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FOREIGN RELATIONS OF THE UNITED STATES 1961-1963, Volume I Vietnam, 1961 Department of State Washington, DC

88. Memorandum From the President's Deputy Special Assistant for National Security Affairs (Rostow) to the Secretary of State/1/

Washington, July 13, 1961.

/1/Source: Department of State, Central Files, 751K.00/7-1361. Secret. Initialed by Rostow.

To follow up on our conversation of yesterday./2/ You say, quite rightly, that if we raise the Viet-Nam issue on an international level "we must be ready to go." This could mean these things:

/2/No other record of this conversation has been found.

1. We must know quite precisely what kind of international action we want-action which might radically reduce the external component in Diem's guerrilla war.

2. If international action is unsatisfactory, we must be prepared, depending on circumstances and timing, for three levels of follow up:

--A sharp increase in the number of Americans in South Viet-Nam for training and support purposes;

--A counter-guerrilla operation in the north, possibly using American Air and Naval strength to impose about the same level of damage and inconvenience that the Viet Cong are imposing in the south;

--If the Vietminh cross their border substantially, a limited military operation in the north; e.g., capture and holding of the port of Haiphong.

3. As I see it, the purpose of raising the Viet-Nam issue as a case of aggression is either to induce effective international action or to free our hands and our consciences for whatever we have to do. The optimum goal is to create a more persuasive deterrent position with respect to the Laos conference and Viet-Nam. At the minimum we put ourselves in a political position to salvage South Laos and save Viet-Nam with a more rational military plan than we now have.

4. I would underline this. I do not believe that raising the issue requires that we be immediately prepared, if we do not succeed, to go for Hanoi; it merely clears the ground for direct action and, in so doing, creates more effective support for whatever negotiations we may have in Southeast Asia.

5. Behind all this is a view, which I believe Alexis Johnson shares, that we are unlikely to be able to negotiate anything like a satisfactory Laos settlement unless the other side believes that we are prepared, as an alternative to a satisfactory settlement, to fight. My anxiety has been that our present military plan, focussed on the Mekong Valley (which I assume the other side knows), might not be an effective and persuasive deterrent. I would assume that a posture aimed more directly against North Viet-Nam is more likely to be diplomatically persuasive.

6. Whatever organizational arrangements may commend themselves for Southeast Asia to you, I suspect it would be helpful if we were to provide some regular forum soon where we could consider the Laos and Viet-Nam problems together; their relation to Thailand and the rest of Asia; and their relation to Berlin planning.

 

89. Paper Prepared by the Chief of the Military Assistance Advisory Group in Vietnam (McGarr)/1/

Saigon, July 13, 1961.

/1/Source: Kennedy Library, National Security Files, Vietnam Country Series. Secret. Attached to a memorandum of July 13 from McGarr to Nolting, in which McGarr said he was commenting on specific military questions raised in telegram 38 to Saigon, July 10. (Document 87) Both the source text and the covering memorandum are apparently copies furnished Rostow who then passed them on to Taylor. In the margin of the covering memorandum is written the following note: "General Taylor. You will wish to read this. Walt."

Question: Are reforms in military command really taking hold or are they mere paper devices to cover Diem's continued personal detailed management?

Answer: A review of the recent accomplishments by the GVN in the military field as the result of MAAG continued and intensive urging over a period of many months convinces me that real progress is being made in this vital field. These reforms, starting with the Transfer of the Civil Guard to the DOD in the fall of 1960, and in particular, the recent command and territorial reorganization of military and pare-military forces, as recommended by the CIP,/2/ have resulted in significant changes in the basic structure of the VN military establishment. These important and far reaching command reforms so long recommended are designed and, under MAAG guidance and supervision in the implementation phase, are progressing towards the desired goal of a clear, sound chain of military command which encourages initiative and the assumption of responsibility at all levels. As a result of representations by MAAG during the recent Vinh Binh operations, the President has reversed the previous assignment to Province Chiefs, of certain ARVN units in this area.

/2/See Document 1.

Specifically, the military reorganization of the RVNAF includes the operational activation of the Field Command as the responsible military tactical operations agency for all of VN, the territorial redivision of the country and assignment of responsibility to the three Corps, and the establishment of Logistic Commands to replace Military Regions. These are all major accomplishments, carried out during a period of increased Viet Cong activity, with a high degree of urgency and efficiency. Troop units have been physically moved with the minimum of disruption of daily operations. And two large control headquarters, Headquarters Field Command and III Corps, which until the reorganization were largely "paper organizations," have assumed actual operational control while still organizing and receiving their communications equipment. The vital logistics reorganization is taking shape as recommended and the Log Commands daily assume more of their full responsibility.

This logical command and territorial organization continues down from Corps to Division Sectors with the clear assignment of responsibility and the troops to do the job. For large scale operations the division commander will exercise command and use his own chain of command. For small operations the Province Chief (subsector commander) will exercise control under the supervision of the Division Commander. It should, of course, be recognized that fully effective implementation of all the military command recommendations will take considerable time and that it is complicated by the continuing heavy commitment of military and pare-military units to counter-insurgency missions. A time lag in accomplishing a reorganization of this magnitude can be expected even in more advanced armies than that of Vietnam-over which we have advisory control only.

