LETTER TO CHESTER BOWLES FROM ALLEN W. DULLES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80R01731R000400470018-2
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 23
• Document Creation Date: December 15, 2016
• Document Release Date: March 18, 2002
• Sequence Number: 18
• Publication Date: June 16, 1956
• Content Type: LETTER

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ER 8-3228/a
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OMG}NAt CL ?? '7
EXs F +iL- j ~~ PIiY
SEASON
Essex
Connecticut
I certainly apprea#at, your
sending as a copy of your am- on
South Asia with your note of MW 29.
Your obser~ratis s are most in-
teresting and I wort lake very such
to talk with you ab t at your
convenience. If you ~a to be is-
Washington time sand please let
as know and as arrsz e a get-
togtber here. Otherwise, next time
I awAw a trip to Now York I will
try to see you there.
Paitbfully, W : v~ t
Allen W. Dulles
Director
Jun 56)
a~
l II sh
ip
l - Reading
ER (w/tasie)
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CHESTER BOWLES
ESSEX. CONNECTICUT
May 29 , 19 56
Dear Allen:
The attached memo was hurriedly written at
the urgent request of some friends on the Hill.
I would like to talk to you about it sometime.
The situation seems to me likely to become increas-
ingly dangerous.
With my best wishes.
A-Lt
Chester Bowles
Mr. Allen Dulles
Central Intelligence Agency
2430 E Street, N.W.
Washington, D. C.
CB.sh
encl.
moo 'vv
-0 'L
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For several years now the world situation has been crying for
a balanced American foreign policy that takes into account, not only
the demands of military defense, but the equally urgent requirements
of economics, politics, geography and ideology.
This confident island informal memorandum dealing with South
Asia and written hurriedly at the request of several members of
Congress describes a classic example of what may occur in a specific
area when these broad dimensions are ignored. It also offers some
suggestions on how the missing balance may be restored.
It is not surprising that many members of Congress have become
disenchanted with foreign economic assistance. In large measure their
negative reaction grows out of the fact that many of the promises
which have been made in behalf of such aid have never been achievable.
Foreign economic assistance, for instance, will not in itself
buy friends, create reservoirs of gratitude, or automatically turn
hungry Asian peasants into advocates-of the American way. What it
will do if administered ably, firmly,. and tactfully and if it is
adequate in amount, is to make it possible for the more capable Asian
and African governments to create the foundations for the rapid
economic growth which is essential to political stability--to create
the conditions under which free governments can survive in their own
right.
To those who suggest that we cannot afford constructive economic
assistance--only military defense--may I suggest that history will
make no similar distinction between the means by which our adversaries
seek to expand their power and influence. Whether a nation loses its
freedom by military aggression or by political and economic absorp-
tion will be considered quite beside the point.
To keep South Korea out of Communist control we spent $1+5
billion in military equipment in addition to 30 thousand young
American lives. The non-military programs which are sorely needed now
to help create the indigenous economic and political strength which
alone can keep South Asia out of the Soviet orbit calls for less than
5% of this sum during the next five years.
May 28, 1956
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Confidential
From: Chester Bowles DATE: May 28, 1956
SUBJECT: Why the Foreign Aid Program in its Present Form
Decreases Rather Than Increases the Outlook for
Stability in South Asia.
SUMMARY
(1) Our interests in South Asia (Afghanistan, Pakistan, India
and Ceylon) are.-best served by the development of independent, viable,
politically stable nations able and willing to resist any effort on
the part of Moscow or Peking to dominate their affairs by whatever
means, cooperative and friendly towards the United States. (Communism
in China now threatens the balance of power in Eurasia; Communism
in India would totally upset the world balance.)
(2) Through our present policies in this part of the world,
particularly as they are expressed in the foreign aid bill now under
consideration by Congress, we are inadvertently setting the stage
for:
(a) The further expansion of the Soviet Union into
Afghanistan.
(b) Increased tensions between Pakistan, India and
Afghanistan.
(c) New difficulties for India in her crucial effort
to achieve political stability based on rapid
economic growth, and bitter resentment among the
Indian people against the United States.
(d) Less, rather than more, security for Pakistan itself.
