4. Memorandum From Secretary of State Rusk to President Johnson 1

The Problem

In the light of Indonesia’s active opposition to Malaysia, whether a Presidential Determination on aid to Indonesia should be signed.

The Situation

Although Sukarno will avoid open warfare, he continues his policy of “confrontation” aimed at “crushing” Malaysia and makes no secret of his intention to support a guerrilla insurrection in North Borneo.

At the same time, the Indonesians continue to explore with the Thais and the Filipinos the possibilities of negotiations to end the dispute, including a meeting planned for early January between Sukarno and Macapagal.

Up to the period of full “confrontation”, the United States maintained a minimal aid program in Indonesia designed, first, to strengthen anti-Communist elements for the battle that will follow Sukarno’s departure, and, second, to give us a foot-in-the-door influence on Sukarno’s policies and for such benefits as the recent oil agreements.

With the advent of full “confrontation”, however, we have strongly opposed Sukarno’s policies—by warning the Indonesians that a direct attack on Malaysia would bring UN action with the US aligned against them; by halting negotiations for new PL 4802 programs and for new aid to support economic stabilization; by cutting all weapons and ammunition from existing programs; and by discontinuing the training of Indonesian officers in courses related to guerrilla activity.

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A summary of action taken on aid is contained in the following table:

1963 Requested for 1964 Present
AID-technical assistance to civil groups, police and officers engaged in civic action, and malaria eradication $19.6 $29.4 $12.9
MAP-weapons, communications, training $16.6 $16.4 $ 2.1
Loan support for stabilization $17.0 $40.0 0.0
TOTAL $53.2 $85.8 $15.0

Recommendation

Our recommendation is against completely cutting off aid at this time. Doing so would not, in our judgment, change Sukarno’s behavior, but would wreck the Thai and Filipino efforts at reconciliation. It would also trigger a violent reaction. In all probability, Sukarno would seize the $500 million American oil properties, encourage Communist hoodlums to burn our Embassy, and break diplomatic relations—all of which could well be followed by UN action involving the United States or even our obligations under the ANZUS treaty. These violent actions may eventually come in any case, since we continue to oppose Sukarno’s “confrontation” policies. But we should see that it is Sukarno that gets the full onus.

What we do recommend is a policy of very tight control over all aspects of both aid and trade with Indonesia, with progressive cuts in our aid programs as the situation and Indonesian behavior warrant.

The primary disadvantage of this policy is the risk of domestic criticism of continuing aid and friendly relations with Sukarno at this time. In addition, any aid to Indonesia will produce continuing resentment from the United Kingdom and from Malaysia, and continuing pressure on us by them. It is also possible, though not probable, that even the very limited aid we propose may lead some Indonesians to believe that we are not firm in our opposition to their policy of confrontation.

The advantages, in ascending order of importance, are that we (1) preserve our foreign business investments in Indonesia, (2) continue strengthening anti-Communist elements within Indonesia as long as possible, (3) maintain for the time being US presence and foot-in-the- door influence, which exercises at least some restraint on the Indonesians and puts us in a position to take advantage of any opportunities for steering their policies into more constructive channels, and (4) avoid [Page 7]the onus of triggering a break and putting the responsibility for any violent action directly on the Indonesians.

Under this policy, we would for the time being:

1.
permit 40,000 tons of PL 480 rice, which you recently approved, plus small Title II and III programs, to continue;
2.
continue the reduced 1964 AID program;
3.
continue the reduced 1964 MAP program;
4.
delay decision on other aid, PL 480, and related matters as long as possible, making decisions in the light of Indonesian behavior at the time decision is required. A recapitulation of these various programs follows:

To Be Continued, Subject to Review:

(Millions of U.S. Dollars)
1. PL 480—40,000 tons of rice, plus small Title II and III programs $ 8.5
2. 1964 AID (Presidential Determination required) technical assistance, civic action, and malaria eradication at monthly rate of $1,075,000 $12.9
3. 1964 MAP (Presidential Determination required) training (monthly rate $0.175) $ 2.1

To Be Delayed:

1. PL 480—Completion of existing three year Title I program (Decision on about $10 million needed within next month. Decision on balance required during calendar year 1964.) $36.6
2. PL480—Consideration of pending requests for new agreement to provide additional rice up to 100,000 tons. $13.5 (est.)
3. Consideration of pending development loan for rehabilitation of tin mines. $10.0 (est.)

In addition, we have warned Lockheed, first, that we would not be willing to grant export licenses for new purchases of C–130’s; and, second, that we may not be willing to grant export licenses for additional spare parts (decision due in February).

Pipeline

The Presidential Determination required by Section 620(j)3 relates only to new obligations. With respect to assistance now in the pipe- line [Page 8](funds obligated in prior years), we propose the following actions.