Military reorganization and realignment of functions has not been restricted to the field units. Plans for major decentralization from DOD to the Joint Staff continue to be refined. The Joint Staff is devoting increased attention to policy matters of a broader nature since it relinquished operational control of combat units to Field Command. These actions also take time, but I am impressed by the progress already made.

Question: How successful was the recent delta sweep?

Answer: From a purely military point of view the operation was considered a success. There were four primary objectives:

a. To test the command relationships between the reorganized military and the civil chain of command, particularly at the Province Chief level.

Special Financial Group Mission -

b. To offset the psywar propaganda of the Viet Cong which states that Vinh Binh Province is a "denied area" to RVNAF.

c. To clear out as many Viet Cong as possible in the area and restrict further Viet Cong activity.

d. To search out and destroy Viet Cong weapons depots, training camps, and bases of operation.

Although this operation disclosed certain deficiencies in coordination and detailed planning, as was to be expected in the initial operation under a new command arrangement, it did represent a major step forward in carrying out the military command and operational principles recommended in the CIP. The chain of command was clear cut from Field Command through the III Corps Commander and the 21st Division Commander to the Combat Units. The joint preplanning, although held closely for security reasons, was very good. Although because of this, implementation of the plan needed improvement. The Province Chief did not interfere with the military aspects of the operation and, in fact, assisted in every way possible. All elements of the RVNAF involved in this operation, and particularly the JGS, Field Command and III Corps, will benefit greatly from the lessons learned.

The objective of "showing the flag" to offset VC propaganda was clearly accomplished. The PsyWar Companies' actions were closely coordinated with the operation throughout and were quite effective. ARVN forces were seen in force throughout the area. Now that major operational forces have been withdrawn it will depend on the civil administration, supported as necessary by local military and/or pare-military forces, to maintain security. Currently, one ARVN battalion and two ranger companies remain in the area to ensure take-over and orderly control by security forces under the civil administration authorities.

A large quantity of equipment and supplies was captured and/ or destroyed to include weapons, boats, kerosene, food caches, and other miscellaneous VC equipment. In addition, a dispensary, a training center, a crude small arms factory, and a supply center were overrun and captured. 26 VC were killed, 37 captured, and another 37 suspects taken into custody. While these figures may not seem impressive at first glance, and undoubtedly some VC as individuals eluded military forces by water, it is the nature of counter-guerrilla warfare that identification and elimination of guerrillas is a long, gruelling and costly process. It is not one that lends itself to sudden and spectacular success. In view of the very large area covered by one division of five battalion equivalents, these results are good.

Question: Will it be followed up by further sweeps of the same area as means of establishing real sterilization?

Answer: This operation was not the traditional French type "sweep". It was a joint operation by Air-Navy-Ground Forces which was coordinated with Provinces on either side of Vinh Binh. There are no known plans at this time for further operations of this nature in same area. However, General Khanh, Chief of Staff, has assured me they intend to ensure take-over and control by the civil and security forces before complete ARVN pull out. The MAAG concept for sterilization of an area as contained in the Proposed Counter-Insurgency Plan for Vietnam visualizes military operations being phased out of an area by the gradual but integrated take-over by security forces and civilian control. Permanent pacification or sterilization can never be accomplished by military sweeps or even more valid military action alone. In this operation, there was insufficient civil-military preplanning for application at the outset of the concomitant political, social, economic and psychological measures required to assure permanent pacification. Even when present operations in Vinh Binh are accomplished, large scale military operations by regular forces will again be required if other measures prove inadequate in the face of renewed, determined VC activities. This remains to be seen.

Question: Is this an example of improved military coordination, planning, and strategy, or does it represent a flashy operation without real permanent improvement in these areas?

Answer: MAAG does not agree with the implication that RVNAF puts on "flashy" operations. This force is too heavily committed to allow for such tactics. We are strongly of the opinion that a genuine improvement in coordination, planning and strategy is in the making as indicated by this and other recent operations. The recent reorganization of the chain of command and subsequent clarification of implementing directives has every chance of significantly improving military operations. Valuable lessons were learned from this operation which have already been pointed out by Chief MAAG to senior military authorities who are now working on improvements. However, the worth of the entire military operation in Vietnam cannot and should not properly be evaluated on one single operation. If properly applied, they will materially improve subsequent operations. Particularly encouraging is the evidence of renewed offensive spirit and motivation on the part of the military who took part in the planning and execution of this operation. From personal observations, I can assure you that enthusiasm, determination and seriousness of purpose on the part of military personnel at all levels was clearly evident.

Question: Is there any effective central planning done by any agency other than Diem himself?

