488. Telegram From the Department of State to the Embassy in India 1

131690. Ref: (A) New Delhi’s 10954;2 (B) New Delhi’s 10955.3 For the Ambassador. Subject: Conte/Symington Amendments.

1. We agree with thrust of reftel s that India has reasonable case under Symington amendment. On other hand, as reftel s suggest, application Conte amendment poses complex problems. A fundamental [Page 954]difficulty is that while we are committed by law as well as policy to relate our economic aid to recipient’s decisions on defense expenditures, GOI appears equally committed to view that our economic aid gives us no charter to know or question its decisions in security field. We respect your judgment that if GOI is confronted with stark choice between forefeiting our aid or submitting to what it sees as our dictation on basic security decision, GOI will choose former. Such a confrontation as you rightly point out could have incalculable consequences. Nevertheless, it may not be easy to avoid. 2. Part of difficulty arises from evident failure of GOI to appreciate seriousness of our commitment. Relation we draw between economic aid and recipient’s defense program has become a matter of law, as expressed in Conte and Symington amendments. We have assured Congress we take these amendments seriously and intend to implement them in spirit in which they were legislated. Furthermore, we are planning on probability that these amendments or others like them, possibly more stringent, will be with us for some years to come. Thus cosmetics and figleafs with which GOI has approached problem so far (insofar as it has even recognized problem existed) are totally inadequate basis our relations. 3. GOI has not tailored its actions to any perceptible degree to meet reality of Conte and Symington amendments. Evidence of Indian bad faith—no matter how unintended or necessary from GOI ’s point of view—is far more troublesome here than any transaction of which we are informed. Thus there has been erosion of our confidence in value of GOI ’s assurances which began with SU–7 “misunderstanding” and has been compounded by need to “amend” Morarji’s recent assurances. 4 GOI will not adopt such tactics in future? One instance involving substantial U.S. aid commitment on false basis could well sink all aid to India. 4. We know you have these problems very much on your mind and will continue to do your best to persuade GOI to improve. But record suggests that since it is USSR , not U.S., that supplies bulk of India’s defense imports, GOI is likely as matter of conscious policy to find ways to avoid leveling with us about specific procurement activities in which we are not directly involved. On the other hand, prospects [Page 955]should be more hopeful of developing and sustaining a reasonably candid and useful dialogue with GOI on its overall defense spending and force levels. Your recent conversations with Swaran Singh and B.R. Bhagat reinforce this judgement. If this is case, we should consider adjusting our tactics to aim for a relationship which might attain this minimum objective. 5. As we see it eventual objective would be achievement of a workable understanding with GOI based on Indian recognition of legitimacy of our interest, as major supplier of economic and food aid, in India’s gross force plans and defense spending levels, including foreign exchange outlays for sophisticated weapons systems. As long as India stayed within such mutually agreed gross force and defense spending levels we would resign ourselves normally to take up with GOI only those individual defense procurement transactions in which we were directly involved, either because we were supplier ourselves or because we exercised control over third country supply. 6. Strictly FYI , we have been considering possible approaches to immediate problem of how to apply Conte amendment to India partly in context of their potential contributions to achievement this relationship. Following possible options have not been fully staffed out. They are suggested here for your background and to elicit your comment. No decision has been taken to pursue any of them. (A) Formal Conte Waiver: We could recommend formal Presidential waiver under Conte amendment, either now for FY ’68 aid or later, say for FY ’69. This course poses number of problems including fact that law as presently written would require determination that Soviet equipment in Indian hands is vital to U.S. national security. Do you think waiver which would become public would (a) serve our overall purposes, including that of holding down Indian defense expenditures, or (b) create political problems for Indians? (B) Deduction under Conte amendment: We are considering your suggestion to dock India $25 million this fiscal year. We recognize some such action may prove only feasible way to handle immediate problem; nevertheless, in evaluating available alternatives, believe following factors ought to be considered: (1) The amount deducted will become matter of public knowledge and final responsibility for determining said amount rests with us not GOI . We must of course act on basis most reliable information available. To extent our sensitive intelligence data differ from those supplied by GOI or available publicly, we