NSC MEETING - THURSDAY, 25 MARCH, 1:30 - 2:30 P.M.

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B00049R000200420014-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 38
• Document Creation Date: December 22, 2016
• Document Release Date: September 2, 2009
• Sequence Number: 14
• Publication Date: March 24, 1982
• Content Type: MEMO

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State Dept. review completed
THE DIRECTOR O~ CEPdTRAI INTELLIGENCE
DDI #2428-82
24 March 1982
MEMOftANUUM FOR: Director of Central Intelligence
Deputy Director of Central Intelligence
VIA Richard Lehman
Acting Chairman, National Intelligence Council
Acting National Intelligence Officer for USSR-EE
SUBJECT : NSC Meeting - Thursday, 25 March, 1:30 - 2:30 p.m.
1. The announced purpose of the meeting is a debriefing of the Buckley
high-level meeting to Europe. The hidden agenda item is what to do in the
wake of the mission.
2. As you will recall, the presidentially-directed purpose of the mission
was to "address restricting medium- and long-term government and government-
guaranteed export credits to the Soviet Union and convening a conference of
these countries and others to consider the establishment of a standing
mechanism of the management of such credit restrictions in the future."
The mission was also to seek a pause in the granting of government-guaranteed
credits pending the convening of the conference (See Attachment 1 for NSC
Directive).
rtions of this memo
ossified SECRET
NSC review completed.
Derv Cl By Signer
Revw on Mar 88
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Next 1 Page(s) In Document Denied
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SUBJECT: PJSC Meeting - Thursday, 25 March, 1:30 - 2:30 p.m.
Attachments:
1. NSC Directive
2. High-level Mission Meeting in Bonn
3. High-level Mission Meeting with NATO Council
4. Message from SECSTATE to French, FRG, UK, and
Italian Foreign Ministers
5. FRG Reaction to USG Position
6. State Assessment and Guidance on West European
Gas Purchases from the USSR.
-4-
SECRET
f
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 MEHORAI~DDi7l~E POR TAE VICE PRESIDENT
CONFIDENTTA;"
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TH? M/i~BTE HOUSE
w~sr~~ro~TON ?
. .c?. 3:~ti r4..
THE SECRETARY OF STATE ~ ==~~=' ~~ y~-;~; ~-s~;._
THE SECRETARY OF THE TRE~SIIRY :~.~:~;'~?"~;~ _'
THE SECRETARY OF DEFENSE. - .:::;`~~"""~--,?~,~..~
-~'-~
TAE SECRETARY OF COMMERCE;,~.~.-'"~ = ?~'Y: '-;;~:~,: c~ .
THE DIRECTOR OF CENTRAL~~:INTELLIGENCE ~'~
THE UNITED STATES REPRESEN:ATIVE~:TQ THE-
UNZT~'D idATIONS -.._~ ... ::^~'~ ~ .
'_TRE DIRECTOR dF OFFICE MANAGI~T~.AND BQDGET~`
THE UNITED STATES TI2AE}E REPRESENTATIVE ,_
THE CHAIRMAN, JOINT? CHIEFS OE~' STAFF
High Level Mission to Europe
'The President has determi.n~-d to defer his decision 1~T9 ~~~''
applicability of the December 3n, i98I, sanctions invni~;.,rr".`
??v~aGY
.-~ :Onion pending return of a yission to Europe headed by itnder~;~::
-Secretary of State Jar:~es Buckley to cans~~t t ~; th ra?ra..-_...._.:
~?y~e yr zne covarnments or the United Kingdom, Franc, Italy
. The consultations will address restricting ~edivm -and' Ior~-
term government and 4overnment QilarantF+?aA csvr~n.-4- .?...~: a._ i_ _
and others to consider the. establishment ~of ais ending me~c3:a8is~:e
.-._ =for the management of such cre*3it rest-;~-t,~~a ;,, +.~,e s..~._.~~
~. v.+wJ~.4a. bV 4vliG:l3s~~a'"~CL -
_ y the' governments involved that no new government or goverrmesxt-;
guaranteed. medium - or,lonq-term credit commitments w311 be._.~
made to the Soviet-Union in the interim.==
- -c -~?~ ~?-?-???s-.. v y ~.crc rz.L~~2.LiSt SF~i}i~.113
? also encourage thes:~ to ~cve aE.'~ead w~~t~ fL~~-?w?r ~-~c~.~,.+~.;....s .
should also encourage the Allied~Gavernmeritsvto~' join vtith~aa
? in an effort to limit European energy dependence on the ar~~aiet
iTwir~w v._~_~,~ .t ~ _ _
to the key objective of significantvrestraints on credits~?
to tin c+....4..~ r,.. __ ---
In addition to Under Secretary Buckley, the Mission will "
incl~zde representatives from the Departments of Treasury,
Defense, Commerce az~d the National Security Council staff.
