Foreign Relations of the United States, 1955–1957, Southeast Asia, Volume XXII

22. Telegram From the Embassy in Burma to the Department of State¹

Rangoon, January 6, 1956—6 p.m.

774. Re Deptel 642.² Some members GUB aware of danger too close involvement with USSR as result latter’s promise take all Burmese rice not sold elsewhere, and might be amenable to offer of assistance by US as means of redressing balance and facilitating Burma’s chosen course of neutralism. (On January 5 [name deleted] expressed to Walinsky and Takahashi of Nathan Associates his growing fear that Russia and other Communist countries are trying to draw Burma into economic domination by Communist bloc.) This not question of backtracking, for GUB sets great value on rice purchase commitment by Russia, and would not wish to undo it.

Present trend toward Soviet bloc induced by economic necessities and by international situation as Burma sees it and not by domestic political situation, although AFPFL not adverse to cutting ground from under local Communists by show of friendly attitude toward Soviets. Burmese leaders in general do not share our distrust of USSR and it would probably be mistake to assume they will ask for US aid for purpose of “assisting Burma counter Communist tactics”.

Importance of Soviet rice commitment (given without political conditions to Burmese to whom marketing of rice vital) is very great, and this advantage exceedingly difficult for US to overcome in view our own rice surplus and Burmese refusal accept direct aid. This Soviet advantage enhanced if we place our surplus rice in Burma’s normal markets on non-competitive terms (see Embtel 756³).

Increasingly clear to Embassy that PL 480 program alone far from sufficient to meet Russian bid for Burma. Complications which GUB encountering in trying arrange processing PL 480 cotton without disturbing normal trade patterns may be diminishing somewhat its appreciation of program. Program no longer offers some relief for pressure on Burma’s foreign exchange since Burma now has other remedies: Indian loan and imports from Soviet bloc countries under rice agreements. Ultimate disposition on kyat proceeds of PL 480 sales still causes Burma some concern. Political credit for negotiating PL 480 promises to be marginal since few persons understand program, and public comment regarding it has at best been mildly approving.

GUB nevertheless apparently still genuinely desires conclude PL 480 agreement (as preferable to drawing down Indian loan, and probably also as sign to US that Burma continues be neutral). Agreement likewise still advantageous to US in context US-Burma relations, since it demonstrates continuing US interest in Burma and desire to be helpful. But assistance in other forms necessary if we hope offset Russian campaign for Burma.

Representative Nathan Associates told Embassy January 5 they have reliable information … that Prime Minister has decided have his letter (Embassy despatch 120, September 13)⁴ delivered to Secretary after some unspecified modifications. Letter would apparently retain request that US take at least token payment in Burmese rice. Exploratory talks with U Nu, U Raschid, and perhaps U Kyaw Nyein might therefore be useful. However believe important for Department be prepared authorize at earliest possible moment offer of some specific assistance, because Burmese leaders have already indicated kinds of aid they wanted, only to have their requests turned down or discouraged: (1) Kyaw Nyein’s request for military aid. (Embtel 588 [558], November 16⁵ and previous); (2) U Nu’s request for loan (Embtel 123 August 10 et seq), met only in part by US offer PL 480 agreement; (3) U Nu’s proposed letter to Secretary which still undelivered requesting technicians and help in financing medical center in exchange for token rice and opium (Embassy despatch 120), (4) GUB’s request to international bank for various types of assistance, which may all be discouraged by bank for reasons which may be sound from bank’s point of view, but effect may be to push Burma further in direction Soviet bloc.

I therefore suggest consideration now be given following specific actions, to be initiated by US, to offset Communist gains and establish closer Burmese-US relations in future:

• First, that I be authorized undertake discussion with U Raschid as suggested in Embtel 756, and that US agree limit its supply of PL 480 rice for Indonesia to amount latter cannot obtain on acceptable terms from Burma and Thailand. There is certainly some possibility that Indonesia could not procure from those countries substantially more than 400,000 tons now contemplated (Deptel 633, December 23⁶); but, regardless whether Indonesia would, on this basis, take more Burmese rice, US would have given impressive, tangible demonstration it has unselfish concern for Burma’s basic interests.⁷
• Second, that US make outright dollar purchase of 10,000 tons Burmese rice for Indo-China, Philippines, even Indonesia (if latter unable get all rice it needs from Burma simply because unable pay for it), or other suitable destination. Realize this extremely difficult for US to do, but consider should make every effort accomplish, because, even though only token amount, it would: (A) generate dollars to finance assistance needed by Burma which Soviet bloc may furnish if US does not and (B) enable Burmese tell themselves they have in some way paid for US help and are therefore not violating their neutral policy by any implied political commitment to US. Thus US could create psychological atmosphere favorable to US assistance to Burma at relatively small cost to our surplus rice disposal program.