Answer: In the military field: Yes. For example, as previously reported, planning and execution by DOD, JGS and lower levels in implementation of CIP recommendations for reorganization, and repositioning of forces and as indicated in the recent Vinh Binh operation. Of course, there will continue to be room for improvement. For example, the Military Assistant to the Director of the Cabinet is developing a policy paper on National Objectives in hopes of obtaining its approval as a basis for further national military planning. At his request, MAAG is currently reviewing the study. Also, the J-1 of the JGS has recently completed a study on further increases in RVNAF, copies of which have been provided MAAG. It is generally in consonance with the MAAG Requisite Force Structure Study, except that it contemplates a slower rate of build up. As you know, Field Command conceived the recent military operation in Vinh Binh Province and planned it in conjunction with III Corps Headquarters. III Corps and 21st Division Headquarters carried it out with little or no interference from above. Again, a combined Vietnamese-US military committee is preparing field manuals on counter-insurgency operations using the MAAG Tactics and Techniques Study as one of their sources.

Question: Is real progress discernible as result of recent U.S. moves or is progress expected or is it business as usual?

Answer: In the military field, real progress has been made and there is every reason to hope that progress will continue. There is no doubt that military leaders at the national level are working long hours in a sincere effort to improve Vietnam's security situation. Their attitude is definitely not one of "business as usual," in the connotation of this question.

Command reorganization and the resultant establishment of a proper chain of command discussed earlier are, of course, only the long needed basis from which real operational changes begin. MAAG feels it unfortunate that this basis for improvement was deferred until the agreements on the overall CIP were reached. I feel that GVN has made considerable progress in training and in the operational field. A concept of employment for Civil Guard units has been developed which serves as the basis for all CG training. This program includes special leadership as well as individual and unit training, all oriented toward anti-guerrilla combat. Ranger training has continued to receive high priority and emphasis as has ranger type training for all combat units of ARVN.

In the field of operations, progress has been made in the cooperation between Air and Ground units. This cooperation involving quick reaction times for air support is of extreme importance and in pertinent operations this year has had good success. Concepts have been developed for use of specially training forces using helicopters and necessary training implementation is under way. Permission for MAAG advisors to assist RVNAF units in operations down to battalion and separate company size units has begun to produce some tangible results. Chief MAAG has requested that the President give his support to ensuring further implementation by Commanders in this area. We are, of course, pushing for much needed improvement in both the training and operations areas. Although MAAG holds the RVNAF to U.S. standards, it should be realistically recognized that these will not be attained immediately.

After considerable delay due to circumstances beyond GVN and MAAG control, ARVN is now moving ahead with its increase to a strength of 170,000. Current plans contemplate all units to be activated by December. Although activation of certain elements of the 20,000 increase has taken place, unfortunately, it has not progressed to the point for which the increase was justified, of permitting rotation of major units for badly needed rest, rehabilitation, and unit training.

In summary, I feel the time for changes of this magnitude, especially under the pressures of a daily hot war, must be recognized. While I am far from satisfied or complacent, and fully recognize the urgency and need for continued improvement, I am not pessimistic but rather I am impressed by the concrete accomplishments made by the GVN in the military command and operations fields. GVN and RVNAF have not implemented all of our military recommendations, nor have they fully completed certain of the projects initiated; however, I feel they are making progress as fast as could reasonably be expected.

 

90. Telegram From the Embassy in Vietnam to the Department of State/1/

Saigon, July 14, 1961, 1 p.m.

/1/Source: Department of State, Central Files, 120.1551K/7-1461. Secret; Priority. Repeated to CINCPAC for PolAd.

66. Task Force VN 22/25./2/ SFG, in association Vietnamese colleagues, briefed President Diem July 11th on special action program, outcome of SFG operations during past three weeks. Diem was joined by senior ministers; Ambassador Nolting, DCM, USOM Director, Chief MAAG, also present. Briefing considered major step forward towards US objectives Vietnam.

/2/Reference is to numbered paragraphs in Document 56.

1. Costs of military and economic programs for 18 months through December 31, 1962 were projected at $85.5 million and 6.5 billion piastres over and above present programs. Military estimates based on reaching force level of 200,000 by December 31, 1962.

2. Emergency economic and social action program involving additional aid designed specifically to support military effort, costing about $13.5 million and 1.8 billion piastres, was described, to be centered on communications, agrovilles, land development, rural medical programs, training civil administrators, and youth corps.

3. A long range development program designed to assist Vietnam achieve target of self-sustaining growth, was also described estimated to cost $30 million and 1 billion piastres more than ongoing programs. (It is thought that additional projects of this magnitude can be developed in the private and public sector in the next 18 months.)

4. Seven principles underlying the commercial aid program were agreed by both Vietnamese and US representatives. These points include joint planning of the external resources of both countries available for imports; agreement that VN foreign exchange reserves should be held in the region of $200 million; agreement that the program should be so handled not to widen gap in living standard between the wealthy and poorer classes nor harm sound infant industry; and other points designed to assure orderly programming, all within the balance of payments approach to determine Vietnam's requirements for commercial aid.

5. Various measures which might meet the additional piastre bill of 6.5 billion for QCP month ending December 31, 1962 were then described, including bank borrowing, 1.5 billion; an issue of victory bonds and stamps, 300 million; tax reform including tightening of collections, 1.25 billion piastres. The gap remaining after the mobilization of the 3.05 billion piastres possibly obtainable from the foregoing sources must be met from proceeds of commercial aid, which might be increased within the criteria described in pare 4. Higher yields on the US aid dollar were advocated both by Dean Thuc and Dr. Staley as essential to resolve financial problem.

