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

67. Memorandum of a Conversation, Department of State, Washington, April 29, 1959¹

Washington, April 29, 1959

SUBJECT

• IBRD and Indus Waters

PARTICIPANTS

• Eugene Black (World Bank)
• Mr. Iliff (World Bank)
• Douglas Dillon—Under Secretary for Economic Affairs

I made the points to Messrs. Black and Iliff which were contained in paragraphs 2 and 3 of NEA’s memorandum of April 28th.² Mr. Iliff replied that the idea of an Indian line of credit for Pakistan of $200 million was a useful one which they would explore if necessary. He also agreed with our suggestion that Germany and others be approached at an appropriate time, the only difficulty being that the assistance would have to be either grant assistance or soft loans, which had not heretofore been made by these two countries. Regarding recommendation 2, Mr. Black said it was their plan to set up an Indus Basin Development Corporation. All funds would be contributed to that and there would not be any specific earmarking of funds.

Mr. Black further said he had talked to B.K. Nehru who had said the Indian contribution should be not less than $100 million and not more than $150 million. They had then mentioned to Mr. Nehru their idea that the Indian contribution should be $250 million, which was the figure they would also put up to Prime Minister Nehru in Delhi, with a view of getting an eventual agreement of $200 million.

Messrs. Black and Iliff seemed well satisfied with my statement that if they succeeded in reaching an agreement the State Department would be prepared to strongly support the proposals to obtain the necessary funds. They pointed out that a soft loan to India to be spent in Pakistan might create some problems for India, and grant aid might be a cleaner way of handling the matter. I said this would require special legislation, or at least a special title in the Mutual Security legislation for next year. I also said I did not rule out the possibility of special grant aid of this sort because I felt the Congress was quite favorable to this particular project.³

1. Source: Department of State, Central Files, 690D.91322/4–2959. Confidential. Drafted by Dillon.
2. Supra.
3. The Department summarized this conversation in telegram 2668 to New Delhi, May 1, also sent to Karachi. (Department of State, Central Files, 690D.91322/5–159) In telegram 2610 from New Delhi, April 29, the Embassy responded: “Climate on both sides appears to be becoming more hopeful for settlement. Timing Black visit excellent. Proposals should be those most conducive early agreement. This opportunity if missed not likely come again.” (Ibid., 690D.91322/4–2959)