Foreign Relations of the United States, 1961–1963, Volume XIX, South Asia

282. Memorandum From Secretary of State Rusk to President Kennedy⁰

Washington, April 25, 1963.

SUBJECT

• Review of Problems Pertaining to the Subcontinent

In preparation for my visits to Karachi and New Delhi, we should discuss several issues which we face in India and Pakistan. It would be premature, however, to seek final decisions on these matters at present. The following represents the views of the Department of State:

1. Kashmir

Our pressure on Kashmir has angered Mr. Nehru; his misunderstanding, for whatever reasons, of our tactics has caused him to think we have been doubledealing. Responsibility for this appears to rest partly on his own officials. The resulting fireworks have clearly revealed the Indian position. In being willing to discuss a political settlement with Pakistan, the Indians have not been willing to go beyond minor border adjustments except apparently to the extent of an offer of the northwestern third of the Vale to Pakistan. They had believed this would satisfy us even if it didn’t satisfy the Paks.

Mr. Nehru’s letter to you¹ clearly indicates a hardened position on Kashmir, loss of confidence in our “objectivity” on the issues, and unwillingness to have his need for military aid be used to force him to make large enough concessions on Kashmir to satisfy Pakistan’s requirements for a settlement. The combination of the Chinese withdrawal, the Pak exploitation of the Indian difficulties with the Chinese, and our own strategic interests in the subcontinent do in fact limit our leverage with the Indians on the Kashmir issue. At this juncture Nehru is the principal key to the achievement of any movement on Indo-Pak issues. Therefore, the task is to see what can be done to get Nehru back in tune with us, and to reaffirm the considerations which lead us to view a settlement of the Kashmir issue as so important to the security of the subcontinent. The Pakistanis must be led to understand that Chicom aggressiveness against India also constitutes a threat to Pakistan. Once they do, Ayub may be more willing to continue talks with the Indians and to explore the necessary compromises to achieve Indo-Pak accord.

This requires that we now explore in Karachi and New Delhi possible directions in which the talks might proceed in the future.² It may be that the Indo-Pak talks should be extended to cover a broader range of problems plaguing Indo-Pak relations. It is clear that we cannot expect the timetable for the talks to fit our schedule for making decision on aid to India, even though there will continue to be a correlation between the two problems. At least for a cooling off period, our pressure should be greatly eased.

2. Air Defense

The Commonwealth-U.S. Air Defense Mission found that a measure of security from strategic air attack can be provided to the Calcutta and New Delhi areas by 2-3 Western fighter squadrons using U.S.-U.K. mobile radars. Such air defense assistance would strengthen the deterrent to a Chicom attack on India, indicate a continuing Western interest in India’s defense at little expense, strengthen India at minimum cost to our relations with Pakistan, and buy us time during which we could hold off on other military aid if we desired. There is, of course, some question whether this degree of involvement in India’s defense would stimulate a Chinese military reaction against the West in the event of actual hostilities between the Chinese and Western aircraft.

The British, however, are uncertain whether they should go ahead on this. Sandys is worried about the consequences of an engagement between these Western squadrons and the Chinese Air Force. In any case, he believes our defense assistance should be conditioned on a Kashmir settlement. We believe we should make every effort to get the British to provide this assistance jointly with us; perhaps you should write to Macmillan.

Note: In connection with air defense as well as with defense production and long-range military assistance discussed below, I believe there are two very important questions which we may have to face but which ought not to be answered until after my talks in Karachi and New Delhi. These questions are: (1) whether we should provide substantial military assistance to India without U.K./Commonwealth participation and (2) whether we should provide such substantial assistance regardless of the state of Indo-Pak relations.

3. Defense Production

Our Defense Production Team, the Staley group, has mapped out a program, keyed initially to a four-year program to meet the combat needs of the Nassau 6 mountain divisions, which would require foreign exchange support up to a total of $34 million for capital goods and $20 million per year for raw materials. Such assistance would have the advantage of helping to meet India’s defense needs, and contributing to the development of its economy. The principal problem it gives us is its possible effect on our relations with Pakistan.

The British, for many reasons, give defense production assistance a very low priority. These reasons include their concern about their relations with Pakistan, their limited aid resources, and their concern about the possible effect on British industry. They believe it should be conditioned on Kashmir progress, as they do regarding all additional military aid.

