Foreign Relations of the United States, 1955–1957, East Asian Security; Cambodia; Laos, Volume XXI

242. Telegram From the Department of State to the Embassy in Cambodia¹

Washington, July 2, 1956—7:26 p.m.

4. Joint State–Defense–ICA message. Your 1613.²

1. We agree in general with analysis reference telegram. We agree our basic policy of assisting Cambodia to remain independent should be unchanged. We intend not to succumb to Aswan Dam fever nor attempt make example of Cambodia. Sessions report³ (copies pouched personally to Ambassador and USOM Director) recommends, for present, Communist aid to Cambodia should not be deterrent to continued U.S. assistance but unless aid program can be placed on amicable and cooperative basis it will be necessary to review our policies with regard to aid to Cambodia.

2. Sessions report recommends U.S.-financed import program be geared to needs of economy for imports and not to cover local currency requirements. Balance Cambodian budget deficit not covered by counterpart generating U.S. financed commercial imports to be financed by their own means. In other words if this Sessions report proposal were adopted by Cambodians, U.S. dollar and local currency contribution would be reduced and Cambodian local currency contribution increased. Report recognizes real problem would be to convince Cambodians cut in dollars would not destroy their fiscal solvency, would not lead to inflation, and above all would not be reprisal against their neutralist policy. Report points out problem of presenting proposal to Cambodian Government is further complicated by necessity to determine which part of total program Cambodian Government would be asked finance from its own resources. If Cambodian Government were asked abruptly contribute additional substantial amount to own military its negative reaction might critically damage military program with result that time effort and money spent this program to date may be wasted and military posture Cambodia seriously weakened. If on other hand Cambodian Government were in effect asked put up local currency for economic development program it would undoubtedly take position it could not afford do so, would consider U.S. was going back on implied commitment furnish local currency costs for projects, and this would strengthen Cambodian suspicions that U.S. is not sufficiently interested in economic development. In view importance both programs to Cambodian future would be preferable to secure increased Cambodian contribution to both programs.

3. These conclusions Sessions Report point up complex nature any proposed cuts in aid and recognize that if proposal improperly presented may lead Cambodians to believe they would have to look to other sources for aid and drive them even closer to Communist camp. We believe any such proposal should be presented to appropriate Cambodian officials at time of and in connection with discussions on FY 1957 aid levels, since FY 1956 program already largely committed. During discussions with Sessions Group Cambodians requested U.S. inform them as quickly as possible after Congressional appropriation as to approximate total amount of nonproject dollar aid to be made available so they could then proceed to plan their total annual import requirements and adjust their budget planning in terms of available aid from U.S. We agree that tentative planning figure should be communicated to Government at earliest feasible time and estimate that FY 1957 figure can become available no later than September. We would suggest therefore that any official demarche to Cambodians regarding size and nature our aid program in future be delayed until that time. In meantime country team and all agencies can give further study to Sessions Group report and its implications.

4. We anticipate that if Nong Kimny visits Washington he will inquire as to results study group mission. We intend outline to him some parts group reports, stressing group found desire on part Cambodians continue receive aid and our determination work closely with Cambodian Government in coming months in attempt eliminate some of misunderstandings which have arisen in past.

5. In view need for reviewing Sessions Group Report and making policy decisions thereon prior to entering discussions with RKG we recommend you not approach King and Queen at present either along lines indicated reftel or even as discussed herein. In any event consider best to initiate FY 1957 program discussions at usual level holding in reserve possible appeal to throne in case of necessity.

Hoover

1. Source: Department of State, Central Files, 751H.5–MSP/7–256. Secret. Drafted by Price; cleared with SEA, FE, ICA, and the Department of Defense (in draft); and approved by Robertson.
2. Document 239.
3. See Document 238.