YOUR MEETING WITH FOREIGN MINISTER SCHEEL, SEPTEMBER 25

• Document Type: CREST
• Collection: Library of Congress
• Document Number (FOIA) /ESDN (CREST): LOC-HAK-142-7-4-2
• Release Decision: RIPLIM
• Original Classification: S
• Document Page Count: 37
• Document Creation Date: January 11, 2017
• Document Release Date: July 17, 2012
• Sequence Number: 4
• Publication Date: September 21, 1973
• Content Type: MEMO

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IveMORANDUM
SECRET
NATIONAL SECURITY COUNCIL
ON-FILE NSC RELEASE INSTRUCTIONS APPLY
MEMORANDUM FOR: MR. KISSINGER
FROM: Helmut Sonnenfeldt
September 21, 1973
PROCESSED I/ANV ON-FILE TREASURY
LETTER
SUBJECT: Your Meeting with Foreign Minister
Scheel, September 25
DOS review completed.
MORI/CDF
C05077905
He will want to talk about the Year of Europe and the President's trip,
especially in light of current reports that it has been postponed till next
year. I assume you want to take the same line with him as with the other
Europeans.
You may want to bear in mind, however, that Scheel is among the optimists
and in public has been alluding to the major success of the Copenhagen
meeting and the favorable prospects for the President's trip.
On the three declarations, Scheel was quite favorable last summer, and
he also talked with you about the ad hoc summit. If you decide to keep up
pressures for an ad hoc summit, or a chapeau declaration, Scheel could
be an ally. On the other hand, Brandt is under continuing and mounting
pressure because his Eastern policy is stalled, and another round of
dispute with the French following the Chirac affair may not go down very
well in Bonn. In any case, it is important that you talk with Scheel on
MBFR and burden sharing/offset.
MBFR
The German government is badly split on the question of linkage between
any first and second stage of reductions and MBFR is becoming another
domestic political issue (Tab A).
--The Foreign Ministry would settle for a very tenuous link and not press
for any specific Soviet commitment to the second stage. They reason as
we did, that cutting national forces is dangerous.
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-- The Defense Ministry under Leber, ably assisted by Schmidt,
want a very specific commitment from the Soviets that there will be a
second stage, and that it will include the Bundeswehr in reductions.
The Defense Ministry reasons that domestic political and financial
pressures can only be contained if there is a firm guarantee that Germany
will share in reductions. Additionally, some hope to use MBFR to
stimulate the restructuring of the Bundeswehr to a smaller but more
mobile striking force.
Scheel has indicated he will discuss it with you.
Your position:
-- We need to be extremely careful not to define for the Soviets
exactly what the West will reduce without determining what the Soviets
might do.
? In the initial round of talks, we will put forward the common
ceiling and press the idea of two stages to reach the ceiling.
? We are not prepared to make a Soviet agreement to a precise
common ceiling the precondition for beginning negotiations in the first
phase of Soviet-American reductions.
-- As that progresses we can determine how firmly to insist on a
Soviet commitment to a second stage and common ceiling.
-- If there is a second stage, it will inevitably include the Bundeswehr
because the US could not take a very much larger cut than we now propose.
Offset-Burden Sharing
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The Germans are very cool to multilateral burden sharing, because they
fear that they will be required to make even greater payments for our
forces.
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At present it appears that the German government has decided that it cannot
meet the 80 percent offset of the last agreement. Bonn will propose
roughly the same figure as the last agreement, but include a large
Bundesbank credit, in addition to the hard offset.
SECRET
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3
The net result, if this view prevails, is that we will (a) have a long
drawn out struggle with the Germans and inside this government, (b) the
outcome will be regarded as another token of European disinterest in
helping us alleviate our economic problems, and (c) poisons the atmosphere
for multilateral burden sharing. (If Jackson/Nunn passes Congress and is
not vetoed, we would have to reduce forces to the degree there is not 100%
offset.)
Your Position
-- Emphasize to Scheel that the Congress will regard offset and
multilateral burden sharing as a test of partnership.
