66. Memorandum From the Assistant Secretary of State for Near Eastern and South Asian Affairs (Rountree) to the Acting Secretary of State1
SUBJECT
- Your meeting with Mr. Eugene Black with Respect to the IBRD Proposal for Settlement of the Indus Waters Dispute
Discussion
Mr. Eugene Black, President of the International Bank for Reconstruction and Development, will be proceeding to New Delhi and Karachi to discuss with Prime Minister Nehru and President Ayub the Bank’s proposal for settling the Indus Waters Dispute (Tab A).2 The purpose of his call on you is to obtain some indication of the Department’s attitude with respect to the Bank’s Plan. In particular, recalling what Mr. Iliff said to you when he saw you before your departure for the SEATO meeting, Mr. Black will be desirous of obtaining some “sympathetic noises.”3 The date and time of his appointment with you is not yet fixed.
The Bank proposal consists of three parts: (1) the preliminary engineering proposal, (2) the proposed financial arrangements and (3) a proposed International Water Agreement.
Briefly, the engineering proposal provides that India would have exclusive use, after a suitable lapse of time, of the waters of the three Eastern Rivers and Pakistan the use of the waters of the Western Rivers. The proposed financial arrangements (which Bank representatives have called illustrative) provide for financing of replacement works which would enable Pakistan to procure her water requirements formerly supplied by India, from the three Western Rivers, and would also provide for a certain amount of new development. The total cost of the Plan, estimated to amount to $985 million, would be provided as follows: from the United States new dollar loans repayable in local currency and PL 480 rupees—$606 million; United Kingdom, Australia and Canada in free foreign exchange grant to Pakistan—$70 million; India in payment to Pakistan in free foreign exchange—$200 million; IBRD—$109 million. Of this total $501 million [Page 164] represents the cost for works in Pakistan necessary to replace the waters which India will take and the balance of $484 million of new development.
Recommendations
- 1.
- That you express your appreciation of the Bank’s efforts and say the Plan appears to be a very sound one.
- 2.
- That you refer to your understanding that the Bank’s financial plan is illustrative and indicate that there seemed to be some elements worth exploring. Points which might be made include: (a) India’s $200 million contribution might be made in Indian rupees as a line of credit for Indian products which Pakistan might procure instead of in free foreign exchange, (b) the Commonwealth countries’ contribution of $70 million might be increased and used to meet foreign exchange costs of construction projects instead of paying for the importation of goods to produce Pakistan rupees and (c) other countries of the Free World, for example, Germany, Japan and Italy might be encouraged to share in the foreign exchange contributions.
- 3.
- That you make the “sympathetic noise” which it is understood Mr. Black wishes before he goes to New Delhi and Karachi by saying that you personally were very sympathetic to the proposal, that you hope that Mr. Black will succeed in his mission and that you would be prepared to discuss with other high officers in the Government and with Congressional leaders the request to Congress for providing the United States’ share of the necessary funds. Such a request, of course, would depend on several factors including agreement between India and Pakistan and contributions from other countries.