Foreign Relations of the United States, 1961–1963, Volume I, Vietnam, 1961

77. Telegram From the Department of State to the Embassy in Vietnam¹

Washington, June 28, 1961, 8:19 p.m.

1591. Task Force VN 11. Joint State/ICA. Embtel 1945.² Department and ICA have agreed release $4.5 million FY 1961 (see separate ICA message³) on basis Ambassador’s strong recommendation as political demonstration of full U.S. support at time when Lao situation poses most grave military and psychological threat to GVN. No further funds available FY 1961; prepared review need additional aid in connection FY 1962 program.

In making this decision Washington agencies have taken into consideration fact that no economic justification for this additional aid at this time. Have also considered whether grant of additional assistance might be misinterpreted by GVN as evidence U.S. no longer pressing economic reforms which would enable GVN meet internal financing problem without additional external aid urged by U.S. in past. Believe danger such misinterpretation considerable, but hopeful problem can be contained through subsequent effort Staley group, Brookings team and through Country team pressure, as appropriate to persuade GVN adopt needed reforms.

Agree that U.S.-GVN good will and mutual cooperation achieved by Vice President’s visit and clear public indications that our backing of Viet-Nam is among highest objectives U.S. foreign policy should not now be weakened by further debate with GVN over question financing 20,000 man increase. To obtain maximum political benefit we prepared approve immediately balance of remaining FY 61 funds, $4.5 million. Also agree it would damage U.S.-GVN relations if GVN obtained impression, however erroneous, we were holding back our support to take advantage of fact they committed to mobilization.

Making these funds available to GVN should not only maintain momentum GVN mobilization and defense effort, but also put U.S. in stronger position to negotiate with GVN on problem sharing cost burden between U.S. and GVN. We will have responded generously to GVN request. Mobilization to 170,000 will be going on into early CY 1962. In this situation and when findings Dr. Staley’s SFG are received there will be time examine mutual cost problem in calmer atmosphere and with more facts available.

In informing GVN funds available you should make clear we have made crash effort to meet request in view their good faith in starting mobilization and due to grave situation in SEA. In return we would welcome official GVN assurance that they will make extraordinary effort solve their financial problems by means available to them. We shall look forward later to full discussion mutual financial problems including aid levels.

FYI. Although no recent mention level GVN contributions to military budget, assume that 700 million piasters remains floor for 1961. End FYI.⁴

Rusk

1. Source: Department of State, Central Files, 7slK 5-MSP/6-2861 Secret; Niact. Drafted by Wood and Furst (ICA) and cleared with Heinz, Cottrell, B/FAC, FE, and ICA. Repeated to CINCPAC for PolAd.
2. Document 76.
3. Not further identified.
4. Nolting informed Thuan of the substance of this telegram on June 29 and Thuan responded that he was authorized to say that he could put up 50 million piasters to help finance the additional 20,000 troops. Nolting reported that the U.S. concession had a salutary effect and believed it would enable the Staley Group to reach a more satisfactory understanding than would otherwise have been possible. (Telegram 1955 from Saigon, June 29; Department of State, Central Files, 751K.5-MSP/6-2961)