Foreign Relations of the United States, 1961–1963, Volume IV, Vietnam, August–December 1963

156. Telegram From the Embassy in Vietnam to the Department of State¹

Saigon, September 27, 1963, 9 p.m.

608. Deptel 447.² Following comments on possible means of exerting pressure on GVN without interfering seriously with war effort were prepared by USOM Director Brent. Analysis strikes me as sound and I hope will be helpful in Washington consideration of problem:

1. We must recognize that the management of the aid program cannot alone achieve major political changes or reversals in direction. Properly timed announcements and actions on aid matters can be used to reinforce and make effective other strategic moves.

2. In Viet-Nam the problem is complicated by the security situation and the US strategic interest. We must face the fact that we cannot hold SVN without the Vietnamese; they can hold for a considerable length of time without us. It is politically intolerable to postulate the possibility of our assuming the position the French were in during the period 1947-1954.

3. Since the GVN is as aware of these facts as we, it is not reasonable to assume sudden success of any moves we might make which rely either solely or largely on the aid program.

4. Items 1 through 4 of Deptel 447 are largely “psychological” rather than “real” in their impact. The GVN could compensate for any of these actions through diversions of materials and funds or through other measures. Recognizing these limitations, we believe they can exert great pressure on the GVN if appropriately publicized in each case as symbols of US determination to disassociate ourselves from the Palace Guard. Properly handled, they can undermine the “political credit rating” of Nhu (and by inference Diem) and at the same time improve the US image in Asia and elsewhere and assuage US public opinion which Washington feels important at this time.

5. The careful timing of each move is important. The tactical moves cannot be trotted out at any time with equal effect. Each move should follow immediately on the heels of a new provocation on the part of the GVN to show a cause and effect relationship. These provocations may be directed either against the US (occurring almost daily in “The Times of Viet-Nam” and in Mme. Nhu’s tirades abroad) or against the Vietnamese populace.

6. The individual tactical moves must be part of a larger plan having the purpose of changing the composition or the policies of the present government. We assume that we are concluding that the war cannot be won on a permanent basis with the present government; that covert negotiation with the military will proceed concurrently with other US actions to effect a change in government, and that the management of the aid is designed to reinforce such other attempts to change the government. If this assumption is incorrect, the moves outlined in paragraphs 1-4 of Deptel 447 hold little promise for achieving our objectives.

7. Publicity or exploitation of tactical moves in the aid program may vary from use of VOA, leaking to the press by the Ambassador or merely passing out to key GVN officials.

8. With respect to the individual suggestions:

(a) GVN written guarantees—This action should only be taken on programs we are prepared and willing to terminate. The GVN would in all likelihood refuse such guarantees as an affront implying past or proposed “repressions” on their part. Then we would proceed to suspend the aid project we had selected for such treatment and appropriate publicity would put the GVN in the position of having refused to give guarantees against repression. We could select, for such treatment, items in the police program to lend additional credibility to our position.

(b) Combat police and DGI—Though the discrimination between elements of the programs being used against the Viet Cong and those not so engaged will be difficult given the war footing of the nation as a whole, we nevertheless feel there is considerable opportunity for psychological impact in this area.

(c) Hamlet militia leaders—Concur with idea that US withdraw support and suggest that word be passed along to GVN military that US not prepared support personal political vehicles of Nhu.

(d) DOD psywar—We suggest that [garble] withhold funds for this item in their joint support budget and then tell General Oai that we are doing this because of the close tie-in of his activities with the personal fortunes of Counsellor Nhu. Hopefully this will have the effect of making the psywar effort more independent of Nhu’s direction since the operation itself is one we would prefer to continue to support.

9. Item 8 of Deptel 447 suggests the accumulation of substantial plaster resources for use by the US directly in the provinces. There is now on deposit in the Bank of Viet-Nam about $2-3 million worth of plasters belonging to the US Government as repayments on prior years Mutual Security Program loans. We could gradually withdraw those funds and hold in escrow as cash for unilateral operations during a short period of administrative foul-up in the wake of a coup or coup attempt. We do not recommend dollar purchases, especially large-scale purchases, because (1) it would frustrate our cut-back on commercial imports by yielding the GVN foreign exchange for expenditures anywhere, and (2) it would put us immediately under suspicion of contemplating a takeover operation. If we should ever get ourselves in the unfortunate position of fighting a war on the side of rebellious Generals while the Ngo family still retains power in Saigon, we could pump in dollars or military scrip and make that acceptable currency in the regions we control.

10. Regarding questions on the commercial import program, reserves are at about $150-160 million and annual earnings of foreign exchange are about $60-70 million. This would provide sufficient exchange for almost 12 months of commercial imports at the present level of licensing (excluding major investment projects and military hardware). We are assuming that the GVN would draw down reserves for a period of time rather than permit serious shortages to occur and prices to rise, in order to frustrate the US efforts to force the government to capitulate to our demands for reform.

After some months of aid cut-offs we could expect importers and government bureaucrats to become worried that reserves will be exhausted and hoarding, speculation, and major price increases to set in. This would be the period of major psychological impact on the government and it is our estimate they would be more inclined to talk than they are now.

If we were to elect to be more selective in the management of the commercial import program we could renew financing the kinds of goods necessary for the day-to-day well-being of the people (fertilizer, milk, cotton, medicines, etc.) adding up to perhaps $40 million on an annual rate and deleting from our program such things as steel, cement, machinery, etc., that are essential for the economy as a whole but do not directly affect people going to the market place. This approach would have the advantage of permitting us to identify ourselves and our program with the masses of people. It would have the disadvantage of permitting the GVN to hold out longer since their reserves would not be drawn down as rapidly. On balance, the latter course appears preferable.

Lodge

1. Source: Department of State, Central Files, AID (US) S VIET. Top Secret; Priority; Eyes Only. Received at 10:18 a.m. and passed to the White House at 12:48 p.m. and to Rusk at USUN at 1 p.m.
2. Document 140.