6. Finally, there was a joint suggestion that committees be established on Vietnamese side, and on American side, to oversee all aspects of Vietnamese/American aid activities and to assure progress of all action programs. These committees will include on Vietnamese side President and representatives of the military and of the social and economic ministries; on the American side, the Ambassador and CT representation. Subordinate committees, VN and US, would be activated on military and on social and economic affairs. These VN and US committees will be considered "parallel" but will meet together; Diem preferred not to have them described as joint.

Comment: The result of this briefing has been to clear the air considerably on the problem of exchange rate and to stimulate GVN thinking, including Diem's, on the necessity to assure higher piastre yield on American aid dollar. Vietnamese, in general discussion, seemed anxious set target for higher amounts commercial aid, perhaps as hedge against expected fall in export receipts. National Assembly, however, has just acted to increase production taxes by 20 per cent which will increase budget yield on American aid dollar to nearly 60 piastres although amounts deposited counterpart including customs will remain at present level of about 43 piastres to dollar.

It is opportune that IMF representatives are now holding annual consultations with GVN overlapping SFG and their influence will undoubtedly be directed toward unification of piastre dollar exchange at rate of 73.50 or higher.

Task Force recognizes, however, that we have an emergency situation here, that momentum and confidence must be preserved and that in negotiations we should estimate liberally the amount of commercial aid that can usefully come in under the principles set forth in the joint study. Believe our theme should be, not that we want to set arbitrary limits on US aid, but that we want to help get the job done in manner and under arrangements conducive to sound economic growth and sound financial management in Vietnam. We also think that negotiations here on government-to-government level should be undertaken promptly in light of imaginative and persuasive SFG study.

Nolting

 

91. Memorandum From the President's Deputy Special Assistant for National Security Affairs (Rostow) to the President/1/

Washington, July 14, 1961.

/1/Source: Kennedy Library, National Security Files, Regional Security Series, Southeast Asia-General. Secret.

You ask: What are the implications of the situation in Southeast Asia for the handling of the Berlin crisis?

I believe they are the following:

1. Military Planning. The scale of our military build-up should take account of a Southeast Asia crisis as well as a Berlin crisis. The state of East Germany makes me somewhat skeptical that Mr. K. will push Berlin too far this year; although he may go as far as the treaty. Moreover, the possibility of a Southeast Asia crisis means we should delay until relatively late in the game the actual commitment of forces to Europe.

2. Public Presentation. The military moves you take should be presented to our people, our allies, and the other side as justified not by Berlin but by a general heightening of danger in the world environment. We do not know whether access to Berlin will be cut; we do not know whether the offensive in Laos will be resumed. We do not know what scale of action the Viet-minh might mount in South Viet-nam; we do not know what lies behind K's threats to Iran; we do not know what mischief Castro plans in Latin America, etc.

Legally, there would be great advantage in presenting your proposals as a modification of existing emergency arrangements. We have lived since 1945-or at least June 1950-under emergency conditions. Your action should simply record your conviction that-in degree-the dangers have increased, and prudence calls for a stronger contingency position across the board.

At home, this line of approach would strengthen your hand in holding the line on foreign aid, space, and education. Increased insurance outlays do not justify breaking up a family's long-range planning, especially when the increased insurance is small in relation to the family's income and income is rising rapidly.

This approach would avoid charges among certain elements in Europe that the U.S. is excessively excited and aggressive about Berlin.

With Khrushchev, this approach would minimize the challenge to his prestige on the Berlin issue, of which the CIA evaluation makes so much;/2/ and it would make it easier for him to talk or let the thing die down.

/2/Not further identified.

3. Asian Opinion. This approach would reassure our Asian allies that we are not so obsessed by Berlin that we are going to bug out in Southeast Asia. The Russians are using this interval to put the heat on Thailand; and, elsewhere as well, we can expect them to try to exploit our concentration on Berlin.

4. The ChiComs. We must draft instructions for enlarged conversation with the Chinese Communists, who have indicated a desire to talk with us over a widened range. It is essential that we communicate to them that our concern with Berlin does not mean that we are unmindful of Asia. Incidentally, I believe you should personally take a hand in formulating these instructions.

5. Planning. Finally, the forming up of a Berlin posture underlines the urgency of getting a combined military-political contingency plan for Southeast Asia of the kind General Taylor and I have advocated. General Taylor has made progress on the Pentagon component; but we still lack a coherent State Department position, and we lack a forum or task force in which the military and political elements could be brought together.

6. Speech. Your talk to the American people in the next week or two should focus primarily on the world situation and our preparations to meet it, rather than primarily on Berlin.

This memorandum has the approval of General Taylor and Henry Owen.

 

92. Telegram From the Embassy in Vietnam to the Department of State/1/

Saigon, July 14, 1961, 7 a.m.

/1/Source: Department of State, Central Files, 751K.00/7-1461. Secret, Priority Limit Distribution. Repeated to CINCPAC for PolAd, Vientiane, Bangkok, London, Geneva for FECON, Phnom Penh, and Paris.

