MEETING WITH DEPUTY SECRETARY OF STATE WHITEHEAD, 13 JUNE 86

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88G01117R000501350002-5
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 27
• Document Creation Date: December 22, 2016
• Document Release Date: April 25, 2011
• Sequence Number: 2
• Publication Date: June 12, 1986
• Content Type: MEMO

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Meeting with Deputy Secretary of State
13 June 1986
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12 June 1986
MEMORANDUM FOR: Director of Central Intelligence
Deputy Director of Central Intelligence
SUBJECT: Meeting with Deputy Secretary of State Whitehead, 13 June 86
You are scheduled for a luncheon meeting with Deputy Secretary Whitehead, Mike
Armacost and Mort Abramowitz tomorrow at 1215, in the DCI Dining Room. Clair
George and Dick Kerr will also attend.
TAB A Leahy Letter to Shultz Proposing HPSCl/SSCI Public "Confirmation" of
Evidence Supporting Counter-terrorist Actions by President. State wants
to talk about how we would propose to handle the Leahy letter. There is a
difference of opinion between OCA and GC. At Tab A you will find a memo
from each office with suggested responses as well as a copy of the Leahy
letter to Secretary Shultz.
TAB B
Mexico. State would like to discuss the situation in Mexico. You may
wish to bring up some of the points you suggested to Bob Vickers and
yesterday. (Your memo is at Tab B. You will also find a memo
from Vickers outlining the key points of a conference he chaired last week
on behalf of Assistant Secretary Abrams which captures much of the current
thinking on Mexico. Included is a cable on de la Madrid's 10 June
television interview in which he covered the waterfront on problems facing
Mexico.)
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TAB C
Substituting for Libyan Oil in Italian Refineries. Armacost asked Bob
Gates Monday for an assessment of the cost to Italian refiners of
switching from Libyan crude. (Armacost had discussed Italian imports of
Libyan oil with both Craxi and Andreotti.) The DI prepared a memo for
Armacost that was sent to him Tuesday. If the subject comes up, following
are the memo's key points:
Alternative crude are available and switching would be relatively easy
from a technical standpoint.
Switching would cost the Italians as much as $50M the first year,
however, both because of necessary equipment adjustments and the
sizable Libyan discounts.
Moreover, Italian refiners receive Libyan oil under barter and
compensation agreements as well as through equity shares and they
might have difficulty selling the Libyan oil they contracted for, if
they switched.
At TAB C you will find a copy of the OGI memo with an attachment
identifying substitutes for Libyan crude.
TAB D Australian PM Hawke's Visit to China. Hawke apparently held quite a
wide?ranging discussion with the Chinese leadership during his recent trip
through East Asia. He told his aides that he had sufficient material to
warrant a letter to Secretary Shultz outlining the discussions. Jim
Hirsch wondered, given the tendency of the Chinese to couple joint US?PRC
activities with broader political issues, if you would consider inquiring
into the contents of the Hawke letter with Whitehead. (At Tab D, you will
find the relevant section of the Hawke trip report cable from our embassy
in Canberra.)
DCl/DDCI Executive Staff
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OCA 86-1945
11 June 1986
NOPE FOR: DI
THROUGH:
FROM:
SUBJECT:
Dave Grie.i
Leahy Letter to Shultz Proposing HPSCl/SSCI Public "Confirmation"
of Evidence Supporting Counter-terrorist Actions by President
advises that at your regular meeting this Friday with
Whitehead you will be asked for your views on how State should respond to
Leahy's 20 May letter to Shultz (attached) on the above subject. Here are
some suggested comments:
o Our primary objection is that it is not in USG's interest to
engage in any "public" discussion of matters relating to
intelligence sources and methods. To do so only leads to
further speculation, additional digging by the press, and,
inevitably, leaks.
o The President's statements on the Libya raid grew out of a
unique set of circumstances. He chose his words carefully and
only after fully considering the pros and cons of making any
public comment. Most importantly, he said nothing that was not
already in the public domain (i.e., reported in the press).
o It is highly doubtful that a public HPSCl/SSCI "confirmation" would
have the desired effect. Those in the Congress, media, etc. who
criticize a Presidential decision to act will probably not be
mollified or deterred by a HPSCl/SSCI assurance, without elaboration,
that the intelligence supported the action. They will still demand
to know what the actual evidence was.
o Finally, the proposal simply is not practical. What if HPSCI and
Si reach different conclusions? What if there is no consensus
inside the committees themselves? Controversy and confusion would
reign, thereby increasing the pressure on all sides of the issue
to comment further in order to justify their positions.
