Foreign Relations of the United States, 1952–1954, General: Economic and Political Matters, Volume I, Part 2

Eisenhower Library, Eisenhower papers, Whitman file

Memorandum of Discussion at the 156th Meeting of the National Security Council on Thursday, July 23, 1953¹

top secret
eyes only

July 23, 1953

Present at the 156th Meeting of the Council were the President of the United States, presiding; the Vice President of the United States; the Secretary of State; the Deputy Secretary of Defense; the Director for Mutual Security; and the Director, Office of Defense Mobilization. Also present were the Secretary of the Treasury; the Secretary of the Interior (for Item 1); the Secretary of Commerce (for Item 1); the Secretary of the Navy (for Item 1); the Director, Bureau of the Budget; the United States Representative to the United Nations (for Item 5); the Chairman, Joint Chiefs of Staff; the Director of Central Intelligence; Mr. Cutler, Special Assistant to the President; Mr. Jackson, Special Assistant to the President; Col. Carroll, Acting White House Staff Secretary; the Executive Secretary, NSC; and the Coordinator, NSC Planning Board Assistants. Also present, for Item 1 only, were: J. A. LaFortune, Petroleum Administration for Defense; W. G. Donley, Petroleum Administration for Defense; Robert B. Murray, Jr., Department of Commerce; Louis S. Rothschild, Maritime Administrator; Commander J. J. Mooney, Maritime Administration; Robert L. Finley, Office of Defense Mobilization.

There follows a summary of the discussion at the meeting and the main points taken.

1. A National Petroleum Program (NSC 97/4; NSC Actions Nos. 852² and 798–c)

In introducing NSC 97/4 to the Council, Mr. Cutler recalled that at its 146th meeting the Council had adopted NSC 97/3 with the exception of paragraph 8 thereof, which was adopted in principle on the understanding that certain interim actions to be taken thereunder would form the subject of a progress report to the Council by the Director of Defense Mobilization not later than July 1, 1953. The recommendations in NSC 97/4 were prepared by the NSC Planning Board after consideration of the other material contained in NSC 97/4. Mr. Cutler then read the Planning Board recommendations.

With reference to paragraph 2–c, Secretary Kyes proposed that the phrase “including the question of treating peacetime safety and operating stocks, and stocks in transit, as part of the stockpile.”, be deleted. He regarded this question as an internal one for solution within the Department of Defense.

Mr. Flemming felt that the question was an important one, the implications of which were not confined solely to internal administration in the Department of Defense. He judged, from the comments of the Petroleum Administration for Defense and the Joint Chiefs of Staff, that a basic issue was involved, and he would prefer to see the question remain open until the Defense report was presented on September 1.

Secretary Humphrey wished to relate this question to the problem of Federal expenditures. If additional aviation gasoline were purchased as a result of not counting stocks in the pipeline as part of the stockpile, then some other expenditure would have to be eliminated. It was not a question of all the things we would like to have, but of what we wanted most.

Secretary Kyes said he had an open mind on the question. He felt Defense should have an opportunity to ascertain the facts and resolve the problem in collaboration with Mr. Flemming on a factual basis.

The President said it was certainly necessary to get a clear picture of the problem.

Mr. Flemming was agreeable to resolving the question with Secretary Kyes. However, he noted the JCS view that working inventories should be excluded from computation of reserve stocks.

General Bradley confirmed the fact that the estimates of military requirements for the first six months of war, made by the logistics experts, were based on the assumption that aviation gasoline in the pipeline would not be counted as part of the stockpile.

In reply to a question by Mr. Stassen, Secretary Kyes said the speed at which aviation gasoline was transported also entered into the question.

With reference to paragraph 3–b, Secretary Weeks reported that the Department of Commerce had submitted to Congress a bill which would be reported out today by the Senate committee and on which hearings would also be held by the House committee today. The bill would probably be passed, even though it was not considered “must” legislation by the Administration. The bill provided for $56 million to $60 million from appropriations or funds otherwise made available for construction of the twenty new tankers. Secretary Weeks noted that it was still necessary to decide where the money was coming from.

Secretary Kyes said that the testimony in Congress had implied that Defense should furnish the money.

Secretary Weeks said that this suggestion did not emanate from Commerce, which had in fact suggested that the money not come from Defense funds.

Secretary Kyes noted that tankers had been eliminated from the regular Defense budget; consequently, no Defense funds were available for the purpose, and he would be in an awkward position if asked to provide such funds.

