Rule
As with the Minh junta, Khánh's ascension resulted in the replacement of a large number of province and district chiefs, causing disruption to the functioning of the government. Khánh initially appointed some pro-Diệm officials who had been relieved by Minh, but after protests from Buddhists, who decried what they saw as a reversion to Diệmism, Khánh stopped this practice, and removed some of the Diệm supporters that he had reappointed. He then jailed some Diệm supporters. Khánh installed some officers on loyalty rather than competency as he feared a coup. This compounded the already problematic lack of trained civil servants, a problem that had existed since the French era. Khánh adopted some of Diệm's conservative social policies, reinstating the ban on the dancing "The Twist".
The activist Buddhist leader Thích Trí Quang continued to criticise Khánh and accused him of jailing Buddhists. Khánh was in a quandary, as he could be perceived as being too soft on Diệm supporters, or being vindictive towards Roman Catholics. To placate Trí Quang, Khánh agreed to remove all Roman Catholic chaplains from the military. Khánh sentenced Major Đặng Sỹ, the Roman Catholic officer who had overseen the Huế Vesak shootings of Buddhist protesting Diệm's ban on the Buddhist flag on 8 May 1963 to a life sentence of hard labour, and sentenced Diệm's younger brother, Ngô Đình Cẩn, the de facto warlord of central Vietnam, to death. This occurred over the private objections of U.S. Ambassador Henry Cabot Lodge, Jr., who thought that it was best for Khánh to take a mild line to dampen religious tensions. Cẩn was executed by firing squad on 9 May. Thích Trí Quang remained critical of what he saw as a lack of vigour on the part of Khánh in removing Diệmists from positions of authority.
Khánh had had no prior political experience and turned to Lodge for advice. Lodge advised him to pursue a policy of inclusion of the various groups in Vietnamese society, and Khánh followed this counsel. Upon American advice, Khánh tried to generate a popular rapport by engaging in Western-style political campaigning and community meetings. He frequently flew around the countryside, meeting peasants, shaking hands and making speeches. In August, he became the first leader of South Vietnam to tour the central coast; Diệm had never bothered to visit the public. He made appearances on the streets of Saigon, speaking to the by passers and asking them for their opinions on the state of the nation. However, Khánh remained hesitant on democracy, saying, “we cannot achieve full democracy for some time, perhaps for another generation or two”. Lodge agreed and privately said that the war effort had to come first, and thus a police state, curtailment of civil rights and crackdowns on opposition politicians were reasonable in order to effectively counter the communists. During this time, Khánh's régime suffered several military setbacks, such as the Battle of Long Dinh.
In March, Khánh began privately advocating that the U.S. attack jungle areas in Laos and North Vietnam near the border with South Vietnam to stop communist infiltration, saying that it was pointless to keep fighting defensive within the country without taking the initiative to stop incoming forces. Khánh made plans with conservative Laotian General Phoumi Nosovan for anti-communist incursions into eastern Laos, but the Americans stopped him and leaked false reports to the media that he was reluctant to attack. As a result, Khánh concluded that a military victory might not be feasible and one of his officials made contacts with the communists to see if negotiation was possible, but nothing came of this approach.
In July, Khánh called for the expansion of the war into North Vietnam. At a rally on 19 July in Saigon that attracted around 100,000 people, he said that the “Communists are the aggressors, not us … If we were to go back to the north, it should be termed a counterattack.” He symbolically took soil from two containers representative the divided nation, and mixed them together to promote his reunification plan, under anti-communist rule. He said, “We have often heard that the people have called for the war to be carried to the North … The government cannot remain indifferent before the firm determiniation of all the people who are considering the push northward as an appropriate means to fulfil out national history.” He then led the demonstrators in shouting, “To the North” repeatedly. At the time, the U.S. had no ambassador in Saigon, as Lodge had returned home to campaign for the Republican Party's presidential nomination, and his successor, Maxwell Taylor, was yet to respond. When Taylor arrived, the US tried to publicly distance itself from this comment and downplay it, as it wanted to portray the communists as the only aggressors and that they had no intentions of going on the attack in any form, but they were sympathetic to his sentiment. Privately, they did not rule out a policy along Khánh’s line.
In part, the American reluctance to escalate was due to the impending elections and a desire to not scare the electorate. In a meeting with Ambassador Taylor, Khánh assured the American envoy that his was a political gesture that should be seen as a show. However, it spread to the government-moderated press, and some generals expressed similar sentiments. Khánh then told Taylor that he had to allow Southerners to express their aspirations to unify Vietnam on their own terms and that plans were being explored. He thus refused to publicly renege from his calls for an attack on North Vietnam. In August, the Vietnam War expanded with the Tonkin Gulf incident, a disputed encounter between North Vietnamese and American naval vessels in which Washington accused the communists of attacking their boats in international waters. Khánh publicly called on the Americans to strike back in order to project a strong image and avoid resembling a “paper tiger”.
U.S. President Lyndon Johnson was given more military powers as a result of the incident, After the second incident, which is believed to have been false, Johnson replied with air strikes, which Khánh praised. Khánh saw the tense situation as an opportunity to concentrate more power in his hands. He declared a state of emergency on 7 August, empowered the police to ban protests, search properties under any circumstances and arbitrarily jail “elements considered as dangerous to national security”. He imposed censorship to stop “the circulation of all publications, documents, and leaflets considered as harmful to public order”.
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