70. Deptel 35 to Saigon./2/ Have for weeks been seeking answers to questions like those posed reference telegram. My reading of situation and prospects here, tending towards optimism, is neither static nor final, and is of course fallible. Views of high-caliber country team here difficult to pin down in common denominator, since assessments vary. Diplomats of friendly countries Saigon also not unanimous in their views, generally inclined to be more pessimistic than US. Intelligent and patriotic Vietnamese citizens, and even GVN officials, not of one accord re prospects of country or re necessary measures.

/2/Document 87.

The following then are my personal views. I shall invite other members task force to forward their comments, if they see matters differently in general or in any particulars.

In the two months that I have been here I have traveled widely in country, generally in company President Diem and several of his cabinet. Have also spent many hours in private conversation with Diem, whom I like and admire as a person. The trips have been worthwhile, I think, despite fact that much of what I saw was dressed up for President's visit. (I feel certain that Department [Diem?] would prefer to see things in the raw, and was not trying particularly to impress me; but a certain amount of artificiality is nevertheless built into such visits.) Trips have extended to all areas of Vietnam, including about 100 kilometers of Laotian border, except far north, which I hope to visit soon. They have provided opportunity to compare conditions and attitudes other sections of country with those in Saigon.

Distinction should be made, I think, between two aspects of situation here, often confused: (A) What is Vietnamese Government (which means President Diem) striving for? Are his philosophy, objectives, and moral values sound in terms US interests in world? (B) How are these being put into effect? How are they being understood and received by Vietnamese people? Is progress rapid enough to keep pace with increased pressure? If not, what can be done about it?

Regarding (A), I think President Diem's philosophy of government, and his objectives for his country, are sound and good. After many hours of fundamental discussions, I am convinced that he is no dictator, in the sense of relishing power for its own sake. On the contrary, he seems to me to be a man dedicated to high principles by himself and his people; a man who would prefer to be a monk rather than a political leader; a man who does not fundamentally enjoy power or the exercise of it. He is, nevertheless, an egoist in the sense that he believes (in my judgment, with some justification) that he can govern in South Vietnam, in general and in detail, better than anyone else now available; and that he knows more about the Communist movement in this area and how to combat it than anyone else. His own strong convictions, energy, and his faith in himself are both a strength and a weakness-a strength in providing a counter-dynamic to communism, a weakness in causing over-concentration of governmental power and authority, consequent lack of governmental efficiency, and in offering a vulnerable political target. His philosophy of government, summed up in the term "personalism" (which does not mean personal dictatorship but rather the requirement for individual development much in the Aristotelian sense) is perhaps too lofty for popular understanding, but is certainly in my judgment sound and right, and compatible with US interests. (Please note July 7 expression of this philosophy sent Task Force Washington./3/) Thus, I think the United States should have no hesitation on moral grounds in backing Diem to the hilt. Where we think he is wrong, we can bring about ameliorations and improvements gradually in proportion to the confidence which he has in us and in his ability to make concessions without slipping.

/3/Not further identified.

Re (B), my (Limit Distribution) assessment is less clear-cut. There is no question that Diem and his government have felt an increasing upsurge of confidence in the US over the past 6 months, despite developments in Laos. High US expressions of support, backed by concrete and continuing actions, have had real effect. First commandment of task force report-to build confidence-was, in my judgment, soundly conceived, is being carried out, and is being reciprocated. Strong and evident US support has brought to the government side a certain number of fence-sitters, and has also probably considerably reduced the likelihood of a military coup d'etat. It has at the same time made Diem an even more vulnerable target of Communist attack, which has, I fear, carried some people into the enemy's camp. Diem himself realizes this and that is why he is so eager to get across the thought that victory of the Vietnamese people over Communist subversion has title [?] gained through Vietnamese sacrifice and not directly through American or free world protection. Nevertheless, I do not think it is true that US support has given President Diem's government as yet a net increase in popularity among the Vietnamese people. Oddly enough, Diem's own keen personal interest in and knowledge of theoretical things of life, such as farming, fishing, disease, teaching methods, construction methods and techniques, are misinterpreted or distorted by many Vietnamese into the picture of a remote and aloof man who has little interest in the welfare of the common man. This is due in part, I think, to his manner and in part to Communist propaganda. It is definitely a false picture, judging from many trips and much discussion. In any case, it seems to me clear that in some way the Diem government must make a "break-through" to regain popular support. If the situation drags on in an inconclusive manner for many more months, either a military coup, or an open proclamation of a Communist Government and widespread civil war, is likely.

I agree that the key to such a break-through is sufficient military and security forces, and skillful selection thereof, to guarantee protection and a free choice to the people in Vietnam, especially in the country districts. At present, despite all efforts, this protection does not exist in many areas. In fact, while accurate statistics on the degree of security are not obtainable, and while the situation varies from province-to-province and from district-to-district, I do not believe that the net security situation is any better now than it was 2 months ago. There have been some encouraging statistics, such as the percentage of actions being initiated by government forces against Viet Cong/4/ forces against 75 percent initiated by VC four months ago), which in turn seems to reflect more intelligence coming in from countryside. (This ratio has recently slipped again.) On the other hand, there are reports of very large losses of rice to Viet Cong (being checked and reported separately), instances of refusal from fear to identify assassins, and the establishment of VC "governments" parallel to GVN authority in some areas, collecting taxes and issuing VC money. All of which adds up to a very mauve picture, but one which is certainly not conclusively getting better. In our attempt to help create a new and winning psychology, I have taken a much more optimistic line in conversations with other diplomats and with press here than that reflected above, and I think we should continue to do so, giving benefit of the doubt wherever possible to optimistic assessment.