W~
Rev ew or, 1-L3rch 19 R A
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STATE
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FM A~C~!t'sASSY LONDOPJ
TU RUEHC/SECSTATE WASHDC IMMEDIATE 7901
I'~f0 kUFNOI/AMEMBASSY gOriN 3329
RUEHBS/AMEMEiASSY BRUSSELS 1953
RUEhRO/AMEMBA5SY Rh~'~E 7235
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BT
S E C k E T LONDON 05926 COMBINED SECTION
E.O. 12465; RDS?1 3/16/92 tBUCKLEY, JA-~ES L.)
TAGS: E.FIN, EFWTo UR
SUBJECT; INTERAGENCY MISSION ON EAST-BEST ECONOMIC
- RELATIONS: REPORT Q~+ BO~+N CONSULTATIONS
1. tSECRET - ENTIRE TEXT.)
2. SUMMARY: INTERAGENCY MISSION'S TALKS IN BONN WITH
FRG COUNTERPARTS HEADED BY FOREIGN OFFICE STATE SECRETARY
LAUTENSCHLAGER AND EC4rJOMiC MINISTRY STATE SECRETARY
VON wUERZEN FEATURED LENGTHY AND INCONCLUSIVE TALKS ON
SECRET
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4y~+ETHER HERS"ES CREDIT GUARANTEE SYSTEr" REPP.E5ENTS ELEMEryT
OF STATE SU3SIDiZATIO~f pF CREf`IFS, GERMANS INSISTED THAT
~~C~~TRAIyTS Ord FUTURE EXTENSIOrv OF THESE GUARANTEES WOULD
Rtsul.T IN DECLINE IN FRG TRADE ~-ITN THE SOVIET UryION,
AS tXPECTED, GERMANS STRESSEn rjEED FOR "EC~UITY" AryD
"BU~raErv SHAHIr~G" IN ANY RESTRAINT REGIME, CLAIMING TMAT
Ti-~E Y r~ERE ALREADY DISApVAryTAGEU BY CREDIT SUBSIDIES OF
UTHE.R COUNTRIES. ALTHOUGH GERr1ANS RESISTED GIVIr~G AraY
C:?'~MITME"yT BEYQrdD AGREEMENT TO PROVIDE FURTHER INFORMATION
0,>> THEIR CREDIT SYSTEM, GERMANS SNOULp gE tJr)DER r+0
ILLUSIONS TMAT RESTRAINTS Dry HERMES OPERATIONS HILL 8E
EsSEr1TIAL IF IJ~S~ PROPpSALS ARE TO SUCCEED. GERMANS ALSrJ
REvtALED r~ISe~NDERSTANDING REGARDING NATURE OF U.S.
POSITION ON "NO UNDERCUTTING.'? STATIrJG THAT THEY
A.;'yTICIPATED U.S. ~iOULO NOT PUT RE9TRAINT ON CONTRACTS IN
E3EIr'G, THEY ASKED THAT THE U.S. AGAIN CONSIDER ALLOi~iNG
EXI5TIhG CONTRACTS (AEG KANIS) TO BE FULFILLED 6Y
APPkaVING EXPORT LICENSE REQUESTS. REPORT ON GROUP
r^Er:TING WITH FOREIGN MINISTER GErd3CHER SEPTEL.
ENU SUMMARY.
