Office of the Historian

84. Memorandum From the Deputy Assistant Secretary of State for Near Eastern and South Asian Affairs (Kennedy) to the Under Secretary of State (Dillon)1

Washington, November 6, 1959.

SUBJECT

  • Indus Waters Settlement

The current status of what the IBRD now calls the “Indus Basin Settlement Plan” is briefly:

1. “Heads of Agreement” have been accepted by both sides and good progress is being made by their lawyers in drafting the actual text of the treaty.2 The latter should be ready for signature by December 31.

The IBRD has furnished the friendly contributors the attached revised financial figures dated October 21 (Tab A).3 The new figures principally reflect (a) the engineers’ revised construction time table [Page 191] which calls for the work to be completed in eight instead of ten years, and (b) the $30 million contribution of Germany and an additional “requirements item” of $29 million for “Reserve for Escalation”.

Mr. Iliff called a meeting last week to discuss with the contributors the necessity of satisfying Pakistan that their promises of financial help were firm enough to permit Pakistan to sign a treaty by which it would surrender forever its rights to the waters of the eastern rivers.4 As far as the United States was concerned, Mr. Iliff hoped that (a) the DLF might handle its $70 million loan in a way which would constitute as “firm” a commitment as the IBRD’s own loan of $80 million would be and (b) the United States together with other friendly governments would provide $120 million of their grant payments during the first three years of the project. In effect this would mean that the contributors would be asked by the Indus Basin Development Fund to provide $13 million in grants during the year beginning April 1, 1960, instead of $8 million in grants to be supplemented by IBRD and DLF loan call-ups of $5 million as set forth in the Bank’s memorandum of October 21. The United States share would be 58.18 per cent or roughly $7.4 million. A summary of the problem is contained under Tab B.

Recommendations

A.
That I be authorized to inform Mr. Iliff confidentially along the following lines:
1.
The United States Government at the highest level has determined that it would contribute an amount not to exceed $517 million in grant and loan assistance towards the construction of the system of works proposed by the World Bank in its plan for settlement of the Indus waters question. This is contingent on similar assistance by other friendly governments and is subject to availability of funds.
2.
It has been decided to include in the Mutual Security legislation for fiscal ‘61 a provision which will, if adopted, put Congress on record in support of the Indus waters plan.
3.
Included in the Administration’s foreign aid program for fiscal ‘61 will be a request to Congress to appropriate the amount of grant funds required as the United States share during the first construction year 1960–61.
4.
You stand ready to support with the DLF the indicated loan to Pakistan of $70 million at such time as these funds will be required.
B.
That I also be authorized to inform the Government of Pakistan along the above lines at such time as, in consultation with Mr. Iliff, appears appropriate.5
  1. Source: Department of State, Central Files, 690D.91322/11–659. Secret. Drafted by Bartlett and Kennedy and concurred in by U/MSC, L/MSC, E, and L.↩
  2. Iliff had recently transmitted to the Department of State the draft text of a Heads of Agreement for an international treaty on the Indus Waters. A copy of the draft agreement was attached to a memorandum from Hart to Dillon, dated September 28. (Ibid., 690D.91322–2859)↩
  3. Not printed.↩
  4. A summary record of this meeting, which was held at the IBRD on October 26, was attached to the source text as Tab ? but is not printed.↩
  5. Dillon initialed his approval of all of these recommendations; in recommendation 1, however, he crossed out the phrase “at the highest level.”↩