2. Memorandum of Conversation1

SUBJECT

  • U.S. Industrialists Trip to the USSR

PARTICIPANTS

  • Mr. James Linen—President of Time, Inc.
  • Mr. C. W. Cook—President of General Foods Corporation
  • Mr. Harper—President of the Aluminum Corporation of America
  • Mr. Richard Clurman—Chief of Correspondents, Time, Inc.
  • The Secretary
  • Mr. ValdesSOV

Messrs. Linen, Cook, Harper and Clurman called to discuss the trip they and other industrialists recently made to Western Europe and the USSR. They reported they had been given VIP treatment in Moscow, and the Soviet part of their trip consisted primarily in seeing Khrushchev—for seven hours at one session. The Secretary commented the Soviets probably considered them to be the “ruling circles” of the US.

The Secretary asked the group if they had seen any indications of the current Soviet economic difficulties, adding that we had underestimated these difficulties. The extent of the problem can be seen by Soviet willingness to spend one billion dollars worth of their gold reserve of two and a half billion to buy wheat. The Secretary added that when he had seen Khrushchev in Moscow in August he noted Khrushchev had been preoccupied, and thought at the time it was because of the Chinese problem. In retrospect, it seems it may well have been over the Soviet economy.

[Page 3]

Mr. Harper replied that Khrushchev had tried hard to convince the group the Soviets wanted trade, and had urged them to sell him fertilizer plants.

Mr. Linen added that at a reception Khrushchev had talked to Mr. Peterson of the Bank of America for twenty minutes or so on the Soviet desire for credits.

The Secretary interjected that we have been trying to hold the line on credits, not just to the USSR but generally, though the British have been a problem. Mr. Linen commented that Khrushchev played on the US-British difference.

The Secretary said the Senate Foreign Relations Committee has said it will take a hard look at trade with the USSR, and the Administration is also studying this. Not too much can be expected, however, since there is not too much the Soviets have to trade.

Mr. Harper said the Soviets told them they could trade us anything we wanted, and seemed very sensitive to the line that they had nothing to trade.

Mr. Cook asked the Secretary to confirm his estimate of two and a half billion dollars of gold reserves. The Secretary said this was our firm estimate, and added that given the Soviet program and their reserves, there is a question of how good a credit risk they are. This is more of a problem than we had supposed. We had thought that the wheat sales were a one-shot operation, but with what we have seen of the virgin lands, and the dust bowl they are turning into, the less short-term the wheat shortage seems.

Mr. Cook said he had come to a similar conclusion. The Soviets do not have enough land with adequate rainfall, they lack herbicides and pesticides as well as fertilizer, and have no seed strains suitable for using with heavy applications of fertilizer. It seemed likely, therefore, the Soviets would be in the wheat market for three or four years.

Mr. Harper asked how the Soviets would pay for the wheat.

The Secretary suggested they might exchange what they have, arms for example, for a commodity such as Cuban sugar or cotton that they could sell on the market.

In reply to a question as to whether it was a better tactic to freeze out the Soviets, or to let them see the benefits of the capitalist world, the Secretary commented that a new situation has arisen since 1955 by virtue of our ability for mutual nuclear destruction. Under modern nuclear conditions, he did not worry that fertilizer plants would increase Soviet military strength, as it might have in the days of long, conventional wars. He added that we do not want to get into an aid program with the Soviets via credit. We would rather give our aid to the Free World. In the case of wheat, however, we have it coming out of our ears, and we are short of gold. If the Soviets spend gold for wheat, this [Page 4]could be very important. The Secretary recalled he had told Khrushchev in August2 that we would like to trade with the USSR, but as traders. We would like to sell 1,000 tractors, not just one, for the Soviets to copy.

Mr. Harper said they had tried to push Patolichev (Minister of Foreign Trade) on patents. Patolichev had not responded, but a Chamber of Commerce man had insisted that no Americans had applied for patents.

The Secretary asked if Alcoa had a plant in Jamaica, and suggested to Mr. Harper that his office there look into the Jamaica situation. The Soviets have offered to underwrite a 250 million dollar five-year development program. Alcoa could be of assistance to us on this.

As the group left, the Secretary summarized by saying that there would be trade, not aid, with the Soviet Union, but suggested they did not count on too much. There are many problems, such as Soviet ability to pay, patents, and lend lease.

  1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, POL USUSSR. Limited Official Use. Drafted by Philip Valdes and approved in S on January 19.
  2. For a summary of Rusk’s conversation with Khrushchev, August 5, 1963, see Foreign Relations, 1961–1963, vol. V, Document 344.