3, AFTER I*yITIAL wELCC1ME BY L.A1.lTE^ySCHLAGER~ UNDER
SECRETARY BUCKLEY MADE INITIAL U.S. PRESENTATION IN
WHICH HE STRESSED;
A, WE ARE SEEKIryG SIGNIFICANT RESTRICTIONS IN
OFFICIAL CP,EDITS AND GUARANTEES TO THE SOVIET UNION,
8, THIS iS NOT PART OF CONFRnNTATIONAL STRATEGY
E3UT RATHER REFLECTS THE PRESIDENT'S STkanGLY HELD ViEw
TMAT wESTER;v SUBSIDIES OF SOVIET ECONOMIC DEVELOPMEPyT ARE
FUrvDAMENTALLY lNRONG ANp THAT ECONOMIC COMPONENT OF EA5T-
~rEST RELATIOraSHIP MUST gE BROUGHT INTO A COHERENT WESTERN
STRATEGY.
C. EVENTS LAST FRIDAY IN MADRID SYMBOLIZED DIS-
APPOINTMENT OF WESTERN HOPES REGARDING SOVIET BEHAVIOR
D. FOP, ECONOMICi POLITICAL AND STRATEGIC REASONS,
FLOW OF SUkiSIDIZED CREDIT TA THE SOVIET UNION MUST 8E
GUKBED,
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82 n2 ] 3fl57 SSU PAGE 003 riC $~ 13>3S?
TUR; 1710582 MAR 82
E. wE REALIZE THAT THIS TRUST 8E DONE ctrl MULTI
LATERAL SAgIS, AND PaUST INCLUDE JAPAN, CANADA AND OTHER
KEY COUNTfZIES.
F. WE SEEK AGREEMENT ON A MECHANIS`^ TU MONITOR
CRkDITS~ A TEMPQRARY PAUSE IN FURTHER EXTENSIONS FENDING
ESTABLISHMENT OF THIS MECHANISM AND GREATER EXCHANGE OF
INFORMATION Tfl 5ET UP THE MECHANISM AND INSURE ITS GOOD
oRE~aTION.
- r. ~!ISSIOr1 WILL REPORT ON ITS TALKS TO THE
PRESIDEhiT, WHO hAS DEFERRED A DECISION ON APPLICABILITY
OF NIS !)ECE"!8ER 30 DECISION TO PEriDING CONTRACTS.
4, Ur,DER SECPETARY IKLE THEr1 PRESENTED 06JECTIVES OF THE
MIS5I!~r+ IN TER^~S OF THE MILITARY STRATEGIC INTERESTS OF
THE ALIIANCE~ NOTI~~G THAT RESTRAI~~T ON CREDITS ~`iAS AN
EBSErtTIAL YET MISSING ELEMENT OF THE WESTERN 5TRkTEGY.
nEVifr:~ItiG THE POST-WAR ERA, HE N07ED THAT EFFORTS D-)RING
THE b0'S ArlD 70'S TO MODERATE SOVIET BEHAVIOR THROt1GFi
GREATER TRADE AND ARMS CONTROL f~AQ FAILED: IrISTEAD, VaE
HAD WITNESSED Er!ORMOUS SOVIET MII.ITAR+/ 8UILD UP, -~ITHOl1T
A MtiRE COMPKEHEriSIVE ALLIANCE STRATEGY, HE WARMED. CHE
ALLIANCE MIaHT NUT SUP.ViVE A PERIgD ~F CRISIS WHICH LIES
AHEAp~ UNDER SECRETARY IKLE SAID THAT A. COHERENT NATO
STRATEGY SHOULD INCLUDE THREE ELEMENTS PIAMELY;
LEAD.
i. DEFENSE BUILC-UP IN 4vhICH U,S. WAS TAKING THE
~, AN APPPOACH EXEMPLIFIED BY THE TvrO-TRACK INF
GEGISIUN TO REINVIGORATE THE ARM5 CONTROL EFFORT ANDS
EXDIS
3. A NEW APPROACH IN THE ECONOMIC AREA TO STOP
TRANSFER OF RESOURCES TO THE SOVIET UNION.
WIThOUT THIS LATTER ELEMENT, WE WILL BE UNABLE TO CLOSE
THE GAP IN THE EAST?WEgT MILITARY BALANCE. HE ARGUED THAT
WESTERN SUBSIDIZATION OF TRADE WITH THE SOVIET UNION Hqp
MADE IT EASIER FOR THE SOVIET LEADERS TO CARRY OUT THEIR
UNtf2ECEDENTED rILITARY BUILD-UP NHICH COULD 9RING THE
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DEFENSE SNARE OF THE SOVIET GNP TO 15 PERCENT BY 1985.