Attachment
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The Honorable George Shultz
The Secretary of State
2201 C Street NW
Washington, DC 20520
Dear George:
WASHINGTON. OC 20,10
May 20, 1986
2415X \
I would like to follow up on an idea you and I
discussed following the Libya raid.
In making public information derived from sensitive
intelligence sources to establish the connection between
Colonel Khadafy and the terrorist bombing in West Berlin,
the President was clearly within his authority. His self-
evident purpose was to demonstrate conclusively to Congress,
the American people, our allies and the entire world Colonel
Khadafy's guilt.
At the same time, I am convinced there are other ways
by which the credibility of such charges can be established
without having to reveal, and thereby lose, vital intelligence
sources. These very sources might have served to warn us of
future terrorist attacks aimed at Americans. What is needed
is a means independent of the Executive Branch which can
publicly confirm the President's conclusions, but without
having to reveal the intelligence upon which they are based.
In my view, this mutual goal of protecting intelligence
sources and methods could be accomplished by having the House
and Senate Intelligence Committees examine the intelligence
in secrecy, assess it, and come to their own conclusions.
Presumably, these will parallel those of the President. The
leaders of these two Committees could then declare publicly
that their assessment of the intelligence confirms the judgment
of the President. Neither he nor the Intelligence Committees
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The Honorable George Shultz
Page 2
May 20, 1986
would go any further in demonstrating the basis for their
parallel conclusions. Joint confirmation by the President
and the two Intelligence Committees should obviate any need
to release intelligence information.
I would be happy to discuss this idea with you further
should you wish.
Sincer y,
.P RICK LEAHY
Vice Chairman
PL/j
Enclosure
bcc: The Honorable William Casey
Director, Central Intelligence Agency
Washington, DC 20505
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. . .
,sEeRrf NOFORN
The Director of Central Intelligence
Washington, D.C. 20505
National Intelligence Council
MEMORANDUM FOR: Director of Central Intelligence
Deputy Director of Central Intelligence
NIC 02747-86
6 June 1986
FROM: Robert D. Vickers, Jr.
National Intelligence Officer for Latin America
SUBJECT: Mexico
1. On 4 June 1986, I chaired a meeting between Assistant Secretary
of State for Inter-American Affairs, Elliott Abrams, and various CIA
experts to discuss political dynamics in Mexico. A full list of
participants is attached.
2. After extensive discussion, the meeting reached the following
conclusions:
The Mexican government is concerned that its hard currency
reserves will decline beloW acceptable levels unless it gets
new debt relief within the next several months.
At the same time, with living standards well below pre-1980
levels and after three years of austerity, President.
de la Madrid is reluctant to meet harsh IMF conditions for
further belt-tightening.
The government also faces state and local elections over
most of Mexico during the next several months, and does not
want to antagonize voters further.
As a result, de la Madrid may well take a hard line against
the IMF by breaking off negotiations on new austerity
measures and declaring a moratorium on principal or interest
payments.
The Mexican government does not have a long-term game plan,
but hopes that its action will stimulate the US government
to intervene with the IMF and the banks and provide some
form of debt relief, such as low rates and longer terms.
,e?r1
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5. Assistant Secretary Abrams was extremely pleased with the CIA
briefings and the resulting discussions, and felt that he and his
colleagues had a closer understanding of Mexican political dynamics and
2
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US policy options. The CIA analysts, for their part, gained a better
knowledge of key policy issues and further intelligence research and
production requirements on Mexico.
I hope to hold further sessions of this type with State and
NSC policymakers in the future, and I believe that other
NIOs could usefully adopt this type of forum to enhance
interchange between the policymakers and the Intelligence
Community.
j _Jr
lp,66171V
Robert D. Vickers, Jr.
