Foreign Relations of the United States, 1964–1968, Volume XXV, South Asia

547. Memorandum From the Director of the Bureau of the Budget (Zwick) to President Johnson¹

Washington, March 27, 1968.

SUBJECT

• Proposed P.L. 480 Agreement with Afghanistan

Orville Freeman and Bill Gaud request your authority to negotiate an $8.2 million P.L. 480 agreement with Afghanistan (Tab A).² The agreement would provide 90,000 tons of wheat and 6,000 tons of vegetable oil on 40-year dollar credit terms, with a 10-year grace period. To help the U.S. balance of payments, it would require that the first $750,000 be paid over 10 months beginning on June 30.

The amount of wheat proposed for this agreement is quite generous in view of Afghanistan’s recent good crop. However, I feel that it is warranted by our desire to move wheat and by the additional self-help leverage which we can get from a larger P.L. 480 program. This agreement would bring to $12.5 million the amount of food aid provided in FY 1968. Our dollar aid is limited to technical assistance and is estimated at $7.5 million this fiscal year.

Self-help. Afghanistan has taken a number of important steps to increase agricultural production, with a view to self-sufficiency in wheat and edible oil by the early 1970’s. The last P.L. 480 agreement, signed in July, contained general self-help conditions designed to reinforce the Government’s commitment to that goal. This agreement would require additional specific and sound measures, in particular (a) the establishment of a wheat price high enough to provide incentives to farmers, and (b) improvement of fertilizer distribution by turning it over to the private sector.

Military Expenditures. Afghanistan’s military supply situation presents a particularly thorny problem. Although about half of its military hardware was provided under contracts concluded prior to 1961, the country’s defense establishment is out of all proportion to its economic situation or any realistic appraisal of the current threat. Almost all of Afghanistan’s military equipment has been supplied by the Soviets. The current inventory includes an estimated 335 tanks, 55 or more surface-to-air missiles, 250 anti-tank missiles, and 96 MIG fighters. (A background paper on military expenditures is attached at Tab B.)³

In spite of this situation Gaud feels, and I agree, that a close reading of the Symington amendment⁴ does not require you to make a finding that Afghan resources are being diverted to unnecessary military expenditures to a degree which materially interferes with economic development. The rationale for this approach is essentially two-fold:

• —Since three-fourths of the equipment is provided on a grant basis, actual expenditures amount to only about 20% of the budget and are not out of line with neighboring India and Pakistan.
• —These expenditures in themselves probably do not unduly interfere with development. Lack of technical skills and workable institutions constitute a more serious bottleneck to Afghan development.

There are also two strong practical reasons for not invoking the Symington amendment now:

• —Our aid program in Afghanistan helps to counterbalance a much larger Soviet presence. In 1963, King Zahir embarked upon an experiment in parliamentary democracy which probably would not have been possible without our influence and support.
• —In Afghanistan as elsewhere, the Symington and Conte/Long amendments⁵ can be quite useful for purposes of persuasion, but they lose their utility once they are applied. Our relatively small aid program may not enable us to convince the Afghans to reduce their future defense expenditures in any event, but to precipitately cut off all U.S. assistance clearly would not achieve this objective.

On the other hand, I do not think we can simply conduct business as usual in the face of this problem. There is a reasonable chance that the U.S., by building on the dialogue which Ambassador Neumann has begun, can induce some restraint in the Afghan military budget. Moreover, if we ignore the spirit of the Symington amendment in Afghanistan, we lay ourselves open to charges on the Hill that we are not serious about its application and will not put any teeth into our policy anywhere in the world.

On balance, I recommend that we go ahead with this proposed P.L. 480 agreement, but that in negotiating it the State Department be instructed to make a vigorous effort, both here and through Ambassador Neumann in Afghanistan, to get across to the Afghans the following points, agreed to by Bill Gaud and Luke Battle:

• —While we recognize that it is difficult for one country to pass judgment on the national security problems and military structure of another, it is our best judgment that Afghanistan’s present military structure and expenditures need serious reexamination in the light of the present military threat and what we all know to be the country’s economic needs.
• —U.S. law now requires that we take future developments on this front fully into account in thinking about any further P.L. 480 assistance or dollar loans or continuation of our technical assistance program.
• —We strongly urge Afghanistan to seek ways to reduce the burden of military expenditures upon its economy. The Afghan Government should know that, under present circumstances, increases in the defense budget or new contracts for additional military equipment will make it extremely difficult for us to provide assistance in the future.

Charles J. Zwick

Approve P.L. 480 sale; instruct Ambassador and State Department to take strong line with RGA

Disapprove⁶

1. Source: Johnson Library, National Security File, Country File, Afghanistan, Vol. I, Memos and Miscellaneous, 11/63–4/68. Secret.
2. Tab A, not printed, is a March 6 memorandum from Freeman and Gaud to the President. (Ibid., Memos to the President, Walt Rostow, Vol. 69, March 25–31, 1968)
3. The attachment, entitled “Review of Proposed PL 480 Agreement with Afghanistan per Section 620 (S) of the Foreign Assistance Act, as Amended,” undated, is not printed.
4. The Symington Amendment to the Foreign Assistance Act of 1967, adopted November 14, 1967 (P.L. 90–137; 81 Stat. 445), directed the President to terminate development loans and P.L. 480 assistance to nations that diverted such assistance to military expenditures or diverted their own resources to “unnecessary” military expenditures “to a degree which materially interferes” with their own development.
5. The Conte-Long Amendment to the Foreign Assistance and Related Appropriations Act of 1968, adopted January 2, 1968 (P.L. 90–249; 81 Stat. 936), directed the President to withhold an equivalent amount of economic assistance from any underdeveloped country other than Greece, Turkey, Iran, Israel, the Republic of China, the Philippines, and Korea, that used its own resources to purchase sophisticated weaponry.
6. This option is checked and next to it a typewritten note reads: “N.B.: The Disapprove decision was made on March 29, 1968. On April 23, 1968 the President reversed his decision and agreed.”