SMALL GROUP MEETING ON THE PROPOSED BUCKLEY MISSION TO EUROPE FEBRUARY 24 1982

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Document Number (FOIA) /ESDN (CREST): 
CIA-RDP83M00914R000500090017-4
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RIPPUB
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S
Document Page Count: 
8
Document Creation Date: 
December 21, 2016
Document Release Date: 
June 12, 2008
Sequence Number: 
17
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Publication Date: 
February 26, 1982
Content Type: 
MEMO
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PDF icon CIA-RDP83M00914R000500090017-4.pdf489.1 KB
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Approved For Release 2008/06/12 : CIA-RDP83MOO914R000500090017-4 SECRET TO : February 26, 1982 OVP - Mrs. Nancy Bearg Dyke - 8205054 NSC - Mr. Michael Wheeler - 8205055 DOD - COL John Stanford - 8205056 JCS - LTC Edward Bucknell - 8205057 CIA USTR Mr. Richard Heimlich 8205059 Treasury - Mr. David Pickford 8205060 Commerce - Ms. Jean Jones 8205061 SUBJECT: Small Group Meeting on the Proposed Buckley Mission to Europe, February 24, 1982 Summary of Conclusions The Small Group of the Poland SIG discussed a draft terms of reference for the Buckley high-level mission to Europe. State, Defense, and the NSC tabled draft TOR texts. On certain points no consensus was possible, but the TOR text attached was devel- oped as- the basis for further. discussion in the NSC. Action Assignments Treasury was requested to provide further detail on credit curbs and default. Two papers listing topics to be addressed were passed out as a guide to the work. They are attached. Commerce is requested to provide an assessment of the re- strictions now being discussed among the Europeans as well as information on other products that they might include. State Dept. review completed. a Gryeme r , ( Q./ SECRET GDS 2/26/88 Zir3 ~~,p ~1 l.- .. (S aaa~. Approved For Release 2008/06/12 : CIA-RDP83MOO914R000500090017-4 Approved For Release 2008/06/12 : CIA-RDP83M00914R000500090017-4 r'eL ruary c4,-7Wf- -'Terms of Reference for High-Level USG Mission to Europe on Soviet.Sanctions Rationale for Mission -- An historic opportunity exists to weaken the Soviet Union substantially by taking advantage of its economic and financial situation through reducing the flow. of resources from West to -- Our allies must be given -new incentives to induce them to participate in a useful program before the USG is forced to take further unilateral measures with possible negative impact on the alliance. ?' -- Measures to curtail Soviet access to hard currency are essential for the Administration's, program for closing the gap between U.S. and Soviet military investments and for creating conditions conducive to greater security and genuine arms control. U.S. public sentiment in support of additional sanctions is quite strong and may be manifested by private sanctions. Assumptions - -- The Siberian pipeline can perhaps be delayed beyond normal construction delays and made more costly to complete. It?cannot .be stopped at this point by U.S. coercion without incurring intolerable dipldmatic costs. However, by working with the Dutch and Norwegians and through an alternative energy program, :?:e can lessen the growth of European energy-dependence on the Soviet Union. -- It is in or long-term interest and that of our allies get them to reduce or cut off new official credi t,s and Approved For Release 2008/06/12 : CIA-RDP83M00914R000500090017-4 R D $ 2116102 Approved For Release 2008/06/12 : CIA-RDP83M00914R000500090017-4 cuarantees to the USSR and to**restrain the flow of financial resources to the USSA. Objectives To begin negotiations to get the allies: -- To cut off or severely limit and make more expensive medium- and long-term official and officially-guaranteed credits to the Soviet Union. To reduce Soviet exports of non-essentials to the West. -- To limit European dependence on Soviet energy. ~_- To make clear that we define their offers not to undercut our sanctions to include subsidiaries and licensees of our companies in Europe.] By proposing an agreement that medium- or long-term official or officially-guaranteed credits to the Soviet Union will be restricted or the cost?increased, to be negotiated-.at a conference-in Washington. The conference would also.consider: measures to counteract the impact ozL the financial markets were here to be a partial or bloc-wide default. By convincing our allies to participate with us in a program of raising t riffs,.and/or-imposing quotas on non-essential Soviet exports, or by other means, to restrict. allied imports of. these items. -- By stressing the importance of a package of European energy security alternatives. Approved For Release 2008/06/12 : CIA-RDP83M00914R000500090017-4 Approved For Release 2008/06/12 : CIA-RDP83MOO914R000500090017-4 r3_ 4?a en,. en rent to interfere with ^- gre extension of U.S. export controls to cover equipment manufactured by foreign subsidiaries