-- Congress is beginning to understand the details of offset and will
be very critical of soft offset, i.e., credits and loans.
? Remind him that even Senator Jackson is sponsoring an amendment
linking troop levels to offset.
? If MBFR is the short run defense against unilateral cuts the long
-min do-ranee. is in Troy;rig toward a rrru1t-41n fora 1 offset in which 11 filo
Alliance participates.
-- Of course, we would not expect a greater German contribution to
the multilateral effort than they would make to the bilateral offset.
Ostpolitik
The Foreign Minister might want to talk about the stalemate with Prague
on the question of Berlin representation. The issue is that the Czechs
insist that Bonn cannot provide consular representation for Berlin
corporations or other Berlin institutions as opposed to persons and that
this interpretation is consistent with the Four Power agreement.
-- He may ask for our help, and on this issue we ought to be ready
to blast the Czechs for deigning to interpret our agreement. (The Soviets
of course, are behind this and using it to pressure Bonn on the CSCE and
economic credits.)
Tab A - Recent Report on MBFR
Tab B - Sonnenfeldt/Odeen Memo on Offset
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Department of State
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RAGE 02 BoNN 13529 101326Z
THE SENATE, woERNER SAX! THE ALLEGEn U,s, LEAl(s HAD
HITHouT nouBT nAmAGEn NATO., wHosE UNITY HE sAin wouo
RE MADE IMPOSSIBLE IF OTHER ALLIES WERE To FOLLOW THF
AMERICAN EXAMPLE, woERNEK AqKFD 1,How EXACTLY wOULo IT
RE POSSIBLE TO HAVE suCcESSFuL NEGOTIATIONS IF THE
SoviE1-:uNION Is INFORMED FRom THE VERY START OF U.S,
VIEWS11?:. WOFRNER CONTINUES PONE MUST AS HImsFLF WHAT
INTEREST Moscow sHOuLn HAVE. IN 4EG0TIATT0Ns IF THE
ImPRFSSIoN INCREASINGLY oEvEl_oPS THAT THE u,s,-HAs
nEcIDEO nN A TROnP REDUCTION IN ANY 'EVENT ANO INTENDS
To USE THE mBER NEGOTIATIONS ONLY AS A CAMOUFLAGE,"
2, THE GENERAL. ANZEIGER FRnNT PAnE REPORT BY wnLE BELL
STATES THAT GERMAN GOVERNMENT SOURCES WERE mAINTA/N1NG
A ?RESTRAINEo POSTURE,' WHILE PRIVATELY INDICATING
IllirNcERN OVER THE PRESS REWIRTs', BUT BELL CITES GoVERN.
T SoURcFS AS PRIVATELY SHARING. wOERNERIS CONCERN
USG AT THE O WAS LEAKING THE MBF R PpnpnSALs To BAT
RACK CONGRESSIONAL FRESSOHE, TO PRESS EUROPEAN PARTNERS
TO ACCEPT 0,5, pROPOSALS, ANO To BRING BONN uNOER
PRESSURE IN THE CURRENT nEFsFT NEGoTTATIoNS, BELL ALSO
CITES GOvERNmENT AND OPPOSITION SOURCES As BEING
CONCERNEI OVER ALLEGED US, READINESs TO DROP THE
CONCEPT nF PRALANCEP IN NEGOTIATIONS wITH THF SOVIETS,
3, THE WRIT STORY BY VON RAVEN AnDS FURTHER OETATLS
TO PREVIIUS nERmAN PRESS REPORTS, IN PARTICULAR, RAVEN
REPORTS ON DISPUTE OVER COMMON cFILING/onHpAy
CAPABILITY sTANDARn ANn GERMAN DESTDFRATA CONCERNING
LINKAGE BETWEEN THF TWO PHAsEs OF THE NEGOTIATIONS AND
THE NATURE OF RoNDESwEHR INCtALS/IN /N THF PROCESS.
