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

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

Washington, June 2, 1966, 4:30 p.m.

Secretary Rusk recommends we take another step in our relations with Pakistan.

In your conversations with Ayub in December and with Shoaib in April, you reached a general understanding that we would resume economic assistance if they would meet certain political conditions.

The Secretary now thinks we should move forward with our side of the understanding.² He proposes that we:

a. Release $70 million for commodity aid about 1 July.

b. Indicate a readiness to release a second slice of $70 million six months later, if our relationship is proceeding satisfactorily.

c. Meet our obligation on the Karachi steel mill ($85 million Ex-Im and $35 million from AID if the Paks decide to go ahead and are ready to meet any additional costs resulting from revised estimates.

He recognizes that going ahead now on this six months’ basis is to take a calculated risk, because the Paks have not yet fully met the political conditions we set.

• —They are not bringing military spending down as far as we recommended, though they have come down some.
• —They may be planning limited new agitation in Kashmir.
• —They have paraded—not just accepted—Chicom military equipment.
• —They are negotiating hard on reopening the small atomic energy detection stations, [1 line of source text not declassified].

We can have no illusion that, by resuming aid, we will now get all we want.

The Secretary thinks the risk is worth taking. George Woods urges that we go ahead: it fits his strategy with the Paks.³ He will be working on them steadily to get military expenditures down further. Bell concurs.

Before making my recommendation to you, I sought independent answers to the following questions:

1. How serious is Pakistani involvement in disturbances along the Indo/Pakistani border?

The CIA prepared a detailed memorandum⁴ which concludes:

• —With respect to the Mizo and Naga tribal rebels (whom the Paks aided before Tashkent) there is no conclusive evidence that this aid continued after Tashkent. The possibility of some limited assistance cannot be precluded. If so, it has been very limited.
• —With respect to infiltration into Kashmir, some intelligence and clandestine operatives may have been sent across into Kashmir in early May. They were not armed for combat, and their number is probably fairly small. This is not good business; and we shall have to watch it carefully; but I do not think it sufficient to keep us from going forward along our track with Ayub.

2. In the matter of the small stations, is Ayub violating his pledge to you that he will not do things contrary to U.S. vital interests?

I have looked carefully into the terms of the negotiation. It appears that what they are negotiating hard about concerns legitimate Pak interests in the installations; [1 line of source text not declassified]. This is a trend in installations in many parts of the world. I conclude it is not a violation of Ayub’s pledge to you.

3. I have talked with George Woods. He is getting deeply into the business of military expenditures in both India and Pakistan. The Pak military budget for this year should be less than it was for last year. Bringing down the military budgets of the two countries will be a process rather than an immediate decision, interwoven with any constructive diplomacy we can generate between India and Pakistan. I conclude in this matter that we are doing at the moment as well as we could expect; we are lucky to have George Woods in the middle of the affair.

4. Can we hold up this package or any part of it for Gene Locke to give as an initial gift to the Pakistani?

Shoaib must present his budget on June 9. With knowledge of our aid package, he can underline the utility of the U.S. relationship and implicitly demonstrate the virtues of restraint towards India. Without knowledge, he cannot put forward a bold development budget. Moreover, Ayub, without a public announcement of our assistance, will have difficulty holding back his radicals, who are progressively undermining Tashkent and creating an atmosphere in which a meeting with India will be politically unviable for him. An affirmative aid decision will strongly, if indirectly, support the voices of reason and moderation within the government of Pakistan. And it is urgent that this element be added to the Pak military equation.

I then probed as to whether we could leave the Karachi steel mill for Gene Locke to give them.

Macomber considers this of uncertain value. It is a substantial project, but it is quite uncertain at the moment. National Steel is reviewing the cost figures, and these will not be clear until six weeks to two months from now. After these figures are known (which may boost the cost to some $70 million foreign exchange over what we are planning to contribute), there will have to be negotiations between the government of Pakistan, the U. S. Government, ExIm, etc. The Paks may even have to do some negotiating with West Germany for some part of the overrun. It is, therefore, far from neat or clean. Indeed, there may be some backfires because costs will have risen and we will not be increasing our contribution to cover them fully. Ambassador Locke perhaps would be better out of this one.

My feeling is that Gene Locke will not need any presents. In his person and his connection with you, he is the greatest present you could give Ayub.

On balance, therefore, I recommend you approve the Secretary’s proposal. I believe it is right that we release our aid on a 6-month basis. This will give us an opportunity to see how the politics of the situation evolves and retain continuing leverage.

I also believe we should consider, shortly after the release of this package, a letter to Ayub like the one you have just dispatched to Mrs. Gandhi.

Walt

Should we prepare an Ayub letter?⁵

Yes

No

1. Source: Johnson Library, National Security File, Country File, Pakistan, Vol. VI, Memos, 1/66–9/66. Secret. A handwritten note on the memorandum reads, “Rec’d 6 pm.”
2. Rusk outlined his proposal in a May 30 memorandum to the President. (Ibid.)
3. David Bell sounded out Woods on June 1 on the question of proceeding with program loans on Pakistan. (Memorandum from David E. Bell to Walt W. Rostow, June 1; ibid.)
4. Not found.
5. Johnson checked this option.