We are inclined to believe that we should approve the Staley plan for defense production support of the six mountain divisions and do our best to get the British to share costs. The question of timing of notification of the Indians is a separate matter on which we would reach a decision after my visit to Karachi. As a minimum we should go ahead on a piecemeal basis with certain projects (e.g., U.S. surplus ordnance equipment) during the next several months.

4. Long-Range Military Assistance

Although we have done some preliminary planning, our plans on this have not yet taken concrete shape. The Department of State is satisfied, however, that there should be military assistance to India beyond the present phase. The questions relate to extent, types, and timing of military assistance.

There are very good political and military justifications for long-range assistance regardless of the outcome of the Kashmir talks. We have much at stake in India and the Chinese can be expected to threaten the Free World at the periphery of their control for many years. Not only must we maintain a degree of Indian military strength to deal with the chance that fighting may again flare up on the border, but we must also support our efforts to strengthen our political relationship with India in a concrete manner. Additionally, we must give India confidence that it has our support in the growing confrontation with Communist China.

5. Economic Aid to India (Consortium)

Very preliminary indications are that Western contributions this year in support of India’s Third Plan may fall short of India’s estimate of its requirements. If this is combined with a failure to meet Indian requests in the military field, we can expect an adverse Indian reaction.

A preliminary meeting of the Indian Consortium will be held on April 30-May 1 to consider the progress of economic development in India and India’s aid requirements for the third year (April 1963 to March 1964) of the Third Five-Year Plan. This meeting will be followed by a pledging session several weeks later, probably in Paris.

The Indians have indicated a requirement for the Plan’s third year of $1,255 million. AID is requesting $450 million in development loan funds for India for FY 1964. If this becomes available, and if the Export-Import Bank approves another $50 million, the U.S. will be able to provide up to $500 million for the third year of India’s Third Five-Year Plan.

How much aid the U.S. would provide will depend primarily upon contributions from other members of the Consortium. We estimate that IDA and IBRD will pledge an aggregate of $200 million. It now appears that the contributions of other countries may be as low as $200-$300 million. If we followed last year’s precedent we would merely match the contributions of these other countries. This would limit India’s total foreign aid to somewhere between $600 and $800 million. Once we have a better idea of what these other countries will do, we will have to decide whether to abandon our matching technique in order to enable India to come closer to meeting its over-all requirements of $1,255 million.

6. Economic Aid to Pakistan (Consortium)

There is a substantial gap between Pakistan’s wishes for economic aid and what the Consortium thinks Pakistan needs. This is of particular concern to us because of the delicate state of our current relations with Pakistan.

At the Pakistan “pre-Consortium” meeting in Paris on March 28-29, a consensus was reached among the donors that the level of aid required for FY 1964 to meet Pakistan’s Plan targets is in the range of $350 to $400 million of new money. The U.S. strongly supported the figure of $400 million indicating that it would be prepared to pledge up to about $200 million of the total. Last year the U.S. contributed $250 million, constituting 53% of the total Consortium aid including IDA and IBRD.

The GOP, which had asked for $550 million, reacted strongly to the results of the pre-Consortium meeting. Top officials blamed the U.S. for the rejection of their $550 million request. They also insist that the U.S. not reduce its contribution below that of last year.

There is to be a pledging session of the Consortium in Washington on May 2-3. On the basis of information now available, we are by no means sure that the contributions from all other members will come to $200 million.

We are prepared to inform the GOP that while we support the $400 million figure, we stand ready to examine with Pakistan and other Consortium members possible additional needs for FY 1964 should events indicate that the Consortium has underestimated Pakistan’s foreign exchange needs.

7. Bokaro

A problem which is not yet ready for decision is Bokaro, the proposed public sector steel mill being considered for possible U.S. assistance. A recent report on this project procured by AID from U.S. Steel raises a number of technical and economic questions requiring further study. We mention it because it may have important political implications in the present state of U.S./Indian relations. The problem is further complicated by the Clay Committee’s critical comments on aid to public sector plants.

DR

0. Source: Kennedy Library, National Security Files, Countries Series, India, General, 4/24/63-4/27/63. Secret.
1. Document 279.
2. The fifth round of talks concerning Kashmir took place in Karachi April 22-25. According to a summary of the talks sent to Rusk in Tehran on April 28, the only point on which Bhutto and Singh agreed was that the valley of Kashmir could not be partitioned. The two delegations agreed to continue the talks in New Delhi on May 15, but the Pakistanis spoke of the sixth round as a “last go” at the Kashmir issue. (Tosec 16 to Tehran; Department of State, Central Files, POL 32-1 INDIA-PAK)