HE uRGEU THAT vtESTERf~ COUr?tTRIES ALLOW "^ARKET FORCES TU
OPkRATE ANU RESIST SOVIET F~P.ESS+JkE FOP CREDITS, VIE DD
fJ01 SF_t.K EC(tr~pr^IC hARFgRE, HF_ SAIU, HUT QNLY AN EVE+v-
NANDED NDNwSrJBSIDIZED TRADE POLICY. Irt CONCLUSIOPtr
Ut'vOER SECRETARY IKLE DREW A CO~~-PARISION f3ET~vEEN ~tESTERN
ASSISTANCE TD Pl1LA~iD ANp TURKEY. WHILE HE ACKNOWLEDGED
5U8ST,~NTIAL FRG ASSISTANCE TO TURKEY HE SAID THAT
ASSISTANCE IN RECEr~T YEARS TO POLA~`JD HAp IN FACT BEEN
TyrICE AS GREAT AS THAI' TD TURKEY.
5, UNDER SECRETARY DLMER POINTED OUT THAT U.S., THROUGH
ACTIONSTAKEN 8Y THE PRESIDENT ON DECEMBER 29, 1981. HAS
LOaT PEKHaP, 5~o MILLION OrILLARS I'~ ExE'ORTS ar}NUALLY,
THIS HA5 SUBSTANTIAL IMPACT ON JOR~ SITUATION IN U.S.,
t3U7 HE SAID THAT WE REGARD THIS AS PRICE 1vE MAST PAY FDR
SECURITY. HE ACKNOWLEDGED THAT U.S. HAS HAD TRADE
SUKPL~IS WITH SOVIETS IN RECENT YEARS, h3UT HE SAIp THIS
WAS UUE Tp SOVIET AGRICULTURAL FA1l.URE AND NOT OUR MARKET
CEVEIOP""E'tT. HE ALSO CALLED ATTEr~TION TO ONGOIrtr, U,S.
EFFi~RTS TJ ASSIST IN VuESTERN EURQPEArJ ENERGY INDEPENDENCE
THi~pUGH FACI'.ITATION OF GREATER COAL EXPORTS THE CAPACITY
FOu hh1ICN MIGHT PEACH 25A ~~ILLIOr; "METRIC TOr,S IN 1983.
a. ASSISTANT SECRETARY LELArdD Mt7TE~ THAT THERE AkE
DIFFEkENCES EiETWEEN U.S, AND EUROPEAr~J AS5E.SSME-~~TS DF EAST"
WEST RELA7IO~:ISNIP BUT ADDED THAT A COMPROMISE HERE 5HOt)LD
8E POSSIBLE. HE EXPRESSED DISAPPOINTMENT WITH THE WAY
Iii ~'+HICH EC t?ECISIO'v ON ItitPORT PESTRICTIONS AGAj~;ST SOVIET
Ur~ION HAD BEEN IM?LEMENTED. THE CREDIT AREA, HE SAID,
STRIKES US AS A pAkTICULARIY IMPORTANT AREA dT THIS TIME.
HE ACxNOwLEDGEp THAT GERr~ANS HAt) PROVIDED RELATIVELY
LUv~(:R t~EGREE (:F St18SIDIZATION THA~i OTHER EUROPEAN
COUrVTRIES BUT MAINTAINEp THAT FACT OF GOVERNMENT INVDLVE?
MENT IN HERMES SYSTEM Ig INDEED EQUIVALENT TO SUBSIDI-
ZATION. HE POINTED OUT THAT ?SUCH HAS CHANGED IN LAST Z/3.
