CAB129-53 — Page 9

Share of international action in resisting aggression; e.g., Korea, Share of economic assistance to other countries, e.g., Yugoslavia, Korea. Obligations arising from participation in International Organisations,

e.g., U.N.O., G.A.T.T., O.E.E.C., E.P.U.As any musÂN, A Other external commitments, e.g., Iraq, Jordan, Arab refugees.

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13. There is the further category of purely financial obligations which fall partly under (b) and partly under (c). These obligations arise from the position of the United Kingdom as the holder of the central reserves of the Sterling area and the liabilities arising from the Sterling, balances.. Apart from a reference to the Sterling balances in paragraph 27 below, the problems of the Sterling Area are not discussed in this paper. But it should be emphasised that the existence of the Sterling Area and the functions of the United Kingdom within it are important factors in the world position of the United Kingdom. If the Sterling Area were to be weakened or broken up, this would be regarded in other countries as a heavy blow to the influence and prestige of the United Kingdom; it would under- mine the cohesion of the Commonwealth; and would thus further weaken British authority in world affairs.

14. It is evident from this classification that theoretically, it would be open to us in some cases to cut out a commitment altogether, since we are alone in holding the commitment (e.g., the surrender of Hong Kong to the Chinese). In other cases, where we are co-operating with other countries in assuming international commitments, we could only contract out of them or reduce them by negotiation (e.g., our general contribution to the defence effort through N.A.T.O., including our specific allocation of 4 British divisions and the Second Tactical Air Force to Western Germany). It is also evident that some measure of relief might be obtained by reducing the scale of our contributions to International Organisations. But wherever we decide to reduce, the result would be a greater or less diminution of our influence as a world Power. We come back therefore to the problem of finding those areas in which reduction could be effected with the least harm to our position.

Possible Methods of Relief

15. If total withdrawal from any major obligations is ruled out, there are three ways in which we can effect reductions in our obligations: by reducing the scale; by sharing the burden with other friendly Powers; or by transferring a minor obligation to friendly shoulders. These methods could also be used in combination.

Category A Obligations

(i) Defence of the United Kingdom and Western Europe

16. Western Europe is, within the Atlantic Pact, the heart of the defence of the British Isles and the nucleus of any Western system of defence. Any relaxation of our effort here is bound to have a direct effect on our own security. It could only be justified by the greater danger of over-straining our economy or in the light of the most careful calculation of the risk of Soviet aggression. Broadly speaking, our obligations here must have the first priority.

(ii) N.A.T.O.

17. N.A.T.O. is a chosen instrument of United Kingdom policy: through it we obtain not only greater security, but also prestige and influence with the United States and our European allies. Any unilateral decision to reduce our agreed share in the defence programme would react adversely on our position as a world Power, depress the Europeans and hearten the Russians. Any substantial slowing up of N.A.T.O. defence production in general (from which the United Kingdom benefits equally with others) would seriously compromise the Western policy of seeking peace from strength. The course we should seek to follow is to persuade the United States toppege & 81253

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(iii) Germany

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