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 3. In our view, General Collins recommendations ignore the basic factor that we would assist a Communist takeover by a withholding of our aid, even if it must necessarily be given to a government which is less than perfect.

The Secretary has analyzed the situation as one in which we are conducting a time buying operation. If we withhold our support to Viet-Nam, it will be taken over sooner than if we extend smaller aid, at a figure of about a third of last year. In the meantime, we will proceed to do what we can to strengthen Cambodia, Laos and Thailand. This is my understanding of the Secretary's policy.

4. I recommend we inform the Secretary and General Collins that we recognize the dangers posed by tho above policy, but that in the lack of more useful alternatives that we will continue to support Diem, because there is no one to take his place who would serve U.S. objectives any better. This includes the Bao Dai solution which is opposed by the facts of Bao Dai's lack of support in Viet-Nam and his past demonstrations of inability to govern. The fear the a fiscal commitment of over $300 million plus our national prestige would be lost in a gamble on the retention of Free Viet-Nam is a legitimate one, but the withholding of our support at this juncture would almost inevitably have a far worse effect.

Recommendation:

That the attached telegram be approved and sent.

FE:PSA:DRHeath:rk 40965