(e) Further gains for the Soviet Union in her effort
to shut America out of Asia and to draw India closer
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(3) The present steady drift towards a new and profoundly
serious setback for American interests in this part of the world
can be reversed only by the prompt reorientation of our economic and
military policy in line with the principles laid down by President
Eisenhower but so far not translated into policy. A new approach,
if launched in the next few months, may indeed enable us to recapture
the initiative. A bold and perhaps decisive economic program in this
key area with its 500 million people could be provided for no more
than $f of the present proposed foreign aid budget.
Congress Faces a Difficult Decision
In the next thirty days Congress wil enact a new foreign assist-
ance bill based on the request of the Administration for 4.9 billion.
Observers in both political parties have pointed out that the proposed
legislation appears largely to ignore the implications of the Soviet
political and economic offensive which has taken shape in the last
few months 9 and to be sharply at cross purposes with recent state-
ments by the President and Secretary of State.
During the last three years our foreign policy has had a heavy
military orientation. Close to 99% of the 446 billion which we
have spent during this period on national security (by which I mean
the direct cost of military defense, military support, overseas bases,
intelligence, foreign information, State Department expenses, Point
Four, etc.) has been spent under the direction of the Pentagon.
Of the relatively small fraction spent on non-military, Point
Four economic development, two-thirds has gone to three countries--
South Vietnam, South Korea and Formosa--which represent primarily
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military problems and include only three percent of the population
of the non-Communist, underdeveloped areas of the world. Economic
assistance to these uncommitted nations, which are the primary
political and economic targets of the new Soviet tactics, has been
no more than $300 million annually.
The dramatic switch of Soviet policy into the economic and
political field has been neither new or unexpected. It was fore-
shadowed at the 19th Congress of the Communist Party in 1952 and
since Stalin's death in 1953 it has been developing openly and
steadily. In May of that year. I wrote:
"There are already disturbing signs that Moscow's indifference
to the political possibilities of economic assistance to the non-
Communist nations of Asia may be changing and that a new period of
'ruble diplomacy' lies ahead... A devastatingly effective Soviet
version of Point Four could be put together for less than one-fourth
of the present 8 billion annual increase in Russia's annual income...
the possibilities are sobering to contemplate. If we continue to put
our exclusive faith in military negation we will lose our big chance."
Within the Administration there were also many who foresaw the
importance of the Soviet approach. In the spring of 1954 leading
officials launched studies of our foreign economic policy at Mass-
achusetts Institute of Technology to develop ways in which it could
be reo rient ated to meet these new tactics. Because of differences
within the government the excellent study which resulted was pigeon-
holed and the military focus continued.
The $4.9 billion foreign aid program now under consideration
reflects this same persistent disregard of the new realities of the
changing world situation. It remains, not an economic development
program, bu p ov '" a e a' ~3 ' /o ' ' 3P8o ~'i i~~o~0 7~t3~18 ct been
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asked to increase military assistance by ,)'2 billion over the previous
fiscal year at the very time when the Soviet Union is wooing Asia
and Africa with the news of a 25% cut in her armed forces.
Because of the complexity of these questions and the pressures
of an election year, Congress is now tempted to do what it can
with an unsound piece of legislation and hope that a more thoughtful
program may be made ready for the next session. The sense of frustra-
tion which encourages this course of action is understandable. But
the implications of our failure to come to grips for yet another year
with the deterioration of Americats position in Asia and Africa in
general and South Asia in particular, are serious indeed.
Background of Our Current Dilemma
For more than 200 years South Central Asia has been a troubled
area subject to continuing Russian pressures from the north. For
generations these pressures were successfully met by a tough-minded
and astute British diplomacy backed by the power of the Indian Army.
Britain succeeded in setting up a line of buffer states consist-
ing of Tibet, Nepal and Afghanistan, generally friendly to the British
and constituting a no-mants land between British Territory and the
Russian and Chinese empires. Three Afghan wars were fought to keep
Russia, the "bear that walks like a man" behind his established
borders beyond the Oxus.
When the British Cabinet in 1947 accepted the demands of India
and Pakistan for independence it was deeply concerned for the defense
of this strategically crucial area. British officials pressed India
and Pakistan to accept a common military command which would unite
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historic invasion route that runs through Afghanistan. But the
bitterness which had developed between India, which advocated a united,
secular state, and Pakistan, which felt that it could be secure only
within a Muslim oriented nation, made this joint defense impossible.
