205. Memorandum From James C. Thomson, Jr., of the National Security Council Staff to the President’s Special Assistant (Moyers)1


  • Rice for Indonesia

I have just learned that the President has instructed the Secretary of State to move ahead on the attached proposal for the one-shot emergency shipment of 50,000 tons of rice to Indonesia under PL 480 Title IV.2

[Page 426]

This decision makes good sense. At the same time, however, I thought you—and perhaps the President—should be aware of some of the additional factors surrounding this recommendation:

There is a continuing argument between advocates of a PL 480 route and advocates of a straight export credit sale arrangement (with CCC guarantee of a letter of credit from the Bank of Indonesia). In the present decision, the PL 480 advocates prevailed on the grounds that such an arrangement would be speediest and would avoid a CCC guarantee of an apparently bankrupt bank. There is a question, however, whether this arrangement will be satisfactory to the Indos who would prefer a less conspicuous U.S. Government involvement and would probably regard the CCC route as the less conspicuous of the two.
A third route was also considered: U.S. financing of Thai rice for Indonesia. This, however, would have involved use of Supporting Assistance funds and, according to our lawyers, a Presidential Determination (under the Broomfield Amendment) that aid to Indonesia was in our national interest. Such a step would become public and would probably be an embarrassment to the Indonesians at this juncture.
The PL 480 route has some worrisome implications for the future: as you may know, cotton dealers have been attempting for some months now to obtain CCC guarantees for Indo letters of credit in order to push the sale of raw cotton to Indonesia.3 Such dealers—and their supporters on the Hill—are apprehensive that the Government may opt for a PL 480 provision of cotton, rather than straight commercial sales under CCC guarantees. Our action on rice will increase the apprehensions of the cotton people and their supporters on the Hill.

James C. Thomson, Jr. 4
  1. Source: Johnson Library, National Security File, Country File, Indonesia, Vol. VI, 11/65–5/66. Secret. Copies were sent to Bromley Smith, Executive Secretary of the NSC, and to Edward Hamilton of the NSC Staff.
  2. Rusk informed British Ambassador Dean of this decision in a meeting on March 31 and Berger informed Australian Ambassador Waller in a meeting the same day. (Memoranda of conversation, March 31; National Archives and Records Administration, RG 59, Central Files 1964–66, AID (US) 15–6 INDON and AID (US) INDON) Thomson sent Rostow a background paper describing Assistant Secretary of State for Congressional Affairs MacArthur and his staff’s briefings of key Congressional leaders about the impending decision on rice. All the briefed Congressional leaders either approved or had no objection. (March 31 attachment to a note from Thomson to Rostow, April 2; Johnson Library, National Security File, Country File, Vol. VI, 11/65–5/66) The proposal was attached, but is not printed.
  3. Komer sent President Johnson a March 28 memorandum in response to a query from a lawyer friend of the President’s, who was writing on behalf of client (a Texas cotton company and cotton growers cooperation). Komer explained that since the Bank of Indonesia was virtually bankrupt, a Commodity Credit Corporation (CCC) guarantee of cotton sales was tantamount to direct U.S. assistance. The chances of default by the bank were extremely high. To add to the problem, top Indonesian leaders like Suharto and Nasution had been saying for the past 6 months that they wished to avoid anything that looks like overt U.S. Government aid. For these reasons the Departments of State and Agriculture rejected the CCC arrangement. (Ibid., Memos to the President, McGeorge Bundy, Vol. 21, March 1966)
  4. Printed from a copy that bears this typed signature.