163. Memorandum From the Under Secretary of State (Irwin) to the President’s Assistant for National Security Affairs (Kissinger)1

SUBJECT

  • Expropriation Policy

At the SRG meeting on NSSM-131 on August 4,2 I supported the issuance of an expropriation policy statement. This statement, however, should be one that does not: (a) get the United States into a confrontation situation with the developing world; (b) ignore the inherent rights of countries (including our own) to expropriate as long as prompt, effective, and adequate compensation is paid; (c) denigrate our past efforts to obtain fair compensation.

Confrontation with one country may, of course, have a deterrent effect on others with respect to future expropriation. However, expropriations usually flow from internal political, economic and psychological conditions, so that it seems unrealistic to expect too great a deterrent effect on one country from action taken in another.

We should have a policy which makes it clear that expropriation is not riskless, in order to have deterrent effect. Each case, of course, has its own characteristics, and should be examined in the context of all our interests in that country, including other financial interests which often limit our leverage. We should, of course, weigh carefully in any decision the deterrent (or other) effect a confrontation in one country might have elsewhere.

Once an act of expropriation occurs, however, confrontation generally will not be useful in reaching a settlement in the particular situation. [Page 428]Confrontation can best be avoided by forward looking actions as early as possible.

Multilateral institutions constitute a special case. Our pursuit in them of unilateral policy objectives make less credible the President’s advocacy of multilateralism. We should consult with other developed countries to determine common ground on expropriation policy, and how best to carry out our policy in an effective way. If we decide enough ahead of time how we are going to vote, we may be able to obtain support and avoid appearing isolated and possibly defeated.

We should also pursue the point which you raised of the foreign policy implications of, and the role of the Secretary of State in, instructions to vote negatively or abstain on particular projects in the multilateral institutions.

Attached is a draft statement that the President or the Secretary of State might issue on United States Government policy toward expropriation.3 It may be preferable for the Secretary to issue it in order not to involve the President until we see how the statement is received domestically and internationally. You might consider the usefulness of having the President at the same time or later reiterate his view that the Hickenlooper Amendment should be repealed. Such a statement might reinforce our position that the Executive Branch needs maximum flexibility in coping with these expropriation problems.

John N. Irwin II
  1. Source: Washington National Records Center, Agency for International Development, AID Administrator Files: FRC 286 75 A 13, Box 8, IPS 7-1 8/6/71-8/31/71 FY72. Confidential.
  2. See Document 161.
  3. Not printed.