Difficulties also developed between Pakistan and Afghanistan,
both Muslim states, over the status of Pushtoonistan, an area
inhabited by the Pathans, much of which lies behind the Pakistan
border established by the British in 1894. The Afghans, whose king
belongs to a Pathan family, favor A plebiscite to decide the future
of Pushtoonistan. The Pakistani vigorously oppose this, and argue
that the Afghans have raised an artificial issue.
Afghanistan's only effective access to the outside world lies
through Pakistani ports on the Arabian Sea or by land through the
Soviet Union. (Communications through Iran are difficult). The
degree of control that this gives Pakistan over Afghanistan's economic
life has intensified the conflict.
Side by side with the sharp differences between Afghanistan
and Pakistan is the continuing conflict between India and Pakistan
which was intensified by the riots in 1947 between Muslims, Hindus
and Sikhs in which some 300 thousand people are said to have been
killed. These differences include the question of irrigation water
in the Indus River Valley, the property of the six million refugees
and finally to Kashmir, a former princely state, the control of
which became a source of bitter conflict leading the two countries
to the verge of a major war in late 1947 and early 1948.
These issues are highly technical and complex and the viewpoints
on both sides are sincerely and emotionally held. Nevertheless., in
1952 and 1953 they did not seem beyond the range of rational settle-
ment . At rgx rRQ; stril99 d/O1 ~I ~f~@ k5~o@ 4~@IQ~ it
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question which would have assigned Azad Kashmir, the area now
occupied by Pakistan troops, to Pakistan, Jammu and Ladahk which
are Hindu and Buddhist to India, with a plebiscite confined to the
valley of Kashmir, seemed almost within reach.
The question of water distribution is indeed still being nego-
tiated through the patient efforts of the World Bank. A proposal
has been made by the Bank, accepted by India, and is now under con-
sideration by Pakistan. The question of Pushtoonistan is in many
ways more complex and at least as emotionally charged. But even here
there was no reason for thoughtful people to give up hope of a
rational outcome.
The Impact of the U.S. - Pakistan Arms Agreement
The proposal of a military alliance between Pakistan and the
United States was raised as early as 1951, and seriously discussed
in 1952 as part of the proposed Middle East Defense Organization
(MEDO).
With others I opposed it on the ground that it would upset the
delicately poised balance of power between Pakistan and her two
neighbors, Afghanistan to the north and India to the south. More
specifically, I argued that it would open up Afghanistan and the
Middle East to Soviet economic and political penetration, further
antagonize Indian opinion against the United States, and lead inevit-
ably to a futile int raregional arms race which would serve only to
set back the economic expansion qnd thus the political stability of
both countries.
This proposal was abandoned in 1952, but reopened in the follow-
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reports stated that an agreement was under active consideration under
which we would arm a number of Pakistani divisions with the most up-
to-date weapons.
In a letter to the State Department in December of that year I
expressed the view that whatever meager military advantages might
flow from the rumored agreement would be far outweighed by the
profound resentment which would be.created in India, the conflicts
which would be further encouraged in the Middle East, and the oppor-
tunity which would be given to the Soviet Union for economic and
political penetration to the south. "A substantial offer of Soviet
economic aid to bolster Indiats Five Year Plan will," I said, "almost
certainly follow, plus a vigorous new Soviet attempt to dominate and
infiltrate Afghanistan."
However, the economic, political, ideological and historical
elements in this situation were discounted, and narrow military
considerations dictated a decision to move ahead. The defense
advantages of 200 thousand well equipped Pakistani troops were thought
to outweigh the increased antagonism which might be aroused in the
two neighboring countries. The extent to which those antagonisms
would create new sources of instability and insecurity was overlooked.
Later Pakistan became part of SEATO and the Bagdad Pact. Ship-
ments of military equipment to Pakistan were begun. The proposed
assistance program for fiscal 1957 calls for substantial increases
in this program.
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Reaction in Afghanistan and India
The Afghan reaction to this agreement was vigorous. Agitation
over the Pushtoonistan issue sharpened and mobs demonstrated in both
Kabul and Karachi. The Afghans charged that the Pakistani had
closed down the border for a period of five months, which, they said,
further increased their dependence on the Soviet Union for such
essential imports as oil.