RAVEN, WHO HAS TRAnITIMNALLY HAD EYCELLENT DEFENSE
MINISTRY SOURCES, EMPHASIZES THE FRG WISH To BE CLEAR
ON THE MANNER IF KINnESwEHR TNrorsToN FROM THE OUTSET
OF THE mRFR NEGOTIATIONS.
A, AS INnICATEo REFTEL, PONOFF AND DEFENSE MINISTRY
OFFICIALS ARE INCREASINGLY DISTRESSEI Ry THE PROLIFERA-
TION OF TNI7RFAsINGO DETAILEn PRESS REPORTS ANO
INIICATIINS THAT THESE REPORTs APE 3FING CONFIRMED FROM
WASHINGTON SouRcES.1, FoNOFF N0FR cHIFF RUTH EXPREsSEn
OPM
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CONFTOENTIAL
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roNcfRN TO EMBnFF SEPT 10 THAT DETAILEO pARLTAHENTARy
nuEsTinNs nN PRESS REPORTS WPRE SOUNn TO FnI_Low sp4r'RT0
nN THE HEELS OF OUTSPOKEN POLTC CRITICISM BY WOERNER,
HILL.ENRR&NO
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WASHINGTON, D.C. Z0506
IICONFIDENTIAL INFORMATION
September 20, 1973
MEMORANDUM FOR: DR. KISSINGER
FROM: YtHIL ODEEN/IIAL SONNENF4DT
SUBJECT: Balance of Payments Offset
Negotiations
The bilateral balance of payments offset negotiations with the FRG
started this week (Monday, September 17) with Under Secretary
Casey heading the U. S. delegation.
The BOP offset question is becoming increasingly large in the
Congressional European troop debate this fall:
-- Secretary Schlesinger has promised in testimony full coverage
of the roughly $2.5B potential deficit (the last agreement covered less than
1-wn1f)_ ?
-- Jackson-Nunn have introduCed an amendment which would make
reductions BOP deficit. It looks
as if this will be very bard to beat.
This memo brings you up to date on both the prospects for the bilateral
negotiations with the FRG, the ongoing efforts to get a broader multi-
lateral agreement including contribution from all the allies, and suggests
ways you can help in overcoming some problems we are encountering,
namely:
-- Treasury's intransigence and refusal to recognize that offset
? has a critical political component as well as an economic importance.
-- The failure of the State Department bureaucracy to back the
multilateral initiative.
You will recall that the original NSDM 214 signed in May (Tab A) called for:
- A new effort aimed at a miltilate val. offset covering as much as
possible of the .B01" costs ($2.543.0) as well as all of the additional ?
budgetary cost of keeping our troops in Europe rather than in the U. S.
($440 annually).
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CON ij ov,IN
,
-- Renegotiation of the bilateral rw,reement with the FRG as a
parallel effort. The bilateral agreement would ultimately be folded in
with the multilateral arrangement once the multilateral arrangement
was formed.
An order of priority was established for the various actions which the
allies could take to reduce our BOP deficit.
First priority was given to actions covering the additional budgetary
costs of keeping the troops in Europe rather than the U. S. (c. g. , FRG
payment of land taxes for our bases, local civilian hire costs, etc.).
These actions also reduce the BOP deficit.
Second priority was given to actions such as military procurement,
which compensate for the BOP outflow but do not cover budget costs.
Finally, loans to the Treasury were to be included but only if interest
rates were below market rates or subsidized by the FRG as they had
been in the past.
It was agreed that loans would not be introduced until the other "hard"
portion of the offset had been negotiated. In response to FRG inquiries,
the negodatoi s wou.ikir Li&e iD6ut_. and take tile line that we v,ic.r.c
interested in.a. "hard" offset. ?
? ?
7",".?7'"' ",' - - - - ?
Although they did not disagree to inclUding loans in the agreement during
preparation of the NSSM study, Treasury's position has hardened and they
are now insisting that all loans are economically and politically worthless.
This, of course, reflects the Treasury's fixation on the economic,purposes
of the offset agreement and failure to recognize that offset agreerne.pts._are
valued in Congress despite their lack of economic value.
Loans have little economic value and they should not be introduced early
in the negotiations since this would errode chances of getting maximum.
