SIG-IEP MEETING ON PIPELINE SANCTIONS TALKING POINTS FOR DCI

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B00049R000501360002-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: December 20, 2016
• Document Release Date: March 31, 2008
• Sequence Number: 2
• Publication Date: September 15, 1982
• Content Type: MISC

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SIG-IEP Meeting on Pipeline Sanctions
Talking Points for DCI
The SNIE, which is almost completed, ties directly into the policy
issues being raised here by bringing together the major pieces of the
overall picture of Western economic relations with the USSR, relations that
Moscow has used to expand its military power.
The SNIE finds that:
o The USSR will depend on exports of gas to Western Europe to avert a
decline in hard currency earnings in the 1980s and possibly to
increase these earnings in the 1990s.
o That Soviet access to Western oil equipment and technology is
important to the Soviets if they are to avoid a serious decline in
oil exports, which currently bring in about one half of total
Soviet hard currency earnings.
o As many other studies have already shown, that imports of military-
related goods and technology are important to Soviet military
programs.
The SNIE also assesses the impact on the USSR of possible Western
economic actions.
o Concerning the Yamal pipeline, the horse has already left the barn,
and nothing we can do will have much affect on the Soviets.
But there are actions we can take and the Europeans might accept that
would have a significant effect. Namely:
o Tightening COCOM controls.
State Dept. review
completed
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o Developing additional sources of natural gas to head off new
Soviet-West European gas projects.
o Controlling at least selectively exports of oil equipment.
o And eliminating interest subsidies on loans.
We believe that the order of magnitude of these effects would be:
o Less than one half billion dollars a year if interest subsidies on
credits were eliminated.
o As much as $10 billion a year by the late 1980s if all oil
equipment and technology were denied, but the impact would diminish
over time and it would be substantially smaller if our Allies did
not cooperate or with a selective embargo.
o Up to $10 billion a year in the 1990s and beyond if no follow-on
gas projects were built--a very substantial impact indeed.
o We cannot quantify the immpact of tighter COCOM controls, but they
could be expected to retard the modernization of Soviet weapon
systems, and consequently the Western countries might be able to
save billions of dollars.
I believe that these assessments can be used to start building some
sort of consensus with the Europeans on East-West economic policy in a
strategic context.
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NSC review
completed
THE DIRECTOR OF CENTRAL INTELLIGENCE
National Intelligence Council
MEMORANDUM FOR: Director of Central Intelligence
DDI #7447-82
15 September 1982
FROM: Maurice C. Ernst
National Intelligence Officer for Economics
SUBJECT: 16 September SIG-IEP Meeting on Pipeline Issues
1. The purpose of the SIG-IEP meeting is to develop agreed policy
guidance in preparation for Secretary Shultz' planned meetings with his
counterparts in the major European countries in the periphery of the UN
General Assembly session at the end of September. These planned
discussions would, it is hoped, constitute a first step in a process of
developing a dialogue with the Europeans on the strategic context of East-
West European economic relations. Although no formal proposals will be
presented during these initial discussions, the US would presumably make
tentative proposals along the following lines:
(1) Ask the Europeans to impose export controls on certain types of
oil and gas equipment and technology as a quid pro quo for
removing the extraterritorial and retroactive elements in the US
controls--that is, returning to the December level of controls.
The new European controls would be designed to have an impact on
the Soviet economy at least equivalent to that of the controls
the US would remove. The justification for these controls would
be the political situation in Poland; they would presumably be
lifted if and when the Polish situation improves substantially.
(2) Restrict export credits to the USSR, tighten COCOM controls, and
work toward developing new sources of energy as alternatives to
additional Soviet gas deals. These initiatives would be examined
as part of a broad Allied strategic approach to East-West
economic relations.
2. The attached State Department discussion paper in our view does an
excellent job presenting background for and a conceptual approach to these
new initiatives. It was drawn partly from several, more detailed papers,
which were discussed at the 13 September IG-IEP meeting, and are also
attached. I have the following comments on those papers:
All portions Secret S E C R E T
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Credits: The earlier Buckley missions found the going slow. We
may go further this time, but I doubt the Europeans will accept
any firm formula for credit restrictions.
COCOM: The Europeans agree with us in principle and negotiations
have been going on for months.
Development of alternative energy sources: It is important not
to expect the Europeans to make long-term commitments at this
time. It will be a major achievement if the US can get some of
the key countries together to discuss these issues in an Alliance
context.
Ouid Pro Quo: There are two serious problems in developing a
quid oro quo for dropping the extraterritorial and retroactive US
sanctions. It is not at all certain that the Europeans will
agree to such a trade-off, although we should try. And for
domestic US policy reasons, there is concern to achieve
equivalence not only with regard to impact on the Soviet Union,
but also to the burden on the US vis-a-vis Western Europe. The
Department of Commerce expressed this view strongly at the IG
meeting. The Intelligence Community view is that the US
sanctions on gas equipment will not prevent completion of the
pipeline, and will not cause the USSR much damage. This suggests
that we do not need very large concessions from the Europeans to
be able to claim equivalent impact.
3. Attached also are Comments on the State discussion paper from STR
and Defense.
STR makes some good points (e.g., the need to consider Japan),
but is mostly quibling.
The DOD comments constitute a wish list of US objectives, not a
realistic basis for negotiating with the Europeans. I know of no
one among Intelligence Community experts who believes the West
Europeans can or would commit themselves to any such list. What
we are saying in the SNIE is that the time is ripe to begin
building a consensus, but if we insist on hard conditions at the
start we will get nowhere. There is a basis of support in Europe
for all our major proposals, but making use of it will take time,
and diplomacy.
4. Having read all the policy papers and talked at some length with
Jim Buckley and other officials over a period of time, I am convinced that
the new SNIE is right on the mark--that is, it addresses in an integrated
fashion all the main questions that are of concern to the relevant policy
officials and on which the Intelligence Community has a contribution to
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make. The SNIE is also very timely, and the sooner it can be made
available, the more useful it will be.
Attachments,
As stated
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DDI #7447-82
15 September 1982
SUBJECT: 16 September SIG-IEP Meeting on Pipeline Issues
DCI/NI0/Econ:M.Ernst:bha(15 Sept 82)
Distribution:
Orig - DCI
1 - DDCI
1 - ExDir
1 - SA/DCI/IA -
1 - ER
1 - DDI Registry
1 - DDI
1 - C/NIC
1 - VC/NIC
1 - NI0/USSR-EE
1 - NI0/WE
2 - NIO/Econ
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