Moscow promptly advanced a f,?'100 million loan drawing account for
Afghan economic development, an oil pipeline was run from the Soviet
border to Kabul, large numbers of Soviet technicians entered the
country. Close economic and political ties between Afghanistan
and Russia are now well advanced.
An experienced and astute Western observer in a South Asian
capital recently stated, SCI do not know how many hundreds of young
Englishmen and Indians were killed to keep the Russians out of
Afghanistan in the course of the three Afghan wars. But one thing is
clear: since the United States agreed to build up Pakistan?s military
strength three years ago the Russians have made more progress there
than in the previous century--and without firing a single shot."
The impact of the United States-Pakistan arms agreement on India
has been somewhat less dramatic 2 but for the long haul it may be even
more destructive to our interests. Six months after the arms agree-
ment was signed the Indian government, having previously failed to
secure financing from America for a steel mill, turned to the Soviet
Union for assistance and met with a favorable response. Unable to
secure certain key technicians from the United Kingdom, the Ind r.ns
requested them from Moscow and they were promptly provided. Today
Soviet missions are in India exploring for oil, setting up techno-
logical centers and studying the possibility of additional economic
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development.
After the announcement of our agreement to provide arms to
Pakistan there was also demand in Parliament by the Communists on
the extreme left, and the Hindu Mahasabba on the extreme right, that
arms be procured from the Soviet Union to maintain the military
balance. Prime Minister Nehru vetoed these proposals, while at the
same time vigorously protesting our action.
Recently, as the deliveries of American equipment have been
stepped up, pressures on the Indian government have increased both
in Parliament and in the press. Because of latent fears of a return
to Moslem rule and memories of the bloody riots of 1947, this is
the one foreign policy issue that the Indian peasant clearly under-
stands. He associates us directly with the arming of his adversary
and thus for the first time he is beginning to turn against America.
Since 1953, nearly 2 million Hindu refugees have entered India from
East Pakistan. The high point was March 1956 when the number totalled
80 thousand.
In the next year or two as a result of the upset in the military
balance, the Indian government will, in all likelihood, feel that it
must choose between two courses of action, each of which is dis-
advantageous to our interests and unwelcome to the Indians:
(1) India may dip heavily into her- already inadequate economic
development funds to buy from Britain, France, or elsewhere, whatever
arms may be necessary to redress the balance. Some Indian sources
argue that this would cost the Indian government more than we arc now
providing in economic assistance.
(2) India may purchase arms from the Soviet Union through a
long-term, low interest loan. I believe that the Indian governrnerr:
would be re,.tF&PRAGPM~OOt41?01c:c4blqoFfl~I'Rb@0o4er grave
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pressure'. Yet as tensions between Pakistan and India become more
acute, harrassed New Delhi policy-makers may begin to see this as
the one way out of what already appears to many of them as an
impossible situation.
We have urged a third alternative: the acceptance of Pakistanis
rapid military expansion on the ground that it does not represent a
threat to India. In view of the traditional tensions between the two
countries, India is no more likely to accept this interpretation than
we would be to disregard a fundamental shift in the military balance
of power between ourselves and the Soviet Union. The suggestion that
India join our alliance and secure free American equipment will be
interpreted by a proud, young, nationalistic government, however
unfairly, as a proposal that it should abandon its independence under
pressure.
An experienced European observer described India's reaction in
the following terms: "For several years relations between Egypt and
Israel were tense and suspicious, but relatively quiescent in a state
of uneasy balance. Then the Soviet Union seeing new opportunity for
trouble making, sent arms to Egypt, the military balance was upset,
Israel reacted vigorously, and America properly called Moscow to
account for a reckless and provactive act. Why cannot America
understand that, however, sincere her reasons, this is precisely
how her military build up of Pakistan appears to Pakistan's nervous .
neighbors2"
Not More Security, But. Less
It is difficult under the circumstances to accept the Pentagon
statement that our heavy investment in arms for Pakistan will increase
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the precise opposite is the case.
