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B. It would also be obviously very well (received?) if you could negotiate no postponements since we could then say to Congress that we did not yield on two of the important variables, grace period and postponements.

C. Have they accepted the concept of regular lend lease payments starting when MFN actually granted? If so, I remind you that this would also mean doubling up if we get MFN in 1973 or 1974. We propose this since it gives Congress an incentive to hurry up and also gets us more cash earlier. Frankly, with an economy of the size of the Soviet Union doing several billion dollars of trade with the Western world annually, it is rather hard to believe that balance of payments projections are so refined that $11 million one way or the other makes that much difference.

5. There is no way we can compute effective interest at this late hour without a computer. We would estimate your first possibility would turn out to yield effective interest rate of between 2.80 percent and 2.90 percent. If you use only the non-pipeline amount of $454 million as the base and do not compute interest on regular lend lease payments until these payments start, interest rate is about 3 percent. If this is all you can get, we can probably sell it but it does intensify the need for a comprehensive trade deal. Also, lower global settlement makes it all the more necessary that we have freedom to market deal in any way we wish since more than ever it now looks as though the British analogy is far better than talking about interest rates on basis of summit settlement.

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41.

Memorandum of Conversation

Moscow, September 12, 1972, 12:10–1:20 p.m.

PARTICIPANTS

Leonid I. Brezhnev, General Secretary of the Central Committee of the CPSU
Andrei A. Gromyko, Foreign Minister
Anatoli F. Dobrynin, Ambassador to USA
Georgi M. Korniyenko, Chief of USA Division, Foreign Ministry
A.M. Aleksandrov, Assistant to the General Secretary
Viktor M. Sukhodrev, Interpreter
Soviet Notetaker
Dr. Henry A. Kissinger, Assistant to the President for National Security Affairs
James T. Lynn, Under Secretary of Commerce
Helmut Sonnenfeldt, NSC Senior Staff Member
William G. Hyland, NSC Staff

SUBJECT

Economic Relations

Brezhnev: Has nothing happened?

Dr. Kissinger: I have been trying to get an answer from Washington. I gave it to Ambassador Dobrynin. We have an answer involving a double payment on the pipeline.?

Brezhnev: Is this a new idea?

Dr. Kissinger: I will take responsibility for an agreement and I will have to get it blessed in Washington. I could accept the figure of $725 million. Also I have a new idea on how to handle the combination of pipeline and lend-lease payments. We will do it the way we handled the postponements. I will take responsibility for this, but I am almost certain it will be accepted, but it should not be the subject of correspondence.

The idea is this: This year you will make the regular pipeline payments; next year you make a double payment; in 1974 you make the first lend-lease payment, but not the pipeline payments; in 1975 we postpone the lend-lease payment, but you pay the remainder of the pipeline. In 1976–77 you postpone lend-lease.

On this basis you pay off the pipeline on the exact schedule, but double 1973–74 into one payment. The concerns you mentioned yesterday will not arise. I am not authorized to make this proposal, but I believe I can convince the President if I can explain it to him personally.

1 Source: National Archives, Nixon Presidential Materials, NSC Files, Kissinger Office Files, Box 74, Country Files—Europe-USSR, HAK Trip to Moscow, Sept. 1972, Memcons (Originals). Secret; Sensitive. The meeting took place in the Council of Ministers Building inside the Kremlin. Brackets are in the original.

2 See Document 40.

Brezhnev: And in 1978?
Dr. Kissinger: One payment.
Brezhnev: 1979?
Dr. Kissinger: Postponed.
Brezhnev: And 1980 and so on will be equal payments?
Dr. Kissinger: Yes.

Brezhnev: [Draws line through notes he has been making.) OK. We have already spent too much time on this subject. Although there were difficulties in approach, I want to pay tribute to the fact that the President agrees to the sum of $725 million. I therefore accept this variant. I trust that my comrades will share this view. We can consider the matter closed. We can list the additional requirements for you to convey to the President. I accept this in connection with the President's acceptance of $725 million. I am deeply gratified. It reflects the interest of maintaining the policy founded during the President's visit to Moscow.

Yesterday our conversations were very businesslike. There were no disputes, they were charming, and the results were positive. Why should we note anything that happened yesterday? Since the President has accepted the figure we suggested yesterday, it is with profound gratification that I therefore accept responsibility for accepting the schedule of payments.

I had a new idea when I was driving home last night. It was hard to tear one's self away from the talks. I thought it would be a good idea to study the formalization of the agreements from a legal viewpoint, so that no misunderstandings arise and neither side runs the risk of falling short. I am referring to the fact that we begin payment only after granting of MFN. There must be a guarantee on this.

