TOWARD US-ALLIED COOPERATION ON EAST-WEST ECONOMIC POLICY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84T00109R000100120020-6
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 5
• Document Creation Date: December 20, 2016
• Document Release Date: May 23, 2007
• Sequence Number: 20
• Publication Date: August 20, 1982
• Content Type: REPORT

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Toward US-Allied Cooperation on East-West Economic Policy
1. The limited consensus achieved at the Versailles Summit on East-
West economic policy has disintegrated as a result of publicly voiced
interpretations of the agreement by the French and Germans which suggested
a narrower agreement than we had supposed, and the US decision to expand
oil and gas sanctions to include retroactive and extraterritorial
elements. Although many other issues involving our relations with Western
Europe, including steel, agriculture, etc., have contributed to the serious
present concerns about the state of our overall relationship, the sanctions
issue is by far the most disruptive because it is seen by them as
constituting a direct attack on traditional national prerogatives and undue
US interference in European affairs, while we see the sanctions as the only
significant Western response to events in Poland. By contrast, the other
issues, although involving conflicting interests, either fall within the
purview of existing international rules and agreements, or can be
negotiated in the framework of longstanding institutions and political
processes.
2. The difficulties with our sanctions position are that (1) even if
successful, it will not prevent the Soviets from meeting its contractual
obligations, albeit probably at substantial cost to its domestic economy;
and (2) the Europeans, who are angry at what they regard as infringement of
their sovereignty, will probably try to defeat or circumvent the
sanctions. Further escalation by us in other areas of trade relations
might cause them to back off of their position on the pipeline but they
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might not even then and there would be further damage to US-European
relations. It is, of course, possible that events in Poland in the coming
months or some action by the Soviet Union anywhere may alter the politics
of this issue in Europe and cause the European governments to move towards
our position. The odds of this happening look low. Therefore, there is a
strong case for putting the pipeline dispute into a wider setting and
trying to seek agreement there.
3. Although US and West European perspectives differ a great deal on
East-West economic issues, with respect to direct economic stake,
political-economic linkages, and foreign policy priorities, I believe
nevertheless that substantial common ground exists within the Alliance. To
find this common ground and build a common approach, it is necessary to:
(1) Conceptualize and work out a US government policy concerning
East-West economic relations that meets our essential needs and
that is both consistent and understandable to the Europeans--the
ambiguities in US policy were a major reason for the breakdown of
the Versailles agreement on East-West matters.
(2) Consider the entire gamut of East-West economic relations, in
order to find as broad a convergence of interests as possible--
specific quid-pro-quos are too difficult to handle and are too
sensitive to publicize.
(3) Find a basis for positive public statements that is consistent
with announced US and West European national policies.
3. I believe that these conditions might be met, and that a
cooperative US-Allied approach to East-West economic relations might be
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established through the following steps: (1) informal bilateral
consultations with the West Europeans on possible ways to reestablish a
cooperative approach on East-West economic issues, leading to (2)
ministerial level agreement among the Seven to reemphasize the Versailles
agreement in a positive and cooperative manner, and (3) agreement to follow
up this positive approach with a regular sherpa-level policy coordination
group, as well as follow-ups through the OECD and NATO.
4. The following specific steps would be taken as part of the overall
package:
(1) The US would drop the retroactive and extraterritorial provisions
of the oil and gas sanctions.
(2) The Europeans would emphasize their willingness to:
(a) Minimize subsidized credits to the USSR;
(b) Discuss at an early stage possible plans for major East-West
economic projects with the US and other members of the
Alliance;
(c) Agree to work toward cooperative energy policies designed in
part to minimize the dependence on Soviet gas; specifically,
they could agree to take only the minimums under existing
contracts with the Soviet Union and to attempt to develop
Norway as a major source of additional natural gas;
(d) Accept the relevance of East-West economic relations for
Alliance security, and hence for discussion in NATO, even
though the OECD would be the primary organization for East-
West trade and financial data collection and analysis.
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(e) Differentiate between the USSR and Eastern Europe and among
East European countries in the use of government-generated
credits and other government policy instruments.
5. Although political sensitivities would prevent explicit public
statements on all these points, it might be possible to devise an agreed
statement, based on the Summit communique, that would be sufficiently
positive to justify the change in US policy on oil and gas sanctions.
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NI0/Econ wrote for C/NIC 20 Aug 82