Foreign Relations of the United States, 1952–1954, Western Europe and Canada, Volume VI, Part 1

700.5 MSP/4–2053

No. 275
Memorandum by the Special Assistant to the Secretary of State for Mutual Security Affairs (Martin) to the Director for Mutual Security (Stassen)¹

top secret

[Washington,] April 20, 1953.

Subject:

• Title I Defense Support Program FY 1954.

Reference:

• (a) DMS Memorandum of April 14, 1953.
• (b) Mr. Nitze’s Memorandum of March 16, 1953.²

The Department of State has given careful consideration to the proposed guidelines for the Title I Defense Support Program for 1954 contained in Reference A as well as to certain tables constructed by the Mutual Security Agency showing a proposed distribution of obligations and expenditures in accordance with these guidelines.

It will be recalled that with respect to Title I Defense Support for FY 1954, the following were the principal assumptions given:

(a) A $950 million expenditure ceiling

(b) $600 million new obligational authority for France

(c) $150 million new obligational authority for the U.K.

(d) No increase in June 30, 1954 pipeline over June 30, 1953 figure.

The Department of State is convinced that adherence to these assumptions may seriously jeopardize, if not altogether compromise the achievement of most U.S. security objectives in Europe, and it strongly counsels against the adoption of all or any of the proposed limitations. The following is an evaluation of the political consequences that the proposed limitations could be expected to have on major U.S. policy objectives in Europe.

1. Maintenance of NATO Strength.

It is the considered opinion of the State Department that in order to obtain firm decision on 1953 and provisional 1954 force goals, it will be necessary to assure the French in advance of the April 23 Ministerial Meeting³ that the Administration will include in its request to Congress for Defense Support appropriations, the same amount as was actually provided to France in FY 1953, i.e. $525 million. In addition, it will be necessary to assure the French of the U.S. willingness to consider additional financial support for increased effort in Indo-China (see below). Present estimate is that this may require $150 million additional. Assurances may also have to be given the British of Executive Branch intention to request $250 million defense support for the U.K. More definite conclusions with respect to the amounts of new obligational authority and expenditures needed for France and U.K. must await discussions to be concluded this week in Paris between U.S. cabinet members and French and U.K. ministers. Flexibility must be maintained in both expenditures and new obligational figures pending reports on these talks.

2. European Defense Community.

Ratification by France of the EDC is of course the critical obstacle to the attainment of the major U.S. objective of a European Army containing important German contingents. The Department of State considers that such ratification will be possible only if the French are reassured and reenforced in their status as a world power by continued and increased support for increased effort in Indo-China, which will permit them to continue the improvement of their NATO forces in the light of the size of eventual German Forces. French ratification is also clearly dependent on the British attitude toward maintenance of British forces on the Continent; any substantial reduction in the British commitment would also have serious repercussions on ratification.

3. Indo-China.

As indicated in 1 and 2 above, the Department of State considers that not only the maintenance of the French and Associated States efforts in Indo-China, but also an increase of that effort with a view toward eventual military victory over Communist forces is major objective of U.S. security policy. The bare maintenance of such effort will require at least as much assistance to France in 1954 as in 1953. The desired increase of such effort is now a subject of urgent staff discussions, but preliminary estimates of the cost to the U.S. indicate that $150 million of additional defense support appropriations and expenditure authority may be required. It is abundantly evident that French resources will not permit any substantial increased French contribution to such effort.

4. U.K.

It is the Department of State’s tentative judgment pending the outcome of the talks in Paris, that if the U.S. is not prepared to provide a reasonable amount of defense support (a minimum of $250 million obligations and expenditures) to the U.K., a reduction of total British military commitments may become a necessity. Such reductions might be felt not only in NATO, but also in other key areas, including Malaya and the Middle East.

5. Spain.

The considerations and recommendations regarding provision for defense support and military aid to Spain in FY 1954, outlined in the Under Secretary’s letter of March 6 to Mr. Stassen,⁴ represented the minimum amounts which were considered necessary for purposes of the current negotiations for U.S. use of Spanish air bases and naval facilities. While $25 million new defense support appropriations were strongly recommended by the Embassy and concurred in by the Department of State, it is felt that in view of the extreme stringency of funds and urgent needs elsewhere, that it is proper to risk no new economic funds for Spain, provided that the $125 million in previous legislation is reappropriated and that some provision is made for Spain in the new MSAP appropriations. It would still appear that of the $125 million reappropriation, $75 million would be devoted to economic aid; it is difficult to derive an expenditure figure, but this might amount to $50 million, not includng expenditures against the old loan which was not included in the ceiling figure.

