487. Memorandum From the President’s Special Assistant (Rostow) to President Johnson1
SUBJECT
- Indian Debt Relief
In the attached Messrs. Gaud, Zwick and Fowler you approve a U.S. role in a debt relief package for India.2 The World Bank has proposed a relief package of $100 million per year for three years. Our share would be less than $9 million per year.
In short, in return for a minor rescheduling of a 1951 wheat loan to India, this exercise would reschedule a good part of the backbreaking load of European debt the Indians now face. There must be such a rescheduling of European debt if we are to avoid a situation within five years in which all our aid to India will go to pay back European loans. Charlie Zwick’s memorandum (Tab A) is a good, concise summary of the proposal. It requires no action by Congress.
You will note in the Zwick memorandum that we have some evidence that India is making another arms deal with the Soviets. Although as a matter of law the Conte Amendment does not apply to debt relief, we would make it very clear that any suggestion of a violation of the letter or the spirit of the assurance Morarji Desai has given us to satisfy the Conte Amendment will affect our ability to provide debt relief just as it will affect all other forms of aid. I think this gives us a defensible position on the Hill if the Indians do something stupid. We still have plenty of time to reverse ourselves on debt relief if need be because the first repayments are not due until June.
I recommend you approve.
This one has a very short fuse. The debt relief meeting began today in Paris. The Japanese—who would have to forego about $20 million a year—are taking a very strong position against the principle of debt relief and they have some support from the Italians. The World Bank needs our help if there is to be any chance of turning the Japanese around. If you approve, we need to let our negotiators know this afternoon.
[Page 953]My apologies for the rush. We have spent almost a week digging this out of the Treasury.