Nixon Presidential Materials

Washington, August 3, 1971.
SUBJECT : Military and Economic Assistance to Pakistan as a Framework for South Asian Decisions
With mounting press and Congressional pressure on our assistance to Pakistan, I thought you should have an updated description of where issues stand. The SRG has met twice to refine a game plan for you. This memo is background for that.

Economic Assistance

There are three elements:
—The U.S., like other consortium members, has held up on new development assistance commitments since March 25 because of the general disruption of the Pakistani development program. We are holding $75 million in FY 1971 money against the time when a revised Pakistani development plan is available. The World Bank and IMF continue to oppose resumption of development lending under present circumstances while Pakistan’s overall development effort is disrupted. Most of the other consortium members share that view.
—Meanwhile, a pipeline of $82 million is still flowing from earlier commitments. Of that $82 million, about half is already tied up in letters of credit for purchases in process; $15 million is committed to longstanding projects in East Pakistan and $5 million for projects in West Pakistan; $20 million remains to be drawn down. Pakistani drawdowns are running much lower than normal, now about $2 million per month. This means that there could still be ten months of assistance left at present rates, but we could not count on that since the monthly drawdown rate could move back to a more normal level ($5–10 million) if economic conditions improved.
—Food and relief assistance is moving at the rate it can be absorbed, and a major internal U.S. and UN effort is being developed to avert starvation in East Pakistan at the end of this year. Some 360,000 tons of U.S. grain remains to be shipped under existing authorizations. The total import need will be about 175,000 tons a month.
The time frame for further decisions is set by the fact that Pakistan’s six-month moratorium on repaying debts to aid donors runs out in October. Pakistan’s foreign exchange position now appears likely to hold until then. But at that point Pakistan will, through the aid consortium, seek relief either via formal acquiescence in the moratorium or via an IMF drawing which would require supporting aid from donor governments. Such aid would require some development framework, and the Pakistanis are aiming to present an interim development framework concentrating on rehabilitation in East Pakistan. That may well not satisfy either the World Bank/IMF or the other aid donors. The US may well be alone in proposing support unless the situation in East Pakistan shows improvement.

Military Supply

Because military supply procedures are intricate, it helps in understanding where the present situation stands to understand the three avenues through which Pakistan has procured military equipment here:
1. Under our Foreign Military Sales (FMS) program, Pakistan has been able to buy some equipment directly from US military depots. In these cases, Defense maintains control over the equipment until it is turned over to a Pakistani shipping agent at the depot gate.
2. Also under the FMS program, where equipment is not immediately available in US stocks, Defense has put a private US supplier under contract to furnish equipment directly to Pakistani shipping agents. In these cases, Defense control over the equipment is limited once the supplier accepts the contract.
3. Apart from the FMS program, the Pakistani procurement mission here can make its own contracts directly with the supplier. Defense is not involved at all.
In addition, it is important to understand the two controls that have been used to limit shipments since the outbreak of fighting in East Pakistan:
1. All Munitions List equipment—regardless of the channel through which it is procured—requires an export license issued by the State Department.
2. In addition, equipment in the first category above—equipment supplied under the FMS program from US depots—is subject to administrative controls within the Defense Department.
When fighting broke out in East Pakistan on March 25, the first tentative decision was to establish an administrative hold on equipment still within US Government jurisdiction but not to touch equipment which had already been turned over to a Pakistani shipping agent or was being handled directly between a US supplier and the Pakistani government.
This meant: (a) no new export licenses would be issued, but valid ones (good for one year) would be honored until they expired; (b) equipment in US depots would be administratively held. This left the following equipment moving: any equipment for which a license had been issued and which was under Pakistani jurisdiction, either because a US depot had turned it over to a shipping agent before early April or because the Pakistanis were procuring it directly from a supplier.
The rationale behind this distinction was that administrative actions over equipment within US Government jurisdiction could be explained for a time as bureaucratic delays, but establishing control over equipment within Pakistani jurisdiction would have had conveyed all the political signals of a full embargo. Those were signals we wanted to avoid.
It has been difficult to know exactly what the effect of these partial controls would be on the actual flow of equipment because the accounting is so diversified—through the Defense system and out into the commercial market.
What is clear now is that our policy has become more restrictive simply with the passage of time because licenses which were good for one year continue to expire. When Secretary Rogers wrote you on our military supply options in June,(2) it was estimated that equipment up to a value of $34 million might legally be shipped under valid licenses but—because some of that was under administrative hold—the value of actual shipments possible would have been less. By mid-July, further refinement of the list which took into account the expiration of licenses set the outside figure at $15 million under valid license, although again the amount free of administrative controls would have been less. The passage of another month is expected to reduce the amount that Pakistan could, by mid-August, still pick up anew from US suppliers to just under $5 million (in addition to $9.5 million in sonar equipment licensed commercially for vessels being built in the UK).
On the other side of the ledger, we do not know how much equipment Pakistani shippers may already have picked up before licenses expired and have in transit. Some shipments could continue to show up from time to time, but the amount is not thought to be large.
The results of this policy are twofold:
1. The Pakistanis have played along with the administrative game and have not made an issue of our restrictions. It was clear when I was in Islamabad that they were grateful that the US had not taken the formal step of imposing an embargo. The loss of military supplies bothers the military, but to Yahya it seems at least as important that the US has not joined others in condemning him.
2. The Indians and the Congress have objected sharply to our not imposing a total embargo. The fact that very little equipment is actually moving now under present policy does not satisfy them. There are widely supported moves in the House and Senate to cut off both military and economic (except relief) assistance to Pakistan until you determine that most of the refugees are able to return home. If we hold out against embargo, we could suffer restriction on the more important economic aid for a small amount of equipment (plus the principle of avoiding embargo).(3)
As a product of two SRG discussions I would expect to have for you very soon a game plan covering our policy on these two issues as well as on the other elements of the South Asian problem.(4)

Footnotes:

2 See Document 78.
3 Nixon and Kissinger discussed this memorandum in a telephone conversation at 5:25 p.m. on August 3. Kissinger said that they, by which he meant Indians and critics of Pakistan in the Congress, were asking for an embargo on arms and economic assistance to Pakistan. “The extreme people want to cut off everything” he said, and concluded “on relief we have a fighting chance but arms itself is hopeless.” In considering how to work around pressure for an embargo on arms shipments to Pakistan, Nixon asked about future export licenses. Kissinger’s advice was: “Fudge it;” indicate that no licenses were being authorized “at this time.” Nixon concluded: “We will evaluate as it goes along. We will have to take the heat on this.” (Transcript of a telephone conversation; Library of Congress, Manuscript Division, Kissinger Papers, Box 369, Telephone Conversations, Chronological File) There is also a tape recording of the conversation among the White House tapes but it is difficult to understand. (National Archives, Nixon Presidential Materials, White House Tapes, Recording of conversation between Nixon and Kissinger, August 3, 5:25–5:31 p.m., Executive Office Building, Conversation No. 270–14)
4 Nixon highlighted this paragraph and wrote “OK” in the margin.