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

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

Saigon, October 19, 1963, 1 p.m.

748. Eyes only Secretary; exclusive for Felt. Deptel 558² requested TF Saigon evaluation on continuing basis of US actions bring pressure on GVN (Deptel 534). Following assessments reflect combined judgment of Task Force.

1. General. To date there have been no clear indications that US actions have had an adverse effect on war effort either in military or economic spheres. People in countryside largely unaware of recent developments in US-GVN relations or if aware do not feel these developments affect their lives directly. Among educated classes in urban areas general aura of unrest and discontent persists beneath surface. Most significant psychological reaction understandably taking place among business community (US, Vietnamese, Chinese and other foreign businessmen) in Saigon/Cholon area. We have received increasing number reports businessmen worried over suspension CI program and its effect on price structure and over possible cut-off of US aid. Price of gold has increased sharply. Other businessmen seeking unload large sums plasters at 120 to dollar or find investments yielding hard currency return (see Embtel 715 paragraph 7).³ Commodities and related trades primarily affected are sugar, flour, condensed milk, and cement. While reports still somewhat conflicting, concern in business community, and to certain extent in general public, has definitely deepened over past few days (see below).

Reaction by GVN to US measures continues in subterranean ways. We hear continued rumors, probably officially inspired, of plans for sacking Embassy and USIS. Times of Vietnam has continued its drumfire of articles strongly supporting GVN policies and attacking elements of US Mission allegedly opposing GVN by overt and covert means. Reports from various sources indicate GVN currently engaged in planning belt-tightening measures.

2. Economic. Key prices of imports during week reversed pattern and took long-expected rise. Most important were sweetened condensed milk (by up to 10 percent, depending on brand), wheat flour (33 percent), and cement (30 percent), as well as chemical products, some iron and steel products in shortest supply, and miscellaneous manufactured imports.

Failure to rise previously in spite of expected shortages was reportedly GVN-inspired belief procurement authorizations would be issued mid-October. Trade sources report there had been some quiet speculative buying. Now canned milk and flour harder to find, and GVN limiting marketing of last flour shipments and is expected do same with coming milk arrivals. Thus, though supplies otherwise adequate till January, appears speculators have started create artificial shortages now. In case of cement, price rise can be explained in part as normal seasonal fluctuation, as end of rains allow resumption building; recent rise brings price only to official level.

Wholesale rice price also rose 8 percent since September 24, following 47,000-ton sale Philippines, 38,000 tons of which was from private stocks. GVN required exporters deliver equal amount no. 1 rice to security stock, creating pressure on market.

Rise key items touched off rise some other prices, particularly foodstuffs, even though no shortage was imminent.

Two commercial banks report rise in demand deposits, no change in loans, which difficult explain. Black market rate on plaster climbed 15 percent to 128, and there is speculation in gold.

In sum, impact on GVN of economic pressures to date has not resulted in request by Diem to see Ambassador, although Thuan has told Ambassador that Diem worried. Further time needed for pressures to take effect and pressures should be continued until point where they likely result in severe economic dislocation. There are no firm indications that Diem/Nhu will back down in face continued pressure.

3. Assistance to Vietnamese Special Forces. Thuan and Gen Don personally advised on 17 Oct⁴ that MAP and/or CIA support of RVNAF Airborne Ranger companies, Civilian Airborne Ranger companies and Civil Guard companies, presently under control of Vietnamese Special Forces (Col. Tung), will be withheld unless these units placed under operational control of JGS and committed to operations. COMUSMACV letter to President Diem of 18 Oct⁵ advised him of same. Col. Tung will be personally notified when he returns to Saigon.

4. Military. In addition to continuation of pressures which have been underway for some time the following specific actions have been taken on military side with results as indicated:

a. Previously proposed and recently re-emphasized suggestion to relocate corps boundaries in order to place greater emphasis in Delta has (with minor modification) been adopted by President Diem and will become effective 1 November.

b. Previously proposed suggestion to place Vietnamese Special Forces elements operating in various corps areas under the operational control of corps commanders has been adopted by Gen Don and JGS Directive promulgated.

c. USMACV J-3 and Gen Don have made country wide tour visiting all corps and cmd with view to determining [garble—what?] measures required; to place greater emphasis in Delta; to stimulate increase in operational tempo in all areas; and to accomplish other directed actions. These measures will be subject of another COMUSMACV letter to President Diem.

