Foreign Relations of the United States, 1952–1954, Africa and South Asia, Volume XI, Part 2

493.919/7–3153

Memorandum by the Assistant Secretary of State for Near Eastern, South Asian, and African Affairs (Byroade) and the Assistant Secretary of State for Economic Affairs (Waugh) to the Under Secretary of State (Smith)¹

secret

[Washington,] July 31, 1953.

Subject:

• Shipment by India to Communist China of Item Embargoed Under Battle Act

Problem:

To determine course of action most in accord with national interest in dealing with situation in which India has sold and shipped to Communist China, on a Polish boat now leaving Ceylon for Taku Bar, 1 or 2 tons of thorium nitrate, an atomic energy material, listed as an item on the Category A List under Title I of the Battle Act.

Recommendation:

1. That, on the basis of the facts reported, and in the expectation of adequate assurances respecting future shipments, the determination be made that this shipment was not “knowingly permitted” by the Government of India, within the meaning of the Battle Act, and, hence, that no violation calling for the termination of aid has occurred;

2. That you urge Mr. Stassen, as Administrator of the Battle Act, to agree to this approach in principle and at the appropriate time to ask the President to approve his findings and his construction of the law as applied to this case, and subsequently to advise the appropriate members of Congress, informally and on a strictly secret basis, of the occurrence, the determination reached under the law, the rationale of such determination, and the reasons for choosing that course of action;

3. That, in aid of obtaining the above assurances, the U.S. promptly resume² and conclude negotiations with India to purchase thorium nitrate, at a reasonable premium if necessary.

Discussion:

The Polish ship SS Mickiewicz, which is about to leave Colombo, carries about two tons of thorium nitrate sold to Communist China by Indian Rare Earths Limited and licensed for export by the GOI. The shipment has been paid for and title has passed from Indian hands. When approached by Ambassador Allen, Prime Minister Nehru said it was impossible to take action to recover this shipment and added if he could do so, political consequences, both internally and in India’s relations with China, would render such action impossible. (As a matter of fact, following our initial representations, GOI, through the Bombay Customs authorities, ordered the ship’s agents to offload the thorium in Colombo; the agents refused on ground cargo had been legally released and GOI had no basis for interfering with the shipment.) As a result, the USG is now faced with a decision as to whether or not to terminate aid since thorium nitrate is included in the Title I Category A List of the Battle Act, which provides for termination if any recipient country knowingly permits the export of items listed.

The available evidence provides a basis for concluding that this shipment could be classed as not knowingly permitted. Deshmukh, Finance Minister, had stated that he did not participate in the decision to issue the license and asked if it would be possible for the U.S. to accept assurances as to the future. R. K. Nehru, Foreign Secretary, has asserted that he had not been aware of the full implications of the Battle Act and that the Prime Minister had not been apprised of those implications. Bhatnagar, Member-Secretary of India’s Atomic Energy Commission, stated he knew nothing of the transaction and that the shipment had been made against his express orders. Officials of the Ministry of External Affairs have given some indication that GOI is prepared to carry out effective administrative controls over shipments of strategic materials, but as in the past cannot consider a written or public commitment.

Although an atomic energy source material, thorium also has widespread, ordinary commercial uses, such as incorporation in incandescent gas mantles, ceramic products, photographic films, plates and papers, etc. While we do not know specifically the identity of the consignee nor the exact intended end-use of this shipment, there is strong probability that the material will be used for innocent commercial purposes. In 1948, Chinese firms producing gas mantles required thorium nitrate in quantities estimated between 500 and 5,000 pounds per year. On the other hand should the material be destined for atomic energy research either in Communist China or, via trans-shipment, in the USSR, the quantity involved, according to the U.S. AEC, is relatively insignificant from a production standpoint.

Political considerations strongly support our taking the position that the present shipment is not in violation of the provisions of the Battle Act. Termination of aid would constitute a major blow to the possibility of India’s reaching its Five-Year Plan goals, a political as well as economic necessity. Re-establishment of aid under the Battle Act might well be impossible because of the more formal nature of assurances which would be necessary. On the other hand it is a reasonable possibility to expect continued effective control by administrative means which, with the exception of the current instance, has worked well in the past. In general it would be a major political loss to have a sharply downward trend in US-Indian relations. This would be especially unfortunate for us at this time because of the key position India will occupy as Chairman of the Neutral Nations Repatriation Commission.

U.S. domestic political considerations present the real difficulty in making the suggested findings. If the shipment becomes public knowledge the Administration no doubt will have to face up to substantial criticism from some quarters because atomic items are particularly sensitive ones in trade with communist countries.

The plan for the future involves a re-affirmation by GOI of their agreement to exercise effective administrative controls to prevent future shipments of strategic materials to Communist countries and the purchase by the U.S. of surplus supplies of thorium nitrate and possibly of some portion of the available rare earths in India. Discussions within the Executive Branch are already well under way in connection with determining the means of carrying through on the latter point.

1. This memorandum was drafted by Kennedy of SOA and by Louis W. Good-kind, Chief of the Economic Defense Staff of the Office of Economic Defense and Trade Policy. It also had the concurrences of Jack B. Tate, the Deputy Legal Adviser, and of R. Gordon Arneson, Special Assistant to the Secretary of State for Atomic Energy Affairs.
2. The United States and India earlier in the year had conducted negotiations regarding possible extensive U.S. purchases of Indian thorium nitrate. The effort failed, however, over the issue of price. Documentation regarding these negotiations is in Department of State file 891.2546.