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Declassified per Executive Order 13526, Section 3.3 NND Project Number: NND 63316. By: NWD Date: 2011  THE CHINESE THE IMPORTANCE WE ATTACH TO PEACE IN THIS AREA. THERE CAN NO LONGER BE ANY QUESTION THAT THE FOOD THESE TWO ARE SUPPLYING IS OF NEARLY DESPERATE IMPORTANCE TO THE CHINESE. I VERIFIED THE POINT FURTHER IN LONG TALKS IN HONG KONG. PROBABLY APPROACHED THE CANADIANS AND AUSTRALIANS WOULD SURELY MAKE THE POINT FORCEFULLY.

23. AS I HAVE SAID THE PRESENT GAME MUST BE PLAYED MOST WITH THE PRESENT DIPLOMATIC AND MILITARY LEADERSHIP. UNDER NO CIRCUMSTANCES SHOULD THERE BE ANY IMPAIRMENT OF THE CIVILIAN LEADERSHIP BY INTERPOSITION OF A NEW HIGH-RANKING GENERAL. WHEN POLICY CHANGES ON DIEM IT WILL BE TIME TO CHANGE THE LEADERSHIP. IN THE NEXT FEW WEEKS ECONOMIC FACTORS WILL BECOME INCREASINGLY CRITICAL AND THERE IS NOW ONNO ONE IN THE COUNTRY WITH AN ADEQUATE GRASP OF THESE ISSUES OR THE POWER TO DEAL FIRMLY WITH WASHINGTON. SOMEONE OF UNDOUBTED ABILITY IN THIS FIELD -- EUGENE STALEY IF HE CAN BE DRAFTED OR JACK BELL IF GUATEMALA CAN WAIT -- SHOULD BE SENT FORTHWITH. IN THE MILITARY FIELD WE WILL HAVE AN UP-TO-DATE PROGRAM OF REFORMS FOR PUTTING IN THE DAY DIEM GOES. WE ARE NOT AS WELL SITUATED ON THE ECONOMIC AND SOCIAL SIDE AND THE SITUATION HERE IS CHANGING RAPIDLY.

24. MY OVERALL FEELING THAT DESPITE THE ERROR IMPLICIT IN THIS LAST MOVE AND THE SUPPOSITION THAT DIEM CAN BE REFORMED, THE SITUATION IS NOT HOPELESS. IT IS ONLY HOPELESS IF WE MARRY OUR COURSE TO THAT OF A MAN WHO MUST SPEND MORE TIME PROTECTING HIS OWN POSITION AND EXCLUDING THOSE WHO THREATEN IT THAN IN FIGHTING THE INSURGENCY. DIEM'S CALCULATION INSTINCTIVE OR DELIBERATE IS EVIDENT. HE HAS ALREADY BEE DEPOSED ONCE AND NOT BY THE COMMUNISTS. HE CAN SEE HIS CLEAR AND PRESENT DANGER AS WELL AS ANYONE.

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