122. Memorandum From the President’s Assistant for National Security Affairs (Kissinger) to President Ford, Washington, May 7, 1975.1 2
THE WHITE HOUSE
WASHINGTON
ACTION
May 7, 1975
MEMORANDUM FOR: THE PRESIDENT
FROM: HENRY A. KISSINGER [HK initialed]
SUBJECT: FY 76 Development Loan Funds for Indonesia and Morocco
State’s memorandum at Tab A requests your approval to restore $20 million in FY 76 development lending for Indonesia, and $5 million for Morocco. These had been excluded by OMB on the grounds that military assistance would be preferable for the political impact sought and that the Congressional impact and opportunity costs of providing balance of payments assistance to countries not needing it would be adverse. These restorations would be accomplished by reprogramming $25 million in development loan funds from the present $100 million level for India in order to remain within the total AID FY 76 development loan budget you approved.
In spite of an overall balance of payments surplus, individual incomes in Indonesia are low. Since oil revenues will not affect the economy for several years, a gesture now will provide political leverage which a much larger sum could not attain later. The destabilization of Indochina through recent events, together with the shift of several Southeast Asian nations closer to Peking, makes it essential for us to maintain good relations with Indonesia. The MAP levels are now being reviewed following Congressional appropriation action and may not permit much military aid, so we will need to rely heavily on economic aid ties.
Reprogramming is recommended for Indonesia to enhance our credibility with the Suharto Government. Several months ago all economic aid to Indonesia for FY 76 was tentatively eliminated except for a small amount of technical assistance. Last year we reduced our economic assistance from $176 million to $70 million — a drastic [Page 2] reduction from the over $200 million annual level of the previous several years. This cutback, which was deemed necessary in view of Indonesia’s oil revenue windfall last year, accompanied Congressional action to reduce FY 75 military assistance (final appropriations may be only half our original request to Congress) and to exclude Indonesia (as an OPEC member), from trade preferences under the new Trade Act.
These actions, coupled with Indonesian pessimism over the reliability of U.S. intentions toward Indonesia, have led the Suharto Government to fear that the U.S. has downgraded Indonesia’s importance as a major stabilizing force in Southeast Asia, and that the U.S. no longer intends to help Indonesia toward a more active regional role. President Suharto probably is also puzzled at our reduced support in view of your assurances to him last October that we intended to seek “a substantial level of U.S. military and economic assistance for Indonesia.” As a result, Ambassador Newsom has lately encountered reduced access to Indonesian officials, and the Indonesians have been less cooperative on international issues such as the ICCS in Vietnam. Your recent invitation to President Suharto to visit Washington next July will help reverse this trend, but we need to reinforce your invitation by restoring some level of economic assistance.
The restoration for Morocco is proposed in order to fulfill our assurances to King Hassan to help Morocco meet economic and military requirements. These assurances were offered to encourage the King to continue a broad and productive relationship with the U.S., embracing U.S. access to military facilities in Morocco, U.S. interest in maintaining Morocco’s pro-western political tendency as a balance to more radical regimes in North Africa, and a constructive Moroccan attitude toward the Middle East settlement negotiations. In addition to pressures for more military hardware.
Reduction of the FY 76 loan program for India from $100 million to $75 million would bring it to the FY 75 Congressional presentation level of $75 million.
OMB maintains its opposition to these-restorations and its view that the political impact sought can better be obtained through military assistance.
RECOMMENDATION
That you approve restoration of $20 million for Indonesia and $5 million
for Morocco, and reprogramming of the necessary $25 million from the
present $100 million FY 76 program for
India.
Approve [GRF initialed]
Disapprove
- Source: Ford Library, National Security Adviser, Presidential Country Files for East Asia and the Pacific, Box 6, Indonesia (2). Secret. Sent for action. Ford initialed the approve option on May 9. Tab A is attached but not published. On May 9, Davis informed Springsteen of the fund reallocation. (Ford Library, National Security Adviser, Presidential Country Files for East Asia and the Pacific, Box 6, Indonesia [2])↩
- Kissinger recommended reallocating $25 million of financial aid to Indonesia and Morocco.↩