SENIOR INTERDEPARTMENTAL GROUP-INTERNATIONAL ECONOMIC POLICY APRIL 28 1983 4:30 P.M. DEPARTMENT OF THE TREASURY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85M00364R000400570052-2
• Release Decision: RIFPUB
• Original Classification: C
• Document Page Count: 4
• Document Creation Date: December 21, 2016
• Document Release Date: May 6, 2008
• Sequence Number: 52
• Publication Date: April 28, 1983
• Content Type: REPORT

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3j-8436
SENIOR INTERDEPARTMENTAL GROUP-INTERNATIONAL ECONOMIC POLICY
April 28, 1983
4:30 p.m.
Department of the Treasury
Attendees (U)
Treasury
Secretary Regan
Beryl Sprinkel
Marc Leland
Transportation
Secretary Dole
Admiral Shear
Office of Vice Presdient
Admiral Daniel Murphy
G. Philip Hughes
State
W. Allen Wallis
Richard McCormack
Defense
Paul Thayer
James Blaker
Agriculture
Secretary Block
Commerce
Secretary Baldrige
William Archey
Energy
Martha Hesse
William J. Silvey
Interior
Secretary Watt
CEA
William Niskanen
USTR
Michael B. Smith
John Ray
OPD
Edwin Harper
Roger Porter
OMB
Alton Keel
CIA
Henry Rowen
Maurice Ernst
NSC
Roger Robinson
William Martin
International Debt (U)
The Chairman opened the meeting by saying that there would
be two items on the day's agenda: an update on the debt situation
in a number of countries and the question of Alaskan oil exports.
He asked Under Secretary Sprinkel to give an update on the debt
situation and indication that the overall situation still remains
difficult, but it is being managed. Some highlights of his
presentation included: (C)
Aentina. We are trying to assist in an effort to find a
solution to the problem of blocked payments of profits and
dividends to U.K. firms, but we are not optimistic about a
solution. GOA officials have advised us that they have finally
received the draft loan agreement from the commercial banks for
the $1.5 billion syndicated loan originally planned for comple-
tion by the end of March. (C)
CONFIDENTIAL
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Brazil. Brazil's cash flow situation will continue to deteriorate
through July or August before improving later in the year. They
have once again sought our financial assistance, but we believe
that official support at this time would undercut efforts to
restore financing from commercial banks. We are in close contact
and will continue to monitor the situation. (C)
Chile. We hope that Chile will be back in compliance with its
IMF stand-by program by the end of September, due to the emergency
economic program announced in late March. These talks with the
12-bank advisory committee are well advanced. Chile and the BIS
are currently discussing the possibility of a $300 million
arrangement. (C)
Mexico. Secretaries Shultz, Regan and Baldrige held a series of
meetings with key members of the Mexican economic team while in
Mexico on April 18 and 19. We are encouraged by the talks and
plan to continue working with our Mexican counterparts to encourage
change in economic policy which we believe to be in their interest.
The Mexicans said they needed no additional official assistance
at this time and do not expect to need any unless there is a
sharp drop in oil prices. They mentioned to us their interest
in a rescheduling of official direct and guaranteed credits to
the private Mexican sector. We are discussing this informally
with USG agencies and other creditor countries. (C)
Venezuela. Venezuela will probably use its SDR holdings and IMF
reserve tranche shortly. Finance Minister Sosa told us that the
GOV would like to arrange an IMF stand-by for end-1983 or early
1984. It appears that banks have continuing concerns about the
GOV's numbers for the size of total external debt and Venezuela's
medium-term economic prospects. The GOV is working to address
these concerns. (C)
Peru. Finance Minister Rodriquez-Pastor will be in Washington
on April 28 and 29 for the Development Committee and will meet
with Treasury officials. Peru may request a Paris Club resched-
uling in the near future. (C)
Nigeria. Nigeria is being forced to negotiate with the IMF by
its inability to obtain sufficient funds from other creditors
in the absence of a Fund agreement. Finance Minister Masi is
here for the Development Committee and will indicate to the Fund
whether or not serious negotiations can begin. The SIG-IEP
working group that was established in response to Under Secretary
Wallis' presentation on the need for financial support from the
U.S. Government has met and will be preparing some options for
consideration by the SIG in the next several weeks. (C)
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Alaskan Oil Export (U)
The Chairman then asked Under Secretary Wallis to-introduce
the report of the Working Group on Alaskan oil export. Mr. Wallis
presented the major findings of the report which strongly
endorse the desirability of Alaskan oil export from an economic
point of view. Restrictions on the export and transport of Alaskan
crude create market distortions and interfere with efficient
allocation of resources. Removing oil export restrictions will
permit the economy to utilize petroleum at a lower cost because
of savings in the transportation sector. In addition, these
savings will increase the wellhead value of Alaskan oil, making
marginal oil fields profitable to develop. Despite the benefits,
elimination of the restrictions on oil exports will require a
considerable political effort. (C)
The Chairman then asked each agency to vote for one of
the options identified in the paper ranging from a complete
lifting of the ban to allowing a partial lifting (100-200,000
barrels) of existing plus any new discoveries to an option
where only new oil is allowed to be exported. (C)
The following agencies preferred a complete elimination
of the ban, although several noted their concern with the
political difficulties of achieving this result: State, USTR,
Commerce, Energy, NSC, CEA and Agriculture. DOD and OMB
preferred to allow only part of existing production plus any
new oil to be lifted. Interior, Transportation and OPD opposed
any lifting of the ban. (C)
Opponents of lifting the ban pointed to the major political
difficulties as well as the negative impact on the maritime
industry. The President has twice noted support for the tankers
involved in Jones Act trade. Even a partial lifting would
require that some seamen are put out of work. Secretary Watt noted
that the political sentiment among the public was not there
and that it could interfere with our aggressive leasing policies
(i.e., tearing up our environment to sell oil to the Japanese). (C)
Proponents noted that overall energy security of the United
States would be improved. A partnership relationship with the
Japanese in Alaska would enable increased investment flows to
develop badly needed infrastructure. Total Alaskan oil production
(primarily Prudhoe Bay) is expected to decline beginning in
1986, unless major investments are made now in new fields and
infrastructure. In pursuing oil exports, we could also encourage
the Japanese to import more U.S. coal and gas. These issues
are being considered by the U.S.-Japan Energy Working Group. (C)
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The Chairman then asked what action forcing event required
a decision to be taken at this time. It was noted that the
principal problem is rapidly growing opposition on the-Hill.
Our supporters need to know where the Administration stands so
that they can begin to challenge the well orchestrated opposition. (C)
The Chairman said that he would check with the White House
legislative office to have them quietly probe which options,
if any, might have a chance of succeeding. While almost all
of the group clearly recognized the substantive value of going
for a complete lifting of the ban, nobody wanted to get the
President out front on an issue he could not hope to win. The
Chairman said he also needed to have, if possible, a better idea
of what, if anything, could be allowed from the Japanese if they
were allowed to import U.S. oil. (C)
Classified by MELeland.
CONFIDENTIAL
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