167. Memorandum of Conversation0
SUBJECT
- Possible Credits for Austrian Arms Purchases in the United States
PARTICIPANTS
- Austria
- Defense Minister Karl Schleinzer
- State Secretary Otto Roesch
- Dr. Wilfried Platzer, Ambassador, Austrian Embassy
- United States
- Mr. George Newman—G/PM
- Mr. William Robinson—G/PM
- Mr. Philip Barringer—Department of Defense
- Mr. Samuel Cross—Treasury Department
- Mr. Jack A. Sulser—WE
After opening the meeting, Mr. Newman called on Mr. Cross to comment on the practicability of the Export-Import Bank as a source of credit for foreign arms purchases in the United States. Mr. Cross said the EXIM Bank is a possibility which should be explored, but he said the Bank does not usually operate in the military field. Therefore, there is little past history which would be useful in the present consideration. Ordinarily the Bank extends credit for a maximum of five years, but somewhat longer terms may be possible.
The Minister said the Austrian Government had agreed on an increase in the military budget, but the rate and extent of the increase would not be adequate for the quick buildup which is necessary. He stated that it was his hope to obtain credit under the terms of the Mutual Security Military Sales Program although it would be necessary to give it another appearance. Mr. Newman said we would do our best to meet the Austrian need. It is, however, a problem which requires further study. He assured the Minister that we will seek to come as close as we can to the requested solution.
The Minister repeated that it is his aim to acquire the equipment over a three-year period, with payment stretched over a ten-year period. In addition to ammunition, the Minister intends to acquire modern tanks, communications equipment, and spare parts. Mr. Newman inquired what the difference in interest rates might be from the various sources. Mr. Cross stated that, since there is no precedent, it would be impossible to state what the EXIM Bank rate might be. The recent rate for export promotion credits, which would be the most comparable, was 5–3/4 per cent. However, the terms would, of course, depend upon further [Page 366] negotiations. The Minister interjected that such an interest rate would be unacceptable to the Austrian Government as a basis for negotiations. He stated frankly that he had hoped for no-interest credit under MSMS. Mr. Barringer responded that the current MSMS credit rate was 3–1/2 per cent. Non-interest terms applied only to so-called cash sales, for which payment could be made in installments up to a maximum of three years. Mr. Newman said these were questions which could be studied further and negotiated later.
The Minister inquired whether, as a minimum, the way could be indicated by which a solution to the problem might be achieved. Mr. Barringer replied that, following the meetings in the Pentagon this morning, Defense Department attorneys had been in touch with both the Treasury and the EXIM Bank. He had been assured that, if terms could be negotiated with the Austrian Government, the problem of processing all documents and other formalities through the EXIM Bank could be managed. Mr. Newman commented that the Pentagon had obviously lost no time in exploring the matter. He assured the Minister that we understood and appreciated the Austrian position. The Minister expressed his thanks.
It was suggested that representatives of the interested offices meet in the near future with Dr. Edgar Plan, Financial Counselor of the Austrian Embassy, to continue the discussion. The Defense Minister and Ambassador concurred in this proposal.
- Source: Department of State, Central Files, 763.56/3–3062. Confidential. Drafted by Sulser.↩