:value for "hard" offset actions. However, we cannot afford to refuse to
include loans at all -- especially in view of Schlesinger's statement and
the Jackson-Nunn agreement. 'Secretary Schlesinger has talked with
Shultz several times on the need to soften the Treasury position and your
support is needed.
The Multilateral Offset Initiative
In calling for a new multilateral effort, we did not expect that a sophisticated
payments union could be created but that a system in which each ally would
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LO1';IIIDENT TA L, 3
contribute to a common fund covering only U.S. costs, would be within
reach. This sort of limited multilateral scheme still looks feasible.
We wanted NATO to take the lead in coming up with the exact plan.
A study group was formed within the NATO Eurogroup to do the ground
work and Rumsfeld gave the effort maximum support in the NAC and in
private. I-le and his staff drew up an ambitious action plan in Europe
coupled with high level political support in Washington. Meanwhile, the
NATO staff is working on an individual basis with NATO countries to get
an estimate of their contribution.
According to Rumsfeld, budgetary relief from the multilateral effort
of about $75M-$100M is possible (almost double the last bilateral effort)
and significant BOP relief may be attainable.
The State bureaucracy predictably has been dragging their heels largely
because they believe a multilateral push would detract from the bilateral
agreement. 1 For example, they objected to Rumsfeld's plan to visit
individual NATO capitals to discuss burdensharing issues and a presentation
to the NAC of the specific offset actions we have in mind. Now State
wants to hold back on the multiiat erai effort until the
bilateral agreement
has been negotiated. We see no reason forthis. In fact, loss of the little
momentum we now have would put the entire initiative in jeopardy.
During his recent visit to Washington, Rumsfeld complained of a lack
of political support from Washington. Except for the dialogue on the
Hill, there has been little publicity given the effort since your original
Year of Europe speech. To pick up the sagging momentum, a high-level
political push is needed.
In addition to your role, Schlesinger and Rush should be urged to provide
the political support for this effort that Rumsfeld believes is needed.
This could include greater pressure on NATO ambassadors here in Wash-
ington, more public statements, etc.
?
cc: Chuck Cooper
Larry Eag,leburger
1/At first, State argued that if we pressed for a multilateral agreement the
FRG would become vulnerable to claims by other NATO countries who also
have .small 130P deficits with the ]'RG. We should, therefore, ? soft peddle
the multilateral negotiations until the new agreement was signed. ? These
concerns were not borne out in practice. .
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_ ^
ERIEFING PAPER
FEDERAL REPUBLIC OF GERMANY
BILATERAL BRIEFING PAPER
Foreign Ministdr and Vice Chancellor
Walter Scheel*; Chairman, Free
Democratic Party (FDP)
Addressed as: Mr. Minister
Our Objectives
to move outstanding bilateral issues, such
as offset, toward successful resolution
Their Likely Objectives
-- to give you a personal appraisal of the
September 10-11 meeting of the EC Foreign
Ministers
-- to discuss matters relative to US-West
1. OFFSET
Points You Might Make
A. Early conclusion this fall of a new high
quality offset agreement with the FRG is
essential.
FACTS
wog..
the last offset agreement, covering FY '72
and '73 expired June 30.
we need help from our allies, especially
the FRG, if we are to meet Congressional
criticism of our military balance of payments
deficit and pressures for unilateral force
reductions.
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the German negotiator,. Ambassador Hermes, met
with Under Secretary Casey on September 18 and
19 for the first round of talks leading to a
new agreement.
-- Mr. Casey will meet with Hermes again in Bonn
the first week in October.
Points Scheel Might Make
A. While the FRG has contributed to the cost of
maintaining US troops in Europe in the past,
ond will in the future, it is not able to cover
the complete cost of these troops in the offset
agreement.
'FACTS
the last Offset Agreement covering FY '72 and
'73 provided for offset totalling ?$2.036 billion:
$1.2 billion in military.proeurement, and $0.65
transactions, $0.186 billion
in troop facilities rehabilitation.
