413. Research Memorandum From the Director of the Bureau of Intelligence and Research (Hughes) to Secretary of State Rusk0
SUBJECT
- US and South African Economic Leverage on Each Other1
On September 12, a copy was sent to McGeorge Bundy under cover of a memorandum from Brubeck calling it an excellent paper worth the President’s weekend reading, which showed pretty convincingly that if the United States were to get into any economic reprisal situation with South Africa, the South Africans would have much the best of it. (Ibid., Brubeck Series, South Africa, South African Arms Embargo)
RAF-30
The subject of sanctions against the Republic of South Africa is as complex as it is topical. This paper presents one segment of that subject. It examines a range of possible unilateral US economic measures towards South Africa and estimates their immediate economic impact both on South Africa and on the US. It does not attempt to calculate the impact of multilateral sanctions nor the psychological-political repercussions in South Africa of economic deprivations.
Abstract
In general, any feasible US economic sanctions would have little economic impact on South Africa. Among large-scale South African exports, only chrome ore and rock lobstertails depend overwhelmingly on the US market; US purchases of these items account for only about eight percent and one percent of South African exports to the world, respectively. Among South African imports from the US, there appear to be no critical items which South Africa could not do without, although South Africa would suffer temporary inconvenience in shifting to substitute items or alternate sources of supply, especially for spare parts for existing stocks of American machinery and vehicles.
South Africa, on the other hand, has some economic leverage on the US. US assets in South Africa are probably at least five times greater than South African assets in the US. The international standing of the US dollar and, by extension, the stability of the integrated Western monetary system, is to a degree dependent on the orderly marketing of gold. South Africa accounts for about 65 percent of Free World gold production, and [Page 647] it could encourage upward pressure on free market gold by withholding sales. This might induce sudden heavy demands on US gold reserves.
Yet symbolic US economic sanctions might have important political repercussions within South Africa. What these might be—reinforcement of apartheid and go-it-alone policies, encouragement of non-white resistance, or a change in direction towards non-racialism—depend on internal South African dynamics. A Departmental strategic study currently under way will attempt the latest and most systematic analysis of this fundamental aspect of the problem.
[Here follows the body of the paper.]
- Source: Kennedy Library, National Security Files, Countries Series, South Africa, 8/7/63-8/12/63. Secret; No Foreign Dissem/Controlled Dissem. No drafting information appears on the source text. A marginal notation reads: “(Taken from Pres. weekend reading dtd 9/14/63, Tab [illegible]).”↩
- For a description of related studies which include the psychological-political dimension and the impact of multilateral sanctions, see the Appendix to this paper. [Footnote in the source text. The Appendix is not printed.]↩