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JLUeiiMTlAJL us to offer credit to provide for modest purchases of military equipment by the Tanzanian Government. I now understand that ECGD take the view that their present volume of outstanding commitments under both sections 1 and 2 is such that they would not propose to accept any further credit cover. I believe that they have been reinforced in this view by a recent deterioration in Tanzania1s external financial position, a situation which the Tanzanians have now taken steps to remedy. 5. In our recent Ministerial discussion about the effects of the Ugandan attack on Tanzania it was agreed that we should provide modest help to Tanzania. In the event our contribution to date in the form of military equipment has been extremely modest, at around £90,000. We need President Nyerere's goodwill over various southern African problems not least Rhodesia and Namibia. On the whole he has played a constructive role on these issues. However, he is disappointed at our inability to supply equipment in any quantity on a government-to-government basis. If we now have to indicate to him that we are unable to provide the small amount of additional credit cover needed to meet relatively modest supplies of commercially ordered, non-lethal, equipment I fear that he will be reinforced in his suspicions of us as a friend. This will make it all the harder to maintain his cooperation and goodwill. It is just possible that the Tanzanian Government will be prepared to pay in cash for the equipment we may now be in a position to offer. But if this is not so, I earnestly hope you can agree to some flexibility in the present ECGD Section 2 ceiling. By excluding Blowpipe and Viper and taking into account the apparent Tanzanian intention to pay cash for one of the major items on their list (a floating bridge), my officials think that the maximum amount of additional cover required would not exceed £4 million. 6. Our national interest in being prepared to help Tanzania to the extent I am now proposing is clear. Tanzania has /moreover CONFIDENTIAL