57. Memorandum From the Deputy Assistant Secretary of State for East Asian and Pacific Affairs (Gleysteen) to the Under Secretary of State for Political Affairs (Habib)1
SUBJECT
- ROC’s Request for Fall-Out FMS Credits
As you guessed, I’m against any fall-out funds for the ROC this year. Despite Jimmy’s pitch,2 the ROC is not hurting for money; they have a $1.4 billion trade surplus with us, rapidly rising foreign exchange reserves, and ready access to foreign commercial loans. Our decision is, however, political not economic. We want to convey a signal by continuing the phase-out of FMS credits. We do not want the ine [Page 230] vitable public knowledge of an additional credit from fall-out funds appearing on the eve of the Secretary’s meeting with Huang Hua. Our failure to provide a couple of million extra credits will not become an issue on the Hill.3
- Source: Department of State, Papers of Philip C. Habib: Lot 81 D 5, Box 2, PCH Official Correspondence, June 1977–March 1978. Confidential. Drafted by David G. Brown (EA/ROC) on September 16 and cleared by Ericson (PM).↩
- Shen’s September 12 letter to Habib, attached but not printed, requested additional money for foreign military sales credits to help finance ROC purchases of U.S. military equipment.↩
- A letter dated September 20 for Habib to send to Chen is attached but not printed. A copy of the signed letter is also attached. The letter informed Shen that although it “will not be possible to supplement this sum [$35 million in foreign military sales credits for the ROC in FY 1977] with fall-out funds this year, the Administration has budgeted $25 million in credits for FY 1978. The size of our credit allocation is, of course, not a limitation on your continuing access to military equipment required for your defense.”↩