• Third, use some of kyats accruing to US from PL 480 sale to Burma to pay local currency expenses for American managerial personnel for some of Burma’s new industrial plants. Need for such personnel noted Embtel 766, January 3.⁸ If possible make these payments from funds allocated sub paragraph (H) Section 104,⁹ because GUB has already agreed exchange activities under (H) and less likely regard as new type of aid activity.

  GUB could pay at least in part dollar costs from proceeds rice sales recommended in paragraph 2.

• Fourth, on same basis supply some US experts to make study flood control, improvement navigation, and hydro-electric potentialities Irrawaddy requested by U Nu in his undelivered letter sent Embassy despatch 120. So far as known, these subjects not yet assigned to Russian agricultural team. Embassy will try provide Department more information about exact terms re [reference] for Russian team.
• Fifth, consideration might be given grant aid offer for completion union medical center to which U Nu personally attaches great importance. GUB accepted as gift from USSR technological institute (Embassy despatch 254¹⁰).
• Sixth, Department may also wish consider feasibility providing some US public relations experts to help GUB with its information activities in order “strengthen democratic process”, as suggested by U Nu in his letter.
• Seventh, if IBRD decides not undertake Rangoon port project, consideration might be given possibility Export Import Bank financing.
• Eighth, believed desirable Department earmark some funds on basis which I could indicate to U Kyaw Nyein or Ne Win at suitable moment that GUB can, if it wishes, buy some military equipment from US at half price.

Needless to say I fully shared Department’s concern over present situation as indicated by Deptel 642 and feel we should make every possible effort in spite serious difficulties involved to reverse present alarming trend toward domination of Burma’s economy by Soviet Bloc.

Satterthwaite

1. Source: Department of State, Central Files, 661.90B/1–656. Secret.
2. Supra.
3. Telegram 756 from Rangoon, December 31, concerned a U.S. proposal to sell or give 250,000 tons of rice to Indonesia under Public Law 480. Satterthwaite commented that if, by providing rice to Indonesia, the United States denied Burma the opportunity to increase its exports, it would indirectly increase Soviet economic penetration of Burma. He proposed that he discuss with Raschid whether Burma could supply some of the rice needed by Indonesia within the time available and suggested that the United States should limit its assistance to Indonesia to the amount of rice that Burma and Indonesia could not supply rather than the amount over their normal marketings in Indonesia. (Department of State, Central Files, 411.90B41/12-3155)
4. Despatch 120 from Rangoon enclosed a copy of a letter, dated September 7, from U Nu to Secretary Dulles, requesting U.S. technical assistance for several specific projects and stating that Burma wished to make at least a token payment for such assistance in rice or opium. (Ibid., 890B.00/9-1355) A copy of the letter had been given to Satterthwaite at U Nu’s request, but the presentation of the original letter was left to Ambassador Barrington’s discretion; it was never delivered.
5. See footnote 4, Document 20.
6. Telegram 633 to Rangoon reported that if Indonesia planned to acquire 400,000 tons of rice from Burma and Thailand, the United States would agree to ship 250,000 tons to Indonesia. (Department of State, Central Files, 411.56D41/12–2355)
7. The Department replied in telegram 720 to Rangoon, January 21, 1956, that it could not approve this proposal, since administration policy, agreed upon with other Departments, was to avoid disrupting the “normal marketings” of Asian countries and that 400,000 tons was regarded as the normal marketing of rice from Burma and Thailand to Indonesia. (Ibid., 411.90B41/12-3155)
8. Not printed. (Ibid., 461.90B41/1–356)
9. Section 104 (H) of Public Law 480 provided that foreign currencies accrued from sales under the law could be used to finance international educational exchange activities.
10. See footnote 2, Document 21.