67. Memorandum From the President’s Special Assistant for National Security Affairs (Bundy) to President Johnson 1

SUBJECT

  • Assistance Programs for Indonesia

Attached memo from Rusk (McNamara concurs) gives joint State/AID/DOD recommendation that we suspend certain remaining aid to Indonesia, chiefly military, but continue a few minor projects (most civilian) in order to keep the door open. No new aid commitments are involved, and no public determination is needed.

We are on a sharp downward curve in US/Indo relations, largely because of the continued threat to “crush” Malaysia and our necessary opposition to it. Sukarno has now adopted a far more overtly anti-US line, which makes holding up further aid essential.

At the same time, the very fact that we’re on a slippery slope makes it all the more important not to burn all our bridges to Indonesia: (1) with Vietnam and Laos already on our Southeast Asia plate, we can ill afford a major crisis with Indonesia too just now; (2) we ought to keep a few links, however tenuous, to the Indo military, still the chief hope of blocking a Communist takeover; (3) there’s still a slim chance of Sukarno drawing back from a full-fledged push on Malaysia, and we want to keep dangling the prospect of renewed aid; and (4) we do not want to be the ones who trigger a major attack on U.S. investments there. So we urge you approve Rusk’s proposals.2

McG. B.
[Page 145]

Attachment

Memorandum From Secretary of State Rusk to President Johnson 3

SUBJECT

  • Assistance Programs for Indonesia

Action Recommendations 4

1.
That you approve certain moderate negative decisions, specifically deferral of delivery of military assistance major communications equipment and suspension of deliveries of all military-type equipment for the Indonesian police and internal security forces.
2.
That, with respect to the military training program, our Embassy explore whether the Indonesians are going to reduce or eliminate this, and work toward a quiet mutual agreement that will probably entail at least some reduction.
3.
That you approve continuation of economic and technical assistance, civic action programs, and nonmilitary training and equipment for police and internal security forces, unless and until Indonesia itself moves to alter these.

Discussion

Sukarno’s recognition of North Viet-Nam on August 10, his strongly anti-American anniversary speech of August 17, and the Indonesian landing of August 17 north of Singapore are adverse developments that should compel us to withhold major actions we might otherwise have taken under paragraph 1 above. At the same time we wish to avoid any drastic or highly publicized action that might lead Indonesia to cut off other assistance programs that we believe to be useful, or that might endanger important American private investments in Indonesia. The attached memorandum describes the situation and the proposed action in greater detail.

The Secretary of Defense concurs in these recommendations.

Dean Rusk
[Page 146]

Attachment

SUBJECT

  • Assistance Programs for Indonesia

This memorandum provides the rationale for a number of decisions tending to reduce our assistance programs for Indonesia but seeking to retain the programs still regarded as useful. These decisions can be carried out without any formal determination under the Foreign Assistance Act, which we continue to believe should be avoided.

Facts Bearing on the Situation

1.
Sukarno recognized North Viet-Nam on August 10. On August 17, Indonesia stepped up confrontation of Malaysia with a small (and apparently ineffectual) landing on the mainland north of Singapore. Most basically, Sukarno’s August 17 anniversary speech was strongly and explicitly anti-American and placed Indonesia on the side of the Asian Communists in a series of issues. It represented the most systematic, although not the most strident, expression of our growing differences with Indonesia.
2.
These Indonesian actions, as a matter of foreign policy alone, would make it wise to adjust our aid policy. The Indonesians have interpreted our statements of support for Malaysia as expressions of hostility towards Indonesia, and this has undoubtedly been one reason for their behavior. However, its roots go deeper, and the fact is that we are, at least for the time being, moving toward a different and lower level of relationships with Indonesia.
3.
From the domestic standpoint, the Tower Amendment cutting off aid to Indonesia, with no Presidential discretion, will probably be dropped if and when the foreign aid bill goes to conference. We would not plan to disclose the present decisions to Congressional leaders as it now looks, but it might become useful to have the story available if it were required.
4.
At the same time, we should seek to avoid drastic or highly publicized actions. These would tend to stimulate possibly violent Indonesian reactions that would go much further than we now wish to go in cutting off our aid programs, and more specifically, that would seriously endanger our major oil and rubber private investments in Indonesia. Basically, our programs are now largely at the point where they maintain valuable ties with key Indonesian groups but do not bolster Sukarno or his Malaysian policy. Moreover, despite his recent actions, Sukarno has not gone over to any sustained military offensive against Malaysia and there is still a possibility of a negotiated settlement probably through an Afro-Asian commission. Thus, we believe we can continue to sustain to Congressional leaders the argument that it is not [Page 147]in our interest to make a Presidential determination one way or the other as to our aid programs as a whole.

