Foreign Relations of the United States, 1961–1963, Volume III, Vietnam, January–August 1963

156. Telegram From the Embassy in Vietnam to the Department of State¹

Saigon, June 7, 1963, 9 p.m.

1128. CINCPAC for POLAD. For Hilsman from Trueheart.² In my view the political context in which requested $15 million NOA has to be considered, apart from broad question of US support, has two main elements: (1) recent negotiations on counterinsurgency funding, and (2) Vietnamese understanding of Staley-Thuc report.³ With regard to (1), results up to now exceed fondest expectations of anyone here and have totally confounded those who confidently predicted new system would spell end of CI program.GVN is holding up its end of bargain, has established special bank account and put money in it, and has issued Presidential decree defining procedures for use of these funds which accords with our understanding. What is more, in the provinces our Rural Affairs Advisers report that coordination with Vietnamese counterparts and readiness to accept and even seek US advice is greater than ever it was when we were signing the checks. This is no doubt too good to last, but I am certainly not keen to do anything which would rock the boat—as this would almost certainly do.

As for Staley-Thuc agreement, position is well understood in Washington. Suffice it to say that, in light of that report, Vietnamese consider that, at minimum, we have no right use against them rises in foreign exchange reserves below $200 million. As maximum, they feel we have positive obligation to help them bring reserve up to that level. (I am not arguing that we should or can ignore GVN foreign exchange level, simply reporting the way they look at it.) Moreover, at least since I came here in October 1961, Vietnamese have been led to believe that US would support CIP up to whatever level required for war effort, provided only that Staley-Thuc and limited worldwide procurement criteria respected. Their need, in budgetary terms, has never been greater, notwithstanding their acceptance of deficit financing and prospect of deficit this year on order of VN $4 to 5 billion (or 5 to 6 percent of GNP).

In this situation any backing off from CIP of about $100 million is bound to be interpreted by GVN as failure on our part to live up to a bargain. Perhaps we can read the fine print differently but this is certainly the way they feel.

It is on above grounds that I would urge that AID Administrator allot full $15 million from contingency fund. Recent events are, I think, probably not relevant in GVN eyes. Pressures have, it is true, been strong but actions GVN has taken have not been thought of, I believe, as a concession to US but as necessary, though belated, moves to retrieve a very dangerous situation.

Re your last paragraph,⁴ fully agree. We are becoming more and more convinced also that level of imports will continue to rise and that delay in payments may only increase problem next year.

“One worry, on which also appreciate your estimate, is that S. A. needs next year may be as great or greater than this fiscal year and delay in payment may only increase problems next year.”

Am surprised at reference to tightness [garble] contingency fund in view AID Administrator’s memorandum to Secretary of May 7,⁵ forecasting that substantial part of FY 63 contingency fund would be turned back.

Trueheart

1. Source: Department of State, Central Files, DEF 19 US-S VIET. Secret; Operational Immediate; Limit Distribution. Repeated to CINCPAC.
2. Trueheart was responding to telegram 1188 to Saigon, June 6, in which Hilsman informed him that AID had recommended a $10 million new obligational authority to meet the shortfall in anticipated USOM requirements in Vietnam, rather than the $15 million authorization which the Embassy felt was necessary. Hilsman noted that “even this amount presents problem in view depleted condition contingency fund and we must explore how harmful delay until soon after July first would be. Request your estimate GVN reaction, especially in light of pressures you have exercised on GVN during past few days, if you let it be known at working levels that money would be soon forthcoming but because of bureaucratic delays not until after July first.” (Ibid., AID (US) S VIET)
3. See Foreign Relations, 1961–1963, vol. I, Documents 72 ff.
4. The final paragraph of telegram 1188 reads as follows:
5. Not found.