Attachment:
List of Attendees
Mexico Conference on Political Dynamics
4 June 1986
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0 111837Z JUN 86
FM AMEMBASSY MEXICO
TO SECSTATE wASHDC IMMEDIATE 3392
BT
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LIMITED OFFICIAL USE MEXICO 12273
E.O. 12356: N/A
TAGS: PREL, ECON, EFIN
SUBJECT: TV INTERVIEW OF PRESIDENT DE LA MADRID CONTAINS
NO MAJOR POLICY ANNOUNCEMENT
1. SUMMARY: IN A ONE HOUR TV PRESENTATION ON JUNE 10, IN
A FORMAT REMINISCENT OF EDWARD R. PuRROW'S PERSON TO
PERSON PROGRAM, PRESIDENT DE LA MADRID GAVE A TOUR OF LOS
PINOS AND FIELDED QUESTIONS FROM TC REPORTERS ON SUBJECTS
RANGING FROM THE STATE OF THE ECONOMY TO NARCOTICS TO THE
PRI AS A VIABLE INSTITUTION. ALMOST ALL WAS IN THE
CONTEXT OF U.S...mEXICAN RELATIONS, WHICH THE PRESIDENT
CHARACTERIZED AS A PERMANENT PROCESS OF NEGOTIATIONS.
NOTHING NEW OF SIGNIFICANCE EMERGED. COMMENT: IT HAD
BEEN WIDELY ANTICIPATED THAT PRESIDENT DE LA MADRID WOULD
USE THIS TV APPEARANCE TO ANNOUNCE A DRAMATIC CHANGE IN
MEXICAN ECONOMIC AND FISCAL POLICY. THE FACT THAT THIS
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DID NOT HAPPEN MAY ALLAY FEARS THAT SUCH A CHANGE IS
IMMINENT; HOWEVER, IT WILL NOT LIKELY DISPEL THOSE FEARS
ALTOGETHER OR FOR VERY LONG IF THE CURRENT SITUATION
PERS/STS. THE FORMAT OF THE Tv PROGRAM APPARENTLY WAS
DESIGNED TO ENHANCE THE IMAGE OF THE PRESIDENT, BUT IT IS
DOUBTFUL THAT THE DESIRED RESULTS WERE ACHIEVED. END
SUMMARY.
2. ACCOMPANIED BY GUILLERMO OCHOA CF "HOY NISm0" AND
ANGEL TRINIDAD FERREIRA OF ImEVISION, PRESIDENT DE LA
MADRID TOURED THE GROUNDS AND PUBLIC ROOMS OF LOS PINOS /N
AN HOUR LONG TV PROGRAM PATTERNED AFTER THE EDWARD R.
MURROw PERSON TO PERSON FORMAT.
?
3. IT WAS WIDELY ANTICIPATED THAT THE PRESIDENT MOULD USE
THIS TV PRESENTATION TO ANNOUNCE SOME DRAMATIC CHANGE IN
MEXICO'S ECONOMIC AND FISCAL POLICY. THIS WAS NOT THE
CASE. INSTEAD HE TALKED ABOUT THE POSITION OF THE
PRESIDENCY, HOW HE HOPED TO BE REMEMBERED, THE RESOURCES
AND CHARACTERISTICS OF THE COUNTRY AND ITS PEOPLE,
MEXICO'S CURRENT ECONOMIC SITUATION AND THE REASONS FOR
IT, THE NARCOTICS PROBLEM, THE CONSTITUTION OF 1917, AND
MEXICAN-U.S. RELATIONS. ALMOST EVERYTHING HE SAID, IN
FACT. WAS IN THE CONTEXT OF MEXICAN-U.S. RELATIONS.
4. MEXICO-U.S. RELATIONS: DE LA MADRID SAID THAT MEXICO
IS SOVEREIGN AND INDEPENDENT AND THAT IT MUST SEEK THE
BEST POSSIBLE RELATIONS WITH THE UNITED STATES. HE
CRITICIZED A CERTAIN UNSPECIFIED IDEOLOGICAL GROUP IN THE
U.S. THAT THINKS MEXICO SHOULD BE JLST LIKE THE U.S. AT
PRESENT, HE SAID, RELATIONS ARE DIFFICULT AND COMPLICATED,
BUT WITH GOODWILL ON THE PART OF BOTH GOVERNMENTS WE CAN
OVERCOME OUR DIFFERENCES AND CONFLICTS. WHILE ANY TWO
COUNTRIES ARE NOT ALWAYS IN AGREEMENT, HE SAID, IT IS
IMPORTANT THAT WE HAVE COME TO AGREEMENT ON MANY
SUBJECTS. HE CHARACTERIZED THE RELATIONSHIP AS A
PERMANENT PROCESS OF NEGOTIATION. MEXICO'S POSITION, HE
CONCLUDED, /S THAT IT WANTS CORD/AL AND POSITIVE RELATIONS
WITH THE U.S.. BUT ALWAYS WITH THE CONDITION THAT THERE BE
MUTUAL RESPECT AND DIGNITY.
