220. Backchannel Message From the Ambassador to South Vietnam (Bunker) to the President’s Assistant for National Security Affairs (Kissinger)1

118. Subject: Viet-Nam: Assessment of Present Situation.

There has been a lapse in the periodic assessments I have submitted as it seemed redundant to report during the visits of General Haig and Sir Robert Thompson. Since my message of May 19, 1972,2 most aspects of the situation here have progressed satisfactorily, but it is obvious that the month of August will see further heavy fighting in MR 1 and the Delta.
Summary. The most dramatic change in recent weeks has been the manner in which the GVN has gone on the offensive in MR 1 and MR 2. In MR 3, An Loc has been relieved. Route 13 is finally cleared, and the situation elsewhere in the region is quiet. These very satisfactory developments must be weighed against the heightened intensity of enemy activity in the Delta and the obvious determination of the enemy to bring his last remaining reserves into MR 1. Pacification setbacks [Page 766] continue only in areas under heavy enemy pressure and the populated areas remain basically tranquil. The passage of the Emergency Powers Bill under rather unusual circumstances does not appear to have hurt President Thieu politically and the essential measures he is implementing by decree appear to be generally acceptable.3 The recession caused by the offensive has bottomed out and I am encouraged by reports of rising industrial output in a variety of fields.
The ARVN counter-offensive in Quang Tri, the effort to reoccupy northern Binh Dinh which began a few days ago, and the reopening of QL 13, which confirms the lifting of the siege of An Loc, are developments which have been most heartening to the GVN and to the population. There is an atmosphere of confidence in South Viet-Nam notwithstanding the storm clouds which loom over Quang Tri and Hue as the enemy brings reinforcements and additional units toward the battle. The Delta situation is fluid and hard to define. It is perhaps for this reason that it has received little press attention. The increased intensity of the war in Dinh Thuong, the enemy’s continued presence in Chuong Thien and the very recent step-up of activity in Kien Hoa are causes for concern however, and are proof that the enemy has temporarily succeeded in infiltrating men and supplies into these traditionally difficult areas. The nature of the war in the Delta precludes definitive battles and I am more concerned by MR 1 and the threat posed by the enemy’s build-up in the north. President Thieu is earmarking additional forces to send to MR 1 if needed. The Marines, Airborne and First Division have fought gallantly, and have been in contact with the enemy for many months. I might mention that I would not be surprised to see a step-up in enemy activity in southern MR 1 in the near future. The NVA Second and Third Divisions might well try to apply pressure on Quang Ngai in order to divert focus from the Quang Tri battle. Both General Weyand and I believe that August will be a difficult month in both the Delta and MR 1, but the enemy will be confronting ARVN forces which are well equipped, numerically stronger and more capable and more confident that they were in March. Most importantly they will be supported by U.S. firepower which will be an important if not decisive factor.
Success on the battlefield has brought an atmosphere of optimism to most of the country and the problem areas remain those in which NVA units present a threat. The handling of refugees continues to be most satisfactory. Some long-range problems like the eventual resettlement in the South of a significant portion of the former residents [Page 767] of Quang Tri will not be resolved until the current offensive abates. An interesting phenomenon is the degree to which peace is in the air. We get reports from all over the country that people expect the war to end or at least a cease fire to be declared in the near future. Henry Kissinger’s visit to Peking, the resumption of the Paris Peace Talks and of secret talks have, of course, contributed to this atmosphere. Basically, however, people are reaching this conclusion in a very subjective way. This gut feeling regarding an imminent cease fire is spurring the GVN to recapture lost ground. It is clear that the GVN does not intend to be caught napping in what might be a fast moving situation and will be resourceful in utilizing all its assets to prevent a last-minute grab by the enemy if a cease fire is declared.
Our continuing interdiction of the supply of war matériel to the North has contributed to a feeling that the tide of war has turned and has also strengthened confidence in United States support, despite a shadow of unease cast by Senator McGovern’s nomination. Domestically, the government emerged successfully from a sharp controversy over President Thieu’s request for special powers. When finally on June 28 the Senate passed the requested legislation over determined opposition, criticism of the government subsided. The measures Thieu has so far promulgated—in the fields of taxation, conscription, public order and labor disputes—have been generally accepted as essential to the nation’s defense.
The first decrees, issued July 8, affected manpower mobilization and exchange rates. The mobilization decree law exempts 17-year-olds and men in the 39–43 age group from active service unless manpower exigencies arise; all males between ages 18 and 38 are subject to active service. The only deferments will be on account of health and by reason of being an elected official. Priests, students who keep pace with their course of studies, civil servants, and certain other categories are mobilized in place, a form of deferment which places them under military discipline and makes them legally subject to active service at the discretion of the Defense Ministry.
An exchange rate Decree Law of July 8 gives back to the executive the right to establish the exchange system and rates. A Prime Ministerial decree issued the same day eliminates the use of the VN$118 rate for student remittances and government agency transactions; these will henceforth be at the new official rate, currently VN$425. An estimated VN$6 billion per year will be added to National Bank receipts on this account, offset by a scholarship program costing some VN$2 billion. On July 18, the GVN raised POL prices, with premium gasoline rising VN$12 per liter to VN$42, and kerosene by VN$6 to VN$22. Increased revenue is estimated as VN$8 billion annually. Revenues from the tax surcharges levied in May on beer, cigarettes, hotels, etc., are now [Page 768] re-estimated as VN$4 billion annually, so that the total effect of tax and exchange rate measures and the net saving on student remittance taken since the offensive began is on the order of VN$16 billion.
During the last three or four weeks, the economy has been recovering slowly from the recession precipitated by the NVN invasion. Inventories have been dwindling, the liquidity position of business improving, and in a few cases, manufacturing output has begun to rise. Industries reported on the upswing include beer, cigarettes, sugar, pharmaceuticals, and cement. On the other hand, the textile industry is still in the doldrums, as are steel, paper, and a large number of others. The recovery has brought with it some price rises, particularly in perishables, perhaps a precursor of increasing inflationary pressures later in the year.
  1. Source: Library of Congress, Manuscript Division, Kissinger Papers, Box TS 44, Geopolitical File, Cables, 24 June–29 August 1972. Top Secret; Sensitive; Eyes Only; Immediate.
  2. Bunker’s May 19 message is attached to Kissinger’s May 19 memorandum to the President as Tab A; see Document 165.
  3. President Thieu signed the Emergency Powers Bill into law on June 27.