Afghanistan, in the face of the Pakistan military expansion,
is steadily becoming more dependent upon the Soviet Union for funds
for economic development, the unhampered flow of commodities which
are essential to her growth, and,; in the minds of many Afghan lead-
ers, for military protection. Inevitably this will bring Afghanistan
more and more into the Soviet orbit.
India, faced with a choice "of either slowing down her already
t -'
inadequate rate of economic development or turning to totalitarian
Russia for assistance to redress the balance with her adversary,
will see her own security steadily diminishing for two reasons:
first, because rapid economic growth is essential to her political
stability; and second, because if India ultimately fe$ls forced to
ti
accept arms from'Moscbw,'Soviet influence, in India will increase
correspondingly, and India, too, will be drawn towards the Communist
axis.
Pakistan, after an initial period of giddy pride in her new
military strength vis-a-vis her two neighbors, must eventually
see that the inexorable forces which have been set in motion leave
her position on balance not more strong but less so. As a tense
and antagonistic India by one means or another finds a means to
redress the military balance, pressure from the south will increase,
and as the likelihood of a politically viable, independent India,
soundly based on an expanding economy.. diminishes, the danger to
Pakistan itself will grow correspondingly. This danger will be
compounded if Soviet penetration of Afghanistan brings Moscow's
power 300 miles south to Pakistan's northern border.
As I have pointed out: America's objectives in this area are
best served by independent, cooperative, friendly nations, econ emi..c
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growth leading to increasing political stability, and a developing
will to defend the fruits of that growth from intrusion from any
source. To argue that our present military assistance to Pakistan
contributes to such objectives is to ignore the clear facts. To
expand this military assistance under present conditions would be
folly.
Indeed it may persuasively be argued that the U. S.-
Pakistan arms agreement may not only turn Afghanistan irreparably
towards Moscow and destroy all hope fora closer and cooperative re-
lationship with India, but ultimately lead to bitter differences and
misunderstandings with Pakistan itself.
In the eyes of the military leaders who sponsored it
this agreement has one simple and, in itself, wholly desirable
objective: to develop an effective military force that can oppose
Soviet intrusion into South Asia and outflank any similar aggression
into the Middle East. But there is no evidence that this concept
of the new relationship is shared by Pakistan. Indeed Karachi's
interpretation of the world conflict has been consistently closer
to that of India, Burma and Indonesia than to that of the United
States.
Pakistan was one of the first nations to recognize the
Peking government. Madame Sun Yat Sen recently was received as
a state guest in Karachi. On June 2nd the Pakistan Prime Minister,
Foreign Minister, and various members of the Cabinet leave for an
official visit to Communist China. Following the visit of Deputy
Soviet Prime Minister Mikoyan a Russian trade mission is now negotia-
ting in Pakistan.
The basic difference in objective between our government
and that of Pakistan is frankly revealed in the following recent
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quotation from the influential Pakistan newspaper, DAWN:
"The big powers cannot have it all their own way and
expect the smaller powers to strengthen their hands
against the enemies of the big powers while ignoring
the dangers which threaten the smaller powers from
other quarters. For instance, if there is any threat
of physical aggression against Pakistan it does not
come primarily from the Soviet Union but from India;
and if Pakistan fails to secure' specific reassurances
of support and help from her allies then it would be a
strange role that Pakistan will be expected to play."
In a sense Pakistan fells that a bargain has been struck.
Because she has agreed to join a defense pact directed at our "enemy"
Russia, she assumes that we must inevitably take her side against
her "enemies" Afghanistan and India. In March we seemed to offer a
measure of such support by appearing to back Pakistan on both the
Pushtoonistan and Kashmir issues.
But Pakistan will almost certainly look on this reluctant pat
of approval as no more than a down payment. If we refuse to provide
Pakistan with more whole-hearted support in her conflict with her
neighbors, she will feel let down and bitter. Yet if, to protect our
investment in the military pact, we agree to such support, our rela-
tions,.'not.only with Afghanistan but with India may fast become im-
possible. Our dilemma is compounded by the fact that India, with
one sixth of the world's population, rich industrial resources, and
great prestige throughout the uncommitted nations, is, in all praba,-
ility, the key to a free Asia.