6. Yugoslavia.

A tripartite conference (U.S., Great Britain and France) on economic aid to Yugoslavia is now underway in Belgrade. To finance the level of imports in FY 1954 which the conference has agreed is required for an adequate Yugoslav defense effort and to help Yugoslavia to stand on its own feet at the earliest possible time, the Embassy, MSA/Belgrade and the MAAG have stated, will involve U.S. aid in the amount of $75,000,000. The British and French are expected to provide $14,000,000 in aid. The present situation of the Yugoslav economy is somewhat precarious, (in part due to last year’s drought), and there is a shortage of imported raw materials. Stocks and pipeline at June 30, 1954 will be at very low levels. The aid level of $55 million suggested by MSA as necessary under the ceiling would almost certainly make it difficult for Yugoslavia to improve civilian consumption (already the lowest in Europe).

7. Greece and Turkey.

The relatively primitive countries of Greece and Turkey are maintaining and developing armed forces that are very large in relation to their total economic capacity. Both countries need time to further develop the economic base which would provide a permanent support for their economies and forces of adequate magnitude. It is felt that new appropriations of $50 million for Turkey may be adequate and that $20 million for Greece, although politically risky may have to be accepted in view of the overall shortage of funds.

8. Italy.

The amount of aid proposed by MSA for Italy ($25 million new obligational authority) under the expenditure ceiling, should, in view of the large pipeline, the balance of trade and reserve position, be adequate to prevent any serious economic consequences. However, any deterioration in general European economic conditions might result in a draw down of reserves which would almost certainly create political and psychological uncertainties and cause a serious retrenchment and reduction of defense expenditures.

9. Berlin.

The Department of State continues generally to support the original MSA estimates as to the cost of the Berlin investment program (approximately $65 million new obligational authority). In view of the special U.S. responsibility with respect to Berlin, it is believed that the U.S. contribution must be maintained at that level. The lack of such a program, or a reduced program at the level proposed by MSA under the ceiling could create a grave unemployment problem with attendant political risks which should be carefully studied before any decision is taken.

With respect to the stockpile program, failure to obtain the funds required ($40 million new obligational authority) would make it impossible to fulfill the stockpile targets established in accordance with the directive of the National Security Council. This directive calls for the establishment of a stockpile which, supplemented by a moderate airlift and existing private stocks, would maintain the city for a period of 12 months. The target date for this stockpile is the date of coming into force of the contractual agreements. Funds on hand and those anticipated on the part of the German Federal Republic are considered adequate to cover the stockpile requirements for solid fuels and food. The new funds requested are those necessary to provide for supplementary stocks of raw materials necessary to maintain employment at a tolerable level which would uphold morale and prevent the possible loss of the city through political disaffection. If the funds requested are not made available, it will be necessary to re-examine the stockpile program as a whole. It will undoubtedly be necessary to cut back the program from a 12 month target to a shorter time period, maintaining more balanced stocks of fuels, food and raw materials, or else it would be necessary to program for a larger airlift than projected by the study of the National Security Council. From a cost point of view the broadening of the airlift, apart from strategic disadvantages, would be very substantially more expensive than the funds necessary to build up the stockpile.

With respect to refugees, the $15 million figure which was given in the Department’s letter of March 3, 1953, has been recently confirmed by Dr. Conant as an amount which he believes necessary for him to deal with this urgent political problem. Dr. Conant has, however, stated that he anticipates the necessity for a larger program, running up to possibly $100 million, which may be developed in the coming months, if the influx of refugees continues at the present rate.

10. Austria.

If it continues to be U.S. security objective to maintain the financial and political stability of a friendly government in occupied Austria, then dollar assistance should be available to the extent necessary to achieve this objective. The Austrian economy is peculiarly vulnerable to Soviet economic pressure; in the absence of any change in current Soviet policy toward Austria, a planning figure for new obligational authority of $25 million appears as the absolute minimum. However, certain Soviet economic moves, which in themselves might not be intolerable politically, might make such a planning figure hopelessly inadequate.

11. Total Requirements.

Depending on the outcome of the talks in Paris with the British and the French, it may be that minimum requirements consistent with U.S. security objectives for new and renewed obligational authority for Title I defense support in FY 1954 may reach $1325 million. Assuming no change in total pipeline during FY 1954, total expenditures would be at the same figure as new and renewed obligational authority. It is therefore possible that the proposed $950 million expenditure ceiling may be inadquate by as much as $375 million. As presentation to the legislative branch of a Title I program of this magnitude would obviously create certain difficulties, it may be desirable for presentation purposes to include a portion of the French program in Title III defense support.⁵

Edwin M. Martin

1. Drafted by Robert G. Cleveland.
2. Neither memorandum found in Department of State or Mutual Security Agency files.
3. For documentation on the Eleventh Session of the North Atlantic Council at Paris, Apr. 23–25, see vol. v, Part 1, pp. 368 ff.
4. Not found in Department of State files.
5. Title III covered the East Asia–Pacific region, including Indochina.