/4/Omission in the source text.

Re security situation Saigon itself, there is no evident change over past several months, aside from shooting up of USOM officer Davis's car about ten miles out of Saigon a week ago, and grenade attempt at me last Saturday. We have been trying to figure out what these mean in terms of security of Americans here, but cannot be categoric. Facts are that no arrests made to date in either incident. There was reluctance on the part of eye witnesses to Davis' shooting to testify or identify assailant. Vietnamese police and surete are conscientiously working on cases, but no concrete results to date. After a study, we have gotten out a note to Americans here, based on conclusion that recent attacks do not seem to foreshadow wider terrorist activities against Americans, but recommending increased prudence and circumspection.

MAAG is writing detailed evaluation of recent sweep in Vinh Binh Province, which should be ready shortly./5/ My impressions to date are that combined operation, first of its kind, was fairly efficient and effective militarily, that most of Viet-Cong escaped net, and that while much territory was liberated, there is question as to who will control it after bulk of forces withdrawn. Some Ranger battalions are being left there, and some civic action being undertaken by army units. In general, however, it appears that this sweep points up the long-felt need of utmost coordination between military actions and quick follow-up on social and economic programs. We have not licked this problem yet.

/5/Not found.

Re GVN reforms in military command, intelligence, economic and social fields, the following is a quick personal assessment.

Military command: Despite some reports to contrary, my evaluation is that reform in military command is producing many desired results, and will produce more. Diem's proclivity to interfere with military authority will be further reduced as his own confidence in US support and in loyalty his military forces increases. Confidence on both fronts is increasing.

Intelligence: While GVN central intelligence organization not yet fully functioning, prospects are good and we expect increasing results.

Economic and social measures: Work of Staley group with Vietnamese opposite numbers, resulting in effective briefing of Diem and Cabinet July 11th,/6/ has opened new prospect and given real boost to possibilities in these fields. This, added to continued effective work of USOM and USIS, plus greater emphasis on part GVN as reflected in recent Cabinet shifts, hold prospects of increasing success. Much depends on US backing and particularly on greater flexibility and promptness to follow-through.

/6/See Document 90.

Re effective central planning, we have come up with a recommendation, embodied in joint briefing July 11 and accepted by Diem, of a mechanism which promises to produce more effective planning and implementation of joint programs. We must assure that these programs bear the stamp "Made in Viet-Nam" rather than "Made in America", and we must keep constantly on alert lest oral or written undertakings by GVN substitute for concrete end products-something which can happen here.

In general, I am optimistic. I believe we taking the right track. It is a question of how fast and effectively we can advance.

Nolting

 

93. Letter From the Vietnam and United States Special Financial Groups to Presidents Diem and Kennedy /1/

Saigon, July 14, 1961.

/1/Source: Kennedy Library, National Security Files, Regional Security Series, Southeast Asia-Rostow Report Second Try. Secret. The attached report, along with this covering letter, are printed in United States-Vietnam Relations, 1945-1967, Book 11, pp. 182-209.

Although the letter and the attached report, not printed here, are both undated, the letter was probably signed by Thuc and Staley on July 14, the day the Staley mission departed Vietnam. Staley's appointment book indicates that the two men held their final meeting on that day and issued a joint communiqué. Staley's appointment book and a copy of the communiqué are in Staley Papers, Palo Alto, California. Staley later recalled that he had signed the report during the final meeting with Thuc. (Department of State, Office of the Historian, Vietnam Interviews, February 16, 1984)

The Viet Nam and United States Special Financial Groups charged with considering the means of further cooperation between their two countries for mutually shared purposes have the honor to propose to their respective governments the attached joint program of action.

Viet Nam is today under attack in a bitter, total struggle which involves its survival as a free nation. Its enemy, the Viet Cong, is ruthless, resourceful, and elusive. This enemy is supplied, reinforced, and centrally directed by the international Communist apparatus operating through Hanoi. To defeat it requires the mobilization of the entire economic, military, psychological, and social resources of the country and vigorous support from the United States.

The long-term economic future of Viet Nam is bright. In fact, the promising start already made toward improvement in the living conditions of its people appears to be one of the factors which precipitated the recent intensification of Communist pressure. The contrast between the achievements of recent years in South Viet Nam and the hardships and failure in Communist North Viet Nam was becoming too glaring. Given the means to throw back the Communist attack and to resume its march of economic, social, and political progress, Viet Nam can be an example in Southeast Asia for the progressive potentialities of men who are determined to remain free. We strongly urge that our two governments make this the purpose of their continued cooperation.

