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 27. On the basis of the evidence we have at this early date, however, we believe that a favorable development of the situation in South Vietnam is unlikely. Unless Mendes-France is able to overcome the force of French traditional interests and emotions which have in the past governed the implementation of policy in Indochina, we do not believe there will be the dramatic transformation in French policy necessary to win the active loyalty and support of the local population for a South Vietnam Government. At the present time, it appears more likely that the situation will deteriorate in South Vietnam and that the withdrawal from Tonkin will involve recriminations, distrust, and possibly violence. There will be delays in the development of effective administration in the south; the French military will probably be forced to retain a large measure of control for reasons of "security"; and efforts by French colonial interests to develop a puppet Cochin-China state will persist. It is even possible that at some point during the next two years the South Vietnam Government could be taken over by elements that would seek unification with the Viet Minh in the North even at the expense of Communist domination. Even-if "If the scheduled national elections are held in July 1956, and if the Viet Minh does not prejudice its political prospects the Viet Minh will almost certainly win."

28. In the interim, Viet Minh propaganda will find ample opportunities to influence Vietnamese attitudes. Within a year, Viet Minh stay-behind units will probably be active politically, and possibly involved in open guerrilla fighting. In these circumstances, the French will probably be able to maintain their "presence" in South Vietnam through mid-1956, but their influence will probably become increasingly restricted to major cities and the perimeters of military installations and bases. The French might be willing to resolve this situation by an arrangement with the Communists which seemed to offer a chance of saving some remnant of the French economic and cultural position in Vietnam. Such an arrangement might include an agreement to hold early elections, even with the virtual certainty of Viet Minh victory. Only if such an arrangement proved impossible, and the situation deteriorated to the point of hopelessness, would the French withdraw completely from the country.

Outlook in Laos

29. Providing the French maintain the 5,000 troops in Laos which the Geneva agreements permit them, and continue to develop the Laotian forces, the Royal Laotian Government should be able to improve its security forces and, excluding the two northern provinces, to deal with isolated, small-scale Communist guerrilla actions. Also, providing the Laotians continue to receive French and US technical and financial assistance, they probably will be able to maintain an adequate government administration. There is nothing in the Geneva agreements to prevent Laos from becoming a member of a defense arrangement so long as no foreign troops other than specified French personnel are based in Laos.

30. However, if the French for any reason decide not to maintain their troops nor to continue military training in Laos, it will be impossible for the non-Communists powers to provide effective aid to the Laotians without breaching the Geneva agreement. At the same time, Laos will be faced with a growing Communist threat and the freedom of political action permitted members of the Pathet Lao movement, strengthened by support from the Viet Minh, may result in the overthrow of the present government through subversion or elections. Finally, further successes for the Viet Minh in Vietnam will have an immediate adverse effect on the situation in Laos.

Outlook in Cambodia

31. We believe that the Communists, in withdrawing organized units from Cambodia will leave behind organizers, guerrilla leaders, and weapons. Initially, the Communists will probably minimize guerrilla action in order to concentrate on building their political potential in Cambodia.

32. Providing the withdrawal of the Communists is substantially in accord with the Rh