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

888. CINCPAC for POLAD. Embtel 882.2 In assessing Diem’s rejection of our proposal for counter-insurgency fund, most significant point is that grounds advanced for rejection approach repudiation of concept of expanded and deepened U.S. advisory effort, civil and military. This concept was fundamental element our agreement with GVN in December 1961 on greatly stepped up U.S. assistance effort. Progress made since that date would not have occurred, in our view, without massive advisory effort, nor do we believe it can be maintained if drastic reduction made at this stage in number of advisors, particularly in provinces and with smaller military formations-which are precisely areas where Diem seems to find most difficulty. We would not deny that some advisors may, on occasion, have acted in way to cause complaint or that their number and zeal have reached point where, to those who want to see it that way, there are similarities with a “protectorate” situation. Point is we don’t think GVN can win without U.S. advisors in roughly present density for the next year at least.

We also gravely doubt that momentum of strategic hamlet program can be maintained and, especially, gains already made consolidated without piastre fund of roughly size we have proposed and procedures for its use as effective as those we have had for purchased piastres. Although Diem says GVN will make necessary funds available, he is probably thinking of much smaller sum than we are (very likely the 400 million piastres already earmarked by GVN vs 1300 million in our proposal) and it is clear that he is not thinking of procedures which would give us satisfactory voice in use of GVN [Page 214] funds. (He probably wants to revert to former unsatisfactory GVN procedures.) In short, we conclude that unless we can get something comparable to what we have proposed, there is grave risk that strategic hamlet program will founder. Without successful strategic hamlet program, it will take longer to get insurgency under control.

If this is correct evaluation of significance of Diem’s position, we see no viable alternative to taking action (or possibly series of actions) designed to convince Diem that we mean business—notwithstanding grave risk that such action (a) will not move Diem but on contrary lead to retaliatory action and descending spiral our relations and (b) might light coup fuse. (We continue have no grounds to believe that coup would bring to power a government more likely to win the war than Diem. On contrary, we think a coup, either accomplished or abortive, would weaken chances of preserving independence of SVN.)

Unless tactical move prescribed at end this message bears fruit, first action we would recommend is to inform GVN that we are revising counterpart support to GVN military budget downward by, say, 1.3 billion piastres (from 7.5 billion) and are tentatively earmarking this sum for support to strategic hamlet program. This would be very r serious matter for GVN but action not irreversible if Diem comes around and would not involve dislocations inherent in cancelling orders for hamlet materials, for example. Moreover, it is in any case going to be necessary to reduce counterpart allocation to military budget (if joint fund is not approved), simply in order to provide funds to carry on minimum existing economic projects and for USOM operating expenses.

In informing Diem of above, we would at same time offer (a) to review advisor situation with view to seeing what reduction can be made and (b) to replace any advisor who abuses his position or undermines GVN authority. Finally, as earnest our firm intention to phase out special military assistance, would give him detailed briefing on 3year comprehensive plan (request authority to do this).

Before taking step of informing Diem of reduced support for military budget, believe it advisable for tactical reasons to ask him to give me written response our proposal for counter-insurgency fund, to include reasons for rejection. This move would provide time for him to reflect on consequences his decision and for members his government to work on him if they are disposed to do so. I might also use this period for further talks with Diem and others in course of which I might draw on arguments in immediately preceding paragraph. Meanwhile, we would quietly hold up approval of military budget support level and any new allocations of funds.

Harkins and Brent concur.

  1. Source: Department of State, Central Files, POL 26-1 S VIEI Secret; Priority; Limit Distribution. Repeated to CINCPAC. Also published in Declassified Documents, 1978, 433B.
  2. Document 81.