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We can give credit without Congressional approval. That we will do in the fall. The gas can start without Congressional approval also. In other words, we can now take steps on Export-Import and on gas.

Brezhnev: And as regards to the sum for lend lease, what would the sum be? Do you want a lump sum without mentioning interest?

Kissinger: The sum we proposed to the Ambassador was $800 million by the year 2001. This is according to the same specific arrangements which I mentioned to your Ambassador.

Brezhnev: Let's be very specific. When the President was in Moscow we mentioned $500 million, including the amount on credit.

Kissinger: Including the pipeline?

Brezhnev: We call it the credit agreement. Now we reached then an understanding in principle. We would pay this sum in payments to the year 2001. You have indicated to our Ambassador that you find it more convenient from the standpoint of Congress that we pay a lump sum. From the standpoint of the Supreme Soviet it is not too convenient to name a large sum. But in all negotiations one must endeavor to meet the other side half way. I agree to a lump sum. I will meet you half way

I on that.

Kissinger: It will be very helpful to us.

Br zhnev: The U.S. is insisting on a very high interest rate. We have stated before that it is very difficult. In fact, it is quite impossible for us. This has been stated before. We do not want to repeat ourselves. Now maybe we could give on the following and agree to mention a lump sum and pay the first installment at the time of the signing. It would amount to $27 million or so. It doesn't really matter. You could then give us a stay of payment for five years, but the remaining payments would be completed by 2001. We will increase payments so as to take care of all of them by 2001. It will be easier for us after a five-year term. It will be easier to find the money and it would all be paid up by the

year 2001. So it would be completed sooner than you anticipated. Kissinger: We had suggested three postponements.

Brezhnev: So if we take this principle you have suggested, the initial installment would be bigger and then would get smaller and smaller to the year 2001. In other words we have a declining schedule. We want an initial stay of five years, but with completion of payments by the year 2001. I do not think this is bad for the United States. If you agree on this, we can pass to the issue of a lump sum.

6 A reference to the "pipeline” debt. See footnote 3, Document 13.

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Kissinger: We were talking about equal payments to the year 2001. We would give three postponements which you would have to request. They would not be automatic.

Brezhnev: After the first installment, at what years would the postponements relate to? What years would you propose to have the postponements?

Kissinger: The point is that it would not be automatic. You would request them.

(Spirited talking across the table by a number of participants.)

Lynn (explaining the basis for the UK agreement): They made an agreement that they would not take an immediate postponement and that any postponement would be based on economic need. This was the basis for agreement with the UK.

Kissinger: Ambassador Dobrynin is aware that instead of five postponements, we are talking about three.

Brezhnev: I can give you a signed agreement right now stating that after the first payment and a five-year postponement, we would pay the remaining amount and it would be completed by the year 2001.

Kissinger: You must understand the problem:
- First, we talked about three postponements and not five.

-Secondly, in our agreement with the British, we agreed to postponements only if the economic situation required it. In other words, it is based on the economic situation. We required the UK to have an economic problem before receiving a postponement.

-Thirdly, it will be difficult to go to the Congress and say that we are finally ready to settle lend lease and that the Soviet Union agrees but wants a five-year postponement. It would be a difficult psychological atmosphere. An additional difficulty is that the pipeline is due in the next three years anyway.

I believe that two payments at the outset would help our problem with the lend lease people. After that there could be an understanding that there would be some possibility of postponement. It would be unmanageable if we extend credit now in return for your postponing payments on your debt to us. I am looking at our domestic situation.

Brezhnev (Pointing finger): I can just as easily refer you to our economic situation. We have to pay out to you. Our problem will be twice yours. From the point of view of the Supreme Soviet, a lump sum is difficult. These are no easy economic terms and they come during the final years of our five year development plan which are the most difficult for us. But the basic difference is you are getting the money. We are paying it. In the same period, we will have to pay large sums for our purchases in your country, including the interest rate on the wheat sales. The timing is what is the problem. The coincidence of timing in these

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events. That is what motivates us in putting forth these letters. We are not trying to impose a combination on you. It is just too great a strain.

Kissinger: I understand. We both have the same problem.
Lynn (to Kissinger): It will all come out the same in the end.

Kissinger: But our domestic problems are now. What we are trying to do is to justify paying out more to you than we are getting back. On lend lease, we have to wait to justify the credit. If a settlement begins with postponement it eventually comes out the same way. It isn't what we are getting. What we get, we want to justify so that we can give more.

(Brezhnev smokes all the time, using his hands while talking. Gromyko maintains a stony poker face.)