Mr. Dodge felt the question of financing should be explored. Either a supplementary appropriation or a transfer of funds would be necessary. It would not be difficult to obtain authorizing legislation for the tankers, but Congress did not look with favor on supplementary appropriations requests.

Secretary Humphrey then recalled that within five months the Administration planned to review the budget with a view to making a 25% reduction. However, such a reduction would be impossible unless the purchase of additional items, such as new tankers, could be balanced by corresponding reductions elsewhere in the budget.

Secretary Kyes felt that Defense had already prepared a very “tight” budget. He noted, however, that the Defense budget now included many expenditures which were not strictly for Defense purposes. He felt the “barnacles”—that is, waste—should be eliminated from the Defense budget, and also that the Defense budget should include only Defense items, so that people would be able to tell what money is being spent for. Secretary Humphrey and Mr. Dodge agreed.

Secretary Humphrey also noted that while the Council, at its July 14 meeting, had made no decision on the source of funds for tankers, it was understood that the Navy would decide what to give up in order to get tankers.

Secretary Kyes said the Secretary of the Navy took the position that he could give up nothing.

The President felt that the underlying problem was being dodged. We must insist on obtaining what the United States has to have for security and for building up its world position and its strength at home. Tax reduction is not our main objective. We must provide the United States with minimum security and a sound economy, and then attempt to reduce taxes. We should decide on our basic objectives and then, if we should need more taxes, we should gulp and ask for them. Many of our problems would prove insoluble until our basic objectives were determined. The President added, with particular reference to tankers, that if we let the shipyards go to hell in a handbasket we will have unemployment, which will reduce the amount of taxes collected.

Secretary Humphrey did not fully agree with this view. He agreed we must have a reasonable posture of defense, but felt that we must stop spending so much money.

The President said that it was impossible to stop spending overnight. We must have military strength and a sound economy to back it up. If we should allow the economy to deteriorate, this would undermine our defense posture.

Mr. Dodge wondered whether funds for tankers could not be provided from the ODM revolving fund if neither the Department of Defense nor the Navy could furnish the funds.

Mr. Flemming said that at the previous Council discussion on tankers everyone had had a sense of urgency and had arrived at the conclusion that this program was important in the total mobilization picture. He was willing to explore the matter to determine the sources from which funds for tankers might be derived.

The President then referred to tanker speed, and asked whether this had any relation to the problem of aviation gasoline stockpile.

Secretary Kyes said that if we had fast tankers for fleet use, petroleum products would be tied up in transportation for shorter periods of time. He felt that the construction of fast fleet tankers might be the most desirable way to use whatever funds were made available. We might be building four-room houses when we need seven-room houses.

The President said it was his feeling that it was necessary to have these tankers. If it was desired to purchase them from Defense funds we could avoid any embarrassment to Defense by saying that we had studied the question more thoroughly since tankers had been eliminated from the Defense budget. He agreed with Defense on the necessity for fast tankers, but said that commercial operators found it unprofitable to run the fast ones.

Secretary Weeks confirmed this, and, in addition, said that fast tankers cost more to build.

Secretary Humphrey felt that the operators could be persuaded to run at low speed ships capable of high speed, at little additional cost.

The President also wondered why we could not have reserve speed in ships without using it. He added that we could start a tanker program as recommended in NSC 97/4 without necessarily carrying it to its full conclusion.

Mr. Flemming suggested that the Departments of the Treasury, Defense and Commerce, the Office of Defense Mobilization, and the Bureau of the Budget could work out a method of financing for the tankers.

The President said that the language of the authorizing legislation, as well as the presentation of the case to Congressional commitees, should permit whatever method of financing was adopted. He wanted to be sure that Congress understood the situation in detail.

With reference to paragraph 3–c of NSC 97/4, Secretary Weeks noted that the Military Sea Transport Service (MSTS) was operating 57 tankers which could be put in reserve and replaced in operation by new tankers. The cost to the Government would be amortization over the period of the charter.

The President said he liked the charter deal. He added that we have adopted the philosophy that we can’t tell when D-day will occur. Therefore, we must build to a respectable long-term defense posture. Instead of trying to do everything quickly, it would be better to take a long sustained program and stand behind it.

Secretary Humphrey wondered whether the question of speed should not receive further study before the figure of 18 knots, was established.

Secretary Kyes said he was not happy with 18 knots, but the President said perhaps we could attain greater speed in the new tankers by paying a premium for each extra knot. He would not mind paying a subsidy in order to get faster ships. He felt the language in NSC 97/4 was all right, but in implementing the paper greater speed should be sought.