of-U.S. companies -and by foreign licensees of U.S. companies operating under technology transferred prior to December 30, 1981 make-up and TimincT of Mission The mission will be led by Under Secretary of State James Buckley and will include Under Secretary of Defense Fred Ikle, Under Secretary of Commerce Lional Olmer, Assistant Secretary of the Treasury Marc Leland, Director of Policy Planning of the National Security Council Staff Norman Bailey and a limited nunber of-aides. At this time, it is proposed that the mission leave in approximately a week to ten days after the terms of reference have;. been approved by the NSC; and visit Rome, Bonn, Paris and London, in that order. The. Embassy _ in Takycs will be kept fully informed and the Japanese Gove measures agreed upon. Definition of Success -- Agreement on a Washington conference on credit.. limitation' and default consultation to meet before the end of :.arch. Success of the missior is defined as follows: (-- Agreement to define their promise not to undercut our : ~ncz o::s as involving not interfering with extensicn of our over subsidiaries and licensees ?Of. U.S. G^-: aniss I Approved For Release 2008/06/12 : CIA-RDP83MOO914R000500090017-4 Approved For Release 2008/06/12 : CIA-RDP83MOO914R000500090017-4 -- Agreement by allies to seq their tariffs or establish quota restrictions onnSoviet a exports. I. ?' w L~ U. Approved For Release 2008/06/12 : CIA-RDP83MOO914R000500090017-4 Approved For Release 2008/06/12 : CIA-RDP83MOO914R000500090017-4 SECRET Restricting Credit to the Soviet Union We need to push forward quickly on staffing out completely how the High Level Mission to Europe should handle the issue of restrict- ing credits to the Soviet Union. Following are areas in which we believe staff work should be completed: l.' -The impact on the USSR of a cessation of new official export credits and guarantees to the Soviet Union: (a) impact of cessation of official new export credits and guaranteed credits; (b) impact of cutting off official credits and guarantees on private credits; (c) total impact on USSR of cessation of new official and guaranteed credits plus the reduction in private credits that would result.. 2. Impact of cessation of new official credits and guarantees to USSR on individual European countries. How they would likely react? Differential impact among European countries, e.g., how trade would be affected and unemployment? 3. What other proposals can we make on credits? 4. At which point, and. in what context, should we propose raising interest rates? (a) What is the impact on USSR of raising to market level? (b) What. is impact of phased increase to market level? (c) Is there an interest rate below market level that inflicts significant cost on Soviets? 5. What legal and regulatory authority do European governments have to cut off new private credits, to phase them out, or to place quantitative restrictions on new private credits. (a) Steady reduction (in nominal terms) of official export credits and guarantees from 1981 base? (b) Quantitative restrictions on official export credits and guarantees to the Soviet'Union? (1) How to define quantitative restrictions? Q) Could the.Z. be differentiated to equalize impact' among European countries?. (c) Would it be possible to target restrictions on official credit and guarantees to USSR to certain sectors, e.g. the-energy sector. SECRET /Ca.s a// 4 /97 Approved For Release 2008/06/12 : CIA-RDP83M00914R000500090017-4 _ Approved For Release 2008/06/12 : CIA-RDP83M00914R000500090017-4 SECRET Preliminary Discussions on How to Avoid Disruption of Financial Markets In Case of Polish Default The High Level Mission to Europe will need to be well _ prepared for its preliminary discussions on how to avoid financial. disruption 'if a default is declared. The following questions need to be explored: 1) Our'assessment of the impact on liquidity of the banks of major European countries. Is this a danger to con- tinued effective functioning of international financial markets, taking into account: a) central bank understandings on-lender of last resort; b) deposit insurance facilities in various countries; c) the possible unraveling of the interbank lending market, especially for those banks, branches, and subs operating mainly in the Euro-currency markets. 2) Our assessment of any likely impact on the foreign exchange markets. Will impact be temporary and manageable, or longer lasting. 3) What can the U.S. do to offer cooperation in avoiding any possible risks? a) promise to step up our intervention in support of impacted European currencies? b) point out that present intervention policy envisages intervention to counteract exogenously derived instability? c) offer to increase swap line-, institute new ones, increase d) offer to be lender of last resort for all US branches and subs'in European countries which might be affected, as well as for European branches and subs in U.S.? SECRET ADS z /2~/W Approved For Release 2008/06/12 : CIA-RDP83M00914R000500090017-4