Brezhnev: I don't think that is in fact quite so. If you agree to grant us credits, we will have to repay with interest. If you do not give credit to us, you will give the credit to someone else. That is the normal way of operating of people who do business. On most favored nation what benefit did the U.S. gain from this policy in the past? Neither pluses nor minuses. If you do extend MFN to us, it will be profitable for us but the growth will be reciprocal in trade and so forth. It will not entail losses for the United States. The situation now is no trade. Since there is no MFN, no growth is possible. Finally, an understanding on these matters is important. It may be difficult in a purely commercial area, but by and large it is regarded by everyone as mutually advantageous. Lend lease and Most Favored Nation are not just gratuities. We look forward to devising ways of utilizing MFN in order to increase economic cooperation. We will meet you half way. We have accepted the principle of a lump sum. With the President we spoke of the sum of $300 million. Then we spoke of $400 million and finally the sum of $500 million. That is where we were at the time of the Summit. Since then you have suggested a lump sum. We could mention say a lump sum of $650 million, with a first payment and then a postponement for five years. I would be willing to talk to my comrades about a postponement of four years, but we must finish our five-year plan.

We are boldly going forward to meet you on that and after the postponements we would insure all of it was paid up by the year 2001.

Another matter is how we set it on paper. Postponement is a tactical question, but we should have an understanding about a respite. We will be paying out large sums for wheat purchases and then lend lease will be done at the same time. That is what we want to base our understanding on. Perhaps you would see a way to get President Nixon to finalize the whole thing. Perhaps you can get in touch with the President.

Kissinger: I can reach the President but we need to get the proposition in manageable form first. I know we can't accept $650 million. Secondly, it is very difficult to begin the process by a four-year postponement. It is a suggestion I will have to discuss with Washington. A global sum is subject to some discussion but not the sum of $650 million. Suppose we say we will grant four postponements. Under the pipeline you are obliged to pay separately anyway. After MFN was approved, you could make one postponement and then have one more payment. Then there could be two years of postponement. Then there would be one more postponement for you to use at your discretion which we do not have to fix now. In other words, we would have one payment after MFN was approved by the Congress. And then the following year there would be a postponement. Then the next year you would pay and then the following two years there would be a postponement. In other words to sum it up, after the first five years you would have three postponements. This of course would have to be a secret agreement.

Gromyko: Can the fourth postponement follow the first one?

Kissinger: What I am proposing that we agree to now is that of the first five payment periods, there would be a postponement of three. There would have to be an understanding between us. President Nixon in his next term would be responsible for three of the postponements while he was President. This will not be easy. (Secretary Lynn echoes the difficulties this will cause.) I am thinking out loud. I am not sure the President will agree.

(Gromyko makes a comment with a chuckle.)

Brezhnev: All right. Let's make the sum $651 million. I will add one million with the wave of a hand. This will show you how generous I am.

Kissinger: Without Politburo authority?

Brezhnev: Or I could change it to $649 million. Yes, I can make this change so I am sure the President can also decide matters like that as well.

Kissinger: We first mentioned the sum of $1 billion and then $900 million when Secretary Peterson was here. Now we are down to $800 million. I know $650 million is impossible. However, $798 million might be conceivable (with a smile).

Brezhnev: We started with $300 million and it rose to $500 million.
Kissinger: But that was the principle without interest.

Brezhnev: You must remember that we pay, you get. I am referring to $650 million with a $500 million base.

Kissinger (to the translator): You have not translated my proposition. On the issue of postponements the British gave us a letter indicating that they would not repeat not take a major part of their postponements in the early period. They made them in 1957, 1964, 1965,

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and 1968. Thus, they were over an eleven-year period. You want to do yours over a five-year period. We will be asked about this and whether there is a similar letter from you. We will not be able to say what we have just told you. $650 million represents less than two percent interest on the $500 million figure. I have enough experience with the General Secretary to know that he is probably prepared to discuss this further.

Brezhnev (pointing figure and gesturing): Of course we are prepared to return again and again if the sum is too small for you. It is however a great burden for us. We could give you a letter stating that after four postponements we would ask for no others on the lump sum. Then we would make a first payment and then ask for four and give you a letter saying that we would ask for no more and would make our payments complete by the year 2001.

Kissinger: I understand your problems. We would want no letter. We could write this into the agreement but it would be a mistake at the time the agreement was published to state that the postponements had already been agreed to.

Brezhnev: I was simply trying to make an analogy. If the U.K. gave you letters in that regard, we could do that also.

Kissinger: The letter said six or seven postponements. The U.K. gave us a letter but it stated that they would not take the postponements in the early part of the agreement. It was the opposite of your case. In this case we do not need a letter.

Brezhnev: This is a very big problem for us, particularly with regard to currency balance. We will be spending more than one billion dollars for U.S. purchases. This is an enormous sum.

Kissinger: Do you mean for wheat?

Brezhnev: Yes, for a three-year period. This will correspond to the period when lend lease is being paid. That is why we want deferment after one payment to settle the wheat. There are some of the payments we must make in cash. Some are not on credit. We want this done too. But it is not just politically difficult, but it is also difficult from the purely economic sense. If we agree to the Tyumen and Yakutsk gas

line of credit, we have to spend enormous credits of our own domestically. It is a big deal with profits for the United States. It is not a single complex. We must take a look at the broad issues and the figures involved. On the Yakutsk gas project, if you want to do this jointly with Japan, we would have no objection. You could reach agreement with Japan yourself. We can't just wave them aside and say that it is purely a U.S. and Soviet agreement.

Kissinger: My view is that your allies may try to discourage them. Your allies may object strenuously.

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