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 -3-#2303, December 16, 7 p.m., from Saigon the only Vietnamese who might, be competent to galvanize the country into unified action is Bao Dai. Though I do not know the man, snd realize his many disabilities, it is possible he might furnish the necessary impact if he were to return and take active direction of the government, whether he retained Diem or appointed Quat or someone else as Premier, or assumed the office himself. Almost all Vietnamese with whom I have talked, including Diem, look instinctively to Bao Dai as the ultimate source of authority. Of course, if we and the French were to support his return, specific conditions would have to stipulated in advance, generally as indicated in Part II, paragraph 35, EMBTEL, 2250. I realize also that Bao Dai's return would furnish excellent propaganda materiel for the Communists, but if they don't have such material in hand they will manufacture it anyway. So we should not permit this aspect to determine our course, after weighing all other factors.

8. I recognize that we must continue to support the Diem Government for some time at least. But I recommend that we not now consummate an agreement with the Vietnamese tc assume on 1 January responsibility for training their forces or for giving direct military aid. We should continue to place American officers with staff of Vietnam army and aid in developing training plans and pacification plans. We should continue to talk with Vietnamese with a view to reaching common accord on size and composition of forces. But we should not conclude formal agreements on training or support for specific force levels, until decision reached in Washington as to our ultimate policy and commitments here. Similarly, planning should go on for initiation of direct military aid comrencing 1 January, but we should no commit ourselves to any given volume of aid until US has adopted definitive policy with respect to Vietnam. Meanwhile would strongly urge consideration of bringing Bao Dai back under one or other of the variants indicated in paragraph 6 above and paragraph 2 EMBTEL 2250. (See also paragraph 5, EMBTEL 2285, repeated Paris 717, for Ely's vies). Therefore present recommendations are:

A. Continue support Diem along present lines for short while longer but without committing US to specific aid programs;

B. Consider urgently, as possible alternative, the early return of Bao Dai;

C. If after skort period of further test Diem Government fails to achieve substantial progressive action, and if return of Bao Dai is acceptable to US Government, to support his prompt return;

D. If return of Bao Dai is not acceptable to US Government, assuming Diem Government continues to demonstrate inability to unite free Vietnam behind an aggressive program, I recommend Rh