YEt+RS, AS SOVIET CREDIT RATING HAS FALLEN, AND PRIVATE
BANi~S HAVE BECOME EXTREMELY RELUCTAyT TO LEND DN ANY
TEk~!S, LELAND POINTED DUT THAT U.S. WAS EFFECTIVELY OUT
DF THE SOVIET MARKET FOR INDUSTRIAL GOODS AND THAT OUR
PAST-AFGHAftISTAN GRAIPJ EMI~ARGO HAD COST US A SUBSTANTIAL
SHAs~E OF THE GRAIN MARKET, TAKEN UP BY ARGENTINA AND
CArJADA. HE SUGGESTED THAT IT t~QUL6 9E RELATIVELY EASY
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FOR THE GERMAt~~s To AROPT POSTUP.E SIMILAR TO OURS, I.E. NO
GOVE.F?N`"ENT GUA~?A"1TEESi IT 1'vOUID 8E "Ai)kE DIFFICULT FnR
OT-1Ej< ALLIES. tvHILE END OF HERMES GUARArjTEES COULp RESULT
I+~~ SOA'E TR,Apf LO;i, "'tCTt1Al OUTCOMEw hAfit? TO PFEDICT. HE
ACnNOWLk.DGEn THAT WESTERr~ PRESSURE MOULD r~EVEP CNA~dGE
SOVIET SYSTE'`~i HC11'!EVER, f~E COt?LD Y~AKE CHOICES MODE
CIFFICULT F(3R S()VIEt LEA7FRS. HE S'RESSED THE Ni:Et~ FOR
BETTER i"~FGRMATIO^~ EXChANGE Or! CPFDTTS/GLAFANTEES, ;WHICH
COULD >NURK Tn THE ADVAraTAGE OF FRG, (LELAf?;f; GAVE VON
ir1JEf~ZEN COPY qF FQRMAT WNICN COULI) BE USED TO REPORT
GUAfkANTEiS.) IN CONCLUSIOrJ, LELAND SAID HE hOPED THAT 11.5.
tNOt1L0 NOt HEAR AF3OUT HOW 1975 FRG-SOVIET TREATY PREVEPfTED
A1Y ACT1,j~'v RESTRICTI~~jG HERPES ACTTVITIES In! USS-~. (FnR
1riHATEVER REASON, GEf~MANS DID MOT RAISE THIS TREATY, IN CON-
TRAST TO THEIR POST-AFGHANI5TAP~ PERFORMAtvCE.)
7. MR. BAILEY NOTED THAT PKESIDF_NT REAGAN HAD DEFERRED
..ANY DECISIOr~ ON APPLICATION OF c~ECEyBER 29 DECISIONS,
ADDING T+iAT THE PPCSIDFPJT WAS COr.-FIDENT TNP{T THE ALLIES
~vOULD SE ABLE TO Wt)RK OUT AN AGREEMENT wHICN COULD
PF2Ut7ENTLY REVERSE NESTwTO-EAST CAPIT'L FLOW. HE
Ex1~RE5sED HOPE THAT TF+ERE ~,oULD t1>~ NO MORE "1.2 eiLLioN
MAkK SUh',PRISES" WHILE EFFORT TO DEVELOP SUCH A SYSTEM
PkOCEEDS, AND OUTLINED CONSULTATIVE PROCESS ~~'OVI^+G
THttOUGH FURTHER BILATERAL MEETINGS TO A CONFERENCE,
PE1iHAPS IN WASHINGTOr~, WHERE t+aE WOULD NUPE THAT FINAL
AGREEMENT CO~.JLD eE F2EACHED.
