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

893. Paris for SEATO for Secretary Hilsman and Felt. CINCPAC for POLAD. Deptel 943, Embtels 882 and 888.2GVN seems to be giving ground on this issue. On Monday, I sent personal letter to President Diem3 requesting written reply to my letter to Thuan of March 184 on counter-insurgency fund. Today, Thuan asked me to see him and what he had to say after talks with Diem and Nhu encourages [Page 217] our hope for reasonable and effective compromise. We went very thoroughly into matter. Thuan, while unable to guarantee Diem’s position, made following points and proposals which he thought, on basis conversation with President after our talk, could be made acceptable to GVN:

Thuan’s first point was that GVN did not want to alter fundamentally relationship with U.S. He said this meant that GVN does not desire a reduction of U.S. advisory-support effort. I asked, what about reduction of U.S. advisors? Thuan replied he thought Diem did not want a reduction in number of U.S. advisors, but only more “political sensitivity” on the part of certain advisors especially in rural areas.

Thuan specifically stated that Diem had agreed that relationship and working arrangements between GVN Inter-Ministerial Committee on Strategic Hamlets and U.S. Province Rehabilitation Committee should remain as is.

(There is an ambiguity here which will require further detailed discussion.)

On the question of financing the rural counter-insurgency program, Thuan stated that the GVN is prepared to contribute piasters from its own resources, on the basis of the list of projects attached to my letter of March 18 (Toaid A-2874) up to 2.3 billion piasters. Questioned closely on this, he said that Diem had not specifically agreed to the amount, but he felt that he could persuade him to state this in terms. I asked, under what procedure would GVN’s contribution be expended. Thuan replied, under special fund set up for this purpose, not subject to bureaucratic red tape, for allotment to province chiefs in manner similar to that employed in Phu Yen Province prior to establishment of U.S. special fund. (We believe this can be made to work, but will require further negotiation and effective understanding.)

In general diagnosis of Diem’s position last week and reasons therefor, Thuan said that President was emotionally worked up by a number of reports (some true, some partly true, and some false) concerning Americans’ activities coming to him at the same time. He listed a number of these, and I agreed, of course, to look into each one. He agreed with me (and said Diem now does, too) that these relatively minor matters do not justify “pouring out the baby with the bath”, the one point on which Thuan said he had no hope of persuading Diem was to continue the procedure of approving expenditures and dispensing funds of GVN origin through the existing province committee of three (generally the Province Chief, the MAAG sector advisor, and the USOM provincial representative). I said I could see no reason to dispense with this provenly effective mechanism. I saw considerable danger in falling again into the time-consuming procedures of prior years, and there was not time for this. I further stated that a good province chief would find, in my opinion, no difficulty in such an [Page 218] arrangement, since he would have the initiative and should exercise it. I also said, that without such an arrangement, I could not see how proper coordination could be achieved between the arrival of U.S. goods (both MAP and AID) and the parallel requirements for piaster expenditures. I said that fundamentally the difference between us seemed to be this: that the GVN, under Ngo Dinh Nhu’s theory, seemed to expect the Vietnamese peasants to pull themselves up by their own bootstraps when they have no shoes; we, to contrary, felt that they must be given, either in money or in kind, some inducement to work for the government’s cause. This did not have to be lavish, but it had to be something. Thuan admitted the difference in philosophy, but stuck to his point that he could not persuade Diem to continue the three-party arrangement in the provinces using GVN funds.

I told him that, while he was not sure of being able to persuade his government on the basis of the above, I was less sure of being able to persuade mine. Nevertheless, hoped with him to be able to work out a satisfactory arrangement to continue the joint effort, and I was encouraged by what he had told me of the relaxation in President Diem’s attitude. Thuan, who was in process of drafting at Diem’s request a reply to my letter of March 18, said he would make this as “good” as he could and hoped to get it signed promptly. I said I felt we could work out the ad hoc and ad hominem problems as they arose, but the main thing was to be sure that we understood each other and had confidence each in the intentions of the other. Without this, no compromise would work. He reiterated that Diem had no intention of suggesting a change in basic relations at this time, although he realized that he had conveyed that idea. Thuan said “the trouble is that we have a lot of people with a lot of views, not a coordinated government”.

Deptel 943 was received after this conversation. Answers to numbered questions therein, in light of above conversation, follow:

1 and 2.
Purpose of informing GVN of reduction counterpart support to military budget would be to impress on them seriousness with which we regard their rejection of CI fund proposal and to do this in such a way as to create minimum dislocations if tactic has intended effect. That is, if GVN in face of our action comes around on CI fund or shows interest in satisfactory compromise, we could revert to status quo ante on military budget. If, on other hand, GVN does not come around, we think it is improbable that they would cooperate on use of transferred counterpart funds in accordance our desires. On contrary, they might also retaliate, for example by additional restrictions on advisers. In other words, as we sought to indicate in our 888, this is exceedingly risky step and chances success we think about fifty-fifty provided there are no leaks. In light indication from Thuan of real movement on GVN side, hope this step will not be necessary.
Primarily because of known view of GVN, particularly Nhu, that province rehabilitation operations should be funded locally to maximum extent and statements of Diem that provincial operations supported by purchased piastres have in past been too “lavish”, we had thought it most unlikely GVN would come up with fund of size we consider necessary. There is also fact that GVN budgeted total of 100 million piastres for Strategic Hamlet Program in CY 1962 and for CY 1963 has budgeted 300 million plus earmarking 100 million from lottery receipts. It would appear from Thuan’s statements that we were too pessimistic.
Conversation with Thuan gives hope that they can be.
See 1 and 2 above. These funds are already part of projected contributor to military budget.
Depends on how “non-CI projects” are defined. (See attachment to Toaid A-2874.)
Under our proposal all planning and expenditures would require joint U.S.-GVN agreement. (See Toaid A-2874 and earlier agreement on purchased piastres.) There may be ways in which this can be improved, at least optically [sic], from GVN standpoint. There are also probably ways in which U.S. advice in this process can be made less obtrusive and possibly some reduction in number of advisors can be effected.

  1. Source: Department of State, Central Files, POL 26-1 S VIET Secret; Operational Immediate; Limit Distribution. Repeated to CINCPAC and Paris. A note on a copy of this telegram in the Kennedy Library indicates that it was included in the briefing book prepared for the President for the NSC meeting on April 10. (Kennedy Library, National Security Files, Vietnam Country Series, /4/63-5/63)
  2. Documents 84, 81, and 82, respectively.
  3. No copy of this letter has been found.
  4. Document 61.