of Defense has been concerned about the accelerating Sino-Soviet campaign of economic penetration in the Free World. We realize that combating this campaign is an extremely intricate problem, complicated by psychological, political, and other factors which are not the primary responsibility of this Department. Our concern arises partly from the fact that Sino-Soviet bloc success in orienting Free World nations toward the bloc would [Page 69]weaken their participation in Free World mutual security programs, thus causing the U.S. to shoulder a heavier military security burden. A case in point is the Soviet active support of the development of air capabilities, civil and military, of Egypt, Syria, and Yemen. The economic bonds that the Soviets are fastening upon these Middle East countries and the widespread penetration of the area by Soviet personnel create conditions which the Soviets hope will make Communism flourish. This development is a direct threat to the security of U.S. air bases in neighboring areas, as well as to the security of the entire Baghdad Pact region.

The continuing publication of the biweekly and periodic summary reports on “Sino-Soviet Bloc Economic Activities in Underdeveloped Areas” has furnished an excellent foundation of facts of the situation and a delineation of certain Soviet action patterns. The CFEP Subcommittee on Soviet Economic Penetration, in March of this year, made some useful action recommendations.2 Many useful suggestions and recommendations were contained in studies prepared last spring for the Senate Special Committee to Study the Foreign Aid Program.3 The consideration of these problems by the CFEP in its meetings in July and October was also of interest. However, we do not yet appear to be equipped to take positive steps to counter Soviet activity.

There is not yet any specific policy guidance on Sino-Soviet economic penetration, nor any focal group to which problems can be referred and which can recommend or direct countermeasures to be taken. Various individual cases (e.g., the utilization of P.L. 480 Finnmarks) have been referred to the Operations Coordinating Board.4 But the OCB is organized primarily on a geographic basis and is concerned with a multitude of varied problems affecting the respective areas. The CFEP Subcommittee on Soviet Economic Penetration has made a study and recommendations concerning the role of private enterprise in countering the bloc economic offensive, but apparently it has no means to initiate action. A NATO subcommittee is studying the problems, and has assisted in a solution of a few [Page 70]minor problems, but appears to be stalemated, partly because of lack of U.S. leadership.

In the belief that the seriousness of the Sino-Soviet economic offensive requires positive steps toward counteraction, we submit the following suggestions for your consideration:

A National Security Council policy paper on the subject, setting forth basic principles and positive courses of action.
The appointment of a high-level interdepartmental group to coordinate and implement the policy. Individual problems could be referred to this group, which might either have authority and means to take action itself or which might recommend actions to be taken by the Department or Departments concerned. This group might be a special committee of the CFEP or the OCB, or it might be a special board for this purpose. The group should have authority to acquire a small staff of experts in the various fields of action which must be coordinated in order to effectuate economic penetration actions.
The U.S. should take the lead in NATO to give impetus to the work already begun there, so as to improve the opportunity for achieving multilateral economic policies which are in harmony with the main mutual security objectives of NATO.

There undoubtedly will be differing views as to how the details of organization should be worked out. The Department of Defense favors, however, a plan of action along these lines. Otherwise, the bloc, by its economic offensive, may attack areas of the Free World which it dare not try to take by military action.

Sincerely yours,

Mansfield D. Sprague5
  1. Source: Department of State, ECFEP Files: Lot 61 D 282a, Soviet Economic Expansion—CFEP 560. Confidential.
  2. See Document 11.
  3. See footnote 3, Document 6.
  4. The Operations Coordinating Board was established by Executive Order 10483, signed by President Eisenhower on September 2, 1953. Members were the Under Secretary of State (chairman), the Deputy Secretary of Defense, the Director of the Foreign Operations Administration, the Director of Central Intelligence, and a Special Assistant to the President. The OCB was designed to coordinate the implementation of National Security policies by the agencies in the Federal Government. By Executive Order 10598, dated February 28, 1955, the membership was broadened to include the Director of the U.S. Information Agency. For texts of the Executive orders and the accompanying Presidential statements, see Department of State Bulletin, September 28, 1953, p. 420, and ibid., March 14, 1955, p. 436.
  5. Printed from a copy which bears this typed signature.