may face numerous sticky problems arising from need to avoid jeopardizing sources, from desire to avoid public speculation as to what GOI is really up to, from questions of GOI good faith, etc. (2) Deduction under Conte amendment could tend to fix ceiling for annual aid level to India and make it more difficult to carry out our present plan for additional commitments to India at end of fiscal year. (3) More fundamentally, we are somewhat troubled by possible long-term effects on Indian attitudes of formal invocation Conte amendment, even though amount of penalty may not be large enough significantly to affect development program. We understand that reasons for our pressure on Indian defense spending may not have gotten fully across, in sense that many Indians assume our pressure reflects interest in maintaining regional Indo- Pak arms balance accompanied by lack of interest or sympathy for India in its defense against China. To extent this generalization valid, seems to us that formal action under Conte amendment could strengthen misconception we no longer cared about Indian security problems with China; result could be continuing erosive effect on Indian confidence in U.S. and on value India places in maintaining good relations with U.S. as hedge against China. This could relate to our future ability influence India on NPT , moderation toward Pakistan, and other issues with security implications. Please comment. End FYI . 7. Regardless of course of action we decide on, it is clear that MIG deal has seriously complicated our relations. We realize GOI had considered deferring MIG deal and decided against it but believe it possible GOI might reconsider if it were fully apprised of nature of our concern and especially of our objective as defined para 5. 8. Accordingly you should approach GOI at appropriately high level along following lines, unless you have serious reservations you wish discuss with us first. (Presume you will want to make your approach at Ministerial level, perhaps at joint meeting of Deputy PM and Defense Minister, which would have advantage of removing any doubts on our side that MOD has been short-circuiting Finance Ministry.) (A) USG remains committed to support of Indian economic development. India is in fact receiving increasingly high proportion of total US aid resources. For FY ’69 we hope obtain resources from Congress which will constitute substantial increase over current FY level for India and provide major stimulus toward level of economic activity in India we have both been working towards for many years. (B) We remain as convinced as we were in 1963 and 1964 that US and India share a vital interest in opposing the hostile ambitions of Communist China. We recognize India’s role as defender of a long and sensitive border with China. We therefore fully appreciate India’s need for an adequate defense establishment. (C) We are also concerned that Indian expenditures on defense acquisitions can cut into resources available for development and to that extent undercut resources we provide. Furthermore, Conte and Symington amendments have incorporated into law principle that we must relate our aid to recipient’s defense program, in sense of precluding us from indirect support of certain defense expenditures. (D) We shall continue to want as much detailed information as GOI feels free to give us that will help us to administer Conte and [Page 957]Symington amendments, although of course we shall have to make final determinations ourselves on basis all information available to us. But we would like at least to work out understanding, based on GOI ’s recognition of legitimacy our interest, as major supplier of economic and food aid, on India’s gross force plans and defense spending levels, including foreign exchange outlays for sophisticated weapons systems. We would normally raise with GOI only those individual defense procurement transactions in which we were directly involved, either because we were supplier ourselves or because we exercised control over third country supply. (E) An immediate problem we face arises from need for time in which to seek better relationship which hopefully would not bring Conte/Symington amendments into play. This constrains us request GOI to place a temporary moratorium on post-January 2 agreements for acquisition sophisticated military equipment. (This would include specific proposed transaction AID Director Lewis recently discussed with Finance Secretary Patel.) Duration of moratorium would be short, several months at most, and purpose would be limited to that of giving us time to work out problem in its broad outlines, and to try to establish understanding as to how we can together best manage question of aid-defense relationship for longer pull. (F) Favorable GOI response to this suggestion will be extremely helpful in context immediate decisions we face regarding pending program loan and PL 480 agreements, which we hope we can proceed on shortly. If GOI cannot in all conscience respond favorably we shall do our best to keep our relations on an even keel, but task will be considerably more difficult, as well as time-consuming. 9. FYI . We intend to call in Ambassador Jung in the next couple of days to convey same message here.