Foreign Relations of the United States, 1964–1968, Volume XXV, South Asia

128. Memorandum From Robert Komer of the National Security Council Staff to President Johnson¹

Washington, June 8, 1965.

SUBJECT

• Meeting on Pak/Indian Aid Decisions, Noon 9 June 1965

Rusk, McNamara, Mann and Bell have been asked to attend.

This memo summarizes the current situation. Much of it is familiar ground but Bundy and I thought you’d like a recap.

US aid an incentive to other donors. The precedents on economic aid to India/Pakistan go back almost to the end of World War II, basically as part of our effort to shore up the threatened nations on the borders of the Communist Bloc. Then in 1958, we organized a World Bank consortium for India as a device to get other Western countries to bear more of the aid burden. Each year since we’ve used a US pledge as a lever on them. This has proven quite successful—in FY 1965 for example we got total pledges of over $1 billion, of which our share was around 40%.

In 1961 we did the same thing for Pakistan; here our share has run somewhat higher (around 50% in the last two years), but we’ve gotten other donors and the Bank heavily involved. So Bell is naturally concerned lest, if we begin to backtrack, our UK, Japanese, German and other friends will too.

Administration clearance of FY’65 India/Pak aid. After being worked out among the agencies, the FY’65 figures went through the regular vetting procedure; (a) BOB reviewed the forward projections provided by AID for consistency with Administration guidelines; (b) the regular budget submission was reviewed by BOB, and then discussed with you; (c) the annual foreign aid message was cleared; and (d) the Congressional presentation was then checked with BOB. The Bundy shop participated throughout. I think it fair to say that all AID decisions and authorizations during FY’65, including consortium pledges, have been within these Administration guidelines.

In late April, following your call to Tom Mann about our pending FY’66 pledge to the Indian consortium, we put out a special White House request that all pending Pak/Indian aid decisions be cleared here first. We’ve been operating on this basis to the present.

Issues for Decision. Mostly because of circumstance, but partly because of our hold order, we have an end of fiscal year logjam. Since we’ve already disbursed most of Pakistan’s FY’65 aid, the logjam mostly affects India:

A. Some $227 million in loans to India and $18.5 million to Pakistan which have already been approved, authorized and announced. Only the actual signing of the loan agreements remains. The biggest item is a $190 million program loan to India under last year’s consortium pledge. For Passman purposes this money is regarded as already committed (it will not show up as an end-FY 65 shortfall); of course, it is also regarded as committed by the Indians and Paks.

B. Some $76 million in loan applications for India and $61 million for Pakistan. AID would like to authorize those which are ready before 30 June to utilize FY’65 funds, but not all will be ready.

C. For the last two years we have given India an advance program loan for a fraction of our new consortium pledge, to keep aid flowing since the Indian fiscal year begins two months earlier than ours. This year State and AID want to give up to $100 million to India and start the same procedure for Pakistan with up to $70 million. Aside from being good economics, this is essential to commit FY’65 funds which otherwise would be haggled about by Passman on specious grounds. It does not deprive us of much FY’66 leverage, since it covers only a fifth to a third of what we’d normally give. Nor does this money flow till we actually sign the loan, it would only be authorized now.

D. The Indian PL 480 agreement also expires 30 June, and the pipeline will begin running out this July. To forestall hoarding and then hunger in India, we need approval to make a new one-year agreement.

The case for going ahead with the above items is threefold:

A. It forestalls a sterile debate with Passman over why we couldn’t even commit the allegedly minimum amount requested for FY 1965. If we hold up all new commitments beyond June 30, we’ll run $250–300 million short.

B. It avoids the risk of a major to-do with Paks and Indians over whether we are backing away from pledges and commitments already made. Both now strongly suspect we’re holding out on them, but haven’t been able to pin it on us yet. If we hold up past 30 June, however, this will be impossible to conceal.

C. The story will inevitably be played up in the US press. Among other things, it will revive speculation about the real purpose of the Ayub and Shastri postponements.

D. The backlash might affect current aid appropriations, if Congress gets a sense that the Administration is backing off on India/Pak aid.

Recommendations. You can use tomorrow’s meeting both to forestall the above kind of unnecessary trouble and to put State, AID and Defense on notice that you’re highly sceptical about our current Pak/Indian policies and (a) want a hard new look at them before we spend a lot more money; (b) want to keep the Paks and Indians worried lest Uncle Sam become a lot less generous. Essentially, the trick would be to do the necessary to limit the risk to our FY 66 aid appropriation, but simultaneously instruct State and AID that we want to play a lot harder to get with the Indians and Paks. The following scenario would serve this purpose:

1. You’ll go ahead reluctantly on using up FY 65 money only because we’re too far down the pike to pull back gracefully without (a) accusations that we’re backing off on pledges; or (b) giving Passman a handle to cut FY 66 money.

2. But you seriously question whether we’re getting our money’s worth from this huge investment, and intend to continue personally vetting all major new commitments until we’ve done a basic policy review which satisfies you and which you can use persuasively on the Congress. Rusk should take leadership on this.

3. You don’t want to have Ayub or Shastri here till we’ve worked out our new policy line, and have softened both up to the point where they want to come for help rather than come tell you how to run Vietnam, etc. So you want much clearer signals to both Paks and Indians first (perhaps via special emissaries).

4. Despite Pakistan’s fine economic performance, let’s get across quietly but clearly to Ayub that he can’t play China’s game while being banked by the US.

5. Let’s tell the Indians we’re not very happy with them either, especially their tendency to take our aid for granted without doing enough to help themselves or to recognize that we’re fighting their war in Vietnam.

6. In effect you fully recognize the central importance of India/Pakistan, but when we’re investing as much AID money there as in the Alianza, you see a need for tighter control and greater emphasis on results.²

R. W. Komer ³

1. Source: Johnson Library, National Security File, Memos to the President, McGeorge Bundy, Vol. 10, Apr. 15–May 31, 1965. Secret. Two pages of statistics detailing economic and military assistance provided to India and Pakistan, 1946–1965, were attached but are not printed.
2. Bundy sent this memorandum to Johnson on June 8 under cover of a brief memorandum in which he stated: “I think he makes a very good case for authorizing the immediate public decisions, while insisting on a hard new look at our Indian/Pak policy.” (Ibid.) Johnson responded with a handwritten note on Bundy’s covering memorandum that reads: “I’m not for allocating or approving $1 now unless I have already signed and agreed—If I have, show me when and where.”
3. McGeorge Bundy initialed below Komer’s signature.