Foreign Relations of the United States, 1969–1976, Volume IV, Foreign Assistance, International Development, Trade Policies, 1969–1972

155. National Security Study Memorandum 131¹

Washington, June 23, 1971.

TO

• The Secretary of State
• The Secretary of the Treasury
• The Secretary of Defense
• The Secretary of Commerce
• The Director of Central Intelligence
• The Director, Office of Management and Budget
• The Assistant to the President for International Economic Affairs

SUBJECT

• U.S. Policy in Cases of Expropriation

The President has directed that a study be undertaken on an urgent basis of United States policy in connection with expropriation without fair, effective and adequate compensation by foreign governments of properties owned by U.S. citizens, or in which U.S. citizens have a substantial interest.

The study should address issues arising in our relations with such foreign governments as a result of expropriations of U.S. privately owned property. It should assess the options open to the U.S. in dealing with expropriation actions in terms of effecting fair and prompt compensation. The legal, economic and foreign policy implications of these options should be discussed, and should be considered in relation to the totality of U.S. interests. The proposed policy options should cover the full range of relationships—including diplomatic, economic and military assistance, Export-Import Bank financing, and such special areas of interest as tariff preferences and sugar quotas.

The study should review our experience with foreign governments which in the past have expropriated U.S. privately owned property or which may be engaged in such an action, including an assessment of the role of the guarantee program in negotiations, and the efficacy of U.S. actions taken.

The study should be performed by an Ad Hoc Group comprising representatives of the addressees of this memorandum and representatives of OPIC, the Export-Import Bank and the NSC staff and should be chaired by the representative of the Secretary of State. A CIEP memorandum is being issued simultaneously providing guidance on the economic aspects of the study.² The study will be submitted concurrently to the CIEP Review Group for consideration of the economic issues, and to the NSC Senior Review Group for consideration of the foreign policy issues. The Assistant to the President for International Economic Affairs will participate as a member of the Senior Review Group in its consideration of this study. The study should be submitted not later than July 12, 1971.

Until the study has been completed and reviewed by the President, all loan and guarantee applications to U.S. agencies pertaining to countries which have expropriated private business owned by U.S. citizens or in which U.S. citizens have a substantial interest, or are currently in the process of expropriating such property, without a compensation agreement having been reached, should be held in abeyance unless specifically approved by the President.³ The previously approved loans for India and Peru may be processed without referral. Any other loans which need to be authorized before the end of the current fiscal year should be submitted to the President for approval.

During this period, we should also seek to defer consideration of such loans by multilateral financial institutions of which the U.S. is a member. If it is not possible to defer, all factors should be considered before the decision is made to vote for, against or to abstain. If there is disagreement among interested agencies, the matter should be referred to the President for a decision.

Henry A. Kissinger

1. Source: National Archives, RG 59, S/S Files: Lot 80 D 212, NSSM 131. Secret. A copy was sent to the Chairman of the Joint Chiefs of Staff. An earlier draft of this NSSM is attached to a June 16 memorandum for the record by Deputy Executive Secretary Brewster indicating that the study stemmed from a direct Presidential order originating in part from several discussions with Connally, and that Kissinger had already discussed the draft with Irwin by phone. (Ibid., S/S Files: Lot 73 D 288, Expropriation NSSM, NSC Misc. Memos)
2. CIEPSM No. 6, entitled “U.S. Policy in Cases of Expropriation,” was circulated by Peter Peterson on June 24. Peterson noted that the study paper should focus on the economic rather than national security dimensions of expropriation policy and would be prepared by an Ad Hoc Group under the direction of Ernest Stern of the CIEP staff. (Ibid., S/S Files: Lot 82 D 126, Box 5195, CIEP Study Memoranda) A paper prepared in OPIC was circulated by OPIC President Bradford Mills on June 25. (Ibid., S/S Files: Lot 80 D 212, NSSM 131) For the response to NSSM 131, see Document 157.
3. A July 14 memorandum from Henry Kearns, President of the Export-Import Bank, reviewed policy in restricted countries. Kearns concurred with continuance of the NSSM clearance procedures for Bolivia, Burma, Ceylon, Chile, Ecuador, Guinea, Iraq, Libya, Peru, Somalia, Syria, Yemen, and Zambia, but questioned its continued application in Algeria, India, Indonesia, and Mexico. In an attachment on Algeria, it was argued that “the Algerian government, as a result of firm Eximbank policy of refusing to consider major cases until all U.S. expropriation claims had been settled, did effect settlement of all U.S. cases and is well along in achieving settlements of French cases.” (National Archives, RG 59, S/S Files: Lot 80 D 212, NSSM 131)