Dr. Kissinger: [Interrupting translation]: We will put it into the agreement

Brezhnev: Then there is no problem. (Continuing earlier remarks): So that there is no uncertainty standing in the way, we guarantee payments down to last kopek. When will the other elements be put into place? We should not go into details, but preparations should be made. Will we hear confirmation of MFN in near future? Will it be submitted to Congress in January? Will the President announce his intention in October that MFN will be submitted next year?

But, first of all, do you accept our acceptance on payments? I confidently accept your statement that you will do all you can to persuade the President. I accept our understanding to be a de facto understanding.

Dr. Kissinger: Mr. General Secretary, we concluded our discussions because they have been frank and open as have characterized our negotiations. We have always been able to settle our problems because our discussions are open.

Second, I am delighted to accept your assistance (assurance) that you accept our proposals. I will confirm our acceptance to your Ambassador on Monday. We can decide if we want to say anything publicly as a result of this meeting.

Third, Mr. Lynn should now talk with Mr. Manzhulo to settle as much as possible on the trade and lend-lease agreements. The more they can settle the easier it will be for us to sell this package. If they can make progress this will be very helpful.

You should send delegations to Washington to complete the agreements in legal form. They could be signed on October 10. We will have a legal obligation to obtain MFN, and your payments do not start until then. The President will make a statement, as necessary, that he submits and recommends to the Congress granting of MFN. If he is re-elected, in the first term of a re-elected President the Congress will be forthcoming. I also confirm the granting of Ex-Im credits in October for the Kama River project and we will set up a mechanism for the natural gas project, as discussed yesterday. But it would help the general atmosphere surrounding these agreements if we could settle one or two other issues simultaneously: the copyright agreements, arbitration and the establishment of a trade center. We would like to settle all of them, but even if only two are settled it would enable us to sell a difficult package more effectively.

This completes economic matters. I understand you are sending a maritime delegation to Washington. In this connection we will announce that a subsidy will be granted to ships carrying grain. This will cost us $50 million. As soon as the maritime agreement is concluded we can break the current deadlock. Meanwhile your ships can call on West Coast and Great Lakes ports in October, but the grain moves in American ships.

In view of the broad scope of the agreements to be signed on October 10, I should tell your Ambassador how your delegations should conduct their conversations in Washington. In any event, I herewith confirm that we will conclude all the agreements on October 10; as soon as you can you should get delegations to Washington, to conclude the agreements within the framework of our agreements.

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Brezhnev: Lynn and Manzhulo should be locked in a room with no food until they reach agreement—but Gromyko says give them water.

Dr. Kissinger: I agree.

Brezhnev: But if they reach agreement, we will give them a gala reception.

Dr. Kissinger: This evening.

I have a personal interest in the copyright agreements: I will earn royalties from my books.

Brezhnev: On the President's statement to the Congress, when will he make it? I am not posing a condition, but merely wondered.

Dr. Kissinger: At the time of signing the treaty we will repeat the statements when we explain it to the press.

Brezhnev: On the copyright, we will resolve it and pay you. There will be no discriminations, but we will only pay you!

Dr. Kissinger: Then I can drive through Washington in a Soviet automobile and no one will pay any attention.

[During the translation, Brezhnev asked for the Minister of Maritime Transport.)

[When the remarks on giving instructions to the Soviet delegation to the translator, Brezhnev injected: This was necessary in order to preserve the channel: some of your suggestions will come from us. Dobrynin remarked to Brezhnev that he will work with Dr. Kissinger to preserve the channel. Brezhnev answered: Exactly. Dr. Kissinger said if Dobrynin and I can be in contact, we can settle matters. Brezhnev replied, we accept that.]

Brezhnev: Well, may I say on behalf of myself and my comrades that the discussions we began yesterday and today are a good step toward upholding mutual interest based on foundations created during the President's visit. There is a lot of work to be done to promote better understanding and cooperation. That which was accomplished in these two days was very good indeed ...

Dr. Kissinger: I share your view ...

Brezhnev: [Examining the payments schedule; asking Gromyko, in Russian:) How long will President Nixon be in office?

Dr. Kissinger: President Nixon can make postponements for the first three payments, and we will leave a letter for his successor.

Brezhnev: Then we can send off a good telegram to the President. There is one thing. I am not very well versed in the difficulties of the trade negotiations. If I could be informed, I could facilitate matters or perhaps make them more difficult. I do not think Manzhulo will take decisions without me (laughter on the American side). So if you could tell me about the difficulties confidentially, I could take Dr. Kissinger's

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