?
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5. ON CENTRAL AMERICA AND U.S. RELATIONS: MEXICO'S
POSITION ON CENTRAL AMERICA HAS BROUGHT FORTH PRESSURE
FROV ULTRA-CONSERVATIVE GROUPS IN THE uNITEC STATES.
HowEVER, MEXICO'S POSITION THERE IN FAVOR OF NEGOTIATION
AND A PEACEFUL SOLUTION IS JUST. THE PROOF OF THIS IS
THAT EVEN IN THE UNITED STATES THERE HAVE BEEN FREQUENT
MANIFESTATIONS OF SUPPORT FOR MEXICC'S ROLE IN CONTADORA.
INCLUDING UNANIMOUS RESOLUTIONS OF THE U.S. CONGRESS AND
INDICATIONS OF SUPPORT FROM PRESIDENT REAGAN HIMSELF AS
WELL AS FROM HIS OFFICIALS. WE HAVE NOT FELT DIRECTLY, DE
LA MADRID SAID, -ANY ECONOMIC REPRISALS FROM THE U.S. FOR
OUR CENTRAL AMERICAN POLICY. HE ACKNOWLEDGED THAT hHILE
SOME MEXICANS THINK THAT TO FOLLOW THE U.S. LINE ON
CENTRAL AMERICA WOULD SURELY BRING THE COUNTRY THE MONEY
IT NEEDS, HE DENOUNCED THIS AS A MERCANTILIST CONCEPT OF
THE COUNTRY WHICH NO PRESIDENT OF MEXICO COULD ACCEPT. /N
SHORT, HE AFFIRMED, THE PRESSURE OF THE DEBT PROBLEM WOULD
NOT CHANGE MEXICO'S FOREIGN POLICY.
6. CURRENT ECONOMIC SITUATION: THE PRESIDENT
CHARACTERIZED MEXICO'S CURRENT SITUATION AS A CRISIS
WITHOUT PRECEDENCE, FOR REASONS BOTH INTERNAL AND
INTERNATIONAL. THE FALL /N INTERNATIONAL OIL PRICES WAS
CITED AS THE MAIN CULPRIT, BUT HE ALSO SAID THAT MEXICO
NEEDS TO BALANCE ITS PUBLIC FINANCES, CHANGE THE STRUCTURE
AND FORM OF ITS PRODUCTIVE ENGINE, DIVERSIFY AND MODERNIZE
INDUSTRY, AND DIRECT PRODUCTION TOWARD EXPORTS. HE ADDED
THAT MEXICO NEEDS TO DIVERSIFY ITS ECONOMIC TIES,
PARTICULARLY INCREASING ITS TIES IN THE PACIFIC BASIN.
7. INTERNATIONAL DEBT: MEXICO WILL CONT/NUE TO EXAMINE
ITS OPTIONS REGARDING THE CONTINUING PAYMENT OF ITS
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E.O. 12356: N/A
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SUBJECT: TV INTERVIEw OF PRESIDENT DE LA MADRID CONTAINS
INTERNATIONAL DEBT, THE PRESIDENT SAID. UNTIL NOK, HE
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CONTINUED, MEXICO HAS BEEN CAPABLE CF MEETING ITS DEBT
OBLIGATIONS. BUT THIS HAS BEEN AFFECTED BY THE DROP IN OIL
PRICES. MEXICO NEEDS TO RECOVER ITS CAPACITY FOR ECONOMIC
GROWTH QUICKLY, HE ADDED, AND TO RECUCE ITS DEPENDENCY
UPON OIL EXPORTS. HE ALSO STRESSED THAT MEXICO, UNLIKE
OTHER COUNTRIES, USED THE FUNDS IT BORROWED (WHICH WERE
LESS THAN THE AMOUNTS OFFERED) TO BUILD HOSPITALS, POWER
PLANTS AND OTHER PRODUCTIVE AND WORTHWHILE PROJECTS.
