19. Memorandum From the President's Deputy Assistant for National Security Affairs (Haig) to the President's Assistant for National Security Affairs (Kissinger)1 Washington, July 25, 1972. SUBJECT Peterson's Negotiations The attached cable (Tab B)2 contains Peterson's views as of COB Monday.3 SUMMARY: Lend-Lease Maintain for the time being our position of $500 million at 5% until they give us a counter offer. (This is below the 51⁄2% Summit position, but well above Peterson's 334% fall back.) Overall Strategy Get as much as we can on MFN, business facilities, arbitration, etc. without giving anything away on lend-lease or credit at this time; and smoke them out on where problems lie so that by Wednesday night we will know what we need to do to "define the package." Strategy Start with Patolichev and suggest that since this is "highest level proposal" arrange sessions with Patolichev and Kosygin to review a proposal that only he and Kosygin-level know about. Peterson also wants "very confidential discussions" with Kosygin and Brezhnev without the Ambassador and "others." To facilitate this, he suggests that you deal with Dobrynin, but not contact him until Peterson gives you a signal. Overall Package -Attempt to get a lend-lease settlement of $500 million at 2% plus an additional amount equal to interest on the $500 billion for the past twenty years, which is $200 million. This, according to Peterson, would enable us to demonstrate that we had won on the principle of back in 1 Source: National Archives, Nixon Presidential Materials, NSC Files, Box 953, VIP Visits, Pete Peterson's Moscow Visit (Commerce), 17 Jul-3 Aug 72 [2 of 2]. Top Secret. Sent for action. 2 Attached but not printed is backchannel message 2741 from Peterson and Sonnenfeldt to Kissinger, July 24. 3 July 24. terest, but permit the Soviets to "save face," i.e., by not going above 2% interest. -MFN: Agree to submit MFN in latter part of the year, but try hard to get our version of MFN approved before making this commitment. This would probably include the Soviets making an initial lend-lease payment at or before the time they are made eligible for Ex-Im credit, with a moratorium provision on further lend-lease payments until MFN comes into effect. -Ex-Im: Assure Soviets of a Presidential Ex-Im determination and $150 million for Kama River projects by a specified date-say September 25 of this year. -Joint Projects: Make a commitment to a high-level mechanism to evaluate and push specific projects. Peterson would head this. A group would be invited to the US in August in connection with this effort. -Business Facilities: Soviets want diplomatic immunity for a limited number of trade representatives in the US. In Washington at the Patolichev meetings Peterson took a strong stand against this. Now the US bureaucracy is for it and our delegation is trying to define immunity in precise terms as to nature and numbers. This could be thrown into the pot. Comment I have no major substantive problems with Pete's scenario. There are a number of loose ends and unanswered questions which will probably be clarified in subsequent memos from Peterson. For now his main objective seems to be to smoke out the problems so that we will have a clearer idea of what the issues are. There will be a number. The Soviets have consistently rejected the concept of paying back interest on lend-lease. This is precisely the problem we had hoped to avoid through the "stream of payments" approach-which would have allowed us to focus on the amount of annual repayments rather than entering into theological arguments on principle, interest, or back interest. In this way the Soviets would not have to cave on any of their principles, but we could if we wish indicate that we had gotten annual payments equivalent to what we would have gotten had the Soviets paid back interest, an interest rate higher than 2% etc. The whole thing, however, is optics, and as long as Peterson can get an annual rate of repayment equivalent to $500 million at between 3 and 4%, that is acceptable. * The Kama River project anticipated the production of 600,000 trucks per year for use in agriculture and inter-city transport. See Foreign Relations, 1969-1976, volume IV, Foreign Assistance, International Development, Trade Policies, 1969–1972, Document Another issue is that of Peterson's dealing with Kosygin and Brezhnev on the trade package. There is little in this that must be negotiated directly with these two. For us to push for them—if we are— seems a bit presumptuous at this point, especially when we are not about to conclude a trade agreement in Moscow. If negotiations are begun at the highest Soviet level, there will be intense pressure on us to move more quickly than we wished to. And that would raise problems when Patolichev visited here, since the Soviets might want the President to get involved in these negotiations. Attached at Tab A5 is a brief cable to Peterson commenting on the attached cable (Tab B). 