507. Memorandum From Edward Hamilton of the National Security Council Staff to President Johnson1


  • Wheat for India

Herewith Messrs. Freeman, Gaud and Zwick recommend a $169 million PL–480 agreement with India. Zwick’s memorandum (Tab A)2 is a concise summary of the proposal. The more detailed Freeman/Gaud memorandum is at Tab B.3

This agreement would provide for the second half of calendar 1968. Last December you approved a $216 million bargain providing 3.5 million tons of grain to cover the first half. This agreement will provide another 2.3 million tons of grain, along with small amounts of tallow, milk and tobacco. Total: 5.8 million tons of grain to India in 1968—about the same as last year.

The development case for providing the food is strong. The Indians have moved on all the self-help measures called for in the December agreement and are ahead of schedule on the important ones. The new wheat would go primarily to build buffer stocks to back the CCC-type price support operation we have been pushing the Indians to adopt. Taken with India’s own bumper grain crop, this will provide the best grain supply situation and outlook in recent Indian history. However, this agreement gives us little new political leverage because the Indians aren’t in the dire need of the famine years.

The most compelling argument for the agreement is our domestic wheat situation. Despite reduced acreage the 1968 U.S. crop will be another record, and the wheat price has now dipped under $1.25 for the first time in a decade. Freeman frankly does not expect to reach our wheat export target of 750 million bushels for this crop year. But this agreement is the core of any fighting chance he may have.

[Page 1003]

Commercial Purchases

India now plans to acquire 1.5 million tons of grain in 1968 beyond the amounts we provide through PL–480. At least one million tons of this will come in food aid from other donors. This leaves 500–700,000 tons to be bought on the world market. We have pushed hard to get the Indians to buy as much as possible from the U.S. So far this year they have bought 146,000 tons from us (and 200,000 tons from others). We hope to get another 200,000 tons or so.

Cuban Problems in the Wings

As you consider this, you should know that we have evidence of a new transaction by an Indian firm in Cuba. An Indian engineering company has contracted with the Castro Government to do the plans for a metal refinery which will probably process products of an expropriated American mine. The Indian involvement is entirely private, so there is no legal restriction on PL–480 or other aid. But it is hard to believe that the aid-haters on the Hill would let this one slip by if it caught their attention. The deal has been in the Indian press but not, so far as we know, in the American papers. It may pass unnoticed, but it may also give us real trouble.

We have made it clear to the Indians that we are unhappy about this, and that the Congress is likely to be more so. They have listened politely and explained that it is a private transaction over which the Government has no control. In fact, of course, the GOI could make it practically impossible for the firm to go ahead. But the Government would take a lot of political heat. State’s judgment—which I share—is that the Indians aren’t about to pay that political price to safeguard wheat they don’t really need for immediate consumption. If we push them and make the wheat a condition, my guess is the only effect will be that we won’t move the wheat.

[Page 1004]


I recommend you approve the agreement.


Agreement approved

Agreement approved but hold off announcement until Congress is out of town


See me

  1. Source: Johnson Library, National Security File, Country File, India, Vol. XI, Cables, 2/68–10/68. Confidential. A handwritten note on the memorandum indicates it was received at the LBJ Ranch on August 6 at 8:30 a.m.
  2. Reference is to an August 3 memorandum from Zwick to the President entitled “P.L. 480 Agreement for India.” (Ibid.)
  3. Dated July 26 and entitled “PL 480 Program for India.” (Ibid.)
  4. Johnson checked the disapproval line. A handwritten note on the memorandum by Jim Jones, reads: “Hold this long as possible then disapprove”; this note is apparently a quote from the President. On August 7 Freeman, who had been informed of the President’s decision by Hamilton, sent a memorandum to the President expressing his concern over the decision. He noted that the 2.3 million tons of wheat involved was important to India to build up its buffer stocks of grain, but he argued that the proposed grain sale was critically important to the United States in light of the record U.S. wheat crop. (Ibid.) Bowles saw the proposed P.L. 480 agreement as an opportunity to reverse the gradual erosion in U.S.-Indian relations. In an August 29 letter to Rusk, Bowles stated that if the President had decided to disapprove the P.L. 480 agreement, “it is a blow that could scarcely come at a worse time.” (Department of State, NEA/INC Files: Lot 72 D 132, AID 15–1, PL 480 Generalnote