341. Telegram From the Department of State to the Embassy in Korea1

1029. 1. Department believes that in this crucial period of ROK-Japanese negotiations careful consideration should again be given to possibility of US initiative which might help to drive agreement over the top. Although Department has always been willing consider useful initiatives enhancing possibilities of agreement, conclusion to date has been that any sign of US “interference” would be counter-productive. It remains of utmost importance that terms of settlement be arrived at by two parties on their own responsibility. Care must be taken to avoid any appearance that Japan settled at behest of US, and on Korean side we should carefully avoid appearance of inducing ROKG to “knuckle under” to Japanese.

2. Serious obstacles to full and final agreement nevertheless lie on Korean side. Korean Opposition, recognizing ROKG’s lack of popularity, has seized on ROK-Japan negotiations issue to try to bring Government down, playing in part upon suspicions that Kim Chong-p’il and others have, or hope to, profit personally from settlement. Underlying political maneuverings and emotional attitudes appear to be two widespread fears: 1) fear of Japanese domination, but little appreciation of economic benefits of normal relationship with Japan, and 2) fear that with normalization US would attempt shift burden of Korea to Japan and perhaps “abandon” Korea. Overcoming first problem requires education and experience on which only limited gains possible in short time. We wonder, however, if there is some action US might take at this time which might help significantly to dispel fears that we hope to unload Korea on Japan. New Cabinet’s professed intention resume negotiations (Embtel 1453)2 may offer favorable opportunity for such action.

3. One possible action for your consideration and comment with understanding that it has not been fully cleared in USG would be: Ambassador Berger would inform ROKG that USG would be prepared to announce upon successful conclusion of ROKG-GOJ negotiations that subject to parliamentary ratification of settlement USG will support [Page 759] an expanded Korean capital development program, specifically (1) Take initiative in seeking to form international aid consultative group for Korea to broaden, enlarge and coordinate capital assistance to Korea; (2) Establish a $100 million AID development lending program with goal of allocating funds for development projects and capital goods import programs over a two-year period, in consultation with other lenders; (3) Continue basic economic support of a sustained Korean financial stabilization policy through adequate provision of Supporting Assistance and PL 480. Development lending program assumes, of course, unprecedented Korean effort in development acceptable projects which US, Japan, International Agencies and other members of consultative group could help finance. Expansion of US development lending also assumes parallel expansion of availability additional local funds. Recognizing profound effects on stabilization effort and counterpart allocations of such an expanded inflow of capital, we need your assessment advantages and disadvantages such USG public commitment.

4. In suggesting to Koreans possibility of offer, we would hope that ROKG would see it as means to obtain needed additional popular support to help conclude ROK-Japan settlement, and to overcome current lack of confidence in government. We recognize of course danger that ROKG, instead of being encouraged by our offer to move to immediate settlement, might bargain for more favorable offer, or even worse, regard offer as substitute for Japan settlement. Fact is, however, utility of offer is dependent, as practical matter, upon establishment of new relationship with Japan and availability Japanese resources, especially as far as Korean trade expansion prospects concerned. We must be prepared therefore to say offer will not stand unless settlement reached. Embassy Tokyo meanwhile must appraise impact this type offer on Japan’s motivations in settling affairs with Korea, and possible Japanese fears that we intend to “manage” their aid.

5. Request comment and suggestions from both addressee Embassies.3

  1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, POL JAPAN–KOR S. Confidential; Limdis. Drafted by Barnett, Fearey, Vettel, and Norred; cleared by Bacon, Green, and Poats; and approved by William Bundy. Also sent to Tokyo.
  2. Telegram 1453 from Seoul, May 11, contained comments made by newly appointed Prime Minister Chong Il-kwon outlining the aims of the new Cabinet, including his statement that “ROK-Japan talks will be actively pursued.” (Ibid., POL 15–1 KOR S)
  3. In telegram 1521 from Seoul, May 21, Berger expressed doubt that the aid package would promote a settlement at this time. He noted that with or without a settlement the Koreans have been assured of U.S. aid, so the proposed package would not overcome the twin barriers of insufficient popular support and the precarious position of the government presently hindering achievement of a settlement. (Ibid., POL JAPAN–KOR S) In telegram 3393 from Tokyo, May 16, the Embassy expressed its belief that the Japanese would be receptive to the proposal and would have no major difficulties with coordinating assistance efforts. (Ibid., POL JAPAN–KOR S)