At the moment, however, the primary problem is the restoration of internal security in the face of tough, widespread, externally aided Communist guerrilla warfare and subversion. To meet this problem requires stepped-up military and policing action. But the problem is more than a military problem. Its solution also demands stepped-up economic and social action, especially in rural areas, closely integrated with the military action. For example, one of the more promising counter-guerrilla methods tried up to this time involves regrouping scattered rural populations into more readily defensible communities so designed and assisted as also to offer improved opportunities for livelihood.

Recognizing this close interdependence of the military and the economic-social problems, we have based our recommendations on the following three central considerations:

1. The military-internal security requirements must for the time being have first call on Viet Nam's manpower and economic resources and on U.S. assistance. This is a short-term but essential requirement.

2. At the same time, the degree to which the military-internal security operations achieve lasting success will, in large measure, depend on the speed and effectiveness with which the recommended emergency economic and social programs are applied.

3. The ultimate objective of these economic and social programs and of the longer-range development planning which we also recommend is to hasten the day when Viet Nam will be a self-sustaining economy and a peaceful, free society. This is desired by the Vietnamese, who want to be independent in the fullest sense, and by the Americans, who conceive their aid as helping people to help themselves toward a condition where they can continue to progress by their own efforts.

The recommendations which our two groups, working jointly together, have thus prepared call for major increases in the level of effort of both Viet Nam and the United States.

These increases reflect our sincere conviction that the subversive, intensive warfare being waged today in South Viet Nam can be brought to a successful conclusion only by the prompt application of effective military power, coupled with large-scale economic and social action reaching every part of the country, especially the rural areas. From the financial standpoint, we believe it far less costly to provide fully adequate resources today than to attempt to match Communist initiatives with just enough strength to meet each new threat. The first course offers a real possibility of early victory and thus an end to the tragic waste of human life and of the material assets so sorely needed for the economic development of the country. The second, while less costly in terms of current budgets, will not provide sufficient resources to achieve a decisive defeat of the Viet Cong organization and therefore will, in the long run, prove more expensive as the war drags on with increased intensity year after year.

Accordingly, the intensified program which we recommend our two countries adopt as a basis for mutual actions over the next several years is designed not just to hold the line but to achieve a real breakthrough. Our joint efforts must surpass the critical threshold of the enemy's resistance, thereby putting an end to his destructive attacks, and at the same time we must make a decisive impact on the economic, social, and ideological front.

Respectfully,

Viet Nam Special Financial Group	U.S. Special Financial Group
Vu Quoc Thuc, Chairman	Eugene Staley, Chairman
Duong Tan Tai	Colonel Edwin F. Black
Dinh Quang Chieu	William W. Diehl
Huynh Van Diem	Paul F. Geren
Luu Van Tinh	Herman Kleine
Buu Hoan	Warren A. Silver/2/

/2/Printed from a copy that bears these typed signatures.

 

94. Paper Prepared by the President's Military Representative (Taylor)/1/

Washington, July 15, 1961.

/1/Source: Kennedy Library, National Security Files, Vietnam Country Series, Regional Security Southeast Asia-Rostow Report Second Try. Secret. A note on the source text indicates that Lemnitzer accepted Taylor's suggestions.

1. President Diem in his letter of June 9 to President Kennedy/2/ has requested an increase of his Army to 270,000 from the presently approved ceiling of 170,000. To respond to this request it is first necessary to determine the missions which have been or may be assigned to this force. They are considered to fall under the following headings:

/2/See footnote 3, Document 69.

a. Internal security

b. Defense against a conventional attack by North Vietnam;

c. Defense against further guerrilla infiltrations across frontiers.

2. The forces for the first two missions, a and b, can be estimated fairly readily (although a may change if c is not carried out), but those for the third will depend on the over-all strategy to be followed and the help obtainable from Thai, Laotian and U.S. sources. If the defense against further infiltration is static along the frontiers of South Vietnam, one set of forces is required. If an offensive solution is sought involving a movement of Vietnamese forces into Laos against the avenues of infiltration coupled perhaps with offensive air and guerrilla action against enemy forces, a different set of forces will be required. Thus, there is need of an over-all Southeast Asian politico-military plan assigning missions to national forces, establishing requirements in manpower, equipment and funds for each country and making provision for the means to satisfy the requirements.

3. To initiate the military portion of such a plan, I would suggest asking the Joint Chiefs to produce an outline plan drawn on the following bases:

a. Assumptions

Under any set of circumstances growing out of the current Laos negotiations, it will be most important to secure and hold enough of the Mekong Valley and the Laotian panhandle to protect South Vietnam and Thailand from conventional attack or guerrilla penetration from North Laos and North Vietnam. In so doing it may become necessary or desirable to mount air attacks against targets in North Laos and North Vietnam, and to launch and support offensive guerrilla operations in these areas. Also during such operations, the United States should have a continuing capability to threaten and, if necessary, to carry out military operations from the sea against vital targets in North Vietnam.

b. Guidelines

(1) Thus it may be necessary to perform three tasks, i.e., (1) the securing of the Laotian panhandle and parts of the Mekong Valley, (2) the launching of offensive air and guerrilla operations from the panhandle, and (3) the application of military pressure against North Vietnam.