8. LAUTENSCHLAGER NOTEp BROAD RANGE OF TOPICS RAISED BY
U.S. SIDE. HE CHARACTERIZED TODAY'S MEETING AS OraE IN
A SERIES P3ET~nEEN JArdUARY 11 NAC FOREIG~~ MIr~iSTERS ~~EETINGS
ANU ,TUNE SU"~MITS- IN PARTICULAR VEF.SAILLES, WHERE
PRESENCE OF JAPAN ~tOt1Lp MAKE DISCUSSION OF EAST?wEST
TRADE PROHLEMS APPROPRIATE. AS RkGARf)S Cor3SIDERATiONS
MEPv7I0"~ED DY DR. IKLE, GERMANS HAVE SINCE JArJUARY it TAKEN
STEPS AGAINST SOVIET UNION, IP~CLUDING REFUSAL TO
PIEGGTIATE TECHNOLOGY Af~p MARITIME AGREEMENTS AND GUT IN
IMPORTS FR0,4 THE USSR. LATTER WAS NOT EASY, HE SAID,
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AND ADVISED U.S, iJU? TO BE SO DISAPPOIr1TED WITH OUTCOME
Si'}CE EC UNITY M10ULD IMPRESS 50VIF_TS r~t7RE THAT! A NIGHER {
r ICUpE, HE ARGt1EU. CONTINUING, t, ,n~)TF'NSCHLAGER P~OTED THAT
U.5. NOT PROPOSING TRADE WAR ENITh SOVIETS gUT a~AS SEE.KItrvG
E~+!' TO~ OFFICI.~L SUF3SIDIZATIUP+ OF C~?EDITS, ~iHICh h!E
~
ChARACTERIZED AS A I~;ORTHWtHILE GOAD, HE ALSO i'JOTED US?FRG
AGkEE,MENT THAT NO 4vESTERiV SANCTIOi'J3 Ir10UL0 CAUSE SOVIETS
TO CHANGE COUR5Ei H~.E COULD I`"AKE T?~INGS MOkE DIFFICULT
FOk THEM, HE SAID, BUT NO MORE, LAUTE~~BCHLAGER STRESSED
NEED FAR COtJSENSUS OF ALL KEY COUi??,TRTES ON BUTS 04JECTIVES
AND PROCEDURES, AND HE RAISED QUESTION OF U,S, GRAIiJ
SALES., REJECTING BY IMPLICATION (1UR CONTENTION THAT THESE.
ARE PURELY COMMERCIAL AND SNOI)LD DAVE ~:O I~~PACT OPT CREt1IT
RESTRAINTS ISSUE, DUE TO DIFFERENT TRADE STRUCI?UkES, AraY
CUT F3ACK IN CREDIT WOULp HAVE VERY ADVERSE AFFECT ON FRG
EXPORTS. HE RECALLED FAMILIAR GERMAN ARGUMENT THAT
' NE-~MES GUARANTEES DO NOT CONSTITUTE SUi35IDiZaTIOti OF
CREDIT FLOWS, BUT 'DOTED THAT U.S. DOES NOT ACCEPT THIS
.REASONING. HER"DES, NE SAID, WA5 A TOTALLY NON-
DISCRI~"INATORY SYSTEM, WITH NO SPECIAL, B}eEAKS FOR SOVIETS.
9, LAUTENSCNCAGER ALSO RAISED FRG St~PPOfcT FOR RAISING
}ISSk Fk~M rATEGURY II TO I IN OECD) CONSENS~JS, AND ASKED
FOR GREATER U,S. SUPPORT. tLELAr1Q SAID NEE SHARED
OBJECTIVE BUT REGARDED IT AS "TUO LITTLE, TOO SUON,"3
GERMANS CONTINUED TO BELIEVE, HE SAID, THAT OECD WOULD gE
APPkOPRIATE FORUM FOR MULTILATERAL 4vORK oN cREDIT
}~ESTRAIivT MECHANISMS HOWEVER, GERMAN$ UNDERSTAND tJ,S.
"ANXIETIES" REGARDING NEUTRALS AND NrOUL~? BE PREPARED TO
viQRK IN A DE FACTO, SMALLER FORUM ON MARGINS OF OECD,
HE MADE REFERENCE TO EXPERIENCE OF ESTABLISHMENT OF LEA
AS EkAMPLE OF WHAT GERMAr~+S BELIEVE MAY BE POSSIBLE, Ids
CONCLUSION, LAUTENSCHLAGER AGREED WITH NEED FOR GREATER
TRANSPARENCY ON CREDITg/GUARANTEES, }4AINTAINED THAT U,S~
EFFORTS TO REDUCE LEVEL OF HERMES GUARANTEES WAS AIMED,
IN PRACTICE, AT FRG EXPORTS, AND STATED FRG COMMITMENT TO
FULFILL SIGNED CONTRACTg. OPJ LATTER POINT, LAUTENSCHLAGER
CLAIMED THAT GERMANS HAD ORIGINALLY U[dDERS70OD THAT U.S~
tNUULD ALLOW Ft1LFiLLMENT OF SIGNED CONTRACTS CAUGHT BY
OUR DECEMBER 29 MEASURES ONCE -THE MEANING OF "NO UNDER..
