'. TOP SECRET--EYES ONLY . Oo a Sek et ee oe anes owe The Government of the United States is committed to helping the ‘people of Viet-Nam resist and overcome the threat to their peace,. ‘Security and freedom /posed by the subversion and, terror of the omnes ame eS moe fo " Communists. “We intend to stand by: that commitment to the Vietnamese . é - people. However, recent events in Viet-Nam have demonstrated that some” - —_ - assistance from the United States has been used by certain persons for oo * ‘- . ; ‘Purposes and in ways repugnant ‘to us. "We are determined to Prevent. 7 so ep oe ? Poor et ost * these diversions and abuses of our assistance. We have undertaken a review of our aid. program’ and of administrative procedures with at ES = Ae Rpt? . _ view to taking those actions necessary to halt these’ abuses by individuals'* at oe ‘tor their selfish ends and, to insure ‘that such, abuses do not occur in the: te pte ~ fature. i We believe that ‘these proposed actions by the United. States - 7 _- Government will strengthen the efforts of the Vietnamese people in 7 , be are ‘ their struggle against the Communists. We think, t00, ‘that they: will - : assist Viet- Nam in its efforts to build a stable. and popular administra.” tion assured. of the support of its own people. = 7 Sco" "ROD SECRET--EYES ONLY’, 7 8 SF . oe Cote tin te ane a 4, ; NW 49061 Docld:32626060 Page 14
A o™~ ad « oe , + teeters es Hem bin cc herd ae A . oo . . TOP SECRET =--EYES ONLY - part E, Phase I a oe oe ear, " EVACUATION OF AMERICAN DEPENDENTS sw fo es alec gree ate ty eth wt mie ath ' ott. ‘ Evacuation of dependents, as suggested by. Ambassador Lodge; might . prove to be an important pressure weapon on the GVN. However, “it is. “ — : a me ate, satya eee, tricky in its handling. . On balance, it seems wise not to order a mass. a) . eee wm tae lee ee an oo ‘ : evacuation, » but rather a selective evacuation of certain dependents, : © Gpecial means for finaricing the evacuation and a subvention for split- , we oF "families will have to be found. ) sme: - . A oe STE ° EF oes * Sere an rom ob etree tote tye at ste oe * ro wee oh Rees aghen nhs eermeresmonath Dah rae “ue . os ' ae a) hoe a se (eteamecanemminn! 3 cand he actirbe navtethin ie eissieecnentadani, wo tetige ne ut, » ¢ . . Fw . . ” . Lo a) . W 49061 Doecld:32626060 Page i5
} % 3 as ae oa . C . : | C TOP SECRET - EYES ONLY Phase II. Purpose: The purpose of Phase iI remains the same as fn Phase I. The means are highly selective cuts, and redirection of u. S. “aid designed tO avoid as much as possible hurting the War | effort. but underlining our determination to bring about a change in the Vietnamese - Government and policies. . Part A. io Lodge approach to Diem: Lodge should continue his eon- | “ : -versations | with. Diem reminding him of the conversations ‘in’ — - Phase. i and stating that reluctantly the United States. “has! [oe oe “decided t to proceed with the aid cuts Lodge. had earlier is L ° > “nentioned--again in order to preserve the program as a. * IM ! “sswhote-f from a total. cut-off by Congress. . os I | | ‘Lodge should. then. warn the President that still further 7 I : aid: cuts might be necessary to avoid losing the whole ‘program bee LE on: capito’ Hill (Phase: Tit specifies to be worked. tout). Ae OR a ewe ee OS pare’, sop. 2 a Selective aid cuts: An analysis oF the aid cuts = 2 TEPER as “1 contemplated in, Phase. it follows: 7 "| Background Fac tors . . ee Ce (1). The AID cominercial import program and PL 480 ae" | | Liveries constitute ‘approximately 60- 10% of South, Viet- ‘Nam' Ss. ete “imports . Fem cote ts eh ok eb eT emo ant Ot cae ene fe ee teeg ent Ya cE we ae - tae . . “ [a SO nna = a a rane NW 49061 DocId: 32626060 Page 16