(2) To do the first two tasks, we should make maximum use of indigenous ground forces, employing largely Laotian, South Vietnamese and Thai troops with the United States' role limited, to the extent possible, to the provision of logistical support. If further study indicates that indigenous forces are not sufficient or do not have the motivation to perform these two tasks, then we need to know the minimum U.S. forces necessary to stiffen the operation and assure its success. In this case, it would be hoped that the U.S. combat forces could be limited to air forces, to the ground forces necessary to provide immediate protection to U.S. air and supply bases, and the Special Force trainers needed to support the guerrilla and anti-guerrilla effort. Although, in principle, it would be desirable to obtain the participation of other SEATO countries apart from those mentioned above, the present study is directed at determining the capabilities of local indigenous forces representing countries with a vital stake in the immediate outcome.

c. Requirements

(1) Under the terms of the foregoing discussion, an outline plan is desired to accomplish the three tasks mentioned above, utilizing local indigenous forces to the maximum. This plan should be divided into two parts:

(a) The evaluation of the extent to which "volunteer" Thai and Vietnam forces in conjunction with the FAL could accomplish the first mission, namely, the securing of the panhandle and portions of the Mekong Valley to block the further infiltration of Vietnam and Thailand by Communist-inspired forces from the North. Assume no U.S. help other than logistical and no formally declared state of war.

(b) An estimate of the forces required, indigenous and U.S., to accomplish tasks 1, 2 and 3 above. In the case of Vietnamese forces, determine the total required for all missions, internal and external, in order to serve as a guide in responding to Diem's request of June 9 for an increase in his army of 100,000.

(2) Under both cases, the outline plan should include a time schedule for implementation, an evaluation of the likelihood of success, and a recommendation as to how to proceed.

 

95. Telegram From the Embassy in Vietnam to the Department of State/1/

Saigon, July 16, 1961, 5 p.m.

/1/Source: Department of State, Central Files, 120.15s1K/7-1661. Secret; Priority. Repeated to CINCPAC for PolAd.

76. Task Force VN 22/26. Following briefing reported Embtel 66./2/ President Diem invited SFG for tea at Palace July 13th.

/2/Document 90.

Appears from Staley's account this interview, which lasted three hours all told, that President Diem now finds a measure of currency reform desirable, and he changed in his own hand portion of joint report/3/ dealing with piastre receipts from sale commercial aid to read as follows:

/3/See Document 93.

"There is complete agreement in the joint group on the desirability of simplifying and unifying Vietnamese system exchange. In other words a single and realistic exchange rate instead of present multiple rate system is recommended."

VN members joint group expressed pleasure to Staley at this action of Diem's stating that "this commits the President to our way of thinking."

Its first step in direction of unification and as measure to increase receipts from imports, GVN now considering adding "premium" of 25 piastres to 35 piastres official exchange, with customs duties and excise levies additive above and beyond the new basic 60 (composed of exchange 35 and exchange premium 25). To effectuate this move expert financial advice is needed and IMF group now present are offering to leave a financial technician temporarily to assist GVN work out details of necessary regulations.

Comment: Such a drastic measure clearly involves much administrative procedure both in modification of present exchange operations and in measures to tax away windfall profits.

Foregoing I most hopeful result of SFG operations and is reason most cordial congratulations. Obtaining such substantial additional revenues for GVN budget will go far to buttress GVN efforts in civilian as well as military sections.

I believe stage is now set for comprehensive agreement with GVN to include three major measures:

(1) Agreement 200,000 force level (with further increase remaining under study).

(2) Establishment of exchange premium of 25 piastres on substantially all imports, over and above present 3s rate, with a sliding scale of customs duties added (see following telegram)./4/

/4/Nolting elaborated on this point in telegram 88 from Saigon, July 18. (Department of State, Central Files, 120.1551K/7-1861)

(3) Agreement on commercial aid at level sufficiently high to assure meeting aid requirements subject criteria described paragraph 4 Embtel 66. Generous estimate necessary for two good reasons: (A) assure GVN's confidence our intentions, (B) provide adequately for balance payments gap in probable shortfall GVN export receipts below estimates prepared for Congressional presentation.

Our suggestions for position to be adopted by US in negotiating long term aid agreement will follow./5/

/5/Apparently a reference to telegram 141 from Saigon, July 29, in which Nolting reported that it was urgent he be authorized to negotiate with the Vietnamese Government on the matters covered in the Special Financial Groups Report. One of the reasons for urgency, wrote Nolting, was that the Berlin crisis was being interpreted by some people in Saigon as making it more difficult for the United States to give increased and accelerated support to the Vietnamese Government, and that "we must demonstrate that we can act promptly and decisively wherever necessary." Nolting also stated:

"Reason for sense of urgency is not only inherent in situation here, where time is of essence, but also fact that momentum in forward planning developed over past several months seems to be waning a bit; also, ad hoc requests from GVN hard to handle in absence over-all plan with priorities; also rumors circulating re 'devaluation', which of course harmful to chances successful negotiations here ( Time magazine Karnow mentioned these to me the other day)." (Ibid., 120.1551K/7-2961)

Nolting

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