;CUTTING" WAS PROPERLY DEFIP}ED, SINCE THEN, U.S. NAO
CHANGED COURSE AND WAS NOW SETTINr, CONDITION OF AGREEMENT
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Qiv GpEDITS/GUARANTEES. U,S, PARTICIPAr+TS STROr+GLY DENIED
TrtAT THERE h/1p EVER
BEEN U.S. PROPOSAL TO LI~~x AGREEMENT
U."1 "NC! tJNDERC+,1TTItlG" 4^IITN 11.S, F'ELEASE OF RfITORSr FOR
ExA~"PLE. I~~ FACT,
Tt~EY
POIrdTED Ol1T, FFG FULFILL~AE~IT OF
COQ+tRACTS COULD fjE
SEEtJ
AS UNDERCIJTTTtiG OtJR '~EAS~JRES,
(Tl~IS SAME EXCHA~lGE
'SAS
REPEATED LATER IN MEETIlvG,)
10, STATE SECRETARY
VON
t~UERZE-`! Si1~'PORTEU LAUTEraSCHLAGER?5
P!+E5ErdTATION, AND STRESSED .AT SEVERAL POINTS THAT ANY
r~EGkEASE. IN HERHES GUARANTEES tro0lJLD LEAD TO FAIL IN FRG
Fks'URTS, HE REJECTED U,S. CONTEr~TION THAT HERHES
Ct1NSTITUTED EITHER A SUBSIDY OR A TECH"PIQUE USED BY THE
STATE ARTIFICALIY TO DIRECT CRFnIT FLO~tS TO THE USSR. HE
EX-'IAINEO NECESSITY OF HERHES ARRANGEME"!TS ON GROi'^~~S
T~1aT Flc1v~STATEwO'~triED ANp RELATIVELY Ui~t~r.f?CAPITALIZED
GEF?MAN ElANKI,,IG SYSTEM COULD NOT OTHERI~dISE PROVIDE
NECESSARY GUARANTEES FpR GERMANY'S HEAVY VOLUME OF EXPORTS.
VO~'- ~+UE~tZEN MADE STRONG PLEA, ON BASIS OF "MAINTAI*iING
U~+ITY," THAT U,S. TAKE INTO ACCpUA~7 U"~.IDUE GEhiMAN
SIiuATIORi, IN PARTIC~.ILAR STRUCTURE OF EXPORT ANp
t/nkTICIPATION OF MANY SRtALL FIR`S THERE TN, IF GUARANTEES
fALL, HE REPEATEn, TRADE WILL ALSO DECLINE, ON Er1ERGY
CU,?PERATIONr VO~I riUERZEN STRESSEr: FRGS DESIRE TO
COuf~EkATE WITH U.S, tiUT ARG~!EC THAT t1.S. COAL EXPORTS
ALUME CQl1Lp r.lOT ELIMIr~~ATE nlEED Fou Sr1vIET GAS.
11. RESPONDING TO FRG .PRESENTATIONS, UNDERSECRETARY
E3UCKLEY OBSERVED THAT REFERENCE TO JUNE SUMMITS DOES NOT
SUGGEST SENSE OF URGFriCY WHICH tvE ATTACH TO PRINCIPAL
ISSUE UNDER DISC'1SSION; WE NEED TO DISCOVER NOW WHETHER
THEEcE I5 A WILL AMOEiG KEY ALLIES TO REACH NE4y CONSENSUS
Or! F_~XPOR7 CREpiTSIGUARANTEES TO SUViET UNION. us FAVORS
HE SAID, iM-'ROVED MECHANISM LIKE CUCOM BECAUSE OF THE
U"r'If~UENESS OF BOTH THE PROBLEM Ar~lD THE OBJECTIVES, WITH
SUCH A SYSTEM, wE CAN WAVE TANGIBLE, THOUGH MARGINAL
IMPACT QN TflE SOVIET UNIOr~ WHICH taAULp BE OF REAL VALUE
TO THE WEST. BUCKLEY pBSERVEO THAT GERMANS HAD CITED ALL
THE PRaeLEMs itiE MUST FACE IN REACHING AGREEMEN7i WE ARE
ANAkE OF THESE OB5TACLESr BUT BELIEVE THEY CAN BE OVER-
CLIME IF ALL Il~1VOLVED COOPERATE, A'V E(JUITABLE ARRANGEMENT,
