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

24. Memorandum From the Assistant Secretary of State for Far Eastern Affairs (Robertson) to the Secretary of State ¹

Washington , February 9, 1956 .

SUBJECT

• Countering Communist Bloc Tactics in Burma

Problem:

The grave danger is arising that Burma may fall under Communist domination because of the success of Communist economic warfare tactics. What action should the U.S. take to counter this development?

Discussion:

The Facts. Communist-bloc tactics of economic warfare are steadily enveloping Burma in the Communist vise, despite Burmese intentions. The recent Bulganin–Khrushchev visit to Burma gave this program a major push forward. The ultimate aims appear to be to squeeze out Western influence and to switch Burma from her neutral position to the Communist bloc.

The twin keys to the Communist penetration are Burma’s surplus rice and the Burmese Government’s desire for external assistance in carrying out its politically vital development program.

Communist bloc countries are now committed to the purchase of about 500,000 tons of Burma’s rice (about one-third of her annual exports). In addition, Bulganin and Khrushchev promised to take all Burmese rice not sold elsewhere. These Communist bloc commitments are obviously politically motivated as the Communist countries are by no means absorbing all of these rice purchases domestically. Much of this rice is going to North Vietnam to support the Viet Minh in its serious rice shortage.

In return, the Communist bloc is offering equipment and technicians for the Burmese development program. Communist China is already engaged in the construction of a textile factory in Burma. The Burmese Government is committed to taking Soviet technicians for the diversification of Burma’s agriculture. Bulganin and Khrushchev offered to construct and equip a technological institute. They likewise offered Soviet assistance in the establishment of industrial plants, agreeing to accept rice in payment, even on a deferred basis, if necessary. A Soviet mission is scheduled to visit Burma in May, 1956, evidently for the purpose of working out the details of Soviet assistance.

In the absence of assistance from the West (the U.S. and the IBRD) Burmese officials, particularly the pro-American Minister of Industries, Kyaw Nyein, have told our Embassy in Rangoon that they will reluctantly feel compelled to accept the offers the U.S.S.R. had made. For example, they expect Soviet assistance on a steel mill, fertilizer plant and tractor factory, and have implied that they might accept Communist Chinese aid for paper and jute mills.

The Burmese have repeatedly indicated that they would like to have assistance from us, but not on a grant aid basis:

1. As the latest approach (Rangoon telegrams No. 864 and 890, February 2 and 6, 1956—Tabs A and B)² the Minister of Industries has just sounded out Ambassador Satterthwaite on U.S. willingness to provide developmental assistance “for political reasons”. A loan of up to $200 million has been mentioned in this approach. (Nature and timing of this approach would suggest that the U.S. may be being given a last chance to offer aid before the Burmese Government turns to the Soviet and Communist Chinese offers.)

2. The U Nu letter of September, 1955,³ suggesting rice for technicians also requested U.S. assistance for the Burmese medical center. (This letter was not formally delivered, but a copy was furnished to our Embassy at U Nu’s instruction. We have had indication U Nu is again considering its formal submission to us.)

3. During the P.L. 480 negotiations the Burmese stated they would like to have a portion of the local currency proceeds for economic development “provided there would be no Battle Act implications”. (The P.L. 480 agreement leaves such a use open for future discussion.)

4. Preliminary discussions some time ago showed Burmese interest in acquiring U.S. arms if the proper conditions could be worked out.

Outline Plan of Operations. To counteract Communist penetration and pursuant to the Burmese initiatives, the following plan of operations (in addition to exchange of rice for technicians) is proposed:

1. Agreement to lend Burma a portion (about $17 million equivalent) of the local currency proceeds of the P.L. 480 agreement for economic development purposes. Projects would be decided upon jointly by the U.S. and Burmese Governments.

2. Loan to cover the first year’s foreign exchange requirements of the Burmese medical center (estimated at $3.4 million), and sympathetic consideration of further loans for the balance of the foreign exchange requirements of that project (estimated at $2.7 million). (The medical center, which was approved but never implemented under the former U.S. TCA program in Burma, would be a useful offset to the Soviet “gift” of a technological institute.)

3. Urge the IBRD to undertake a program in Burma. (I am handling this with Mr. Prochnow.)

4. Authorizing Embassy Rangoon to explore with the Burmese Government the latter’s interest in obtaining a U.S. loan to finance the foreign exchange requirements of economic development projects.

5. Allocation of funds not to exceed $20 million (from Section 401) to make available to Burma military and police arms, war materials and training as approved in “OCB Operating Plan for Sale of Arms and War Materials to Burma”, October 27, 1954,⁴ and “OCB Analysis of Internal Security Situation in Burma and Recommended Action”, November 16, 1955,⁵ pursuant to the NSC 1290–d, December 22, 1954.

Summary of Proposed Assistance:

Nature of Assistance	Amount
1. Exchange of rice for technicians	1,000,000
2. Part of P.L. 480 local currency proceeds	17,000,000 (in local currency)
3. Loan for medical center	3,400,000
4. Military and police aid	20,000,000
	$41,400,000
Plus
5. IBRD assistance	Amount undetermined
6. U.S. development assistance	Amount undetermined

Implementation. Implementation of the above program requires the following action:

1. The Battle Act Administrator’s confirmation of his finding of December 7, 1955,⁶ that Burmese cooperation is adequate to meet the requirements of the Battle Act. This is necessary to enable us to agree to lend part of the P.L. 480 local currency proceeds to Burma and to confirm that Burma is eligible for other proposed assistance financed from funds outside of Section 401.

2. ICA Action on funds as follows:

a. Earmarking of $3.4 million (from funds other than Section 401) for the medical center.

b. Tentative earmarking of $20 million (from Section 401) for military aid.

3. Authorizing the exploration with the Burmese Government of a foreign exchange loan for sound economic development projects. (Such a loan could be made either by the Export-Import Bank or by ICA or partly by each, depending upon the nature of the projects and Burma’s repayment capacity. The amount would in part depend upon the IBRD’s decisions about a program in Burma.)

Recommendations:

1. That you approve in principle the Outline Plan of Operations proposed above.⁷

2. That you sign the attached memorandum to Mr. Hollister (Tab C)⁸ requesting his concurrence in the Outline Plan of Operations and his approval of its implementation.

1. Source: Department of State, FE Files: Lot 58 D 209, Burma, 1956–57. Secret.
2. See Supra and footnote 2 thereto.
3. See footnote 4, Document 22.
4. For text, see Foreign Relations, 1952–1954, vol. XII, Part 2, p. 234. The Operations Coordinating Board was an interdepartmental body charged with coordinating the implementation of policies established by the National Security Council.
5. This paper recommended that the United States initiate a selective program of providing training and equipment to improve the effectiveness of the Burmese border patrol along the Sino-Burmese border and to strengthen Burmese countersubversive capabilities. (Department of State, OCB Files: Lot 62 D 430, Burma) It was one of a series of papers prepared by the Operations Coordinating Board in response to NSC Action No. 1290-d of December 22, 1954, which requested the Board to report to the Council on the status and adequacy of programs to improve internal security in countries vulnerable to Communist subversion. (Ibid., S/S–NSC (Miscellaneous) Files: Lot 66 D 95, Record of Actions by the National Security Council, 1954)
6. Not found in Department of State files.
7. Dulles did not initial the memorandum, but see Document 28.
8. The original draft memorandum to Hollister is not attached to the source text, but see the February 28 memorandum (drafted on February 21), ibid.