321. Memorandum of Conversation0


  • Indonesia: PL 480 Rice; Lockheed Contract to Service Hercules Aircraft (C–130)


[Page 697]

P. L. 480 Rice

Ambassador Jones said the Indonesians, due to a poor harvest as a result of drought, needed rice badly. They had asked for 60,000 tons. The President asked how much money this represented and was informed about $8,400,000. Ambassador Jones urged that this be approved in principle but suggested it might be easier to work out in two stages—approximately 40,000 tons under the existing three-year agreement, the balance under a new agreement to be subsequently negotiated. The President approved this arrangement, provided that the 40,000 tons under the existing agreements could be supplied without giving the impression we had reached a new judgment and provided the additional agreement be conditional on our making some progress on the political front. He further suggested that this matter be handled with a minimum of publicity.1

Lockheed Contract to Service Hercules Aircraft—(C–130)

A problem had arisen, Ambassador Jones reported, in connection with renewal of the Lockheed contract for training, repair, servicing and supplying of spare parts for the Hercules aircraft. The contract would involve the sum of $5,500,000. Because these aircraft had been used in transporting troops to the Borneo border, some questions were being raised in Congress. Mr. Hilsman added that the matter had also been raised in the British Parliament. The question arose because Lockheed had approached the State Department to sound out whether approval of export licenses for spare parts might be anticipated if the new contract were to be negotiated.

Ambassador Jones urged that we informally approve the contract for these reasons: (1) this was a commercial transaction, with no government aid involved; (2) if we withheld approval, future sales of American equipment to Indonesia would be seriously affected; (3) we would not be denying this type of equipment to Indonesia since Russian, French and British aircraft of similar capabilities were available; (4) Indonesian use of our equipment gives us some measure of control.

The President wondered whether the matter could be postponed a month or two or whether we could proceed by simply amending the existing contract. Either of these courses of action would be preferable. It was agreed to explore these possibilities further. The President requested that the matter be brought back to him again before final disposition.

[Page 698]

Summary of Actions:

FE to consult with Agriculture and other offices and agencies concerned in implementation of decision, paragraph 1;

FE to consult with Lockheed representatives re paragraph 4 to determine whether the decision can be postponed or, alternatively, whether contract could be amended with minimum of publicity.

  1. Source: Kennedy Library, National Security Files, Countries Series, Indonesia, Vol. V, 10/63–11/63. Secret. Drafted by Jones. The ending time of the meeting is taken from the President’s Appointment Book. (Ibid.) The source text is labeled “Part II of II Parts”; Part I is printed as Document 320.
  2. President Johnson subsequently approved this arrangement. (Memorandum from Read to McGeorge Bundy, November 29, with notation that the President approved; Department of State, Central Files, AID (US) 15–8 INDON)