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

321. Memorandum From the President’s Special Assistant (Rostow) to President Johnson¹

Washington, April 20, 1966, 11:15 a.m.

The next step in shoring up the Pakistan side of our affairs in the subcontinent is to decide what kind of aid deal we offer. You established common political ground with Mrs. Gandhi and told her we would help Indian development within our means if her planners would come to terms with the World Bank on economic policy. Ayub’s political performance since he was here, while not all bad, leaves us uncertain as to whether we are on common ground. So it is harder to decide where to go on aid. But Finance Minister Shoaib is here talking with the Bank this week, and we must make at least a tentative decision.

The choice is between two courses, which the attached paper from State² spells out in more detail:

1. Taking a hard line, we could promise Shoaib nothing. We could tell him that Pakistani political performance still does not justify the full-scale development aid that its economic performance could warrant. The Pakistanis have received Liu Shao-chi and, worse, substantial quantities of Chicom tanks and jet fighters. Although they agreed to troop withdrawal at Tashkent, they blocked further progress at the Indo-Pak ministerial meeting. The press still uses us as a whipping boy. The government still has not reopened our closed facilities. Until we see more compatible behavior, we can not move on any aid but a limited holding-operation.

2. Meeting Ayub half-way, we would accept a Pak-Chicom relationship on about the present plane, even including modest Chicom military aid. We would tell Shoaib (as State recommends in the attached memo) that we are ready to resume development aid through the World Bank consortium at about the FY 1965 level of $140 million in non-project loans provided that Pakistan: limits defense expenditures (we will ask the same of India), moves ahead with India, respects our Asian interests and cooperates with us to a reasonable extent and accepts World Bank terms.

The central issue is how you want to treat Ayub. Do you feel in the light of your talk with him that you must continue to stonewall to bring him around? Or do you feel that you have a satisfactory understanding with him on limiting his relationship with Communist China and promoting peace with India that permits you now to meet him halfway?

State’s “Recommendation 1” provides an offer to meet Ayub halfway on grounds that, if we do nothing, Ayub will have no choice but to move closer to China. However, it spells out strong enough political conditions that Ayub would still have to accept that it does not get us back into full-scale aid until we hear from him. Alternative would be saying nothing now.

State’s “Recommendation 2” offers a six-month PL 480 deal now. The Alternative would be more measured pace, promising to discuss a new deal when we have a clearer idea of requirements.

State’s “Recommendation 3” is to say that, if all goes well, we would be ready to talk about project loans (and more PL 480) in December. The alternative is to leave this carrot for later.

My own feeling is that “Recommendation 1” gives us enough control to justify going that far now. It still keeps our aid in six-month slices. But I would prefer the alternatives to the other recommendations. I do not believe we ought to sacrifice the fruits of your painful but successful tough posture of the past year by rushing into new promises until we hear again from Ayub.³

Walt ⁴

1. Source: Johnson Library, National Security File, Country File, Pakistan, Vol. VI, Memos, 1/66–9/66. Secret.
2. Reference is to an April 19 memorandum from George Ball to the President entitled “An Aid Deal for Pakistan.” (Ibid., Memos to the President, Walt W. Rostow, Vol. I, 4/2–5/26/66)
3. There is no indication of a response from Johnson on the recommendations, but see Document 323.
4. Harold Saunders signed for Rostow.