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

319. Memorandum of Conversation Between the President’s Special Assistant (Rostow) and the Pakistani Finance Minister (Shoaib)¹

Washington, April 19, 1966.

After I explained broadly our concerns about Tashkent and military expenditures, Shoaib made the following points.

1. He will take up with George Woods two multinational projects on which Pakistan is prepared to move now with India: the export of natural gas to India from the fields of West Pakistan; and the joint development and exploitation of the waters of the Ganges-Brahmaputra-Teesta rivers. Shoaib says that, in the past, the Indians were unwilling to become “dependent” on Pakistan gas. And they have also been unwilling to discuss the joint development of the river waters. He hopes George Woods can interest the Indians in proceeding on these two fronts quietly but promptly.²

2. He will also take up with George Woods a possible World Bank role as third party in India-Pak negotiations to limit over-all military expenditures between the two countries. He says Ayub is prepared to settle for Pakistan military expenditures between one-fourth and one-third of Indian military expenditures.³ In any case, Shoaib has been financing the increase in Pak military expenditures by increased taxation and is determined to preserve the level of development expenditure in Pakistan, earning the additional foreign exchange necessary for additional military expenditures by a special export drive. But this assumes that the old economic aid level to Pakistan will be restored.

3. Shoaib says the biggest single thing that we could do to restore U.S.-Pak relations would be to finance the steel mill.⁴ He will be seeing Harold Linder as well as Dave Bell on this. The management will be done by the National Steel Company of the U.S. The energy will come from natural gas. The raw material will be mainly U.S. scrap metal. National Steel, as well as Shoaib, believes it will be an efficient operation, making a profit.

WR

1. Source: Johnson Library, National Security File, Country File, Pakistan, Vol. VI, Cables, 1/66–9/66. Confidential.
2. Rostow sent a copy of this memorandum of conversation to the President on April 19 with a covering note in which he stated that Shoaib’s message was important if true. He noted that in the past Pakistan had insisted upon movement on the Kashmir problem before considering economic collaboration. Rostow suggested that George Woods of the World Bank be encouraged to follow up on the constructive moves Shoaib had indicated Pakistan was prepared to make and lean on the Indians to cooperate. (Ibid.)
3. Shoaib discussed Pakistan’s military budget with Secretary McNamara on April 22. In the course of the discussion, Shoaib pointed to Pakistan’s pressing need for spare parts for U.S.-supplied aircraft and tanks. (Memorandum of conversation; Washington National Records Center, RG 330, OSD Files: FRC 77–0075, Memos of Conversations Between Sec McNamara and Heads of State (other than NATO))
4. Shoaib also discussed financing for the Karachi steel mill with Under Secretary of State Mann on April 25 in the course of a wide-ranging discussion. (Telegram 1522 to Karachi, April 25; National Archives and Records Administration, RG 59, Central Files 1964–66, POL 7 PAK)