Declassified: Reagan’s CIA Feared Pak Aid Could Jeopardize Thawing Ties With Indira Gandhi

WASHINGTON, DC – A newly declassified CIA memorandum from March 1983 reveals that the Reagan administration’s spymasters believed a sharp fall in world oil prices could significantly reshape the strategic balance in South Asia. The secret study warned that any move by Washington to step up military aid to Pakistan risked undermining a “recent thaw in US-Indian relations” under then Prime Minister Indira Gandhi.

The 19-page paper, titled ‘An Oil Price Drop and US Leverage,’ was circulated by then-CIA Director William J. Casey to the top US national security cabinet and has now been released under the Freedom of Information Act.

In the section concerning South and Southeast Asia, the memo states, “In India, Prime Minister (Indira) Gandhi apparently is trying to steer a more neutral course between the United States and the USSR than she has in the past; any US move to increase military aid to Pakistan might jeopardize the recent thaw in US-Indian relations.”

The CIA judged that Pakistan’s financial position would be heavily exposed if Gulf cash flows declined. “Pakistan, although an oil importer, would be hard pressed financially if Saudi aid and remittances from Pakistani citizens working in the Persian Gulf states were substantially reduced,” the document notes. However, it added that growing economic and political pressures were “unlikely to affect the nuclear program since Zia views it as a mechanism to maintain regional balance.”

By contrast, the CIA assessed that New Delhi’s overall economic position would benefit more from cheaper energy than Islamabad’s.

Globally, the CIA laid out a framework linking oil markets to US power.

One of the most consequential global implications, in the agency’s view, lay in shrinking hard-currency revenues for Moscow. Since the Soviets earned over half of their total hard currency from oil and gas sales, the memo noted, reduced earnings would force the USSR “to choose more carefully those countries or groups it wishes to support.” A “forced Soviet retrenchment would lessen the allure of the Soviet model” while giving Washington “greater access as a variety of countries look to the United States for assistance in getting back on the growth track.”

The memo was drafted as global oil markets transitioned from the price shocks of the 1970s toward the mid-1980s glut, a period when Indira Gandhi’s government and General Zia-ul-Haq’s military regime were navigating high oil import bills and Cold War alignments, with Pakistan’s nuclear program central to US calculations. (IANS)