US POSITION
The total balance of payments cost for the next
two years (ca $3.4 billion) of maintaining US
troops in Germany should be covered in the
offset agreement.
If total offset is to be achieved, a loan by
the FRG to the US will be necessary.
FACTS
WE MY.
it is not likely that we can achieve complete
offset in hard, high quality items such as mili-
tary procurement and absorption of local costs
by the FRG.
US POSITION
Loans have no lasting balance of payments effect,
except for their interest factor. ? Congress
shares ? this opinion.
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2. US-GDR RELATIONS
Points You Might Make
A. We have made no decision on when to open
substantive talks in Washington with the
GDR on the establishment of bilateral
relations. We have repeatedly stressed
to the GDR that our Embassies must open
simultaneously. Tactically, we consider
i.hc GDR to be the demandeur. We feel
under no pressure to push ahead with sub-
stantive negotiations.
FACTS
-- following an initial meeting with represen-
tatives of the GDR UN Observer Mission in
Washington on August 9 , we sent an ?admini-
strative team to ?East Berlin to inspect .
. future chancery and residential property.
'A GT7JR administrative .1-cam has ?1) -1-1 similarly
occupied in Washington. ?
-- property shown to us in East Berlin would re-
quire extensive renovation and could not be
occupied in the immediate future. The GDR
administrative team is considering several
possible sites in Washington. ?
Toints Scheel Might Make
A. Express appreciation for US keeping FRG
informed of developments in this area and
outline FRG plans for opening its representation
? in East Berlin.
FACTS
???
FRG-GDR negotiations on the exchange of
permanent representations are stalled on the
question of accreditation.
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-- the GDR insists that the respective
representations be accredited in the
?same manner as Embassies (with credentials
presented to the head of State), whereas
the FRG .wishes the accreditation to be to
the office of the head of government. ?
US POSITION
-- we have stayed out of FRG-GDR controversy.
3. EASTERN POLICY
Points You Might Make
A. Underline US support for the FRG's efforts
to obtain-a sound understanding with
Czechoslovakia, Bulgaria and Hungary which
will permit the FRG to afford effective
consular services on behalf of West Berlin.
FACTS
???Aim?
'West German negotiations with Prague,
.?Lt,,eeee T- ofjri arc stalled because4e
nf
the consular representation issue.
the Four Power Agreement on Berlin permits
the FRG to represent Berlin "residents"
abroad, but the East Bloc countries have
argued that this does not include West
Berlin authorities such as courts or
corporations.
points Scheel Might Make
A. Request us to approach the Soviets, Czechs
or other on the question of Berlin consular
? representation.
FACTS
-- we have already explained our position to
the Czechs.
an approach to the. Soviets could only
succesSfully be undertaken if there. were
UK. and French participation.
Orb ow
COM' I DEN AL
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US ?POSITION
we are willing to consider this action
in the Bonn Group in order to be as
helpful as possible to the FRG.
4. CONVENTION ON PROTECTION OF DIPLOMATS
Points You Might Make
A. We hope that the FRG will support the
adoption of the Convention on Protection
of Diplomats in this General Assembly.
(See Background paper for details.)
PACTS
-- the International Law Commission's draft
COnvention has been submitted to the Legal
Committee of the General Assembly.
diseussion of the Convention may begin in
tho'Czenerai Assembly early as the week
Of October 1.
'bin S Stheol Mioht Make
A. While the FRG generally favors adoption of
Such a convention, it has technical diffi-
b culties with the present draft,
US POS:ITION
we think that the Convention can and should
be adopted by this General Assembly.
-- We are ready to work out any difficulties
the FRG may have with the .present draft.
CONFIDENTIAL
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No Objection to Declassification in Part 2012/07/17: LOC-HAK-142-7-4-2
-6-
5. NARCOTICS
Points You Might Make
A. Thank Scheel for increased cooperation
in the interdiction of international
traffic in narcotics. (See Background
paper for details.)
FACTS
-- US-FRG cooperation is excellent.
Points Scheel Might Make
None.
3.973 UNGA
9/13/73
CONFIDENTIAL
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