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 Associated states, with full independence within the French Union. The French Union is an ultra-national, commonwealth-type arrangement, as yet loosely defined and subject to further legal development. The statements of French leaders to the effect that "France intends to maintain its presence in the Far East" allude to the concept of the French Union. Further, the French are capable of negating U.S. programs by: (a) working to bring about the downfall of the Diem Government through an internal coup or through influencing Bao Dai to dismiss Diem; (b) refusing to cooperate in the training of the Vietnamese Army; (c) withdrawing completely from Indochina, thus forcing the U.S. to increase substantially its political, financial and military commitments in the area; (d) unilaterally reaching a rapproachement with the Viet-Minh; and (e) insisting on executing their obligations under the Geneva Agreement by working towards holding the elections now scheduled for July, 1956.

The basic factors on French policy with regard to Indochina are as follows:

(a) The French desire to maintain a maximum of influence in Indochina.

(b) The French believe, because of their financial investment and their historical position in Indochina, that their interests should be the determining factor in political developments in Indochina and they are Jealous of what they regard as U.S. intervention.

(c) French acceptance of the Geneva Accords recognized their military inability to defeat the Viet-Minh, and the consequent need for a political settlement of the Indochina problem on a basis which would minimize French political, commercial, and prestige losses resulting from such a settlement. Copyofcopies.Rh