Aid Actions Proposed

1.
We can now take the following definitive negative actions:
a.
Decide not to ship any further major military assistance equipment, at least for the present. Arms and ammunition had already been eliminated last fall, and the major pending item affected would be about $8 million already funded to buy communications equipment for a basic army network connecting the major islands. This equipment would have been supplied under a longstanding commitment and would not have contributed to Indonesian capabilities in Borneo. We would now tell the Indonesians that delivery was being deferred, and—which is true—that we may well have a valid US operational requirement to ship it to Thailand instead. The shutdown would then be complete in this area except for about $100,000 per quarter of spare parts for automotive and other equipment that we believe is playing no significant part in Borneo or other anti-Malaysian operations.
b.
Decide not to ship any further military-type equipment and supplies to the National Police, including the Mobile Brigade. We have since October 1963 cut off arms and ammunition to these units also, but limited quantities of vehicles and communications equipment had remained in the program. These would now be completely withheld.
c.
Decide not to furnish any further overhaul for the Indonesian C–130’s purchased commercially under a license granted in 1960. We are now overhauling one C–130 in Georgia, and the effect of this decision would be to stop the overhaul program with the completion of this aircraft, with the result that the C–130’s would become progressively useless. They are clearly relevant to Indonesian military capabilities against Malaysia, and the British have been particularly sensitive to our actions in this area.
d.
Consider no new PL 480 Title I and Title IV commitments.
2.
The military training program is a particularly sensitive problem and was singled out for attack in the Senate debate on the Tower Amendment. We have felt that it was an important link to the Indonesian military, and this long-term asset value is still considerable. On the other hand, there are strong signs that Indonesia is slowing down, if not stopping, the nomination of candidates for the coming year. We would propose to find out what the Indonesian reaction is to this problem and how they plan to handle it. If they are in fact shutting down or eliminating it, we would necessarily go along and let the program find its own level through quiet mutual agreement. At the same time, we would try to avoid any categorical “do you or don’t you” approach to Sukarno himself or any senior civilian official since [Page 148]to do so might invite wider Indonesian action affecting programs below that we wish to keep.
3.
In addition to whatever military training would be preserved under paragraph 2, we would be continuing, and would wish to continue unless the Indonesians say otherwise, the following programs.
a.
Non-military training and support for the Indonesian armed forces under the civic action program conducted by AID.
b.
Continuation of the malaria eradication program, which is basically humanitarian and also affects the health of neighboring areas.
c.
Continuation of technical assistance, non-military training, and supply of non-sensitive equipment for the National Police including the Mobile Brigade, to preserve US influence in this important power center.
d.
Provision of instrument landing equipment for Djakarta’s airfield, provided that Indonesia permits continued US flag use at the field. This is a valid form of assistance to international civilian air traffic. However, Indonesia would have to terminate the current union boycott of Pan American.
e.
Civilian technical assistance and training programs at roughly current (and fairly extensive) levels.
f.
Completion of existing Eximbank loans for thermal and fertilizer plants, and granting of a pending $5 million credit for cotton purchases.
g.
Continued availability of PL 480 Title I sales covered by the general existing 3-year commitment, provided that Indonesia can meet the criteria of normal market purchases and an acceptable exchange rate. In practice, there is no possibility of Indonesia meeting these conditions except—and even this is remote for the rest of the year—with respect to $8 million of cotton.
h.
Continue to negotiate terms of PL 480 local currency loan agreements under previous sales agreements, but delay signature pending further political appraisal; and Title II and Title III PL 480 assistance where it provides for humanitarian programs of disaster relief and voluntary agency programs for children and the needy.
i.
Continuation of present gradual phasing out of air transport, maritime training, and navigational aid programs through AID. These are small in scale.
j.
Continuation of Peace Corps activity.

  1. Source: Johnson Library, National Security File, Country File, Indonesia, Vol. II, Cables and Memos, 5/64–8/64, [2 of 2]. Secret.
  2. A check mark on the approval line indicates that the President approved. Bundy wrote the following note at the top of the memorandum: “tell Komer &State.”
  3. The Department of State copy of this memorandum and its attachments indicate that they were drafted by William Bundy on August 29. (National Archives and Records Administration, RG 59, Central Files 1964–66, AID (US) INDON)
  4. The approval lines for all three recommendations are checked.