In the case of MAP, we have already suspended deliveries of aircraft, ships, and all weapons and ammunition. Up to now, however, we have continued deliveries of other items such as, trucks, electronics equipment, and various spare parts and consumable items (uniforms, tires, etc.) for the Indonesian armed forces, less one major long-standing project for communications in Java and Sumatra only (i.e., possibly not contributing to Indonesian capabilities against Malaysia in the foreseeable future). Preliminary analysis is that about 7.5 million dollars of such items remain for delivery at the present time, of which only a small fraction of the items directly used by the armed forces would be likely to be delivered in the near future. Weighing the impact of cut-off on Indonesia versus the consequences of delivering items that do in some degree contribute significantly to Indonesian military capability, the Secretary of Defense, in consultation with the Secretary of State, will examine the list in detail and suspend deliveries that could in any way so contribute. The Secretary of Defense will then report to you the action taken, noting any items that may in his judgment be deliverable under this criteria.

With respect to the AID “pipeline” of unexpended obligations, the Secretary of State and the Administrator of AID, in consultation with Department of Defense, will examine continually the desirability of continuing deliveries of equipment to the Mobile Brigade in the light of its geographic dispositions, leadership and other considerations and will suspend other deliveries they judge likely to contribute substantially to Indonesian military capability. Approximately $5 million in equipment for the Mobile Brigade is in the pipeline; of this, approximately $2.5 million in arms and ammunition already has been suspended. Other elements of the economic assistance pipeline, deliverable over the next two years, consisting of approximately $10 million for technical assistance, $5 million for industrial supplies and equipment, and $7 million outstanding on capital project loans, will be discharged in accordance with our commitments.

Presidential Determination

A Presidential Determination is required to implement the above policy as it relates to 1964 programs. However, we believe that this determination can be so worded as to reflect the selective policy recommended above and the provisional nature of the decisions being taken on aid matters. Two alternatives along these lines for your signature are attached at Tabs A and B.

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Gruening Amendment

One further matter concerning aid to Indonesia is the Gruening Amendment, Section 620(i) of the Foreign Assistance Act of 19644 which, in pertinent part, provides—

No assistance shall be provided under this or any other Act, and no sales shall be made under the Agricultural Trade Development and Assistance Act of 1954, to any country which the President determines is engaging in or preparing for aggressive military efforts directed against etc.

Our recommendation is that responsibility be assigned to the Secretary of State to keep the situation under continuing review and at such time as the situation may warrant, recommend to the President that he determine that Indonesia is engaged in or preparing for aggressive military action.

DR

Tab A

MEMORANDUM FOR

  • The Secretary of State
  • The Secretary of Defense
  • The Administrator, Agency for International Development

In the light of Section 620(j) of the Foreign Assistance Act of 1961, as amended, I hereby direct that the furnishing of assistance to Indonesia shall be only for such selective purposes and in such amounts as I may from time to time authorize.

Pursuant to Section 620(j), I hereby determine, subject to my continuing review in the light of developments, that the furnishing of limited and provisional assistance to Indonesia as follows is essential to the national interest of the United States:

(1)
Assistance for training Indonesian specialists, officials and military personnel in the United States;
(2)
Technical assistance to educational and governmental institutions and agencies, including police;
(3)
Assistance for malaria eradication;
(4)
Assistance in the form of equipment and training for civic action programs; and
(5)
Transportation and communications equipment for police forces.

In accordance with the provisions of Section 620(j), the Foreign Relations Committee and the Appropriations Committee of the Senate [Page 10]and the Speaker of the House of Representatives will be kept fully and currently informed of any assistance furnished to Indonesia under the Foreign Assistance Act.

Tab B

  • MEMORANDUM FOR
  • The Secretary of State
  • The Secretary of Defense
  • The Administrator, Agency for International Development

Pursuant to Section 620(j) of the Foreign Assistance Act of 1961, as amended, I hereby determine that the furnishing of limited and provisional assistance to Indonesia is essential to the national interest of the United States. I have directed that the furnishing of such assistance shall be only for such selective purposes and in such amounts as I may personally from time to time authorize.

In accordance with the provisions of Section 620(j), the Foreign Relations Committee and the Appropriations Committee of the Senate and the Speaker of the House of Representatives will be kept fully and currently informed of any assistance furnished to Indonesia under the Foreign Assistance Act.

  1. Source: Johnson Library, National Security File, National Security Council Meetings, Vol. 1, Tab 2, 1/7/64, Assistance to Indonesia. Secret.
  2. The Agricultural Trade Development and Assistance Act, enacted July 10, 1954. P.L. 480 provided for the donation of U.S. agricultural surplus to friendly governments; for text, see 68 Stat. 454.
  3. Section 620(j) of the Foreign Assistance Act of 1963, Public Law 88–205, approved December 16, 1963. (77 Stat. 379)
  4. Reference should be to the Foreign Assistance Act of 1963. (77 Stat 379)