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January 20, 1955

1. The situation in Vietnam is most complex and difficult to fathom. My judgments are conditioned by the fact that I have been in Vietnam only two months. However, during this period I have studied intensively the major factors which will affect the outcome of our efforts to save Free Vietnam from Communism. These major factors are:

a) : Free Vietnam cannot match the military power of the Viet Min who have, and will retain, the capability to overrun free Vietnam if they wish. Free Vietnam's ultimate security lies in the military and moral support it may receive under the Manila Pact. Strong affirmation by the signatories to the Manila Pact of their determination to react if hostilities were renewed in Indochina may be an essential factor in deterring the Viet Minh from launching an open attack. Moreover such a declaration would greatly strengthen the Diem Government's position. The Viet Minh have loft elements throughout South Vietnam which constitute a continuing threat to the nation's security. On the other hand the Viet Minh have serious economic problems in the North, where semi-confiscatory taxation and other acts of repression have created much dissatisfaction. Knowledge of these adverse conditions of life in the North, as it reaches Free Vietnam, is beginning have a salutary effect on the attitudes of people in the South and may have considerable bearing on the elections if they are held in 1956.

b) : There is considerable doubt in my mind as to the real intentions and objectives of France in Indochina. There is strong evidence that the French favor a new Vietnamese Government which will offer no serious resistance to the Viet Mlnh or to French direction. Without French Support, and that support is far from assured, the survival of Free Vietnam is problematical.

c) : The politico-religious armed groups called the Cao Dai, Hoa Hao, and Binh Xuyen are anti-Communist in orientation, but feudalistic and regressive in all other respects. At present they have an Rh