. a “ . , ~~ * . . . i . . . 4 - . . . : , ° x . uO u oo (2) Piaster counterpart therefrom constitutes: aoproxi- — 0 aes we emhs a etetheon et Sb auiba men orant + 0+ mately 70% of the GVN military budget. aad (3) GVN reserves. amount to about $170 million,ie., approximately 10 months import cover at 1962 levels.” ' we (4) The SVN general supply and stock position, poth o economic and military, is good. . | - (5) So. long as: the GVN can effectively administer its - - budget and so long as it can allot foreign exchange | from’ its own reserves, the impact of aid cuts will be psychological : ete «° nes “o 2 B a 4 eee weer ee me .: : oe nme geen ey . “ . oeky tenn age vee coset 21S. samen: 9s them at mone b cere maci ane meemnnenn i ene ene eet enh, wept 6 ened iets tats mec Ag teady owe te th amen” vile me 86 Rete ceeeth tat ee Banna gees a2 pet all gaateres ave COE Rib mean ttt ty lhe aa ciewt PLA Rone wine cans one e+ Ger oP sont w BAF athe wet ane “aeo hastens we mY * . : . - ey ~ . 0% . eo. . . eo . . - . ° . . . o rather than real ain the short run. The psychological impact eS Do as greatest, if it is credible that measures taken: fore- : os 7 "Shadow: all- out determination to suspend all v. S.. vai. for ee PE ao pottitieal’ or other reasons... . cs a ae | : “SF petion | *., | -~ a ; ‘The. aid cuts: recommended in Phase II of the: Government's ‘program’ ‘of pressures, on the GVN follow: - 1. withhold CIP allotments not yet made for august and . i thot: being made in ‘September, (CIP pipeline will remain relatively solid. for. eg itt tn tee bout 4 months » then decline to virtually nil in. about a - 8 months. | Notwithstanding the negligible economié effect: of making no allotments, the- psychological effect: upon -_ the Saigon business communi t would be profound and” could well provoke ‘hoarding, speculation, price. rises "and general anwiety j. if. ‘not panic, about ses eons _ outlook) a oe oo me pe | TOP SECRET--EYEs ONLY Ee eretbertreeee aatean—rans Gp © eee meme meeseetemdiemeteiee rmeomeeeentnenataeethee au aeaee wy + = ° ace ewe Fre wee 2 ae Sc ae cata WW 49061 DoeclId: 32626060 Page i?
TOP SECRET--EVES ONLY - a.° Publicly announce “cancellation of U.S. support of - 7 the Saigon Water Works ($17.5 million) and the Saigon: Electric ‘Power Plant ‘($12.7 million). . . (These two projects are known to be ‘highly valued by Diem, are conspicuous evidences of long-term U. ‘S. . interest in the City of Saigon's development, and ‘are - now w under way with completion dates 1-1/2 to 2-1/2, years hence. Suspension of these projects would ‘have a ‘conspicuous impact upon public opinion in Saigon HS —— and would have | to be regarded by Diem as evidence’ of the : 7 oo | - “seriousness of, U. S. doubts regarding its , long- term aia, . . a -Antentions in Sw. “Cancellation of existing contracts: cs ao - “woutd be costly to. the United States and reneivea: nan “construe tion would present real difficulties ‘and added“ f A expenses. “this action might bé a more credible res" ors - . “giedtion of U.S. determination tnan verbal threats or ae warnings of possible future U.S. moves. The achdion cs should be publicly justified as indicating the un- | certainties of the. United States over the wisdom of. a Long- tern investments in’ the absence of basic structural ‘changes, in the GuN which offer promise of tne: long- tern . cS ose a security and. stability, of the. country. Me Seen ee ee a ae mend err ke ete EE en mysentatesnapannnnnnesessnnnnnnsnestertanntesssratasn lana n! ee! weeecemce NW 49061 Docld:32626060 Page 16
TOP SECRET--EYES ONLY 3. Publicly announce continuation of U.S. support of: ongoing programs related to support of the military estap- . . oe . & lishment, counter-insurgency, strategic hamlets, and the - oe -gocial and economic development of the countryside. [- , . . . . . . . t. ae ee 0 ee ote Ane TERE Lert manne 902 sem 6 ememrnenmtett ine te ee . < oan . * Seis mem ben ad oe Bremadnite + , . < heer) Yee ete a ole onto made Le ' ‘ we, Mee por eter ee 7 . soe . . coe # . . we c . . sp oy é 2 omdenw rt vd i 7 poo. ree ' . | W 49061 DoclId:32626060 Page 19