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How This Drift Can Be Reversed And
An Increasing Measure of Stability Created
The security of each of these three nations depends in large
degree upon the security and stability of its neighbors. The loss of
Afghanistan's independence will immediately threaten Pakistan and
eventually India, since it will bring the Soviet Union to the historic
gateway to the subcontinent, the Kybher Pass. An unstable, insecure
and impoverished Pakistan, in turn,, is a direct threat to the
stability and security of India. If India fails to maintain internal
political stability, based on an expanding economy and a satisfied
people, it is difficult to see how a free Pakistan can survive
indefinitely.
A constructive American policy in this key area must be deeply
rooted in an awareness of this profoundly important interrelationship.
The following approach seems to me indicated:
Our first effort should be to create a new military balance
between India, Pakistan and Afghanistan which will give all three
nations a sense of security in their relationship one to the other.
The situation has now advanced to such a point that this can be
achieved only in stages and through the application of great tact and
firmness.
The State Department and the Pentagon have made commitments to
Pakistan which, however mistaken they may appear now, cannot be
disregarded. Yet it can persuasively be argued that these commit-
ments reflected a situation which has now been drastically modified
by the new Soviet tactics, including the recent sharp cut in Soviet
ground forces. In the interests of Pakistan's security and our own
it would seem logical to re-examine the assumption on which our agree-
ment was based in the light of the new circumstances.
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A new intraregional military balance should take into account
the legitimate security requirement not only of Pakistan but India
and Afghanistan, and enable each of these three nations to focus
its resources, with our help, on the central problem of internal
economic development. If it would be helpful as a temporary exped-
ient to make some modern equipment available to India on a long-term
loan basis and without political strings in order to bring about
a new balance, we should do so.
A study should also be undertaken of the economic and political
practicability of opening up free port facilities for the Afghans on
the Arabian Sea, either as part of the port of Karachi or a new port
to be built on land leased by the Afghan government with the rights
of rail travel from the port to Kabul guaranteed under bond.
The proposal of a free port on Pakistan soil opens up some
formidable questions. It might, for instance, require a capital
investment out of all proportion to the amount of traffic which
would be accommodated at this stage. However, a realistic policy
in this part of the world must take the not unreasonable security
fears of the landlocked, suspicious, isolated Afghans into account.
If the Kabul government cannot be convinced that its access to the
outside world is assured under all conditions, it will be drawn
inexorably by the pressures of geography, economics and politics
into the Soviet orbit. This process is already well advanced.
Expanded economic assistance to India and Pakistan is also basic
to a rational new approach. Both governments have created bold,
capable, intelligently programmed Five Year Plans. The Indian
Second Five Year Plan started April 1, 1956. The Pakistan First
Five Year Plan is already underway for one year.
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.Neither of these plans can succeed under present circumstances
without substantial outside help. The cost of underwriting the
Pakistan Five Year Plan would be roughly
125 million a year for the
next four years. The cost of underwriting the Indian Five Year Plan
would be roughly $300 million for the next five years.
We have frequently wasted American dollars on economic assist-
ance to countries which were not prepared to spend it intelligently,
where the civil service was inadequate to the task, where there has
been a lack of an economic base, and a stubborn unwillingness to
institute the necessary political and economic forms. We have also
been drawn into wasteful and ineffective.spending policies on the
assumption that economic aid would enable us to buy friends and allies
and create reservoirs of gratitude.
Neither Pakistan or India can be placed in such categories.
Each represents ..a .key country which offers.-ideal opportunity for
adequate aid given for the one practical, realistic objective on
which economic assistance can ever be justified: to assure the growth
of independent, viable nations able and willing to defend their own
freedom. Each of these two nations has a powerful desire to remain
independent, a highly competent British-trained civil service,
and a determination to demonstrate that a vital, purposeful democracy
can effectively raise living standards and promote individual oppor-
tunity in an underdeveloped country.
India's Second Five Year Plan calls for the expenditure by the
government of $9 billion in addition to the normal cost of government.
It has been assumed that all but '2.4 billion of this sum can be
raised either through local taxation or by a continuing favorable
balance of trade. By drawing down her sterling balances, aid from
foreign sources other than the United States, and deficit financing
it is hopecbpt ge d"4Ek&Me 4)b%/Ori '' ,K-WD R P ( e018-2
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If this sum is not forthcoming from some source over the span
of the next five years, India's progress will be slowed dangerously.