?
8. FLIGHT CAPITAL: THE PRESIDENT SAID THE SO CALLED
CAPITAL FLIGHT FROM MEXICO WAS MORE ACCURATELY DESCRIBED
AS A MOVEMENT OF CAPITAL TO THE UNITED STATES, ATTRACTED
FOR THE PAST FOUR OR FIVE YEARS BY HIGH INTEREST RATES AND
AN OVERVALUED DOLLAR. THE ENORMOUS, UNCONTROLLABLE U.S.
DEFICIT, HE NOTED, WAS DUE TO U.S. DEFENSE SPENDING.
?
9. PESO VALUATION: EARLY IN 1986 INCREASING INTEREST
RATES IN MEXICO ATTRACTED A GROWING AMOUNT OF MONEY BACK
TO MEXICO, THE PRESIDENT CLAIMED. THE RECENT RAPID
DEVALUATION WAS DUE PRIMARILY TO SPECULATION, HE SAID,
WHICH THE MARKET WILL ADJUST, HE COMPARED THE CURRENT
PHENOMENON TO THAT FOLLOWING THE SEPTEMBER 1985
EARTHQUAKES. WHEN *MANY SPECULATORS LOST LOTS OF MONEY."
?
10. PLAN AZTECA: THE PRESIDENT SAID THAT THE GOm HAD
EXAMINED THE ECONOMIC PROGRAMS OF ARGENTINA AND BRAZIL,
AND FOUND THEM NOT APPLICABLE TO THE PRESENT CIRCUMSTANCES
OF MEXICO. HE POINTEDLY SAID THERE IS AT PRESENT NO PLAN
AZTECA FOR MEXICO. HE SAID MEXICO'S ECONOMIC PROGRAM
$TILL IS BASED ON ITS NATIONAL DEVELOPMENT PLAN, 1983-88.
?
11. NARCOTICS: DRUG USERS IN THE U.S. NUMBER SOME 25
MILLION AND ARE INCREASING, THE PRESIDENT NOTED. IT IS
NORMAL FOR A COUNTRY TO LOOK ELSEWHERE FOR THE CAUSES OF
ITS PROBLEMS, HE SUGGESTED. NEVERTHELESS, HE ADDED, THE
PROBLEM OF NARCOTICS IS AN INTERNAL PROBLEM TO BE SOLVED
BY COUNTRIES INTERNALLY, ALTHOUGH IN COOPERATION WITH EACH
OTHER. HE DENIED THAT EDUARDO DE LA MADRID IS A COUSIN,
BUT ADDED THAT, REGARDLESS, NO ONE IS ABOVE THE LAw. HE
ALSO NOTED THAT DESPITE REQUESTS, NC EVIDENCE HAD BEEN
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PRESENTED BY THE USG TO SUBSTANTIATE RECENT CLAIMS OF
CORRUPTION AMONG MEXICAN OFFICIALS.
12. CONSTITUTION OF 1917: ACCORDING To PRESIDENT DE LA
MADRID THE PRI, DESPITE THE NEED FOR RENOVATION AND
MODERNIZATION, STILL EMBODIES THE SPIRIT OF THE
cONSTITUTION OF 1917.
13. COMMENT: IF THIS TV PERFORMANCE WAS DESIGNED TO
ENHANCE THE IMAGE OF PRESIDENT DE LA MADRID AS A STRONG,
DECISIVE LEADER, IT SEEMS TO HAVE MISSED ITS MARK. HE DID
NOT COME ACROSS AS A MAN WITH THE ANSWERS. (AT ONE POINT
HE EVEN SAID THAT EVERYONE WAKES MISTAKES, IT IS THE
BALANCE THAT COUNTS.) FOR MANY, /T MAY HAVE BEEN A RELIEF
THAT THE WIDELY EXPECTED DRAMATIC CMANGE IN COM
ECONOMIC/FISCAL POLICY REGARDING DEBT REPAYMENT DID NOT
MATERIALIZE. NEVERTHELESS, IT HAS NOT DISPELLED FEARS
THAT SUCH AN ANNOUNCEMENT MAY NOT BE POSTPONED MUCH LONGER
IF THE CURRENT ECONOMIC SITUATION CCNTINUES TO
DETER/ORATE. IT IS INTERESTING TO NOTE THAT BETWEEN
MONDAY AND TODAY, THE PESO STRENGTHENED FROM 730 TO 625.
