140. Memorandum From Robert Komer of the National Security Council Staff to the President’s Special Assistant for National Security Affairs (Bundy)1
I’ve asked Talbot to goose Rusk to join in on Indian PL 480.
Let me recap that we’ve already cut down the new Indian request from a two-year 16 million ton deal to a one year 7 million ton one.
Second, we’ve just had a new high level appeal from Indian Food Minister, Subramaniam, who says they need help now to “avoid crisis shortage.” His “particular concern arises from fact that lean months are August and September” before the new Indian crop is in.
Agriculture is our best source. Its key man tells me that to prevent interruption in food shipments, new shipments have to start by 1 September; this means contracts have to be made by 15 August; this means Indians have to have a PA by 15 July; this means we’ve got to allow say a minimum week before 15 July to negotiate the deal with India. Hence 6 July or so.
Indian stocks are quite low (two months). If shipments are interrupted, word always leaks out. Once the public becomes aware hoarding starts almost immediately (we’ve been through this before). Traders hold out of the market to wait for higher prices. The experts are convinced that Indian opinion won’t understand why we didn’t come through, and Indian officialdom will try to shift the blame to us. We’ll have a lot of flak in the US press too about why we’re “starving” Indians.2
The way out is a simple two-month extension of the current agreement (only one million tons). If done by 6 July or so, it would buy time, avoid a political explosion, and still keep India on a mighty short rein. We’d insist on all the new tough PL 480 provisions, e.g. dollars for ocean freight, 20% US uses (up from 5%), and 4–1/4% interest.
If we don’t come through India will have to use its own scarce foreign exchange to buy wheat elsewhere as the UAR did. In this case our [Page 289] own aid dollars would be indirectly subsidizing Indian wheat purchases to help out someone else’s balance of payments.
- Source: Johnson Library, National Security File, Country File, India, Vol. V, Cables, 6/65–9/65. Secret.↩
- In a July 2 memorandum to Rusk, AID Administrator Bell warned: “I cannot emphasize too strongly the serious consequences that would follow from a cessation of wheat shipments—or even from publicity about the possibility of such a cessation. There were food riots in India last year and they could easily occur again.” (National Archives and Records Administration, RG 59, Central Files 1964–66, AID (US) 15–8 INDIA)↩