Disillusionment with democratic methods will increase and China's
case for a totalitarian dictatorship will become far more persuasivep
not only in India but throughout Asia.
Even this picture will be described by many observers as too
optimistic. The price level under pressure of deficit financing
has already begun to rise sharply, present heavy tax rates cannot be
raised further, our continuing military build up of Pakistan may lead
to a far heavier defense burden than the'Five Year Plan budget yet
contemplates,
This foreshadows the likelihood of a crisis for which the Indian
government and even more ominous the Indian people themselves, may
America
feel that/,because of our action in precipitating an intraregional
arms race, carries a heavy responsibility. Faced with a choice be-
tween the collapse of its Five Year Program of economic growth on
the one hand, and the risk of drastically stepping up its borrowings
from the Soviet Union, on the other, the Indian government, would,
I believe, be forced towards the latter course.
To assume-that Russia will not grasp such an opportunity would
be to add to our already long list, one more miscalculation of her
capacity. Russia's gross national Product is increasing at the rate
of some $10 billion annually. A small fraction of this increase
applied to an economic aid program to India would fill the capital
requirement gap, assure the success of the Indian Five Year Plan,
and as an inevitable by-product, draw the Indians emotionally,
economically and hence politically closer to the Soviet orbit.
The Indiangovernment would, I am sure, view the implications
of such a drift with grave forebodings. Yet, if it appears to be
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their one alternative to failure, it may at some point feel forced
to accept this association, hoping at the same time that somehow
India may manage to maintain its independence of action.
One final word on the intraregional tensions which are at the
heart of these difficulties; It is rarely possible for outside
governments, however well intentioned, to find acceptable answers
to the bitter problems which arise between individual nations all over
the globe. We must learn to accept and live with our limited capa-
city to influence such situations. America at this stage, for
instance, cannot contribute a solution to the Pushtoonistan problem.
The Kashmir question is at least equally complicated and emotionally
charged.
We might, I suppose, suggest privately that the legal status
of Kashmir be referred to the World Court. If this proposal should
by some chance be accepted by both parties some of the immediate
tenseness could be removed from the present situation; indeed a
decision by the court might prove to be the first step towards an
equitable solution.
Unless the present tensions are eased in some way any peace-
ful solution to the internal differences which threaten the stability
of this area will remain impossible. Our most immediate contribution
should be to withdraw with the best possible grace from a policy that
further inflames their relationships. If we can also contribute
by our economic assistance and a tactful diplomacy to a more construc-
tive atmosphere, then the indigenous forces of a goodwill which are
many and strong may ultimately succeed in substituting cooperation
for conflict.
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Conclusion
Excellent groundwork for an enlightened approach to economic
assistance has already been developed at the Center for International
Studies at M.I.T. A memorandum describing what I believe to be the
only rational basis for foreign aid and outlining: the scope and
direction of such a program has been prepared there entitled
"Proposal for a New Foreign Economic Policy". It provides a practi-
cal approach to this complex and vitally important subject that
deserves careful study.
It is clearly too late at this juncture to prepare a program
for the coming fiscal year based on these concepts and specifically
keyed to the new economic and political realities. But at least
we can begin now to reverse our present drift.in South Asia towards
a crisis which may prove even more dangerous than that of the Middle
East and to make a small start in the right direction:
To this end I suggest that:
(1) The Administration should be urged to initiate in the very
near future high policy talks with both Pakistan and India along the
military and economic outlined above as groundwork for Mr. Nehru's
July visit.
(2) Out of cash in hand and from whatever Congress may at this
late stage agree to make available, low interest, long term loans
for economic assistance in the next fiscal year should be made to
Pakistan and India as evidence of our intentions.
(3) Bilateral talks should be launched forthwith to determine
in detail the extent of future capital loans that may be necessary
to assure the success of the Pakistan and Indian Five Year Plans,
and, if practical, for the Afghan port arrangements
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(4) As soon as possible talks should be begun designed to
lay the foundation for the kind of general foreign assistance
programs outlined in the M.T.T. report, so that legislation can be
drawn up early in 1957 with maximum public support. Only through
such a program supported by an astute and sensitive diplomacy can
we recapture the economic and political initiative in Asia, Africa,
and South America.
CB/fmo 5/29/56
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