MANY BELIEVE THIS WAS DUE TO GOP' INTERVENTION IN THE
MARKET. (DRAFTED:POL:PSIEKERT/ECON:PPENNINGER) BUSBY
END OF MESSAGE/
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E T
tral Intelligence AgFricy
V16shingion.QC20505
MEMORANDUM FOR: Mr. Michael H. Armacost
Under Secretary of State for
Political Affairs
SBUJECT: Libyan Oil: Value to Italian Refiners
Attached is the analysis you requested assessing constraints
Italian refiners would face in switching from Libyan crude oil.
We believe that alternative crudes are available and that
switching would be relatively easy from a technical standpoint.
The major discouragement is economic?specifically the costs to
Italian refiners of walking away from Libyan price discounts and
costs of adjustments necessary to accommodate other crudes.
Richard Kerr
Deputy Director for Intelligence
Attachment:
As stated
T
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Libyan Oil: Value to Italian Refiners
From a technical standpoint, the main refineries in Italy
that process Libyan crude could switch fairly easily to other
crudes. These refineries have sophisticated equipment, including
secondary refining facilities to handle and process a variety of
types and qualities of crudes. Switching, however, would incur
costs to the refiners because Libya offers sizable discounts on
its more waxy crudes, and because some adjustments to equipment
and processing would be required to produce the same products
from different crudes. In our judgment, these costs--including
the foregone discounts--could amount to as much as $50 million in
the first year.
Technical Considerations. Libyan crude can be divided into
two general categories: a) light (high API gravity), low sulfur
crudes such as Zueitina, Brega and Sirtica, and b) light, low
sulfur, high pour point (waxy) crudes such as Bu Attifel, Amna
and Sarir. The first group contains high quality crudes, but
these require no special handling and are easy to replace with
other crudes.
The waxy crudes require special handling facilities such as
heated storage tanks, and secondary processing facilities such as
catalytic crackers to further refine their residual components
into usable proqucts. The high paraffinic naphtha yield of these
crudes is used to make petrochemicals. A number of high gravity,
low sulfur crudes from the Atlantic Basin area could be
substituted for waxy Libyan crudes to produce petrochemical
feedstocks. We have identified substitutes for both categories
of Libyan crude in Table 1.
We have also identified three main refineries in Italy that
process Libyan crude oil (in Table 2). Each is modern and
equipped to process many different crude oils. In general, the
more sophisticated the refinery, the less expensive it is to
switch crude feedstocks. At least two of the facilities are
probably equipped to maximize output of naphtha and supply nearby
petrochemical plants owned by the same companies. Several
7
smaller Italian refineries al o process Libyan crude from time to
time.
Economic Considerations. Although technically feasible,
switching to alternative crudes would entail some real and
opportunity costs for Italian refiners. Waxy Libyan crudes are
primarily attractive to Italian refiners because of the
discounts--relative to other high gravity crudes--Libya offers to
offset costs associated with their difficult handling
characteristics. For example, Bu Attifel--AGIP's equity crude--
reportedly is discounted by about $1.00-1.50 per barrel, although
contract details generally are not available. Besides lost
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discounts, the refiners would incur higher transportion costs
associated with buying crude outside the Mediterranean (as much
as $0.25/barrel). In addition, there would be blending costs,
adjustments to refinery equipment, and logistical, distribution
and other costs (possibly $0.10/barrel). Applied to the
discounted Libyan crudes (about 100,000 b/d) these costs could
total as much as $50 million in the first year.
Italian refiners receive Libyan oil under barter and
compensation agreements as well as through their equity shares.
If the Italians ran alternative crudes through their refineries,
they might have difficulty selling the Libyan oil they have
contracted for under these arrangements.
2
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