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

76. Letter From the Acting Secretary of State to the Assistant Secretary of the Treasury (Upton)¹

Washington, June 19, 1959.

Dear Graydon: As suggested in your letter of June 8,² the stage has now been reached in the discussion of a solution of the Indus Waters problem where priority consideration should be given to means for financing the implementation of the solution. In case you have not yet seen the text, I am enclosing two copies of the IBRD memorandum³ setting forth the understandings on an Indus Waters settlement reached by Eugene Black with the Governments of India and Pakistan in the course of his recent discussions with Prime Minister Nehru and President Ayub.

These understandings, as noted on page 8 of the memorandum, call for a meeting of representatives of the two Governments in London during the first week of August to discuss agreed agenda items. Meanwhile, as set out in paragraph 14, the Bank is desirous of discussing the Amended Financial Plan with representatives of friendly governments and of obtaining “the firmest assurances possible in the circumstances, that financial assistance in the amounts and of the nature contemplated will be forthcoming.”

You will note that the United States foreign exchange contribution in the amended plan remains at $278 million, but whereas the whole amount was originally proposed as DLF loans to the two countries, $177 million is now suggested as a grant to Pakistan.

I have had a preliminary discussion of these amended proposals with Mr. Black⁴ during which he stressed the need of having assurances of financial aid from friendly governments prior to the London meeting in August. I indicated to Mr. Black my personal approval of the suggested contribution from the United States, both in form and amount, and said I would try and work out assurances of a “best efforts” kind. Mr. Donald D. Kennedy, Deputy Assistant Secretary for Economic Affairs, Bureau of Near Eastern and South Asian Affairs, is presently working with Mr. Sommers of the IBRD in an attempt to work out a satisfactory statement. This statement will naturally be subject to concurrence by the Bureau of the Budget before being finally agreed. In the course of a discussion of the Indus Waters settlement with the Senate Foreign Relations Committee, in Executive Session on May 13, I said that the Department of State believed the Bank’ plan to be a practical one and that, if agreement were reached between India and Pakistan, we would recommend the necessary legislative action to provide, together with other friendly governments, the necessary financial assistance.

Mr. Kennedy is prepared to discuss these financial problems with you or Mr. Paul D. Dickens,⁵ at your mutual convenience.

Sincerely yours,

Douglas Dillon⁶

1. Source: Department of State, Central Files, 690D.91322/6–859. Secret. Drafted by J. Wesley Adams and cleared with NEA, ED, and W/MSC.
2. Attached to the source text but not printed. It requested that the Treasury Department be kept informed of developments relating to the Indus Waters negotiations.
3. Reference is to the IBRD memorandum of March 26, not printed.
4. See Document 74.
5. Chief, Southeast Asian Division, Department of the Treasury.
6. Printed from a copy that bears this stamped signature.