18. Telegram From the Embassy in Korea to the Department of State 1

12. I spent July 2–3 in Chinhae with President Pak and had an opportunity for frank and friendly discussion on following matters.2

Economic Stability: I listed favorable economic developments and prospects since devaluation,3 i.e., reversal of capital flight, record-breaking exports in June, better than anticipated earnings from US/UN forces, improved KFX position, leveling off of prices within five weeks, bumper barley harvest, large food imports this year to provide reserve, and good rice crop prospects. Korea now had another opportunity to build on a solid economic foundation if wise policies were followed, but if inflationary policies again resumed there will be neither economic nor political stability, and he would have nothing but renewed [Page 39] domestic trouble in future. Urged him especially to keep a tight rein on Chang Ki-yong4 and Min. Agriculture.
U.S. Assistance: President asked me to comment on requests made by Chang Ki-yong to Killen, and I ticked them off:5
No prospect of additional SA this year;
Development loans for fertilizer plants would be sympathetically considered along with any other good projects;
Buying POL from Ulsan refinery for ROK and US forces presented difficult problems for us owing to world-wide policy, but matter was being studied;
Future of MAP transfer program under study, did not believe it would be suspended, but may be amended to provide for MAP funding of raw materials;
Request for support for large highway development program was new request. It was under study, but not likely to be given high priority;
Increased Korean Exports to Viet-Nam. In reply to his request for waiving “Buy American” policy in order to permit use of U.S. AID dollars to pay for Viet-Nam imports from Korea, I said our policy was likely to be flexible. Responsibility for finding items needed in Viet-Nam rested with Koreans, and I urged that a vigorous effort be made to sell in this market.
ROK-Japan: President said if U.S. could involve itself more openly and actively in the negotiations it would make it possible for him to overcome domestic, political and student opposition. Korean fear of Japanese economic domination, fear of being deserted by the U.S. and fear of “deals” between Korean and Japanese in respect of use of $600 million were real however unjustified. If U.S. would take initiative to form a consortium of consultative aid group and make long-term aid commitment to Korea it would be of immeasurable help in dealing with Korean fears. He appealed for Secretary Rusk to involve himself directly in talks with Japanese and Koreans to work out a solution on these lines by the end of this year. I said Dept anxious to be helpful and we are now exploring with Japanese and Germans possibilities for a new approach to ROK-Japan settlement on these lines. It unlikely Secretary would commit himself to direct involvement unless and until agreement reached beforehand. Meantime most hopeful line of attack was improved Japanese purchase of Korean exports. Reports from Japan suggested some progress might be made in this direction and we were doing our best to encourage it.
Martial Law: I urged him to lift martial law. I reminded him that Embassy had predicted student trouble week of June 1 when Kim Chong-pil, General Min Ki-shik and others were saying that gov threats to crack down on students had broken the back of the student demonstrations and that agitation would subside. I predicted that if his govt tried to bull-doze through the Assembly student control law, there would be most serious trouble in Assembly and in country. I urged him to support Assembly Speaker’s efforts to develop agreements between govt and opposition moderates and to merge his own and PriMin’s separate effort with those of the Speaker. I said that General Min Ki-shik’s view that he could force these laws through the Assembly under martial law were dangerous and doomed to failure. This approach was opposed by every sensible person and by many of the commanding officers in the armed forces. I said General Min’s bull-dozing and erratic behavior had lost him the confidence of General Howze and U.S. Govt.
President replied that he was aware of dangers and did not plan to try to bull-doze the laws through the Assembly under conditions of martial law. He and Chong Il-kwon were working together on this matter and would work with the Speaker of the Assembly in whom he had great confidence. They hoped to get agreement in principle with opposition that Assembly would pass such laws to deal with the possibility of renewed student and press agitation. Then he would lift martial law. I gathered from this and from a separate conversation earlier with PriMin that they were now engaged in feeling out the opposition, and testing how far they can go in passing restrictive legislation.
Kim Chong-pil: I said reports from Washington, Japan and Korea were coming in that Kim Chong-pil had stated he would return to Korea in Sept and that I was under instruction from the Dept to raise this matter with him. He said he had told Kim prior to his departure that he was to plan to stay away for a year or more and that he would look at this matter again in about a year’s time. He said he had not made any statement on this in order to save Kim’s face. I could assure the Dept that Kim would not return in less than a year.
Comment: Pak was relaxed, attentive and extremely friendly during all conversations. Only during discussion of martial law and cooperation with opposition did he become indecisive and slightly evasive. In my view he has not determined his final position on these questions. What is most worrying is that he remains particularly ill-disposed toward opposition and anti-govt press, and his tendency is to think in terms of force rather than compromise.
On economic questions I believe Pak readily appreciates importance of stabilization program and expect he will keep our views in mind when faced with inflationary tendencies on part some Cabinet [Page 41] ministers. Pak also made clear his continuing commitment to ROK-Japan normalization, but now is looking for a way to break impasse presented by student and political opposition.
  1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, POL 15–1 KOR S. Confidential; Priority. Repeated to Tokyo and CINCPAC for POLAD.
  2. In telegram 1732 from Seoul, June 26, Berger reported that Pak had invited him to Chinhae and outlined the approach he would take in discussing the possibility that Kim Chong-pil planned to return to Korea around September 20. Berger noted that he was “convinced that return of Kim will plunge this govt. and this country into another and ultimately dangerous domestic crisis.” He intended to tell Pak that Kim’s prolonged absence was “essential to internal stability” of the ROK and to ask for Pak’s assurance that Kim would not return soon. (Ibid.) The Department of State concurred, noting that Pak should be told of the importance of keeping Kim out of Korea for at least 1 year. (Telegram 1203 to Seoul, June 26; ibid.)
  3. The Korean Government announced a devaluation of the won in May.
  4. Deputy Prime Minister and Chairman of the Economic Planning Board.
  5. The specific economic requests made by Chang to AID Director James S. Killen on June 17 and 18 were detailed in telegram 1071 from Seoul, June 22. (National Archives and Records Administration, RG 59, Central Files 1964–66, POL 7 KOR S)