5. Political. In general there have been no favorable developments on various measures we would like see adopted in political area. Diem/Nhu have reacted to pressure by digging in more deeply and attempted exert discreet counter pressure on their own. On resumption of normal university life, University of Hue has reopened except for medical faculty which expected open this week; however, student attendance from 60-70 percent and general atmosphere at University remains sullen. No firm information when University of Saigon may reopen. Appears that GVN now attempting assess whether students actually will attend classes in sufficient numbers to give appearance of normalcy.

GVN general position re Buddhists is that Buddhist issue solved. While over one hundred Buddhist bonzes and faithful released from jail in Hue recently, many remain under detention including two leading bonzes who negotiated joint communique of June 16 and ranking lay leader. Such actions taken by GVN to date can be interpreted as moves on GVN part to demonstrate Buddhist problem solved rather than as concessions to Buddhists. Also, some indication that GVN will not move quickly to repeal or modify Decree Law 10. In meantime Buddhist faithful staying away from pagodas through fear of government reprisals. In sum, GVN appears believe any previous concessions to Buddhists under US pressure are interpreted by Buddhist leadership as weakness and further concessions not warranted and self-defeating.

Nothing significant to report re land reform. Similarly few recent indications (if any) re specific re-emphasis of political aspects of Strategic Hamlet Program, which would be geared in any event to tempo of construction and development of strategic hamlets. Hamlet elections are proceeding as hamlets built and organized. Self-help projects and economic follow-on assistance in development phase are receiving good reception by hamlet populace. Concrete benefits can be expected to result in progressive identification of hamlet populace with the government at least on local level.

GVN has not abandoned extreme police measures and shows no inclination do so in immediate future. Night arrests continue although on reduced scale. Similarly, no action has been taken by GVN to restore civil liberties. On contrary, actions to date seem designed to impress any potential oppositionists among educated classes that they can not count on any guarantees of civil liberties and are at mercy of security organs of the regime.

With regard to refurbishing GVN image through broadening of government, etc; no concrete actions have been taken. Rumors persist that Diem will announce Cabinet changes and realignment certain government functions. However, should this occur it likely to be mere window dressing since most unlikely Diem now contemplates any action which might undermine power position and solidarity of Ngo family. While we cannot discount possibility of Cabinet shuffle for optical purposes, we see no signs that any reduction of influence of the Nhus is in the offing. In fact, harassment of Americans both through newspaper attacks, arrests of Embassy and USOM local employees, and general freeze on normal contacts between Americans and their Vietnamese counterparts would indicate that family still believes it has strong cards to play.

At this juncture little prospect for public and official statement by Diem before National Assembly setting new tone for government. Diem’s speech on October 7⁶ characterized by ambiguous position toward US, a call for self-sufficiency with xenophobic overtones, a catalogue of national accomplishments, and an effort to blame negative factors on Communists and other machinations from outside SVN.

6. US/GVN relations. No general improvement has been noted in GVN campaign of divisive press attacks on CIA, USIS, Embassy, etc. Recent trend is to place blame on US Government rather than singling out specific agencies. While campaign waxes and wanes, major thrust is still one of confrontation with US policy as GVN wishes to interpret it.

GVN appears to have focused on paragraph in White House statement of October 3⁷ on seriousness of political situation as indication US will continue apply pressure for political changes which they not prepared grant. We believe US program of pressures has put Diem/Nhu off-balance and they attempting assess strength of US resolve; however too early judge ultimate outcome and significant indications as [of] a change of attitude may not appear for some time.

Lodge

1. Source: Department of State, Central Files, POL 27 S VIET. Top Secret. Repeated to CINCPAC. Received at 6:56 a.m. and passed to the White House, CIA, and Office of the Secretary of Defense.
2. Dated October 10, not printed. (Ibid.)
3. In paragraph 7 of telegram 715 from Saigon, October 16, the Embassy reported it received calls from two “panicky” Chinese businessmen in Saigon who wanted to unload 6 and 20 million plasters, respectively. (Ibid., POL 2 S VIET)
4. See Document 198.
5. The letter is dated October 19. (Washington National Records Center, RG 334, MAC/V Files: FRC 69 A 702, 204-58 Organization Planning Files-Establishment of and Changes in Organization (1963))
6. An analysis, summary, and selection from Diem’s speech of October 7 before the opening session of the third Legislature of the National Assembly was transmitted in telegram 654 from Saigon, October 7. (Department of State, Central Files, POL 15-1 S VIET)
7. Statement by McNamara and Taylor, October 2; for text, see American Foreign Policy: Current Documents, 1963, pp. 874-875.