Foreign Relations of the United States, 1958–1960, South and Southeast Asia, Volume XV

276. Telegram From the Embassy in India to the Department of State¹

New Delhi, January 9, 1959—8 p.m.

1550. Reference: Deptel 1566,² Kathmandu 12 repeated information Calcutta 355. Embassy has not received text New York Times report but summary outlined reftel essentially accurate as far as it goes. Full report on Ambassador’s September visit Kathmandu including all known details of Soviet aid offer being pouched.³

Highlights of offer as revealed these talks were 30 million ruble credit repayable in currency readily convertible to dollars or pounds sterling over 12 year period at 2½ per cent interest. Soviets proposed this credit be used for aircraft (6 IL–14’s, 2 AN–2’s and 2 helicopters at concessional rates), saw mill, salt factory, eastwest road, hydro electric plant, transport equipment including cars, trucks and heavy road building equipment (9 Pobedas, 6 GAX 12’s, 6 “Volgas”, 20 GAX 69’s and 10 heavy cars). Soviets also pressed for technical mission but Nepalese demurred and expressed willingness accept only those technicians needed for projects agreed to by GON with understanding they would reside at site of project and not establish residence in Kathmandu valley.

[less than 1 line of source text not declassified] Soviet agenda included airport in terms, science college, mineral exploration and restriction on mountaineering by Westerners.

Comment: [3½ lines of source text not declassified] Both King and Subarna obviously disliked idea of Soviet loan and made clear their preference for grant. Seems evident Nepalese committed to some form Soviet aid but decision on terms and magnitude not yet reached. GON would prefer avoid large scale commitment for technicians and is casting about for formula which provides for Soviet aid with minimum Soviet participation.

Nepalese dilemma provides opportunity we may not have again to influence direction and magnitude Soviet aid in Nepal. Ambassador took every available opportunity stress to King and Subarna 1) political risks involved in accepting Soviet technicians; 2) technical and maintenance problems if Soviet equipment also brought into Nepal’s development programs; 3) possibility of friction detrimental to Nepal’s progress should Soviets enter same spheres of activity as roads, aviation, education, telecommunications in which free world countries already engaged; 4) dangers of over straining Nepalese absorptive capacity; 5) our flexibility in road program and willingness consider assisting in monetary stabilization program, noting however such assistance obviously difficult in Nepal under obligation at same time to repay Soviet loan.

Points appeared to have healthy effect on King and Subarna and by end of week Subarna conveyed impression GON attitude toward Soviet offer hardening, especially if Soviets insisted on loan. Important therefore we support Nepalese inclination to resist by providing prompt assistance in such fields as aviation and by maintaining flexible attitudes our other projects such as roads, in order preclude Soviet entry these important areas.

Bunker

1. Source: Department of State, Central Files, 861.0090C/1–959. Confidential. Repeated to Calcutta and Kathmandu.
2. Telegram 1566 to New Delhi, January 6, reads as follows: “NY Times reports Ponomarenko offered Nepal long-term credit 30,000,000 rubles in December visit. Money for airline, airfields, agriculture, roads, science teaching, production basic products. Embassy assessment and additional available information requested.” (Ibid., 861.0090C/1–659) Panteleimon Kondratevich Ponomarenko was Soviet Ambassador to India and Envoy to Nepal.
3. Bunker did not visit Nepal in September; reference is to his visit of December 14–19. Despatch 783 from New Delhi, January 19, reported in more detail on the Ambassador’s trip, and included memoranda of his conversations with Nepalese officials. (Ibid., 790C.00/1–1959)