5 The attached July 25 backchannel message from Kissinger to Peterson and Son nenfeldt was initialed by Haig for Kissinger. It reads in part: "I agree in principle with the substance of your package proposal and scenario. With regard to strategy, I question the advisability of detailed discussions at this time with Kosygin and Brezhnev. This might put undue pressure on us to move faster than we wish. And it would involve questions of reciprocal treatment when Soviet delegation visits Washington in September. I agree, therefore, that you should get as much cleared up through regular channels as possible. With regard to lend-lease, couldn't the problems of back interest be subsumed under a stream of payments approach, which would allow each country to indicate to its domestic audience the components of whatever amount was repaid?" 20. Memorandum From the President's Deputy Assistant for National Security Affairs (Haig) to the President's Assistant for National Security Affairs (Kissinger)1 Washington, July 27, 1972. SUBJECT Peterson's Negotiations: Shipping and Dates for Next Meeting Secretary Peterson is thinking of September 15-25 for the next meeting of the Soviet-American Commercial Commission in Washington. He wants to know whether this is acceptable time frame, and, if so, whether dates should be included in the communiqué (Tab B).2 On Cuban shipping, the Soviets took one step back in response to Peterson's proposal. He proposed that (a) no Soviet ships involved in Cuban trade be used until January 1, when the Maritime Agreement would go into effect; and (b) thereafter the Soviets would set aside a special group of ships that would henceforth not be involved with Cuba, North Vietman, or North Korea. A few US ships would be used during the moratorium. Patolichev objected to setting aside a group of Soviet ships and proposed instead an arrangement whereby Soviet ships would carry cash cargoes while US ships would carry government-financed cargoes. Soviets would not bunker in our ports, however. He apparently agreed to moratorium, but this is not clear (Tab C).3 In a later head-to-head talk, Peterson made a special pitch for Soviet understanding of our union problems and how Cuban angle could blow whole deal. He asked that this be given high level attention. Sonnenfeldt thinks that the best tactic is to let the Soviets think over Peterson's presentations. Peterson may see Brezhnev in the Crimea on Sunday, but the result may be that there will be no maritime agreement to sign during the trip. Comment: Peterson has not used the fallback position of one-time exception for the grain deal which must wrap up the maritime agreement. However, the idea of a moratorium and special group of Soviet 1 Source: National Archives, Nixon Presidential Materials, NSC Files, Box 953, VIP Visits, Pete Peterson's Moscow Visit (Commerce), 17 Jul–3 Aug 72 [2 of 2]. Secret; Sensitive; Exclusively Eyes Only. Sent for action. Haig did not initial the memorandum. 2 Attached but not printed is backchannel message 2759 from Sonnenfeldt to Haig, July 27. 3 Attached but not printed is backchannel message 2760 from Sonnenfeldt to Kissinger, July 27. *July 30. ships is not dead, and would be the more favorable solution. It will almost certainly require higher level decision than Peterson's counterpart. Since Peterson departs tomorrow for Kiev, he needs immediate answers: -Are September 15-25 dates acceptable? -Should he make concession of one-time exception to reach maritime deal or allow matter to slide? Recommendations 1. Because of your scheduling it might be best if the next meeting were in early October rather than mid-September. 2. On substantive issue, it is impossible to run the tactics from here, especially since Peterson will be seeing Brezhnev. The cable at Tab A5 gives him some leeway to work on a deal as he has already discussed with Patolichev, but advises him that if he cannot reach a satisfactory bargain, he will have to decide whether to use his authority to grant one-time exception. 3. That you approve the telegram at Tab A. 5 The undated draft backchannel message from Kissinger to Peterson, initialed by Haig for Kissinger for transmission, reads as follows: "Believe you should continue as you have in pressing for moratorium until January 1, plus some kind of Soviet assurances on special company. Alternative of Soviets carrying only cash cargoes raises political problems you outlined in earlier messages. If this line does not work out, you still have authority to make one-time exception. You are in the best position to judge, especially after discussion with Brezhnev, whether there is some promise of maritime agreement along lines you have been exploring with Patolichev or whether you should move to one-time exception. While conclusion of agreement in Moscow is desirable, a few weeks delay would not be an unmanageable problem. Early October is better for next meeting of Commission." |