IN WHICH NO PARTICIPAMT SEES ITS INTERESTS SUFFERING IN
RELATIVE TERUS, I3 THE ONLY KIrJD t~iHICH riOULD WORK, HE
ADDED, AND POIMTED OUT THAT UNLESS GER"MANS ARE PREPARED
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r~~~w.-S~~AYr~w~1~r~~Y~w~sf`i~1~~~1rr~rw AS~mrr ~~ww~w1 M~A~~~tR6l~ws_~~~i~6A0O4 Arc@wMCeC ~a^.~~s+~~
TO MAKE AbJUST-~ENTS IPA HERMES, THEY COULD NOT EXPECT UK
A!`iU FKANGE TO ELIr?~INATE ELEMENTS OF Su9SIDIZATID!v Ira THEIR
SYSTEMS, AS FAR AS THEORY OF HER?~ES IS CONCEf~NEUi BUCKLEY
ARGUED. FACT THAT GOVERN~''ENT STANDS BEHIND IT AS
EXDIS
GUAkANTOR INVOLVES ELEMENT OF SUBSIDY, WHY NOT REMOuE
THIS STATE GUARANTEE, HE ASKED, APfO LET MARKET QECIOE
WHETHER A GIVEN CREDIT IS SECURE? HERMES HAS t?UGTAS, HE
POINTED OUTr FOR COUNTRIES IN POOR FINAP~CIAL STRAITS,
WHY NOTE DO THIS IN CASE OF USSR, PARTICl1LARLY SINCE t"E?
AL.L AGREE THAT ~JSSR IS pIFFERENT FRO" OTHER COU*rTRIES,
VON WUERZEN ACKNOWLEDGED THAT USSR AS A COUNTRY AND TRADE
WITH USSR WEP.E DIFFERENT, RUT HE REJECTED CONTENTION THAT
THIS REQiJIREO ADJUSTMENTS IN HERMES, WHICH HAD BEEN
APPLIED WITHOUT CHANGE FOR 30 YEARS, TO DEMON5TfdATE
ALLk:GEULY WEAK FRG TRADI~~G POSITI~~^~, VO~~ ~~+UERZEN CITED
tAND P,EPEATED SEVERAL TI"~ES LATER IN CONVERSATIOr~? FACT
THAT Gt,RMANS APPEAR LIKELY TO RECEIVE ONLY 2.S BILLION
P~AFtKS IN PIPELIFlE ORDERS ALTHOUGH 10 }iTLLION HAD F3EEN
Ar~,TICI}'aTED. NE CO'dCLUDED t~iITH ARGUMEP~T THAT SI~`~CE
LI~~ITS ON HE P,~"ES MEAN LIMITS Or?~ TRADE, WE SHOULD DISCUSS
LATTER 5U8JEGT,
1~. IN REPLY, LEIAP}D STRESSED NEED FOR EgUALLY SHARED
FUkDEk; Irl WHICH PJO COUP~TRY WOULD SUFFEP IP! RELATIVE
5Ey5E, HE CHARACTERIZEp GERMAcd STATEMENT THAT FRG
PREF'AKED GO TO MARKET RATES IN Of CD YET RETAIN HERMES
AS A SIT LIKE JAPANESE pOSITIO~~ ON SALES OF U.S, CARS
IN JAPAN, IF MARKET TO RE FaLLOwEa, WHY NOT DISPENSE
WITH HERMES, HE ASKED? AS FAR AS U.S. POSITION ON
RECLASSIFICATION OF USSR IPA OECD CONSEP~SUS, OUR ONLY
PRU6LEM WAS TO HAVE GENERAL RECLASSIFICATION WITHIN
CONSENSUS SO THAT NUETRALS WOULD GO ALONG. AS FAR AS
FOKUM FOR SEPARATED NEW CONSENSUS ON CREDITS/GUARANTEES
To THE USSR, LELAND ARGUED THAT OECD WOULD NOT ttiORK,
DUE IN LARGE MEASURE TO ITS MEM6EP,SHIp, VON WUERZEN
ACCEPTED THIS POINT ANp SAID FRG PROPOSED FO WORK WITHIN
A SMALLER CTP.CIf ON MARGINS OF Of CD. IN SOMEWHAT
CONTRIDICTORY P,EMARK, HE SAID THAT IF U,S, WAS INTERESTED
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