Secretary Humphrey said the extra cost of faster ships was not great, and it might be possible to obtain tankers with a speed of 18 to 20 knots.

The Vice President then noted that the adjournment rush in Congress provided a favorable opportunity for obtaining authorization to go ahead with the tanker program.

The President said we should seek Congressional authority for the program even though we did not ask for money now, as long as we made it clear to Congress that the funds might come from any source, for instance, from ODM or even CIA.

With reference to paragraph 4 of NSC 97/4 and the item in the Financial Appendix for “Liquid Fuels from Non-Conventional Sources”, Secretary McKay said that the estimated expenditure for FY 1954 should be changed from $8 million to $4.5 million. This reduction was possible because efforts to obtain gasoline from coal had now been discontinued. It had been found that shale was the best source of synthetic liquid fuels, and work on extracting such fuels from shale would continue.

Mr. Cutler read to the Council the change in paragraph 6 proposed by the Secretary of State.

The President agreed with the proposed change. He felt that the Government should scrutinize imports instead of asking the petroleum companies to do it.

The President then addressed a question to the experts: As we build more jet airplanes will we use more or less crude oil for the same amount of flying?

Secretary Kyes said that if we converted to jets, the drainage on our petroleum reserves would be greater. One jet airplane now being developed, for example, consumes 16 times as much fuel per hour as a propeller plane.

Secretary Humphrey felt that while jet fuel consumption might be greater per hour, the jet would go more miles in an hour. Secretary Kyes agreed that the answer is complex.

The President then concluded that converting to jet airplanes, and consequently exhausting our petroleum reserves more rapidly, causes us to become more and more interested in the Middle East.

The National Security Council:

a. Adopted the recommendations by the NSC Planning Board contained in NSC 97/4 (with the exception of paragraph 3–b, previously covered by NSC Action No. 852), subject to the following amendments:

Paragraph 2–c: Delete “including the question of treating peacetime safety and operating stocks, and stocks in transit, as part of the stockpile.”

Paragraph 3–d: Change “of approximately 18 knots” to read “of not less than 18 knots”.

Paragraph 6: Revise to read as follows, which would then supersede NSC Action No. 798–c:

“6. Para. 8–f. Oil Imports.

“Approve the course of action to resist further restrictions on imports of petroleum and natural gas from the Western Hemisphere in order to assure maximum development and wartime availability of Western Hemisphere resources, with the understanding that the Secretary of the Interior, in coordination with the Secretary of State, the Attorney General, and the Director of the Office of Defense Mobilization, will give continued scrutiny to the volume of oil imports from all sources, with particular relation to any significant adverse effect on the development of domestic resources.”

b. Noted the statement by the Deputy Secretary of Defense that, unless the Department of the Navy can find a method of financing paragraph 5 of NSC 97/4 during FY 1954 within its currently approved budgetary limits, this course of action will have to be postponed until FY 1955.

c. Noted that the estimated expenditure for FY 1954, shown in the Financial Appendix for “Liquid fuels from non-conventional sources”, should be changed from $8 million to $4.5 million.

d. Noted an oral report by the Secretary of Commerce on the status of the authorizing legislation to carry out NSC Action No. 852, and agreed that the question of financing this program should be worked out jointly by the Departments of the Treasury, Defense and Commerce, the Office of Defense Mobilization, and the Bureau of the Budget, and that the language of the authorizing legislation, together with the legislative history, must clearly permit whatever method of financing may be adopted.

Note: The above actions, as approved by the President, subsequently reproduced as NSC 97/5³ and transmitted to the Director, Office of Defense Mobilization, to coordinate their implementation.

[Here follows discussion of continental defense, significant world developments affecting United States security, the situation in Korea, additional United Nations forces for Korea, savings in defense expenditures in the event of a Korean armistice, the strengthening of the Korean economy, the transfer to the Chinese National government of light United States naval ships, Project Solarium, and the National Security Council status of projects.]

1. This memorandum of discussion was prepared on July 24 by the Coordinator of the NSC Planning Board Assistants, Marion W. Boggs.
2. NSC Action No. 852 was the directive issued by the NSC at its meeting of July 14, 1953; see the memorandum of discussion, supra.
3. NSC 97/5, consisting of the revision of NSC 97/3, plus the revisions stipulated in NSC 97/4 and the pertinent memoranda of NSC discussion, was approved by the President on July 24, 1953. (S/S–NSC files, lot 63 D 351, NSC 97 Series)