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

293. Telegram From the Department of State to the Embassy in Vietnam¹

Washington, February 10, 1966, 10:07 p.m.

2342. For the Vice President. Subject: Interim Aid for India and Pakistan.

1. President has authorized negotiations for economic commodity loans of $100 million for India and $50 million for Pakistan subject to agreement on economic policy conditions. President would like Vice President initiate discussion these matters Karachi and Delhi including application necessary economic conditions. Memorandum² which President approved in substance given to Mr. Bundy for VP. New Delhi Aidto 1109 and Karachi Aidto 1306³ provided additional details re contemplated conditions which in summary call for:

a. priority to development and its corollary avoidance of diversion of resources to arms race

b. emphasis on using aid and at least matching amount own resources for imports for full utilization of existing capacity, as opposed to use for building new capacity or increasing reserves, and

c. In case India, resumption discussions with IBRD on economic policy changes.

2. President also authorized greater flexibility to permit some commercial sales and MAP credit sales of non-lethal military equipment, subject to continued satisfactory moves toward peace (e.g. actual troop withdrawal). VP asked advise governments of this new policy, indicating it to be administered on selective limited case by case basis with decisions clearly related to events on subcontinent.

3. We here concerned that public announcement loans at time VP in South Asia might appear as bribe related Vietnam, therefore contemplate that appropriate announcements concerning economic loan negotiations be made after completion South Asia visits. No public announcement on military sales policy contemplated.

4. Suggest that VP, in telling Mrs. Gandhi and President Ayub of above decisions mention following:

a. President well impressed with new movement toward establishment peace on subcontinent symbolized by Tashkent troop withdrawal, and other moves toward Pak/Indian reconciliation;

b. This frees U.S. to take interim steps, i.e., the loans, to help prevent undue run-down of Indian and Pak economies;

c. Undertakings sought in return are part of increasing emphasis on self-help essential to justify such aid resumption to the Congress. In Delhi suggest VP add that President looks forward to seeing Mrs. Gandhi as soon as convenient for her, to reach meeting of minds at summit which will facilitate resumption of mutually beneficial relation. In both capitals would also be most valuable to underline basic view that President eager to help those who help themselves and who respond in kind. He determined that our relations must be a two way street.

5. In this connection, the President suggests that you develop with Mrs. Gandhi the theme that he must balance in the scales what each people can do for the other. More and more, public sentiment in both countries must be taken into account in our relations. The President intends to lead the American people into carefully weighing all the ways in which we can contribute to furthering our friendship with almost 500 million Indians. We believe we can help in many ways—in food, economic aid, education, health, and in maintaining peace in the world. In return, the President hopes that Mrs. Gandhi, before she comes here, will explore ways in which her 500 million people can be helpful to 200 million Americans. This doesn’t mean that we want India to ally itself with us, much less adopt our economic system or philosophy. Nor do we insist on total Indian support of our foreign policies. But when the US is under attack in the UN or other forums it would be immensely helpful if the Indians could occasionally at least stand up and say “stop, look and listen—let’s try to understand what the US is doing before we criticize it.” Last but not least, one immediate thing the Indians could do would be to find ways of helping to promote peace through the ICC (septel will follow on ICC matter).

6. Septels will also be prepared on administrative details economic loan documentation and on military sales matter.⁴

Rusk

1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, AID (US) INDIA. Confidential; Exdis/VP. Drafted by Director of the Office of South Asian Affairs in AID C. Herbert Rees; cleared by Macomber, AID Administrator David Bell, Stoddard (DOD/ISA), Komer, and Handley; and approved and initialed by Rusk. A handwritten marginal notation, in an unknown hand, reads: “OK/L” indicating that the telegram was also cleared by the President. Also sent to New Delhi, Karachi, and Rawalpindi.
2. Not found.
3. Neither found.
4. Telegram 2374 to Saigon, February 12, conveyed additional points that the President suggested Humphrey might take up, including informing Gandhi of the prompt decision to authorize a $100 million program loan to India as his response to her urgent request. He encouraged Humphrey to get an up-to-date feel for India’s food problems but warned that he could offer no further help until he had consulted with Congress. Johnson was inclined to favor announcement of the program loans in Karachi and New Delhi, and telegram 2374 recommended that Humphrey issue a statement at the end of each visit setting forth the decision to negotiate the loans. (National Archives and Records Administration, RG 59, Central Files 1964–66, AID (US) INDIA)