Foreign Relations of the United States, 1958–1960, South and Southeast Asia, Volume XV

100. Telegram From the Embassy in Afghanistan to the Department of State²

Kabul, January 3, 1958—11 a.m.

697. From Country Team for Department, ICA, Defense, [less than 1 line of source text not declassified], USIA. RGA decision not accept additional foreign loans from any sources, recently communicated by Prince Naim to both me and USSR Ambassador, appears to mean Afghanistan’s foreign policy as it relates to position in struggle between free world and Communist bloc is no longer fixed in pattern of close collaboration with Soviets which was evidence of Khrushchev–Bulganin visit December 1955,³ but now is in state of flux. Unless Soviet Union prepared to provide Afghanistan with grants, which it has not thus far been willing do with countries outside Soviet bloc, Soviet financing of Afghan economic development appears destined to come to end once those projects already agreed upon (possible Salang Pass tunnel, Naghlu hydroelectric, and Jalabad irrigation projects, according to ComMin Sherzad) have been completed. Afghan dream of economic modernization financed by foreign credits, mainly from USSR, had come to end. Undoubtedly, increased awareness of realities of Afghanistan’s ability derives [from] such foreign loans and provide local currency necessary for carrying out economic development projects has been important factor in RGA’s recent decision. There may have been present, however, another factor of equal importance: growing anomaly of Afghanistan’s posture with respect to Russia (which was not unnatural response, when adopted two years ago, to circumstances then existing) and realities of improving relations with Pakistan, substantial aid being received from United States, and Afghanistan’s historical fear of Russian expansion.

There no reason believe decision forego further foreign loans means RGA regards economic development of Afghanistan of any less importance than formerly, and Prince Naim has told me on more than one occasion that economic development is essential for very survival of country. This fact suggests that for promise of grant aid of magnitude which is well within our means we might now be able obtain substantial favorable modification of Afghanistan’s foreign policy.

During past two years our economic aid policy with respect to Afghanistan has been formulated as reaction to Soviet policy. What we are suggesting is that at this crossroads in Afghanistan’s history we react positively, rather than drift and have our next major policy decision with respect to Afghanistan come as reaction to some Russian move. Afghanistan’s absorptive capacity for economic development funds is not large, and if we could assure RGA we would seek from Congress $15 million of grant aid each year for Afghanistan plus substantial PL 480 program⁴ to provide ICA currency, RGA might be willing loosen its close economic ties with Russia and place its economic development largely in our hands. Such an offer, made now, would go far to remove from minds of Daud and Naim belief which they known hold that United States not interested in Afghanistan’s development, but concerned only with preventing its having close ties with USSR.

Recent protestations made to me by ComMin Sherzad, and previously to Strong and Elwood, to effect Afghanistan leaders are basically sympathetic to, and would welcome closer relations with, United States are significant. He may, of course, have been speaking solely for himself, but he has certainly done his best give impression his views shared by Royal Triumvirate.⁵ In any case, his frank discussion December 28 opens channels which could be used, if Washington agrees, to sound out Daud and Naim as to their reactions to such proposal.

Embassy/USOM recently recommended to Washington we provide additional $6.2 million grant aid for air transport project (Toica 538)⁶ and we shall almost certainly recommend grant aid for transit project. If these recommendations are approved, we shall already be well on way toward adopting new policy with respect to economic assistance for Afghanistan. Rather than have this new policy appear to Afghans as result series ad hoc decisions with respect to specific projects (in which we have political interest), preferable if we announce to Naim and Daud as deliberate new departure in our relations with Afghanistan.

We do not believe we should attach explicit conditions to such aid. We must at same time, however, protect ourselves against possibility our grant aid would make it possible for RGA continue draw against Soviet line credit. Our announcement of new aid policy should be made in some such terms as “policy of financing economic developments in Afghanistan on grant basis during such period of time as country’s fiscal and foreign exchange situation makes it inadvisable to seek to finance such development through foreign loans.” This would constitute clear enough warning we do not intend to provide grants while Russia provides loans, but at same time it is wording to which Afghans could hardly object.

If such decision can be reached speedily, then Ambassador Lodge, when he arrives Kabul,⁷ should be authorized tell Daud, Naim and King (if latter is here) that President has authorized him offer up to $30 million in grant aid over period of two years. He should say it is up to RGA to choose projects for which such aid should be used but USG hopeful that between one third and one half would be devoted to transit project if agreement on this can be reached between three governments.

Other projects in which RGA or important elements thereof have keen interest with sums needed to complete are:

1. New Kandahar airport and paving certain country airports— $6.2 million.

2. Completing phase one Helmand Valley as desired by RGA— $7.0 million.

3. Completing plant University of Kabul—$1.5 million.

4. Kandahar industrial district—$1.5 million.

Total—$16.2 million.

If approximately $13.8 million used on transit project in country of Afghanistan, this total $30 million. Would be great mistake, however, to follow policy of past and for USG unilaterally choose for Afghanistan projects it considers most important then present RGA with take-or-leave-it choice.

If Soviet riposte is to make similar grant offer, it would of course, rob our gesture of some of its impact. Even so, acceptance of grants instead of loans from Russians would avoid having Afghans getting themselves heavily mortgaged to Communists and thus serve our ends. Russians might hesitate establish grant precedent since it would have to follow it in other non-Communist countries where it trying gain dominance.

As at time of Ambassador Richards’ visit,⁸ many signs now point to moment having arrived when fundamental reorientation of Afghan policy is possible if United States willing seize opportunity. Year ago we let opportunity slip because economic resources at Ambassador Richards’ disposal were insufficient.⁹

Mills

2. Source: Department of State, Central Files, 789.5–MSP/1–458. Secret; Priority.
3. Khrushchev and Bulganin visited Afghanistan, December 15–19, 1955; for documentation, see Foreign Relations, 1955–1957, vol. VIII, pp. 206 ff.
4. Agricultural Trade Development and Assistance Act of 1954, approved on July 10, 1954. (68 Stat. 454)
5. King Zahir Shah, Prime Minister Mohammed Daud, and Deputy Prime Minister and Foreign Minister Mohammed Naim.
6. Dated December 31, 1957. (Department of State, Central Files, 789.5–MSP/12–3057)
7. Henry Cabot Lodge left the United States on January 28 for a trip to Iran, Afghanistan, Pakistan, and India. He was in Afghanistan, February 5-8.
8. James P. Richards, the President’s Special Assistant on the Middle East, visited Afghanistan, April 1–3, 1957, as part of a larger trip to the Middle East and South Asia. See Foreign Relations, 1955–1957, vol. XII, pp. 491–492.

9. On January 25, Ambassador Mills and Robert M. Snyder, head of the ICA Mission in Afghanistan, met with Prime Minister Daud to discuss the question of economic assistance. “At close conversation when opportunity came for him to comment, Daud said RGA meant just what it had said; that RGA could not take on additional foreign debt now; should its financial position improve and it be able carry more foreign debt, US Government would be first to which it would apply for assistance in shape of loans; stated he had given instructions I to be given debt and other data Bartlett and I had requested (Embtel 735).” (Telegram 798 from Kabul, January 25; Department of State, Central Files, 789.5-MSP/1–2558)

   Telegram 735 from Kabul, January 15, is not printed. (Ibid., 889.2614–Helmand/1–1458)