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RhRh (A) Since Luyenrs return from Paris, his open opposition to Quat has undermined Diem's decision to appoint Quat Minister of Defense. On 11 December Diem informed Fishel as follows: six of seven cabinet members consulted by Diem have voiced strong opposition to Quat. Generals Phuong (Cao Dai) and Soai (Hoa Hao) have declared they will withdraw from government and threaten open rebellion if Quat appointed. Because of location Hoa Hao territory, Diem purports to fear General Soai might cut off rice supply of Saigon-Cholon, block road and waterway traffic through coastal areas and to Saigon, make war in Hoa Hao areas against national army which in present condition could not (repeat not) handle situation. Diem fears also comparable action might be taken by Cao Dai forces, including possible moves against government in Saigon and vicinity.

(B) Diem told Fishel that he had informed Phuong and Soai that Americans wanted Quat as Defense Minister. The Generals replied, "a responsible American should speak for the Americans". Hence Diem asked Fishel to transmit these "facts" to me, saying if I or "some other person" can convince Phuong and Soai not (repeat not) oppose actively the appointment, Diem will appoint Quat at once. (A neat passing of the buck, we must admit). If sect leaders persist in their opposition Diem says he would be inclined raise present Deputy Minh to Derense Minister and give him full authority and responsibility over armed forces.

(C) I am quite convinced that Diem and brothers Luyen and Nhu are afraid to turn over control of armed forces to Quat or any other strong man. They may also fear Quat as potential successor to Diem and hence are doing everything they can to keep him out of any post in government. With General Hinh fired and General Vy replaced as Chief of Staff by spineless General Ty, Diem has fairly effectively seized control of army. I doubt Diem would delegate real authority to Minh, but would retain meddling hand on details to detriment O'Daniel's training mission and effective development of armed forces.

(D) Through Colonel Ls.nsdale r s group and CAS, I am canvassing attitude of sect leaders and genuiness of their alleged threats. Depending on Lansdale's findings, will consider (1) proposing to Ely a direct US-French approach to General Soai, who Quat has said will bow to French pressure; (2) having Lansdale' suggest to Soai that with Quat in defense all rice for armed forces would be purchased from Hoa Hao (this was hint dropped some time ago by Quat as means of buying off Hoa Hao); (3) sending emissaries to Soai, Huong and Cao Dai Pope (Pham Cong Tan) making clear that any rebellion would lead to withdrawal all American aid and inevitable victory for Ho Chi Minh who would certainly not (repeat not) tolerate private empires of Hoa Hao or Cao Dai.

(E) I realize disadvantages of forcing Diem to accept "American Rh